Venture Capital Financing and the performance of Small and Medium-Scale Enterprises in Nigeria: Empirical Evidence from Cross River State
Abstract
This study examined the impact of venture capital financing on the performance of small and medium-sized enterprises (SMEs) in Nigeria, with a focus on Cross River State. Using a descriptive survey design and quantitative approach, primary data were collected from 475 respondents (95% response rate from a sample of 500) through a structured questionnaire distributed across SMEs in Calabar Metropolis. Four venture capital dimensions, namely, the amount of VC funding, stage of funding, duration of investment, and market conditions, served as independent variables, with SME performance as the dependent variable. The regression technique was employed to analyze relationships among variables via SPSS Version 3.28. Reliability testing yielded Cronbach’s Alpha values ranging from 0.865 to 0.891, all exceeding the 0.70 threshold. Results from the multiple regression model demonstrated a strong overall model fit (R = 0.871, R² = 0.758, Adjusted R² = 0.756, F = 362.916, p < 0.001). All four VC dimensions exerted statistically significant positive effects on SME performance: market conditions emerged as the strongest predictor (β = 0.466, B = 0.464, p < 0.001), followed by amount of VC funding (β = 0.244, B = 0.241, p < 0.001), stage of funding (B = 0.126, p = 0.009), and duration of investment (B = 0.108, p = 0.024). All four null hypotheses were rejected at the conventional α = 0.05 level. The study concludes that venture capital is a statistically significant and strategically vital determinant of SME performance in Nigeria. Findings suggest that investments made at early stages and over extended periods yield the most beneficial outcomes, while a conducive macroeconomic and regulatory environment is paramount to maximizing VC impact. Recommendations include strengthening Nigeria’s venture capital ecosystem, implementing stage-aligned funding strategies, and prioritizing macroeconomic stabilization to foster sustainable SME growth.