Re-examining the Determinants of Small- and Medium-sized Enterprises’ Performance Profitability and Growth: A Case of Ghana

Abstract

Abstract This paper looks at the effects of the six main independent variables (sources of finance, social capital, ownership type, government policies, age and size, and human capital) on the main dependent variable (performance profitability and growth) of small and medium-sized enterprises (SMEs) in Ghana (the context for the project). The thesis is in three (3) parts. Project One (1) is the thematic literature review of the independent and dependent variables in this study. The review introduces the literature on the characteristics of SMEs in Ghana, and refers to SMEs in the developed world in order to compare the contributions and characteristics of SMEs worldwide. Information about the Ghanaian economy is provided, in order to set the context of the study. In addition, project one reviews the manufacturing and hospitality sectors and notes reasons for which they are the focus of this project. It ends with a presentation of summary of the review. Within this paper, the terms ‘firm’, ‘organisation’ and ‘enterprise’ are used interchangeably. Project Two (2) is concerned with the methodology. It is a cross-sectional study and uses interview for data collection. It emphasises the descriptive nature of the work, the suitability and importance of all the necessary processes like snowball technique, sampling methods, and data analysis. Nvivo 8, a computer assisted qualitative data analysis software (CAQDAS) is the primary software that is used for the analysis. Project Three (3) is the result of the study. It exposes the impermeable wall separating lenders and Government and SMEs as the former lack better knowledge of the latter. The reluctance of SMEs to outsource funding is consistent with the pecking order theory because of the negative consequences of borrowing on their performance profitability and growth. Unclear, unhelpful and unsuitable government policy framework has led to eschewal of such policies by SMEs. Social and human capitals affect the performance of the SMEs. Good social networks benefits SMEs as they reduce operating costs. Skilled and highly educated employees create positive value in the companies. The study is critical of the style of ownership structure of most SMEs. The “more is better” is very simplistic as age and size had mixed effect on SME performance profitability and growth in the study