ENTREPRENEUR’S MANAGERIAL COMPETENCY AND ACCESS TO VENTURE CAPITAL BY SMES IN NAIROBI CITY COUNTY, KENYA
Abstract
Small and medium Enterprises are vital for economic growth especially in the developing countries. However, empirical evidence shows that most of these enterprises fail due to poor/lack of access to finance. Access to venture capital by the small and medium enterprises could be a plausible alternative but unfortunately research has pointed out that majority of the enterprises do not access venture capital financing. This study therefore sought to investigate the effect of entrepreneur’s managerial competency on access to venture capital by selected SMEs in Nairobi Kenya. Agency theory underpinned the study. The study adopted the explanatory non-experimental research design and positivism philosophy guided the study. Target population of the study was 334 Small and medium size enterprises ranked by KPMG between 2008 and 2017 in their annual survey. Proportionate random sampling technique was used to select the firms. Primary data was collected by use of questionnaire. Both descriptive statistics and inferential statistics were used to analyze the data. Nested multinomial logit model was used to establish the effect of entrepreneur’s managerial competency on access to venture capital financing. The results reveal that; the influence of the highest level of education and professional qualification on access to venture capital financing is statistically significant. Secondly, the number of seminars/job training and the number of years of experience of managers/owners had positive influence and statistically significant to access to venture capital financing among SMEs. Given that managerial competency positively affects SMEs access of venture capital financing, firms should invest in human capital of their management through various strategies. For instance, investing in training gives employees the opportunity to develop new skills and accumulate the knowledge they need in order to achieve specific organizational and personal goals with the priority being to train managers so that they can be able to cope with the challenges which hinder business success.
Key words: Managerial competency, Venture capital, SMEs, Venture Capitalists, Risk Measure, syndicate of investments, staging of capital infusion Nested multinomial logit model.
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