Abstract
Small and medium-sized enterprises (SMEs) are widely acknowledged as crucial contributors to today’s economies; their capacity to foster growth and development is tremendous. Through SMEs, governments around the globe can manage various socio-economic-related issues such as unemployment, poverty and income redistribution. Of greater importance, in the African continent, which is experiencing countless economic challenges, a flourishing SME sector could play a vital role in advancing growth. Growth in SMEs denotes an improvement in profits, return on investment, total assets and increase in market share. Therefore, SMEs' growth significantly improves the country’s GDP and overall economic outlook. Even though SMEs' growth has been positively linked to economic advancement, growth intention is not a natural phenomenon since perceived opportunities, skills, and resources within the business environment influence this phenomenon. Some SMEs have a clear intent to grow, whilst others might not have the same intention. Growth intention is “the entrepreneur’s goals or aspirations for the growth trajectory he or she would like the venture to follow.” This implies that SMEs should understand growth dynamics to make it a reality for their firms. It has also been reported that the majority of SMEs in the African continent do not pass the early stages of growth to success, take-off, and maturity, mainly due to several factors such as poor management, lack of government support, and or financial access. These various challenges led to the study of critical success factors (CSFs). CSFs are essential elements of a business that must be constantly scrutinised to achieve financial performance. For this study, the following CSFs were selected: government support; social support; financial access; market orientation; technology adoption; and management. These CSFs appear to be essential since they address vital areas that might facilitate or hinder growth intention and financial performance. Financial performance portrays a firm's image in terms of profit, return on investment, and total assets. Moreover, literature has suggested that there is a positive relationship between CSFs and financial performance. Even though the relationship between CSFs and financial performance has been established, there is currently no evidence that growth intention could mediate this relationship. Therefore, the study investigated this gap.
For this study, the mediating effect of growth intention in the relationship between SMEs, CSFs, and financial performance was conducted in two African countries, namely, South Africa and the Democratic Republic of Congo (DR-Congo). The two countries were primarily selected because they present contrasting scenarios. For example, South Africa has an established SME sector with sound banking and financial systems, along with a high level of
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income inequalities and poverty; however, the DR-Congo is rich in natural resources but has a high level of informality among SMEs and a high rate of poverty.
Given the study’s focus on the mediating role of growth intention in the relationship between CSFs and financial performance, a quantitative research approach seemed most appropriate. This approach used a descriptive cross-sectional study and a structured questionnaire to collect data. Prior to the data collection, a questionnaire pre-test was conducted on 15 SMEs. The survey questionnaire was divided into two sections, with A and B focusing on demographical information derived from the participants, such as gender, age category, level of education, the number of years in operations, the reason for starting the business, the size of the company, questions about business and management training and membership with an SME support group. However, the remaining sections, C-J, were comprised of questions relating to the variables of interest that included government support, social support, financial access, market orientation, technology adoption, and management. The study used a cluster sampling approach, considering that the participants were spread throughout various locations in South Africa and the DR-Congo. For South Africa, data were collected from the Gauteng Province, South Africa’s economic hub. As for the DR-Congo, data were collected from the capital city of Kinshasa, and the towns of Lubumbashi and Kolwezi were considered crucial to the country's economies. The data collection process continued for approximately five months, and 464 usable questionnaires from both countries were gathered for further analysis. Considering the primary and secondary objectives stated at the study's inception, the positivism paradigm appeared to be the most suitable. The reliability of the constructs was ensured using the Cronbach alpha coefficient, and the validity was assessed using the Pearson correlation. Data were analysed and interpreted statistically using regression analyses, ANOVA, and mediation analysis using Process Macro, an extension of the statistical package of social sciences (SPSS).
The study's main findings revealed that market orientation, technology adoption, and management appeared essential to SMEs in South Africa and the DR Congo. Three regression models were performed to assess the relationship between CSFs, growth intention and financial performance. The first regression model suggested analysing the relationship between CSFs and financial performance; outcomes of the analysis revealed a significant positive relationship between market orientation, technology adoption, and management and financial performance. Secondly, the relationship between CSFs and growth intention; results of this regression model 2 revealed a significant positive relationship between government support, social capital, market orientation, technology adoption and management. Lastly, regression model 3 tested the mediating effect of growth intention in the relationship between
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CSFs and financial performance. For this analysis, the mediating effect was tested individually on each of the CSFs to assess the strength of the relationship.
The outcome of the mediation analysis revealed a significant relationship between market orientation and management and financial performance through growth intention.
This study contributed to the body of knowledge in several ways. First, it is unique because it has established for the first time that growth intention “partially” mediates the relationship between market orientation, management, and financial performance in South Africa and DR-Congo. Furthermore, the study has also established which CSFs are deemed essential for SMEs, regardless of the sector of activity, since most of the earlier findings have mainly been focused on specific sectors. Recommendations on improving the environment in which SMEs operate were also provided for each country. Because common challenges were primarily related to the institutional environment, the lack of support from the government and financial access, recommendations were provided concerning how to create a business environment that could be more conducive for SMEs operating in the selected areas in South Africa and the DR-Congo.
Keywords: critical success factors, DR-Congo, financial performance, growth, growth intention, mediation, small medium sized enterprises and South Africa