An Analysis of the Presence of an Entrepreneurial Culture in Kenya: An Application of the Population Ecology Theory and the Resource Dependence Theory

Abstract

Several factors have been put forward to explain economic development and growth in different countries. The main factors are first, economic resources and second, well functioning economic, social and political institutions. Third, a growing number of authors have argued that culture is also a critical ingredient of economic development and growth. One important aspect of this cultural influence on economic development is the entrepreneurial culture. In Kenya, the debate on the presence or absence of the entrepreneurship culture is old and still raging. This study contributes to this debate by examining whether there is an entrepreneurship culture among micro and small enterprises (MSEs) in Kenya. Specifically, the study inquired into the possible causes of the phenomenal rise in new MSEs in Kenya between 1993 and 2005. Could this be, as is popularly believed, a manifestation of an entrepreneurial culture in Kenya? To answer this question a survey of over 170 entrepreneurs was conducted for different types of ventures in Kariobangi, Kasarani Division of Nairobi County in Kenya. Data was collected on the reasons behind business formations, the constraints to growth and the strategies used to market their goods and services using a questionnaire. A factor analysis technique was used to analyse the data. The evidence adduced shows that the mushrooming of MSEs over the sample period is not an epitome of an entrepreneurial culture in Kenya. The key factors behind this phenomenal growth are desire to supplement income, availability of credit, the desire to generate wealth and retrenchment. These are rational defensive responses to unemployment, retrenchment and poverty. Therefore, the observed increase in MSEs was a response to the harsh social, economic, and political environment at that time. Indeed, the results showed that an economic turn around in the country could lead to a massive close down of many MSEs as formal employment increases. Thus, policy-makers need to initiate policies aimed at reducing unemployment and poverty, which drive people to form MSEs to eke out a livelihood.

Key words: Entrepreneurial culture, Economic Growth, Economic Development, MSEs, Institutions, Business Formation, Poverty, Environment, Population Ecology Theory, Resource Dependence Theory.