Non-Tariff Barriers, Regulatory Quality, and Performance of Small and Medium Enterprises at Namanga Border, Kenya

Abstract

The purpose of this study was to establish the effect of regulatory quality on the relationship between non-tariff barriers and the performance of SMEs at the Namanga Border, Kenya. The specific objectives of the study were: to investigate the effect of technical barriers on the performance of SMEs at Namanga Border, Kenya; to investigate the effect of customs rules and procedures on the performance of SMEs at Namanga Border, Kenya; to investigate the effect of transport-related barriers on the performance of SMEs at Namanga Border, Kenya; and to assess the moderating effect of regulatory quality on the relationship between: a) technical barriers and performance of SMEs at Namanga Border, Kenya, b) customs rules and procedures and performance of SMEs at Namanga Border, Kenya, and c) transport-related barriers and performance of SMEs at Namanga Border, Kenya. Rational Choice Theory, New Trade Theory, and Institutional Theory guided the literature review. The study adopted an explanatory research design. The target population comprised 285 owners of cross-border retail SMEs engaged in the clothing, footwear, and electronics sectors operating within the Namanga Border town. The study used a purposive sampling method and Slovin’s sampling formula to derive a sample of 166 respondents. A systematic questionnaire was used to gather data, which was then analyzed using descriptive statistics and correlation analysis to find out how the dependent and independent variables were related. The correlation results showed that technical barriers (r = –0.315, p = 0.037), customs rules and procedures (r = –0.582, p = 0.023), and transport-related barriers (r = –0.512, p = 0.008) were negatively and significantly related to SME performance. Conversely, regulatory quality had a positive and significant relationship with SME performance (r = 0.188, p = 0.011). Regression analysis revealed that technical, procedural, and transport-related trade barriers each have a negative and statistically significant influence on SME performance. However, the overall explanatory power of the model was relatively low (R² = 0.023), suggesting that other unobserved factors may also contribute to SME outcomes. Hierarchical regression further demonstrated that regulatory quality acts as a significant moderating variable, strengthening the impact of trade barriers on performance. The findings affirmed the pivotal role of regulatory quality in cross-border trade, leading to the recommendation for policy reforms aimed at improving regulatory frameworks, streamlining customs processes, and enhancing transport infrastructure.