THE MEDIATING EFFECT OF FINANCE ON THE RELATIONSHIP BETWEEN SMES' INTERNAL GROWTH STRATEGY AND EXPORT PERFORMANCE

Abstract

Research on the role of small and medium enterprises (SMEs) in economic growth and development has focused more in recent times on determinants of SMEs’ export performance (EP). However, as much attention is being given to investigating the effect of finance on SMEs’ performance, its impact as a mediating factor in the relationship between firms’ internal growth strategies and export performance indicators, has not been sufficiently established in most developing economies including Nigeria. The present study thus examines this gap in a multi-stage, cross-sectional and purposive survey of 285 owners/managers of SME firms in Lagos, Oyo, and Osun with the highest numbers of SMEs in Nigeria. The empirical data collected were processed and analysed with multiple regression and correlation methods on PASW Statistics 18. The result shows internal growth strategy impacting positively and significantly on EP through entrepreneurial orientation, employees’ productivity enhancement programs, marketing philosophy, resources, and export risk management. Similarly, positive and significant effects of finance on EP were established through firms’ access to credits and start-up capital, terms of loans, and financing mechanisms for export facilitation. Essentially, the study detected evidence of the mediation effect of finance as a significant factor in the relationship between SMEs’ internal growth strategy and export performance in southwest Nigeria. The three hypotheses tested were thus, rejected and recommendations made to SMEs’ stakeholders & government to strengthen entrepreneurial ingenuity, employees’ productivity enhancement, SMEs’ financial inclusion, and long-term strategic management in the areas of SMEs’ competitive advantage and positioning strategies in the foreign market.