Effect of Resource Fluidity on Operational Performance of SMEs in Nairobi City County, Kenya

Abstract

Purpose: This study examined the effect of resource fluidity on the operational performance of small and medium-sized enterprises (SMEs) in Nairobi City County, Kenya. The study sought to establish whether resource fluidity, measured through resource reallocation flexibility and resource adaptation, significantly influences operational performance.

Methodology: The study was anchored on the Resource-Based View (RBV) theory and employed an explanatory research design. The target population comprised 103,214 registered SMEs operating in Nairobi City County across wholesale and retail trade, manufacturing, professional, scientific and business services, accommodation and food services, information and communication technology, transport and logistics, construction, and other service sectors. Stratified random sampling was used to select the SMEs, and Yamane's formula was applied to determine a sample size of 399 respondents. Primary data were collected using structured questionnaires based on a five-point Likert scale. Of the 399 questionnaires distributed, 303 were returned, while 280 valid questionnaires were retained for analysis, representing an effective response rate of 70.18% of the distributed questionnaires. Data were analyzed using descriptive statistics, Pearson correlation analysis, and hierarchical multiple regression analysis, with firm age and firm size treated as control variables.

Findings: The findings revealed a strong positive and statistically significant relationship between resource fluidity and operational performance (r = .762, p < .001). Hierarchical regression analysis further established that resource fluidity had a positive and statistically significant effect on operational performance (β = .232, p < .001), after controlling for firm age and firm size. Firm age (β = .127, p = .001) and firm size (β = .132, p = .001) also had positive and statistically significant effects on operational performance. These findings indicate that SMEs with greater capacity to reallocate, redeploy, and adapt financial, human, technological, and other organizational resources tend to report better operational performance.

Conclusion: The study concluded that resource fluidity is an important factor associated with the operational performance of SMEs in Nairobi City County. SMEs that can flexibly redirect and redeploy resources in response to changing business conditions are better positioned to maintain operational efficiency, quality, and delivery reliability. Strengthening managerial capabilities in resource planning, mobilization, reallocation, and adaptation may therefore support improved operational performance among SMEs.

Value: The study contributes to the Resource-Based View by highlighting resource fluidity as an important organizational capability through which SMEs can leverage and redeploy available resources to support operational performance. The findings provide practical insights for policymakers, SME managers, and business support organizations in strengthening resource management capabilities, resource flexibility, and operational effectiveness among SMEs in Kenya.