Owner-manager motives and the growth of SMEs in developing countries

Abstract

Purpose – This paper aims to contribute to the understanding of the motives of individuals in Tanzania to start their own businesses on the one hand and the growth of their firms on the other hand. Design/methodology/approach – A survey method was used to gather data from 300 small business owners and managers located in selected cities in Tanzania. Multiple regression analysis was conducted to analyse the relationship between the motivation to start an own business on the one hand and firm growth on the other hand. Three indicators for growth, namely, employment, sales and assets, were used to measure growth. Findings – The results suggest that that pull factors are more important to start the businesses than push factors. This contradicts the common opinion and previous research that push factors are more important than pull factors in developing countries. Furthermore, the study found that pull factors are positively related to firm, whereas push factors are negatively related to firm growth. Research limitations/implications – It should be noted that while this paper makes a number of contributions, there are some limitations that should be considered when interpreting the results. For instance, the data for this study were collected from only one type of business, i.e. the furniture industry (in Tanzania). Accordingly, we do not know the applicability of these findings to other businesses in other sectors. Therefore, future research should include businesses in other sectors to ascertain if the present findings are specific to the furniture business only or are applicable to other businesses as well. Practical implications – Our findings indicate that there are differences in motivations among owner-managers in starting the business and subsequent firm performance. Therefore, individuals need different forms of support depending on the level of development of their business, as well as their motivation. For example, we have seen that the presence of role models has a significant effect on business growth. Therefore, the government might consider using the media and other mechanisms to feature stories about successful entrepreneurs. Originality/value – The authors extend the findings of previous studies that investigate the owner-manager motives and small and medium-sized enterprises (SMEs) growth in developed economy settings, but neglected emerging economies. The study also contradicts the common opinion and previous research that push factors are more important than pull factors in developing countries.