Institutional Determinants of Profitability in Small, Medium, and Micro Enterprises (SMMEs) in Botswana: An Empirical Analysis Using Poisson Regression

This study investigates the factors influencing the business performance of Small, Medium, and Micro Enterprises (SMMEs) in Botswana. It employs institutional theory as a guiding framework, which posits that institutions provide a reliable structure within which organizations operate, thereby reducing uncertainty and fostering predictability. The research utilizes a quantitative design, analyzing data through Poisson regression analysis to identify key determinants of SMME profitability. The findings reveal a multifaceted relationship between various factors and business performance. Notably, high competition in the market and frequent engagement in online marketing were found to negatively impact profitability. Conversely, several factors positively influence profits, including meticulous record-keeping, the business owner’s educational attainment (measured in years of schooling), frequent preparation of financial statements, provision of employee incentives, and operating a business account linked to mobile banking. These insights underscore the critical role of strategic business practices and financial management in enhancing SMME profitability. The study concludes that SMMEs’ profitability in Botswana is shaped by a complex interplay of competitive pressures and operational strategies. It emphasizes the importance of adopting practices such as rigorous record maintenance, investment in education, regular financial reporting, and leveraging mobile banking technology to maximize profitability. The research recommends that SMMEs adopt a cost-benefit analysis approach to online marketing to ensure that digital outreach efforts yield positive financial returns. This strategy will help businesses balance the trade-offs between marketing expenses and profitability, enabling sustainable growth in a competitive business environment.

  Keywords: SMMEs, Botswana, institutional theory, profitability, Poisson regression, business performance, online marketing.