**5. Empirical results**

This section gives the results of the LPM regression (see **Table 2**) and discusses the results.

A total of 3222 observations were considered in the analysis. The LPM regression results were reported.

Number of business entities or units (businessnum) was found statistically significant at 10% level. The more business entities one has the greater the profits obtained. The findings were in line with Ayyagari et al. [29] who argued that the concept of diversification helps explain business dynamics in this case. If one unit is doing well and the other one is not the owner is cushioned and enjoys some income. In terms of income two is better as they can provide you with twice the income. With two or more businesses there may be synergy in marketing and other aspects of business [30].

The variable of travel was not significant with a negative correlation. It may not have been significant but the negative sign shows that to some extent as the distance from the work place increases the less profit is reported. With owner managed businesses the problem may be absence when crucial decisions are to be made and lack of supervision. However, the findings contradicted Kapteyn and Wah [31] who found distance travelled significant to profitability.

Education level was found significant at 1% level. This shows that the more one is educated the better the management and profitability of business in Zimbabwe. Someone educated is expected to have a better appreciation of business concepts hence better profits. A number of studies have shown that education level contributes positively to profitability of a business [18].

Age was found not to be significant. This showed that age had no significant effect on profitability levels of business. However, the results contradicted Abeh [13] who found that age had an effect on business profitability of small businesses.

The ownerun variable was found not to be significant implying that whether the business is run by the owner or not there is no effect on profitability of business.

**227**

*The Factors Influencing SMEs Growth in Africa: A Case of SMEs in Zimbabwe*

Variables Profitability Businessnum −4.156\*

Travel −0.0324

Education level 2.511\*\*\*

Age 1.375

Ownerun 5.366

Bustype 19.82\*\*

Fambus −7.660\*\*\*

Ownership −0.245

Useit 5.072

Motivations 2.312

Finprob −3.575

Busregprob 0.448

Busplanprob −37.28

Empmot −3.266

Advertising 6.067\*\*

Licenced −5.504\*

Bankacc −8.432\*

Businsurance −1.694

Busrec 2.055

Busadvisory −2.711

**LPM**

(2.172)

(0.0556)

(0.875)

(0.872)

(22.86)

(9.884)

(2.223)

(2.577)

(6.902)

(2.317)

(2.239)

(6.055)

(25.89)

(3.041)

(2.916)

(3.058)

(4.335)

(8.899)

(9.941)

(3.988)

*DOI: http://dx.doi.org/10.5772/intechopen.87192*


#### *The Factors Influencing SMEs Growth in Africa: A Case of SMEs in Zimbabwe DOI: http://dx.doi.org/10.5772/intechopen.87192*

*Regional Development in Africa*

*4.2.25 Level of Business R&D*

**5. Empirical results**

results were reported.

of business [30].

the results.

better appreciation of business concepts.

profitability but for this study the data was not available.

ity but was not considered because of lack of data.

found distance travelled significant to profitability.

utes positively to profitability of a business [18].

education. The higher the level of education obtained the greater the results or profits are expected. With education one is expected to be more organised with

Many developed countries today are what they are because of investment in research. A business that takes research and development (R&D) seriously is always outstanding and is expected to report high profits. B&D drives innovation, business growth, profitability and ultimately economic growth. Research shows that R&D contributed significantly to the growth of businesses and economies of Republic of Korea, India and China [28]. In some countries R&D did not increase profitability and growth significantly. R&D is an important factor to consider on business

In sum, the following factors were considered in this study: profitability, businessnum, travel distance, education level, age, ownerun, business type, family business, ownership, use ICT, self- motivation, financial problem, business regulation problem, business planning problem, employee motivation, advertising, licenced, bank account, business insurance, business record, business advisory, expertise, corruption, tax and marital status. R&D is an important determinant of profitabil-

This section gives the results of the LPM regression (see **Table 2**) and discusses

A total of 3222 observations were considered in the analysis. The LPM regression

The variable of travel was not significant with a negative correlation. It may not have been significant but the negative sign shows that to some extent as the distance from the work place increases the less profit is reported. With owner managed businesses the problem may be absence when crucial decisions are to be made and lack of supervision. However, the findings contradicted Kapteyn and Wah [31] who

Education level was found significant at 1% level. This shows that the more one is educated the better the management and profitability of business in Zimbabwe. Someone educated is expected to have a better appreciation of business concepts hence better profits. A number of studies have shown that education level contrib-

Age was found not to be significant. This showed that age had no significant effect on profitability levels of business. However, the results contradicted Abeh [13] who found that age had an effect on business profitability of small businesses. The ownerun variable was found not to be significant implying that whether the business is run by the owner or not there is no effect on profitability of business.

Number of business entities or units (businessnum) was found statistically significant at 10% level. The more business entities one has the greater the profits obtained. The findings were in line with Ayyagari et al. [29] who argued that the concept of diversification helps explain business dynamics in this case. If one unit is doing well and the other one is not the owner is cushioned and enjoys some income. In terms of income two is better as they can provide you with twice the income. With two or more businesses there may be synergy in marketing and other aspects

**226**


*\*\*p < 0.05*

*\*\*\*p < 0.01 Source: Stata 2014.*

#### **Table 2.** *Empirical results.*

The results contradicted that of Soni [32] who argues that the one running the enterprise determines SMEs profitability.

The type of business (bustype) was found significant at 5% level implying that the formal business was more likely to report better profits than an informal enterprise. Formal businesses have an advantage of being taken seriously by customers and stand better chances of getting big contracts. The finding was in line with Kazimoto [18] who found that formal business had more opportunities hence better profits.

Family business (fambus) was found significant at 1% significance level showing that a business owned by a family was likely to have more profits than the one owned by different people. This may be due to less conflicts in running the business as a family. This is in tandem with Soni [32] who found that family businesses are likely to report better profits but results may vary as the enterprises get bigger with time.

Ownership variable was found not to be significant. This shows that the ownership structure had no effect on the profitability of SMEs in Zimbabwe. However, this differs with other studies that found that ownership influences profitability levels of businesses [12].

The use of ICT (useit) in business was not significant. This implied that the application of technology in business operations had no impact on profitability of SMEs in Zimbabwe. The level of technological development of the country and/or consumers may have an impact on the effectiveness of ICT use. The study contradicted a number of studies that found ICT applications having a huge impact on profitability of business [11, 14]. The argument is that the use of ICT use drives costs of operations down.

The reasons for starting a business (motivations) were found not significant. The reasons behind the start of an enterprise had no effect on the profitability of small

**229**

*The Factors Influencing SMEs Growth in Africa: A Case of SMEs in Zimbabwe*

businesses in Zimbabwe. The results contradicted with other studies that argue that

Business regulation problems (busregprob) was found not significant implying that the challenges encountered due to some regulations in place had no effect on the profitability of SMEs in Zimbabwe. Some studies have shown that some regula-

The business planning problem (busplanprob) had no significant impact on profitability. The problems associated with business planning had no significant impact on SMEs operating in Zimbabwe. However this differed with other studies that found that lack of planning was the major hindrance of SMEs growth and

Employee motivation (empmot) had no significant effect on profitability of SMEs in Zimbabwe. This implies that any form of scheme to motivate staff had no impact on profitability levels. The reason may be that as many are owner/family run incentives may not mean much to them as they will be building on value of business. However many studies found different results from the current one because motivation of employee is believed to be having a huge impact on profitability of

Advertising of business was significant at 5% significance level. This implied that adverts are an important component of a growing business. The more expenditure on advertising the better the profits achieved in business. The results were in line with some studies that reported that a business that does not advertise may not

The licenced variable is significant at 10% level. This implies that a business operating legally is more likely to report more profits than one operating illegally. The legal status makes such businesses operate more profitable and sustainable [31, 36]. Bank account variable was found to be significant at 10% level. If a company is financially included higher profits are expected. If a company has a bank account it is likely to access funds at cheaper costs and more profits are reported as a result [39]. The results are in tandem with findings of Nkuah et al. [12] who reported that those firms with bank accounts are likely to report better profits than the financially excluded. Financial services are important in an economy and particularly for SMEs entrepreneurs. Financial institutions play a pivotal role in the resource allocation

Business insurance (businsurance) was found not significant. This implies that business insurance has no influence on profitability of business. However the results differed with some other studies that reported that an insured business was likely to

Business records (busrec) was found not significant. This implied that whether the business records are in place or books done by a professional had no effect on the profitability of SMEs in Zimbabwe. The finding contradicted other studies that reported that those firms with business records are likely to have better profits [12]. Business advisory was found not significant. This means that whether the business owners receive business advice or not there is no effect on profitability of SMEs in Zimbabwe. Though business advisory is important some sectors may not require special business advisory let alone for a small firm. The findings disagree with some studies that advocate for business advisory at any stage of growth and in decision

process and entrepreneurs need finance to grow their businesses.

motivation had an effect on profitability and sustainability of SMEs [32, 33]. Financial problems (finprob) were found not significant. The issues to do with the business having financial problems at some stage of the business had no significant impact on the profitability of business. This contradicted with other studies that found that financial problems contributed to SMEs business failure and

tions indeed have had a negative effect of business profitability [14, 32].

*DOI: http://dx.doi.org/10.5772/intechopen.87192*

suppressed growth [12, 34, 35].

sustainability [10, 12]).

business [36, 37].

produce outstanding results [26, 38].

report more profits [40].

making [11, 33, 41].

#### *The Factors Influencing SMEs Growth in Africa: A Case of SMEs in Zimbabwe DOI: http://dx.doi.org/10.5772/intechopen.87192*

businesses in Zimbabwe. The results contradicted with other studies that argue that motivation had an effect on profitability and sustainability of SMEs [32, 33].

Financial problems (finprob) were found not significant. The issues to do with the business having financial problems at some stage of the business had no significant impact on the profitability of business. This contradicted with other studies that found that financial problems contributed to SMEs business failure and suppressed growth [12, 34, 35].

Business regulation problems (busregprob) was found not significant implying that the challenges encountered due to some regulations in place had no effect on the profitability of SMEs in Zimbabwe. Some studies have shown that some regulations indeed have had a negative effect of business profitability [14, 32].

The business planning problem (busplanprob) had no significant impact on profitability. The problems associated with business planning had no significant impact on SMEs operating in Zimbabwe. However this differed with other studies that found that lack of planning was the major hindrance of SMEs growth and sustainability [10, 12]).

Employee motivation (empmot) had no significant effect on profitability of SMEs in Zimbabwe. This implies that any form of scheme to motivate staff had no impact on profitability levels. The reason may be that as many are owner/family run incentives may not mean much to them as they will be building on value of business. However many studies found different results from the current one because motivation of employee is believed to be having a huge impact on profitability of business [36, 37].

Advertising of business was significant at 5% significance level. This implied that adverts are an important component of a growing business. The more expenditure on advertising the better the profits achieved in business. The results were in line with some studies that reported that a business that does not advertise may not produce outstanding results [26, 38].

The licenced variable is significant at 10% level. This implies that a business operating legally is more likely to report more profits than one operating illegally. The legal status makes such businesses operate more profitable and sustainable [31, 36].

Bank account variable was found to be significant at 10% level. If a company is financially included higher profits are expected. If a company has a bank account it is likely to access funds at cheaper costs and more profits are reported as a result [39]. The results are in tandem with findings of Nkuah et al. [12] who reported that those firms with bank accounts are likely to report better profits than the financially excluded. Financial services are important in an economy and particularly for SMEs entrepreneurs. Financial institutions play a pivotal role in the resource allocation process and entrepreneurs need finance to grow their businesses.

Business insurance (businsurance) was found not significant. This implies that business insurance has no influence on profitability of business. However the results differed with some other studies that reported that an insured business was likely to report more profits [40].

Business records (busrec) was found not significant. This implied that whether the business records are in place or books done by a professional had no effect on the profitability of SMEs in Zimbabwe. The finding contradicted other studies that reported that those firms with business records are likely to have better profits [12].

Business advisory was found not significant. This means that whether the business owners receive business advice or not there is no effect on profitability of SMEs in Zimbabwe. Though business advisory is important some sectors may not require special business advisory let alone for a small firm. The findings disagree with some studies that advocate for business advisory at any stage of growth and in decision making [11, 33, 41].

*Regional Development in Africa*

Expertise −5.456\*\*

Corruption 8.426

Tax −6.087

Marital −0.0188

Constant 54.20\*\*

Observations 3222 R-squared 0.043

The results contradicted that of Soni [32] who argues that the one running the

The type of business (bustype) was found significant at 5% level implying that the formal business was more likely to report better profits than an informal enterprise. Formal businesses have an advantage of being taken seriously by customers and stand better chances of getting big contracts. The finding was in line with Kazimoto [18] who found that formal business had more opportunities hence better

**LPM**

(2.648)

(13.56)

(9.387)

(2.571)

(23.93)

Family business (fambus) was found significant at 1% significance level showing that a business owned by a family was likely to have more profits than the one owned by different people. This may be due to less conflicts in running the business as a family. This is in tandem with Soni [32] who found that family businesses are likely to report better profits but results may vary as the enterprises get bigger with

Ownership variable was found not to be significant. This shows that the ownership structure had no effect on the profitability of SMEs in Zimbabwe. However, this differs with other studies that found that ownership influences profitability

The use of ICT (useit) in business was not significant. This implied that the application of technology in business operations had no impact on profitability of SMEs in Zimbabwe. The level of technological development of the country and/or consumers may have an impact on the effectiveness of ICT use. The study contradicted a number of studies that found ICT applications having a huge impact on profitability of business [11, 14]. The argument is that the use of ICT use drives

The reasons for starting a business (motivations) were found not significant. The reasons behind the start of an enterprise had no effect on the profitability of small

enterprise determines SMEs profitability.

*Standard errors in parentheses.\*p < 0.1*

**228**

profits.

*\*\*p < 0.05 \*\*\*p < 0.01 Source: Stata 2014.*

**Table 2.** *Empirical results.*

time.

levels of businesses [12].

costs of operations down.

Expertise was found significant at 5% level. This implies that if the business operator is skilled the higher the probability of better profits. The findings are in line with other studies [19, 32]. To operate a business it is best for one to be knowledgeable for better results to be realised. For the SMEs to contribute more to the GDP and create more job opportunities, there is need to train the operators in every sector.

Corruption was found not to be significant. Any corrupt activity in the system does not have any effect on profitability of business in Zimbabwe. This contradicts with some studies that have found that corruption has become a hindrance to business growth and profitability [16, 36]. In some cases corrupt activities in the system may hinder licences, permits to operate or sell in some markets influencing profitability of business. Some countries have been affected by corruption making it difficult to operate business.

Tax variable was not significant. Any form of tax or tax status of a company has no influence on the profitability of an enterprise in Zimbabwe. A business that avoids tax usually reports more profits as tax is an expenditure that reduces profits [13, 15, 33].

Marital status was not significant. Whether one is married or not has no significant effect on profitability levels. Some single women are operating in Zimbabwe with varying results and equally competing with married individuals. Business is no longer determined by marital status as individuals can take independent decisions or make decisions aimed at promoting business [13].
