Academy of Entrepreneurship Journal (Print ISSN: 1087-9595; Online ISSN: 1528-2686)


A Literature Review of Venture Capital Financing and Growth of SMEs in Emerging Economies and An Agenda for Future Research

Author(s): Ahmed Kato

Orientation: In spite of the dominance of the SMEs sector in emerging economies, access to sustainable financing for SMEs ‘ survival and growth, remains small and fragmented. There is a general consensus that VC is the most suitable funding model to revive the growth of the earlystage ventures. However, the fundamental impact of VC financing on the growth of the smallmedium enterprises especially in the emerging economies has been under researched. Research purpose: The paper seeks to conduct a comprehensive literature review from six emerging economies in Africa (South Africa, Nigeria, Kenya, Ghana, Egypt and Uganda) to substantiate the empirical studies underpinning the impact of VC financing on SMEs growth in emerging economies and offers a ground for future research agenda. Motivation for the paper: SMEs are the teamsters of economic growth and development for both developed and emerging economies nonetheless; their growth is in jeopardy, due to absence of sufficient finance. Profoundly, VC is typically the only suitable financing mode for entrepreneurial firms with high growth potential. Research design, approach and method: The paper used a systematic literature review strategy by exploring 50 recently published articles on VC performance from 2010 to 2019, by searching for internet accredited journals of entrepreneurship, business management and finance and economics using keywords like VC and SMEs performance, VC growth in emerging economies and Access to finance and SMEs growth. Findings/Results: Empirical findings disclosed that VC financing positively influences the growth of VC- backed firms in terms of sales growth, job creation and increase in returns on investment. Practical/managerial implications: This paper documents the relatively under-explored research areas and presents an agenda for future research in emerging economies. Contribution/value-add: The paper presents valuable knowledge to policymakers and practitioners to assist in the design of appropriate policies in support of easy access to VC financing by SMEs for their growth.

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