Determinants of Equipment Replacement Decisions and Their Association with MSME Operational Performance
Evidence from Taraba State, Nigeria
Main Article Content
Abstract
Micro, Small and Medium Enterprises (MSMEs) in Taraba State, Nigeria, continue to rely on ageing and increasingly costly equipment, yet little empirical evidence explains what drives their equipment replacement decisions or how those decisions relate to operational performance. This study examined the association between four antecedents — maintenance and operating costs (MOC), equipment performance and reliability (EPR), equipment age (EA), and technological change and strategic alignment (TCSA) — and Equipment Replacement Decision (ERD), and the association between ERD and MSME operational performance (OP). Using a cross-sectional survey of 380 MSMEs drawn from six commercial towns across Taraba State's three senatorial zones, data were analysed using variance-based structural equation modelling (PLS-SEM) in SmartPLS-equivalent procedures, following an ERD-mediated specification in which the antecedents predict ERD, which in turn predicts OP. All four antecedents were positively and significantly associated with ERD (γ = 0.181 to 0.257, p < .001), jointly explaining 40.1% of its variance, and ERD was strongly associated with OP (δ = 0.574, p < .001, R² = 32.7%). All five null hypotheses were rejected. Reliability, convergent validity (composite reliability ≥ 0.89; AVE ≥ 0.69), and discriminant validity (Fornell-Larcker and HTMT) criteria were satisfied after one weak indicator (MOC1) was removed, and blindfolding and PLSpredict procedures indicated modest but genuine predictive relevance. The findings suggest that MSMEs' replacement decisions are shaped jointly by cost pressure, condition-based signals, accumulated age, and strategic/technological considerations, and that timely replacement decisions are, in turn, associated with meaningfully better operational performance. The study recommends that MSME support agencies and owner-managers institutionalise periodic, criteria-based equipment reviews rather than relying on reactive, failure-triggered replacement.
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Copyright (c) 2026 Voghagi Udisienambu Micah, Nouseh Shidawa Ali, Habila Hussaina Obadiah (Author)
This work is licensed under a Creative Commons Attribution 4.0 International License.
Nouseh Shidawa Ali, Department of Business Administration, Faculty of Management Sciences, Federal University Wukari, Taraba State, Nigeria.
Department of Business Administration, Faculty of Management Sciences, Federal University Wukari, Taraba State, Nigeria.
Assistant Lecturer
Habila Hussaina Obadiah, Department of Business Administration and Management, College of Agriculture, Science and Technology, Jalingo, Taraba State, Nigeria.
Instructor,
Department of Business Administration and Management, College of Agriculture, Science and Technology, Jalingo, Taraba State, Nigeria.
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