RETHINKING OPEN COMPETITION: HOW RESERVATION & PREFERENCE SCHEMES SHAPE MICRO, SMALL, AND MEDIUM ENTERPRISES (MSMES) PERFORMANCE DYNAMICS IN KENYA
Abstract
Purpose of the study: This study examines the pathways through which preferential policies and reservation schemes influence the performance outcomes of Micro, Small, and Medium Enterprises (MSMEs). It specifically focuses on how these mechanisms shape enterprises dynamics within Kenya.
Problem statement: Reservation and preference schemes such as public procurement quotas, preferential credit, and targeted support policies have emerged globally as tools to enhance the performance of Micro, Small, and Medium Enterprises (MSMEs). Despite widespread implementation, theoretical explanations of how these mechanisms influence MSME outcomes remain fragmented and contextually uneven. The Access to Government Procurement Opportunities (AGPO) program, in Kenya reserve 30% of public tenders for marginalized groups, actual participation remains low (averaging 18%), highlighting a significant gap between policy intention and realized performance gains.
Methodology: The study employed a systematic theoretical literature review, synthesizing peer-reviewed research from 2000 to 2025 retrieved from Scopus and Web of Science. It integrated perspectives from Institutional Theory and the Resource-Based View (RBV).
Results: Findings indicate that these schemes improve market access and stabilize revenue, but their effectiveness is heavily dependent on institutional quality and firm-level absorptive capacity. Multi-dimensional policies combining financial support, capacity building, and market access produce the most sustained outcomes.
Conclusion and recommendation: Reservation schemes alone are insufficient; they must be embedded within broader enterprise development ecosystems. It is recommended that AGPO be integrated with capacity-building and financial support to translate market access into measurable growth and innovation
Keywords: Open competition, Reservation and preference schemes, MSMEs, performance
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