Adoption of E-Commerce and The Growth of Small and Medium Enterprises in Nairobi Central Business District, Kenya
Abstract
Small and Medium Enterprises (SMEs) are central to employment creation, economic growth, and inclusive development, particularly in emerging economies. However, high business failure rates continue to constrain their contribution to sustainable economic development. This study examined the influence of e-commerce adoption on the growth of SMEs in Nairobi Central Business District (CBD), focusing on electronic payments, e-procurement, e-banking, and e-logistics. The study was anchored on Diffusion of Innovation Theory, Behavioral Theory of the Firm, and the Technology Acceptance Model. An explanatory research design was adopted, targeting 21,100 SMEs. A stratified random sample of 393 SME managers was selected, of whom 368 provided valid responses, representing a 93.6% response rate. Data were collected using questionnaires and analyzed using descriptive statistics, correlation analysis, and multiple linear regression in SPSS Version 22. Diagnostic tests confirmed compliance with the assumptions of Ordinary Least Squares regression. The findings revealed significant positive relationships between SME growth and e-logistics (r = 0.73), e-payment (r = 0.71), e-banking (r = 0.69), and e-procurement (r = 0.66). Regression results indicated that the four e-commerce dimensions jointly explained 66% of the variation in SME growth. E-logistics (β = 0.34) and e-payment (β = 0.30) demonstrated the strongest effects. The findings indicate that e-commerce adoption enhances transaction efficiency, reduces operational costs, improves service delivery, and strengthens SME profitability. The study concludes that e-commerce is an important driver of SME growth in Nairobi CBD. It recommends strengthening digital competencies, ICT infrastructure, and secure digital platforms to support effective adoption of e-commerce technologies.
Keywords: E-commerce adoption; SMEs; E-payment; E-procurement; E-banking; E-logistics; SME growth
References
Adam, N. A., & Alarifi, G. (2021). Innovation practices for survival of SMEs in the COVID-19 times: The role of external support. Journal of Innovation and Entrepreneurship, 10(1), Article 15.
Ahmed, I., & Ishtiaq, S. (2021). Reliability and validity: Importance in medical research.
Ajao, B. F., Oyebisi, T. O., & Aderemi, H. O. (2019). Implementation of e-commerce innovation on small enterprises in Nigeria. International Journal of Entrepreneurship and Small Business, 38(4), 521–536.
Al Naim, A. F., & Bhatti, M. A. (2022). Impact of e-procurement, e-fulfillment, e-logistics on Saudi SME’s performance: Mediating role of e-supply chain performance and moderating role of reverse logistics and return. International Journal of eBusiness and eGovernment Studies, 14(4), 114–136.
Alzoubi, H. M., & Ghazal, T. M. (2022). The effect of e-payment and online shopping on sales growth: Evidence from banking industry. International Journal of Data and Network Science, 6(4), 1369–1380.
Aondo, R. M. (2019). Effectiveness of taxpayer education on tax compliance for SMEs in Kenya: A study of selected business enterprises in Kitengela Town in Kajiado County. International Journal of Management & Entrepreneurship Research, 1(3), 114–123.
Apuoyo, B. O. (2020). Venture capital financing and growth of SMEs in Nairobi City County, Kenya [Doctoral dissertation, Kenyatta University].
Ausat, A. M. A., & Peirisal, T. (2021). Determinants of e-commerce adoption on business performance: A study of MSMEs in Malang City, Indonesia. Jurnal Optimasi Sistem Industri, 20(2), 104–114.
Awinja, N. N., & Fatoki, O. I. (2021). Effect of digital financial services on the growth of SMEs in Kenya. African Journal of Empirical Research, 2(1), 79–94.
Bell, E., Bryman, A., & Harley, B. (2022). Business research methods. Oxford University Press.
Bertrand, M., & Bouchard, S. (2008). Applying the technology acceptance model to VR with people who are favorable to its use. Journal of Cyber Therapy & Rehabilitation, 1(2), 200–210.
Bromiley, P., & Rau, D. (2022). Extending the behavioral theory of the firm to entrepreneurial firms. Strategic Management Review, 3(1), 99–123.
Buyko, M. (2022). The implications of e-logistics on business performance in supply chain management. Journal of Enterprise and Business Intelligence, 2(4), 200–210.
Chepkoech, N., Gichana, J. O., & Agong, D. (2022). Effect of e-payment systems on sustainable revenue collection in Nairobi City County Government. International Academic Journal of Economics and Finance, 3(7), 238–253.
Chima, A. V. (2023). E-payment system and sales growth of retail outlets in Nigeria. BW Academic Journal, 14–14.
Cyert, R., & March, J. (1992). Behavioral theory of the firm. In Organizational behavior 2.
Đalić, I., & Terzić, S. (2021). Violation of the assumption of homoscedasticity and detection of heteroscedasticity. Decision Making: Applications in Management and Engineering, 4(1), 1–18.
Davis, F. D. (1989). Technology acceptance model: TAM. In M. N. Al-Suqri & A. S. Al-Aufi (Eds.), Information seeking behavior and technology adoption (pp. 205–219).
Dew, N., Read, S., Sarasvathy, S. D., & Wiltbank, R. (2008). Outlines of a behavioral theory of the entrepreneurial firm. Journal of Economic Behavior & Organization, 66(1), 37–59.
Fatonah, S., Yulandari, A., & Wibowo, F. (2018). A review of e-payment system in e-commerce. Journal of Physics: Conference Series.
Fliginskih, T. N., Vaganova, O. V., Solovjeva, N. E., Bykanova, N. I., Ragheed, Y., & Usatova, L. V. (2020). The impact of e-banking on performance of banks: Evidence from Russia.
Goh, T. S., Henry, H., Erika, E., & Albert, A. (2022). Sales growth and firm size impact on firm value with ROA as a moderating variable. MIX: Jurnal Ilmiah Manajemen, 12(1), 99–116.
Grimmer, L., Miles, M. P., Byrom, J., & Grimmer, M. (2019). The impact of resources and strategic orientation on small retail firm performance. Journal of Small Business Management, 55, 7–26.
Gunawardana, K. D. (2020). E-commerce in SMEs in Sri Lanka. In Start-ups and SMEs: Concepts, methodologies, tools, and applications (pp. 634–649). IGI Global.
Hossain, M. I. (2021). Effects of e-banking adoption on the financial performance of state-owned commercial banks in Bangladesh. Information Resources Management Journal, 34(4), 93–112.
Hussain, A., Akbar, M., Shahzad, A., Poulova, P., Akbar, A., & Hassan, R. (2022). E-commerce and SME performance: The moderating influence of entrepreneurial competencies. Administrative Sciences, 12(1), Article 13.
Iskandar, D. (2021). The effect of profitability and sales growth on company value moderated by leverage. International Journal of Management Studies and Social Science Research, 3(5), 32–41.
Kamaru, A. N., & Were, S. (2018). Effect of e-procurement adoption on the performance of state corporations under the State Department for Infrastructure in Nairobi, Kenya. The Strategic Journal of Business & Change Management, 5(2), 2228–2241.
Kavila, T. M., & Kilika, J. (2023). E-banking strategy and performance of commercial banks in Kenya. Journal of Finance and Accounting, 3(1), 47–60.
Khavere Kitigin, B. (2021). E-banking technology characteristics, adoption, innovative behaviour and performance of micro and small enterprises in Vihiga County, Kenya [Doctoral dissertation, Moi University].
Kidali, F. K. (2020). Access to credit and growth of micro, small and medium-scale enterprises in Kenya [Doctoral dissertation, University of Nairobi].
Kimana, V. (2020). Factors affecting e-commerce adoption among small and medium enterprises (SMEs) in developing countries: The context of Kenya.
Kimonye, E. K., & Muchelule, Y. (2024). E-payment system and financial performance of commercial banks in Nairobi County, Kenya. International Journal of Social Sciences Management and Entrepreneurship, 8(4).
Kumar, A., & Praveenakumar, S. G. (2025). Research methodology. Authors Click Publishing.
Kuruwitaarachchi, N., Yajid, M., Khatibi, A., & Azam, S. (2020). Information technology factors influencing the adoption of e-commerce in small and medium-scale organisations in Sri Lanka: A research agenda. International Journal of E-Education, E-Business, E-Management and E-Learning, 10(1), 95–103.
Kwabena, G. Y., Qiang, M., Wenyuan, L., Qalati, S. A., & Erusalkina, D. (2019). Effects of the digital payment system on SMEs’ performance in developing countries: A case of Ghana. EPRA International Journal of Economic and Business Review, 1, 79–87.
Kwak, S. G., & Park, S. H. (2019). Normality test in clinical research. Journal of Rheumatic Diseases, 26(1), 5–11.
Kyalo, T. (2024). Social media marketing and performance of youth-owned SMEs in Nairobi County, Kenya. International Journal of Research in Business and Social Science, 13(5), 147–159.
Lakens, D. (2022). Sample size justification. Collabra: Psychology, 8(1), Article 33267.
Lowe, N. K. (2019). What is a pilot study? Journal of Obstetric, Gynecologic & Neonatal Nursing, 48(2), 117–118.
Lule, E., & Tusiime, B. (2019). The effects of e-commerce on the performance of SMEs in Uganda.
Maina, P. M. (2023). E-procurement strategies and sustainable procurement performance of telecommunication companies in Kenya [Doctoral dissertation, University of Nairobi].
Makworo, G., Muhoho, J., & Mugambi, H. (2019). Effect of e-banking strategy on growth of SMEs in the hospitality industry in Nairobi County, Kenya. Journal of International Business, Innovation and Strategic Management, 3(3), 72–94.
Masudin, I., Aprilia, G. D., Nugraha, A., & Restuputri, D. P. (2021). Impact of e-procurement adoption on company performance: Evidence from Indonesian manufacturing industry. Logistics, 5(1), Article 16.
Mawiyoo, F. M. (2023). E-logistics and operations performance of international humanitarian organizations in Nairobi [Doctoral dissertation, University of Nairobi].
Mazhar, S. A., Anjum, R., Anwar, A. I., & Khan, A. A. (2021). Methods of data collection: A fundamental tool of research. Journal of Integrated Community Health, 10(1), 6–10.
