INFLUENCE OF EXTERNAL ENVIRONMENT ON THE PERFORMANCE OF SERVICE- BASED MICRO, SMALL AND MEDIUM SCALE ENTERPRISES (MSMES) IN MAKURDI METROPOLIS

Abstract

This study investigates the influence of external environmental factors on the performance of Service-based Micro, Small and Medium Enterprises (MSMEs) in Makurdi Metropolis, Nigeria. The research focuses on three primary external factors: the economic environment, regulatory environment, and socio-cultural environment, and their influence on MSME performance, which is measured by profitability, market share, customer satisfaction, and business sustainability. The theory backing this study is the institutional theory propounded by DiMaggio and Powell (1983). A total of 176 completed questionnaires were returned and analysed using descriptive statistics and regression analysis. The findings revealed that the economic environment had a significant influence on MSME performance, with indices such as inflation, exchange rates, and interest rates influencing operational costs and profitability negatively. The regulatory environment was also found to have a significant influence, highlighting the importance of supportive government policies. Additionally, socio-cultural factors, including consumer behaviour and cultural values, were identified as critical influencers of business success. Based on these findings, the study concludes and recommends that policymakers focus on improving the economy, the regulatory framework, and supporting MSMEs in understanding socio-cultural dynamics. This research contributes to the existing literature by providing a context-specific analysis of external environmental influences on MSMEs and offering practical recommendations for improving MSME performance in developing economies.