Modelling the determinants of SME’s investment intention in the Ghanaian energy sector: the role of local content policy

Abstract

PurposeThe purposes of this study are: to investigate how the dimensions of resource competitive strategies impact on small and medium enterprises’ (SMEs) intention to invest in Ghana’s downstream petroleum sector and to develop a model to explain the moderating role of local content policy on the relationship between competitive strategies and investment intention of SMEs. Focusing on the Ghanaian SMEs, quantitative research approach and survey questionnaire have been used. The research hypotheses have been tested using variance-based structural equation modeling technique.Design/methodology/approachSince the Ghanaian Parliament passed the Local Content and Local Participation Policy (LI.2204) into law in 2013, successive governments have strived to optimize oil and gas benefits and encouraged local participation, yet the actual impacts are mixed, ambiguous and inconsequential. This paper further argues that the extent to which the local content policy role moderates the relationship between firms’ internal resources (proxied as competitive strategies) and investment intention in the energy sector remains largely unexplored.FindingsThe results have shown that competitive strategies such as entrepreneurial competency, finance resources and technological usage have positive and significant effects on SME's investment intention. Again, local content policies exert significant moderating effect on SMEs’ investment intention.Practical implicationsThe policy implication of these results includes the need to strengthen regulatory capacity of the Petroleum Commission to enforce local content implementation in Ghana to enhance indigenous participation in the sector.Originality/valueTheoretically, using the resource-based view theory, this study has offered a robust predictability of SMEs investment’s determinants in an emerging economy.