Author(s): Sunday Raymond
The cooperation of small and medium scale Enterprises is becoming more important as a tool of economic development of a country. Entrepreneurs tend to work together in order to share their competencies, consolidate limited resources, and hereby increase their profitability. It is emphasized that the role of clustering is crucial in the development of SME sector, as SMEs may benefit from economies of scale and extend the operation limits. Thus, the current study has analysed the effect of clustering activities on the performance of small and medium scales enterprises in Nigeria; The study adopted a quantitative method using the empirical study with a designed questionnaire that involve 255 respondents comprising of fabric store owners and their employees. All stages of data analysis use the method of Structural equation modelling (SEM) to develop a model and to test the study hypothesis. The outcomes of the study shows that Market Limitation (ML) and Employee Performance (EP) had negative effects on the Performance of Small and Medium Scale Enterprise (PSME), while Social Responsibilities (SR), Market Segmentation (MS), and Social Networking (SN) had significant positive effects on Performance of Small and Medium scale Enterprise (PSME). This area of research is limited in Nigeria and it recommends for future researchers’ study to determine if exist other factors influencing the performance of SMEs asides from clustering, and also to stretched out by increasing the sample size to derive solutions that can be implemented for the development of Nigeria.