Examining Factors Affecting SMEs Growth and Development: Case Study of Indigenous Zambian Businesses in the Hospitality Sector

Zambia's hospitality sector presents both a fertile ground for opportunity and a landscape riddled with challenges for indigenous Small and Medium Enterprises (SMEs). While these businesses are vital to the nation’s economic growth and job creation, many struggle to achieve sustainable development. This thesis embarks on an in-depth exploration of the key factors that influence the growth and development of SMEs in Zambia’s hospitality sector, highlighting the strategies that can drive their success in an increasingly competitive market. Through a rigorous quantitative methodology, this research analyzed data from 90 returned questionnaires (95.7% response rate) to test various hypotheses and offer key insights. The findings reveal that innovative capacity plays a critical role in SME development, with respondents acknowledging that innovation enhances service quality and operational efficiency. However, its effect on revenue growth, market expansion, and competitive advantage is more limited; suggesting that other external factors in the competitive landscape may hinder these potential benefits. Entrepreneurial orientation also emerged as a significant driver of SME growth, positively impacting revenue, customer satisfaction, market expansion, and profitability. However, a notable gap in formal training for entrepreneurs’ points to an urgent need for improvement in business education and support services. Meanwhile, high operational costs remain a substantial barrier, affecting financial stability and limiting investment. The study highlights entrepreneurial traits such as resilience, visionary thinking, and risk-taking as pivotal to business success, with respondents affirming their role in driving growth. Regression analysis confirmed that higher innovative capacity, entrepreneurial orientation, and key entrepreneurial traits are strongly associated with SME growth, while high operational costs negatively impact it. In conclusion, the research calls for a stronger focus on fostering innovation, improving entrepreneurial skills, and managing operational costs to enhance the performance and sustainability of Zambia’s hospitality SMEs.