The Cognitive Process of Entrepreneurs Seeking Access to External Finance to Drive SMME Growth

Abstract

Small, micro and medium enterprises (SMME) need access to external finance to grow. Entrepreneurs’ financing decisions play an important role in enabling SMME access to external finance. Existing research does not adequately capture the complexity and dynamics involved when entrepreneurs make decisions. This study explored the cognitive process of entrepreneurs seeking external finance through which entrepreneurs’ financing decisions promote or limit SMME access to external finance. The study collected qualitative data through 14 in-depth interviews with entrepreneurs who operated businesses in South Africa. The data was analysed using reflexive thematic analysis to generate themes. Based on its findings, the study proposes a model of entrepreneurs’ process of choosing a course of action (MEPCCA). In addition, the study proposes an integrated model of the cognitive process of entrepreneurs seeking external finance to drive SMME growth (MCPESEF). The proposed MCPESEF provides a temporal account of the complex and dynamic process of seeking external finance. The study proffers that growth aspirations promote entrepreneurs applying for external finance by increasing its desirability, which positively influences their intention to apply. In contrast, the study proposes that discouragement limits entrepreneurs applying for external finance through its negative influence on entrepreneurs’ intention to apply. Further research is required to test the effect of perceived desirability and feasibility on entrepreneurs’ intention to apply for external finance. An in-depth understanding of the cognitive process of entrepreneurs seeking external finance supports efforts to improve SMME access to the external finance needed to drive growth.