Small and Medium Enterprises (SMEs) in Kenya have not performed creditably well and hence have not played the expected vital and vibrant role in the economic growth and development of Kenyan economy. This situation has been of great concern to the government, citizenry, operators, practitioners and the organized private sector groups especially because many of the SMEs owners are faced with unpredictable operating environment which presents many entrepreneurs with a challenge of both growing and managing their SMEs consequently affecting SMEs performance. The study aimed at establishing operating environment effects on performance of small and micro enterprises in urban townships in West Pokot County. The specific objectives of the study included determining the influence of skills and competence, technology, legislations and competition on the performance of small and micro enterprises in urban townships in West Pokot County. The study was anchored on the theory of multidimensional performance, goal setting theory and Human capital theory. The target population was drawn from small and micro enterprises owners and managers in the two major townships in West Pokot County that is Kapenguria, and Chepareria Townships. The study was based on descriptive research design where the researcher used stratified random sampling techniques to sample its respondents; Questionnaires were used for the data collection. Both descriptive and inferential statistics were undertaken. Inferential statistics was used to test the extent and nature of the relationship between dependent and independent variables. The correlation results of the study found that SMEs owners/managers skills and competence, technology and competition are positively related to SMEs performance. Results further showed that legislations are negatively related to SMEs performance.SMEs owners/managers skills and competence, legislation, technology and competition were found to be significant variables in explaining SMEs performance which is illustrated by coefficient of determination(R square) of 79.4%.Based on the research findings the study concluded that SMEs owners/managers skills and competence, legislation, technology and competition has a significant relationship with SMEs performance. The study recommends that the financial institutions, NGOs, and Government agencies should work in collaboration in improving SMEs owner’s skills and competence, also technological changes awareness should be provided to the SMEs owners and managers. The Government agencies should come up with friendly policies and regulations to eliminate unhealthy competition towards the SMEs.
