Small And Medium-Scale Enterprise (Sme) Survival In Ghana: A Social Network Theory Perspective

ABSTRACT

Small and medium-scale enterprises (SME) are significant contributors to the development efforts of developing nations like Ghana. Yet their high failure rate continues to intrigue academics, policy makers, SME owners and managers. Scholars have used many approaches and their associated theories to understand the phenomenon yet one theory that has received little attention regarding the survival of SMEs is the social network theory. This thesis focuses on four network mechanisms of resource access, structural capital, isomorphism and diffusion and how they serve as antecedents to SME survival. Data was collected from the Dormaa poultry cluster in the Brong Ahafo region of Ghana in 2014 and 2015. A network survey using multiple name generators was used to solicit information relating to financial, distribution and cluster networks from which network effects were generated. Other firm level attributes such as owner characteristics, SME characteristics, managerial orientations and capabilities, technical competencies and investment climate constraints was also collected. Survival is modelled as persistence from 2014 to 2015 using lagged independent network effects and their corresponding attributes as covariates. The results indicate that approximately forty percent of the SMEs failed. Specifically, market resource access through distribution ties are seen to lead to negative survival outcomes and when moderated with SME characteristics the negative effects still persist for age and resource partition but not for size. Structural capital in financial networks in the form of prestige of financiers is associated with positive survival outcomes. When the specific type of financier is considered, universal banks and cooperative credit unions lead to positive outcomes while savings and loans companies are associated with negative outcomes. Descriptively, SMEs with prestigious financiers and ties to universal banks were less likely to be credit constrained. Network isomorphism measured as structural equivalence is seen to be positively linked to SME survival and useful in overcoming the general investment climate constraints. However, the benefits of this isomorphism reach a threshold and returns negative results. Finally, SME alter attributes in both technical and market forms are seen to be useful for SME survival. The direct and indirect mechanisms through which the resources reach SMEs are both associated with positive outcomes. The study makes a contribution to the issue of SME survival by attempting an explanation with relational network effects instead of the attribute-based approach that has been adopted by earlier scholars.