Determinants of SME growth: Do External Factors Matter? Evidence from Bukedi Sub-Region of Uganda

This study employs primary data collected from a sample of 1900 business owners to investigate the role of external factors in the growth of small and medium enterprises (SMEs) in the Bukedi sub-region of Uganda. Simple random sampling was used to obtain SME entrepreneurs, who were the major respondents in our study. Descriptive statistical tools and multinomial logistic regression were used for analysis. On assessment of the empirical literature and regional applicability, we constructed two models, with declining SMEs as the reference category. Accordingly, model one compares SMEs that experienced growth against those that declined, while the second model compares stagnant SMEs with enterprises that declined. The results underscore the importance of electricity, partnerships, and local government support as significant determinants of SME growth in Bukedi. Based on these findings, enhancement of the above variables is a key enabler of sustainable SME growth. Specifically, direct government intervention such as through implementation of SME support programs, and provision of key infrastructure such as electricity can be critical in influencing enterprise growth for the sector to create sustainable employment. Social networks need to be strengthened in Bukedi, as empirical findings indicate that partnerships are a key factor in SME growth. Unlike existing studies that apply secondary data, our study extends the existing literature by using primary data collected directly from SME owners in a low-income, regional context. Our study focuses on SMEs at the regional level_ future studies could focus on understanding how external factors affect SMEs at the national level.