13th Annual International Management Conference Proceeding

Gender diversity on the Board, Intellectual capital, Governance Mechanisms and corporate performance: a Theoretical
Configuration
Nkundabanyanga K Stephen,
Makerere University Business school
Email: snkundabanyanga@mubs.ac.ug
sknkunda@yahoo.com
Dr. Ntayi M. Joseph,
Makerere University Business School
Email: ntayius@yahoo.com
jntayi@mubs.ac.ug
Mr. Sserwanga Arthur
Makerere University Business School
Email: asserwanga@yahoo.com
asserwanga@mubs.ac.ug
21st November 2006
Abstract
Several theories, most notably agency, resource-dependency, institutional and social network theories have been put
forward to explain and predict the attributes of boards and how these in turn affect corporate performance. While
these theories have all been applied to the board phenomenon, I argue that their failure to incorporate intellectual capital
and gender diversity on the board of directors explicitly, renders them ineffectual in today’s knowledge economy. I
contend that corporate performance predictive validity of these theories is contingent upon the existence of appropriate
intellectual capital and gender diversity on the board. This paper presents a critical review of the above theories and
proposes a comprehensive framework for predicting the attributes of boards and firm performance
Introduction
Several theories, most notably agency, resource-dependency, institutional and social network theories have been
put forward to explain and predict the attributes of boards and how these in turn affect corporate performance.
While these theories have all been applied to the board phenomenon, we argue that their failure to incorporate
intellectual capital and gender diversity on the board of directors explicitly, renders them ineffectual in today’s
knowledge economy. We contend that these theories’ corporate performance predictive validity is contingent upon the
existence of appropriate intellectual capital and gender diversity on the board. In the next section, we present a
theoretical/empirical review and hypotheses and argue that these theories are inadequate in explaining performance of
firms. We propose a theoretical framework and finally we end with theoretical and methodological implications.
Theoretical review
Agency theory
Since Berle and Means (1932), a great deal of effort has been made on this theory and it has been the central issue in
corporate governance debate for the last two decades. Most of the literature argues that some governance mechanisms by
outside investors (in particular shareholders) are necessary to discipline management behavior. These mechanisms draw
heavily from agency theory, which assumes that managers’ own interests submit to constraints imposed by the agency
relationship. Thus, boards of directors are put in place to monitor management on behalf of shareholders (Eisenhardt,
1989; Jensen & Meckling, 1976). We find this standard view unsatisfactory, since it ignores an implicit control
mechanism of managers inside the firm, gender diversity on the boards, pre-nomination discussions and post-nomination
evaluations of directors and a particular manager’s risk perception (which affects a Manager’s strategic choices) and
focuses on exogenous controls to management.
Outside the standard agency paradigm, some researchers suggest that managers are controlled more or less inside the firm
(Sunder, 1997; Donaldson and Lorsch 1983) to the extent they are primarily concerned with firm performance proxied
by long-term corporate survival. Shareholders concentrate on external control because of the need to solve the agency
problems like the moral hazard, introduced by three assumptions of agency. The first assumption is that agents are selfinterested;
which is illustrated by an agent choosing actions to maximize utility and is assumed to be effort averse. Real
life situations illustrate this postulation by on-the-job consumption, shirking and pursuing off-the job opportunities
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(Kunz and Pfaff, 2002). The second assumption concerns attitude towards risk. Whereas the principal is considered risk
neutral, agents are considered risk averse. Therefore, the agent will require additional compensation in the form of risk
premium, for taking risks of the principal. The third assumption concerns the information asymmetry. The agent
possesses hush-hush information that is not necessarily available to the principal free of charge. Consequently, the
principal has limited information on the actions of the agent, her actual level of effort and the state of nature.
By concentrating on outside control mechanisms, the agency theory fails to acknowledge that insider control mechanisms
prevents managers’ moral hazard and makes it possible that the firm continues to survive for a long period. By
overlooking the possibility that the degree of the manager’s survival motive may depend on the firm’s domestic (such as
information sharing between the manager and workers) and exterior (such as labor market rigidity) factors, the agency
theory does not explain (i) why corporate managers tend to pursue the survival of the firm, (ii) what factors affect the
manager’s survival motive, and (iii) how the survival motive affects shareholders’ wealth.
Even if managers were constrained by the agency relationship in their actions, their separation from ownership provides
the opportunity for them (agents) to act in their own self-interest by maximizing their own wealth and power at the
expense of the owners (principals) (Fama, 1980; Jensen & Meckling, 1976). For this, the agency theory only succeeds in
explaining partially why companies make decisions, which do not always conform to the expectations of maximizing
shareholder wealth, secondly, why directors have an interest in changing accounting standards as standards affect the
calculation of profit, which in turn influences the directors’ remuneration, and also why directors engage in creative
accounting practices. The theory tends to focus on what the manager is likely to do and fails to recognize the processes
through which the manager’s roles are performed to the extent he/she may exhibit dysfunctional behavior. This
dysfunctional behaviour by the agent means that the profit aimed for will not be maximum profit, because of the
directors’ wishes for expenditure on themselves, their staff and the perquisites of management. This oversight tempts an
argument that the agency theory may not be robust in explaining performance of firms. One particular criticism in this
regard is that the role of intellectual capital of firms and pre –nomination discussions and post-nomination evaluations
of directors and CEO celebrity so far, has not been adequately stressed by the agency theory. Given the growing
importance of intellectual capital in today’s knowledge economy, we criticize the theory for insufficient realism based on
the growing importance of intellectual capital and negotiation skills (as implied by pre-nomination discussions and post
nomination evaluations and CEO celebrity). CEO celebrity arises for instance when journalists broadcast the attribution
that a firm’s performance has been caused by its CEO’s actions (Mathew, Violina and Timothy, 2004).
Finally, Agency theory acknowledges that boards will vary in their incentives to monitor on behalf of shareholders and
as a result, incentives are an important precursor to effective monitoring (Fama & Jensen, 1983; Jensen & Meckling,
1976). However, the theory does not adequately address this issue, it just acknowledges. In particular, how does for
example diversity of gender on corporate boards count on the board-monitoring role? There is evidence (Westphal &
Milton, 2000) that the composition of boards should not be overly homogeneous. One particular aspect of this
diversity could be a particular director’s risk perception and gender. This appears to point at the role of
entrepreneurship and gender diversity on the boards. We notice that since in real world there is no perfect market of
information, the intrapreneurs’ ability to win is helped by superior knowledge and experience acquired over time
(Corley, 1990), which is an apparent reference to intellectual capital. Agency theorists (e.g. Baysinger & Butler, 1985;
Daily & Dalton, 1994a, 1994b; Weisbach, 1988) acknowledge that board independence, or the degree to which board
members are dependent on the current CEO or organization, is seen as a primary incentive that is key to board
monitoring. However this dependence my be inevitable since an individual board member could have unique
capabilities. The theory therefore lacks credence by ignoring that the board needs some independence even from a
shareholder (principal). The contrast between agency theory’s strong theoretical logic and widespread policy influence
on board phenomena vis-`avis its inconclusive empirical record has prompted scholars to search for alternative theories,
which we turn to next.
Resource-dependency theory
Resource-dependence theory views board directors as “boundary spanners” who extract resources from the environment
(Pfeffer, 1972). It predicts that the more resource-rich outside directors are on the board to help bring in needed
resources, the better the firm performance. Resource-based theory views firms as collections of productive tangible and
intangible capital resources that can be combined to derive new products and services (Wernerfelt, 1984). Though this
theory does not directly deal with weaknesses of the agency theory, it tries to focus marginally on intellectual capital
resources. Key among these resources is the firm’s knowledge and relationship assets. Relationship-based assets provide
access to other resources such as complementary knowledge and other tangible resources that the firm can combine with
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its own. Relationship-based assets can exist at various levels: with customers, with partners, and with suppliers. However,
Penrose (1959) recognized over four decades ago that it is not the firm’s resources but the services that those resources
render that are of value to the firm.
Nowadays the dominant view of business strategy –resource-based view of firms – is based on the concept of economic
rent and the view of the company as a collection of capabilities. This view of strategy has a coherence and integrative role
that places it well ahead of other mechanisms of strategic decision-making (Kay, 2003). The resource-based perspective
highlights the need for a fit between the external market context in which a company operates and its internal
capabilities. It is grounded in the perspective that a firm's internal environment, in terms of its resources and capabilities,
is more critical to the determination of strategic action than is the external environment. Instead of focusing on the
accumulation of resources necessary to implement the strategy dictated by conditions and constraints in the external
environment (input/output model), the resource-based view suggests that a firm's unique resources and capabilities
provide the basis for a strategy. The strategy chosen should allow the firm to best exploit its core competencies relative
to opportunities in the external environment (Hitt, Ireland, & Hoskisson, 2001).
The drawback with resource-dependency theory is that it does not fully explain corporate (firm) performance. We
contend that the resource-based view is not firmly established, its application is perceptive and its Concepts are
unsettled. First, there are certain assumptions; that resources are diversely distributed across competing firms and
resources are imperfectly mobile with the four attributes: value (productivity) resource, rareness, imperfect imitability,
and nonsubstitutability (Barney, 1991). In addition, Peteraf (1993) presents four conditions in which resourcedependency
theory can generate superior firm performance: superior resources (heterogeneity within an industry), ex
post limits to competition, imperfect resource mobility, and ex ante limits to competition, all of which must be met in
order to generate superior performance. The resource-dependency theory cannot always allow firms to generate superior
performance based on the existing assumptions and conditions due to the dynamic characteristics of the current market
environment in which consumers taste, preferences, and behaviors are always changing together with the offerings of
suppliers’ resources (Dickson, 1996). Human resources, for example, cannot be taken to be immobile in this respect.
Even then, other critics (Drejer, 2000; Wade & Hulland, 2004) have posited that the assumption of perfect imitability
promotes ambiguity leading to a conclusion that firms are static which overlooks their desire to develop an arsenal of
intellectual capital resources overtime. This perfect imitability assumption is difficult to sustain in this era of
information technology where firms are always in search of intellectual capital resources to sustain superior
performance.
Institutional theory
The past two decades have seen a major reassertion of institutional theories in social sciences and beyond (Guy, 2000).
The March and Olsen (1984) article in the APSR cited by Guy, 2000 was the beginning of the insurrection against the
methodological uniqueness of both behaviorism and rational choice approaches. Although a proliferation and
application of institutional theories can be traced back from March and Olsen (1989; 1994; Brunsson and Olsen, 1993;
Olsen and Peters, 1996), Sociologists like DiMaggio and Powell, 1991; and Scott, 1995; Zucker, 1987 have resurrected
institutional approaches to the basic questions in this discipline. While this proliferation is gratifying to those who never
give up on this theory, we argue that this theory ignores voluntary disclosure of information and therefore the signaling
effect of such information. In fact, Stigler (1964a, 1664b) and subsequently Benston (1982a, 1982b) question the
necessity and efficacy of continuous disclosure as advocated by shareholders. Developing the socio-cognitive perspective
in their study, Carpenter and Westphal (2001) note that individuals cope with complex decision- making tasks by
relying on the knowledge structures they have developed about their environment and from experience in similar roles.
Accordingly, they argue, directors are likely to use knowledge structures developed from their experience on other boards
and to learn about business practices through their social interaction and communication with other directors in board
and committee meetings, as board members evaluate management and raise ideas and suggestions for better strategy
implementation. Information acquired from fellow directors may be particularly influential because it often comes from
a trusted source and is typically more timely and current than that derived from secondary sources. While the focus of
Dimaggio & Powell (1991) is the homogenization that emerges out of institutional isomorphism, this observation does
not blend well with institutional theorists. This is because these social connections and opportunities for vicarious
learning can lead to more highly developed knowledge structures for implementing strategy. Recent academicians
notably Williams (2001) have concluded that to maintain any superior performance it has, a firm could reduce the
intellectual capital disclosure levels in an effort not to signal competitors and others as to where potential opportunities
may lie.
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Neo-institutional theory asserts the importance of normative frameworks and rules in guiding, constraining, and
empowering behavior. In particular, firms consist of cognitive, normative, and regulative structures and activities that
bestow meaning to social behavior (Scott, 1995). Cultures, structures and routines operating at manifold levels of
authority become the carriers through which institutions impact firms (Scott, 1995). Organizational practices can
become, in Selznick’s words, “infused with value beyond the technical requirements at hand” (1957:17) and be adopted
for the sake of legitimacy rather than improved performance (DiMaggio & Powell, 1983). We contend that it is the
nature of the competitive game that those who have superior performance seek stability, while the unhappy rivals seek
change. As a result, Institutional processes may not produce long-term efficiency, because they end up producing rigidity
and resistance to change. We argue that the theory is not clear about what it is trying to solve, since in our case the board
should be preoccupied with the performance of the firm if the principle (shareholder) is to be happy.
Thus, over time, organizations reflect the enduring rules institutionalized and legitimated by their social environments
(DiMaggio & Powell, 1983; Meyer & Rowan, 1977; Scott, 1995). Societal norms have been shown to influence board
decisions regarding CEO selection and executive compensation (Zajac & Westphal, 1996) and how boards explain the
adoption of CEO incentive plans to shareholders (Zajac & Westphal, 1995). This implies that organizations’ quest for
legitimacy and the process of structuration results in the homogenization of organizations with respect to their most
visible attributes (e.g., board composition , Board Effort norms, Board Breadth of perspective and Board Independence).
However, this convergence of attributes may not necessarily result in efficient organizations with regard to performance
since Institutional theory for example argues that board composition will be determined largely by prevailing
institutionalized norms in the organizational field and society. The current environment is highly complex and therefore
some researchers (e.g. Ingley & Van der Walt, 2003b) suggest that greater gender diversity on the board may be
appropriate in these environments characterized by greater strategic complexity. By this, they assert, greater expertise and
perspectives can be brought to bear on decision making thereby leading to higher quality decisions and ultimately, better
organizational performance. The problem with institutional theory is that it ignores this issue.
We note that theories of institutional isomorphism (DiMaggio & Powell, 1983; Hawley, 1968), or the propensity of
organizations in a population to resemble other organizations that operate under similar environmental conditions,
suggests that boards of organizations in the same institutional set will tend to be more similar to each other than to the
boards of organizations outside of their set. This means that organizations may not develop their own competitive
advantage to leverage the bottom line, which sets this theory inadequate in explaining firm performance as it is not
emphasizing differences in intellectual capital of such firms.
Institutional theory examines the role of social pressures in shaping firm behavior (Ingram and Simons, 1995; Oliver,
1997). Informal institutional pressures that correct deviant behavior arise from the behavior of industry leaders, peers,
and network associates. Amid uncertainty about the ramifications of disclosing deviant behavior, the focal firm will
observe how other industry members have dealt with deviance. For instance, when the focal firm sees other firms in the
industry voluntarily restating earnings, it may also be compelled to do so.
Interestingly, resource-based and institutional perspectives have different viewpoints to explain superior performance.
Institutional perspective emphasizes homogeneity within institutions such as conforming to predominant norms,
traditions, and social influence, in order to achieve superior performance (Oliver, 1997). In contrast, resource-based
perspective argues that rare, specialized, and inimitable resources allow corporations to achieve superior performance
under the two assumptions: resources are heterogeneously distributed across competing firms, and resources are
imperfectly mobile (Barney, 1991; Oliver, 1997). We argue that the theories could be harmonized if the issue of gender
diversity was incorporated in these theories.
Social network theory
The final theoretical perspective on board that we consider is a sociological perspective that builds upon resource
dependence theory, specifically, the influence of social networks on board formation and composition. Social network
theory suggests demographic similarity among board members is reflective of the organization’s emergent interorganizational
network (Gulati & Gargiulo, 1999). From this perspective, board composition will reflect the social
networks of the principal stakeholders (e.g., CEO, external financiers). Rather than just acknowledging the role of social
networks, the theory should be all-embracing by incorporating intellectual capital which we feel is wider tem than social
net works.
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Boards, for example, enable the firm to create a network without the full costs of true vertical amalgamation. Resourcepoor
entrepreneurial organizations can achieve required strategic benefits by building network exchange structures with
outsiders who are identified as critical resource suppliers. These relationships can stabilize the new firm in its targeted
markets. It is therefore possible to attach value to these networks in the valuation of intellectual capital. While this view
is consistent with the resource dependence perspective, social network theory emphasizes the importance of network
formation on reputation, trust, reciprocity, and mutual interdependence (Larson, 1992). Thus, for example, our earlier
discussion of resource dependence focuses on the role of the board as facilitating the acquisition of resources. In
contrast, social networks theory considers the predictable paths (based on preexisting relationships) that may be used to
acquire these resources.
Therefore, the social network perspective is closely aligned with other theoretical perspectives. This perspective is
distinct, however, in that it focuses on social networks as the primary predictor of board composition. For example,
Forbes and Milliken (1999) pursued the links between group processes and diversity in the study of the literature
focusing on group dynamics and their effects on board effectiveness. They highlighted such areas as board cohesiveness
and effort norms (ensuring preparation, participation and analysis), cognitive conflict (leveraging differences in
perspective), the presence of knowledge and skills, effects of board processes; job related diversity, other aspects of board
demography (proportion of outsiders, board size, board tenure) and board dynamics across different types of boards.
They concluded that board effectiveness was likely to depend heavily on social-psychological processes, particularly
those pertaining to participation and interaction, the exchange of information, and critical discussion. We disagree with
this perspective, however, because it does not explain the other side of the coin of how the board can help in enhancing
the intellectual capital resources of the firm. This is because there is empirical evidence (Nkundabanyanga, 2006) to
show that actually gender diversity on the board enhances intellectual capital performance of firms.
We contend that this is harmonizable by incorporating intellectual capital as a wider set so we could develop a
comprehensive framework for understanding corporate performance. Accordingly, although social networks have been
posited to play an important role in the formation of boards (Birley, 1985; Khurana, 1996), we believe much greater
elaboration of the impact of boards on firm’s intellectual capital is justified since Intellectual capital is generally
becoming widely accepted as a major corporate strategic asset capable of generating sustainable superior firm
performance (Barney, 1991).
Thus, it can be considered that external governance may not be a necessary condition for controlling managers and that
there should exist some other factors that augment, discipline the management, and ensure the efficient operation of the
firm. Outside the standard agency paradigm, some researchers suggest that managers are controlled more or less inside
the firm. Yet others believe that institutional isomorphism explains board behavior and therefore corporate performance.
It is for this varying utility of agency theory, network theory, resource dependency, and institutional theory in predicting
firm performance, we are proposing a comprehensive framework incorporating gender diversity, intellectual capital, and
CEO celebrity.
Theoretical Framework
The following model describes how gender diversity on the board, intellectual capital, governance mechanisms increase
corporate performance. It shows that governance mechanisms can enhance a CEO’s self-efficacy as also the performance
of intellectual capital can enhance the celebrity of CEO’s. We posit that a CEO’s celebrity and his efficacy enhance his
strategic choices in turn enhancing corporate performance. It predicts that a manager’s strategic choices can lead to both
startling performance and spectacular failures of firms because of his celebrity and self-efficacy. Board diversity,
intellectual capital and governance mechanisms shape a firm’s culture and voluntary disclosure proclivity of firms and
this in turn affects corporate performance. The framework shows some demographic factors as being control variables.
Figure 1: Proposed theoretical model
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Gender diversity
on Board
-Board Composition
-Board Effort norms
-Board Breadth of perspective
-Board Independence
Intellectual capital
-Human capital
-Structural capital
-Relationship capital
Governance
Mechanisms
-External governance mechanisms
-Internal governance mechanisms
-pre-nomination discussions
-post-nomination evaluations
The above theoretical model together with our arguments earlier guides us in posing the following hypotheses:
Hypotheses
Organizational
culture
Corporate
voluntary
disclosure
CEO Celebrity
Self-efficacy
H1: Firms with effective internal governance mechanisms will result in higher corporate performance proxied by future
viability, financial performance, shareholder value, market performance and sales performance.
H2: Firms with effective internal governance mechanisms attract and leverage greater intellectual capital
H3: Firms that are leveraging the intellectual capital have higher chances of attracting celebrity CEOs which in turn
enhances corporate performance.
H4: The greater the availability of information about a CEO’s idiosyncratic personal behaviors the greater the likelihood
that a CEO will perceive control over the present and future actions and performance of the firm.
H5: CEO Celebrity has a positive relationship with firm’s market value because of the stakeholders’ infatuation with
celebrities.
H6: Firms in constant search of intellectual capital to harness current market environment have better corporate
performance premised on future viability, financial performance, shareholder value, market performance and sales
performance than those that are not.
6
Manager’s
strategic
choices
-Resource identification
-Resource
development/protection
-Resource deployment
Firm size, industry,
firm age, etc
Corporate
performance
-Future viability
-Shareholder value
-Market performance
-Sales performance
-Financial
performance

H7: Firms with diverse boards are in a better position to leverage intellectual capital
H8: A board of Directors that is not determined largely by prevailing institutionalized norms will have a positive effect
on corporate performance based on future viability, financial performance, shareholder value, market performance and
sales performance
H9: A diverse board of directors affects the culture of the organization in question and consequently corporate voluntary
disclosure proclivity.
H10: The amount of Voluntary corporate disclosure depends on intellectual available in the focal firm and hence
affecting firm performance.
Theoretical and methodological implications
Previous research have concentrated on the use of financial accounting measures of corporate performance and the use of
accounting data obtained from only listed firms. Hence, they have almost all invariably employed quantitative research.
Our research will be a blend of quantitative and qualitative study (methological triangulation). In addition, a major
criticism of extant board research is that it focuses almost exclusively on large, mature organisations (Daily & Dalton,
1993; Dalton & Kesner, 1983) as compared with smaller and newer firms. We will control for such factors like age of
the firm, industry, size and other demographic factors aware that Individual company differences in demographic factors
can have an impact on the relationships between variables (Marco, Mirjam and Cools, 2003). Given the fact that most
Ugandan firms are not listed, we will include non-listed firms in addition to a census of all listed firms in Uganda on the
Uganda Securities Exchange. We will use non-probabilistic sampling (in particular snowballing) with the aim of getting
pure play comparison companies. Our research frame will require that the amount (importance) of intellectual capital be
measured within the firms. A survey will be conducted to fulfill this need.
Conclusion
Researchers studying corporate boards have employed a wide set of theoretical perspectives to understand the
characteristics, behavior, and effects of executives (Finkelstein & Hambrick, 1996). Agency theory (Jensen and Meckling,
1976) is among the most recognised in research on the contribution of boards (Zahra and Pearce, 1989) as is the use of
the board as a mechanism for managing resource dependencies (Johnson, et al., 1996; Pfeffer and Salancik, 1978). It is
common for researchers also to invoke institutional theory (DiMagio and Powell, 1983; Meyer and Rowan, 1977) and
have examined the role of social networks (Granovetter, 1985) in boards (Birley, 1985; Gulati & Gargiulo, 1999;
Larson, 1992; Westphal, 1999). Our theoretical review has produced a theoretical concern brought about by the gaps in
the knowledge we have identified and we feel that filling these gaps will result in advancement of knowledge in the area
of corporate performance. We have argued that these (see the review) theories’ corporate performance predictive validity
is contingent upon the existence of appropriate intellectual capital and gender diversity on the board. These together
with governance mechanisms, have been employed as predictor variables of corporate performance.
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9

LEADERSHIP AND CAPACITY DEVELOPMENT CHALLENGES FOR SMALL AND MEDIUM
ENTERPRISES IN KENYA: A REVIEW OF LITERATURE WITH SPECIFIC REFERENCE TO THE
MOBILE TELEPHONE VENDING.
By
Robert Kuloba
Kenya Institute of Administration (KIA)
P.O. Box 23030-00604
Lower Kabete, Nairobi
Email: rkuloba@kia.ac.ke
Abstract
The Economic Recovery Strategy for Wealth and Employment Creation (ERS) 2003 – 2007 subsumes a very pertinent
role for the small and medium enterprises (SME) in Kenya. The latest review of the ERS for the year 2005 estimates
that total employment both in the modern and informal sector, increased by 6.5 % in the year 2004 to stand at 7.8
million with the informal sector generating 437,900 more jobs against the formal sectors 36,400. Growth was noted
more in manufacturing and mobile telephone service providers where new mobile phone connections increased by 42.0%
from 1,097 thousand in 2003 to 1,558 thousand in 2004. As a consequence, there were a significant number of new
entrants into this sector. Although there are no entry and exit statistics for these new entrants, their operations are often
perceived as hinged on figuratively putting out fires on a daily basis in a bid to gain both inter and entrepreneurial
capacity. With this in mind, this paper attempts to review the varied management and leadership challenges that this
growth portends as mobile telephone service venders concentrically move from leading oneself to leading a team or an
organization. This review is considered significant since the government is increasingly giving more emphasis on work
based solutions to enhancing performance i.e. moving away from theory to evidence based practice and which have
significant policy implication for KIA in terms of developing training programs that specifically address this sector. The
paper also identifies the elements of successful leadership development, and assesses the skills or competencies that need
to be developed if SME’s have to continue being the engine of growth for wealth and employment creation.
INTRODUCTION AND BACKGROUND
The complexity of the constantly changing environment in which small and medium enterprises (SME’s) operate has
significant implications for their effectiveness. Internal and external pressures continuously challenge their identity and
ability to achieve their mission. This can be particularly significant where rapid change processes are triggered by
contextual influences, whether negative (phobia for non white collar jobs), or positive (consumer habits) as has been the
case in the rapidly growing mobile telephony sector in Kenya.
Until recently, there had been general resistance among educated people to venture into informal sector as a key source
of employment. But with the introduction of the cellular mobile service in Kenya in 1993, coupled with phenomenal
growth in the number of subscribers particularly in the last six years, the number of venders/dealers in this seemingly
elitist business venture has been growing due to limited entry and exit barriers. This introduces an interesting dimension
in addressing the un employment challenges facing Kenya i.e. why such unprecedented growth trajectory. Understanding
the ingredients of what makes economies grow remains one of the most vexing questions facing policymakers and
economists i.e. why are some sectors fated to race ahead (high entry traffic for small businesses) while others lag behind?
The exponential growth in this sector is attributable to the enactment of the Kenya Communications Act 1998 that saw
both Safaricom and Celtel Kenya realize tremendous growth in subscriber rollout with a combined subscriber base of
about 4,611,970 as at June 2005 1 . Consequently, the sector has served as a major fall back position for the un employed
1 Mobile phones are changing the way that many people live and work. They make business easier and more
efficient. They help families and communities to stay in touch, and individuals to feel connected. There is an
exciting mix of social and economic groups of customers across the social spectrum - from civil servants,
business executives and artisans to housewives and students
10

population in Kenya especially in areas of dealerships 2 simu ya jamii (community phones) and what is commonly called
ongea 24/7 dealers (pre paid electronic airtime vending system using mobile handsets). The majority of those venturing
into these businesses though educated do not have the necessary management and leadership skills (NESC, 2006). And
emerging problems of disguised unemployment especially in the public sector, it is argued that any solution to the
current problem of high unemployment must therefore address this sector and the challenges arising there from.
The capacity of SME’s to analyze and understand their internal and external environment and adopt their strategies with
new conditions can help them to respond appropriately to these challenges. However, some do this more consciously and
successfully than others. This paper’s premise is that by facilitating an understanding of management and leadership
capacities, and how they can be strengthened, this may help SMEs increase their effectiveness. It reviews current
thinking, drawing on literature from fields such as organizational learning and change, strategic management, systems
thinking and complexity theory. It then proposes a number of considerations that may guide efforts to develop
management and leadership competencies particularly of emerging or entry level businesses with specific reference to
mobile telephone service vendors.
PURPOSE OF THE REVIEW
The management of small and medium enterprises considering that there are no entry and exit barriers is inundated by
multiple and diverse problems. The recently launched Vision 2030 for Kenya identifies a number these challenges to
accelerated economic growth as unemployment (especially among the youth as most jobs can be found in the informal
sector), rising disparities in income (hence the need for income redistribution), rapid urbanization (at a rate of 6% per
annum) and low savings ratio (16%) compared to the need. Given that urban areas will hold 60% of Kenya’s population
by the year 2030, then it is imperative that the economy must grow as projected at a rate of 10% and in the identified
growth areas. A critical challenge to unlocking the potential to this growth is the consolidation of the gains already
witnessed in the growth of the mobile telephony service sector that holds the key to economic growth through
generation of employment opportunities to absorb the large army of unemployed and particularly the youth. Studies
show that there is a high correlation between high mobile subscriptions or penetration and GDP growth not only in
Africa but in the developed works as well. In Kenya, the government has also recognized the vital role that this sector
plays in development and GDP growth as evidenced in the latest review of progress made towards implementation of the
economic recovery strategy for wealth and employment creation.
With an exponential growth 3 in the mobile telephony sector and the many entrants (no literature on entry and exit) in
the form of dealerships, simu ya jamii as well as ongea 24/7 dealers, this has tended to accelerate business dynamics that
has boosted the growth in subscriber base. The entrants to this sector in the three forms identified above do face a range
of challenges that forms the thesis of this paper. As new entrants and although well educated, they often lack skills in
management and leadership which leaves them figuratively putting out fires on a daily basis in a bid to gain both intra
and entrepreneurial capacity at a personal as well as organizational levels. Although there is consensus that small and
medium sized enterprises will fuel job creation, one pertinent question remains, how many of the people going into such
businesses as witnessed in the phenomenal growth of the mobile telephony sector have experience and knowledge of how
to use analytical and adaptive capacities to cope with the challenges of this new and rapidly changing technology based
business ventures.
METHODOLOGY
By and large, this was a desk study that focused primarily on reviewing literature on leadership and how this can be
configured to the unique needs of mobile phone vendors. However, as great limitation to the review was that the
reviewer is not a leadership theorist. The analysis of information reviewed and presented should therefore be viewed in
the context of the reviewer’s institutional affiliation which has a focus on capacity building i.e. arising from the review,
one question that the reviewer kept asking himself was what kind of training programs can be developed to target this
market niche?
2 Dealerships are well established businesses (at the apex of the entrepreneurship funnel) whereas simu ya
jamii and 24/7 as well as other community phone services are still at the entry level and characterized by a
number of vexing problems
3 The number of mobile phone connections were at par with fixed land line connections at approximately
300,000 in the year 2001, compared to 4.6million and less that 0.3 million respectively in 2005 (fixed line
teledensity dropped)
11

Limitations
Nonetheless, the review does recognize that lack of or less data and information from which to draw firm conclusions
about the impact of mobile service vendors, about efficiency and effectiveness in their operations, about sustainability
(their ‘mortality’) and the gender balance remains a major challenge to evidence based decision making.
MANAGEMENT AND LEADERSHIP FOR SMALL BUSINESSES
Introduction
“Who doesn’t want to live more whole heartedly? Who would deny deeper experience of being alive and
connecting more powerfully with those activities or ventures that they hold so dearly? Who says no to a deeper
experience of joy, a chance to contribute to success and well being of others? Unless one is seriously deranged,
these choices can be provided one has the courage and know-how (self fulfilling prophecy)”. (Wabala, 2006)
With high entry level in small businesses as evidenced in the phenomenal growth in the mobile telephony sector, it takes
total commitment to improve performance, create greater happiness and to escape emotional suffering especially if the
business is on a down turn. This retinue of challenges calls for a critical review of the operations of mobile telephone
venders who more often than not are expected to portray business acumen as well as acting as agents or ‘technical
advisers’ of their respective customers irrespective of service providers.
Theoretical Foundations
While the terms ‘leadership’ and ‘management’ are commonly used interchangeably, many theorists distinguish between
them. ‘Leaders’ are expected to provide strategic direction and inspiration, initiate change, encourage new learning, and
develop a distinct organizational culture, while ‘managers’ are seen to plan, implement and monitor on a more
operational and administrative level (Dwyer, 2006). As a consequence there is a perception that management is
concerned with resolving specific issues and day-today challenges, while leadership is about the bigger picture and
promoting change (Keller, 2006). The reality is that those people with responsibility to ensure that plans are
implemented, systems are effective, and staff motivated are both leaders and managers. This overlap of roles is
particularly apparent in smaller organizations similar to the focus of this review where one person often has to play both
roles simultaneously (White, 2005).
However, in practice leadership 4 and management are integral parts of the same job both of which need to be balanced
and matched to the demands of the situation. Hence any analysis that makes a clear distinction between managers and
leaders can at best be misleading (White 2006). Effective leaders have to demonstrate some managerial skills on one
hand while good managers should display leadership qualities on the other making the relationship between the two
symbiotic. There is therefore no water tight formula on the extent or synergy for which these skills or attributes can be
used or displayed within an organization or business entity. In practice it depends on the judgment of the individual
involved and the context in which they find themselves (Bolden 2004).
Nonetheless, leadership remains a grey area that is much contested given the plethora of different theories that attempt
to mystify the two concepts. For instance, it suffices in literature that some of the early leadership theorists tended to
focus on identifying and isolating a finite number of ‘traits’ that were exhibited by ‘great men’ based on psycho-dynamic
perspectives. Some of the limitations of trait theories prompted others like McGregor (1960) and Blake and Mouton
(1964) to highlight the importance of what leaders actually do, rather than their personal characteristics. They focused
on leadership
behavior and styles, often advocating for a ‘team management’ approach. The next wave of theorists (such as Fielder
1967 and Hersey and Blanchard 1977) emphasized the ‘situational’ aspect of leadership – in other words they believed
that the effectiveness of different leadership styles depended largely on the particular situation. Within this framework
4 In the last 25 years, leadership has become one of the most talked about elements of organizations. As an
illustration of this, today there are more than 16,000 publications referenced to leadership on the
Amazon.com web-site, up by almost 50% in the last two years alone. Yet amidst this accelerating activity,
there is still no widely accepted definition of leadership and no common consensus on how best to develop
leaders.
12

John Adair highlighted the importance of a leader being able to balance the needs of the task, the team and the
individual (1973).
From the late 1970s onwards the concept of ‘transformational leadership’ gained currency with writers like Burns
(1978) and later Covey (1992) advocating that leadership should be about transforming people and organizations by
engaging their hearts and minds or what Eric Garner calls the Pygmalion effect (treat a man as he is and he will remain as
he is and treat a man as he can or should be and he will become as he can or should be).
Other leadership theories have emphasized the importance of the ‘charismatic leader’ or the ‘servant leader’ particularly
in the last 20 years (Greenleaf 1998). Others have highlighted the spiritual dimension of leadership (Owen 1999;
Kakabadse and Kakabadse 1999) or what Wabala calls the heart of a servant leader 5 . These ideas have been
complemented by recent work on ‘distributed leadership’, based on the notion of leadership being first and foremost a
relationship of mutual influence between leaders and followers. The ‘followership’ of an organization or business entity,
and how freely they attribute leadership authority, is also increasingly recognized as having an important role to play in
the behavior and success of a leader (Howell and Shamir 2005).
Good as this review may be, it suffices that almost all this leadership theory is based on a very specific context – Western
management of private sector companies. As a result much of the current leadership research is not relevant to the
different contexts in which small businesses operate or work given the great dynamism (Smillie and Hailey 2001;
Fowler, Ng’ethe and Owiti 2002; Hailey and James 2004). While these studies have increased our understanding of the
static characteristics of effective leadership within small organizational settings, few have tried to explore the dynamics of
how leaders change and develop within small enterprises that might have either just one or two people. Yet as social
identity theory suggests, for leadership development approaches to be effective, they must be designed with an
understanding of the historical social forces, pressures and realities affecting small and medium enterprises in local
contexts and which influences them to change behavior.
POLICY FOCUS FOR GROWTH OF SMALL BUSINESSES
The Economic Recovery Strategy for Wealth and Employment Creation 2003 – 2007 underscores the major challenges
facing Kenya as being restoration of economic growth, generation of employment opportunities to absorb the youth
(they comprise 75% of the national population) and reduction of poverty levels. It may be important to recognize here
that the paper was developed against a backdrop of rising poverty levels in the country from 48% in 1990 to 56% in
2001 However; it does identify the small and micro enterprises sector 6 (SME’s) as an integral part of employment
creation over the four year period. The sector currently employs over 6 million (78% of the national labour force)
mainly young people compared to 1.8 million, in the formal sector. In 2005 alone, the sector provided employment for
over 474,000 workers against 437,000 created in 2004. This employment figures are benchmarked on the 1998/1999
labour force survey, the 1999 population and housing census projections and the Annual labour enumeration survey of
the central bureau of statistics (CBS, 2003).
The key sub sectors that registered increased growth included manufacturing and mobile telephone services providers.
MOBILE TELEPHONY SERVICES PROVISION
The growth in the mobile telephone services in Kenya has been exponential. With about 15,000 subscribers in 1998 to
over 4.5 million in 2005, the mobile telephone sector remains one of the fastest growing sectors in Kenya with great
potential for employment creation (see chart 1) below. Given that there are no entry and exit statistics, there is a flurry of
activity particularly as regards vending business from established dealerships, simu ya jamii, pre paid electronic airtime
vendors using mobile handsets to retailers operating roadside kiosks.
5
The Bible exhorts us to gird our hearts with all diligence for it is out of it that the issues of life flow Prov.
4:23
6
A comprehensive policy paper on development of micro and small enterprises is being developed. The
paper outlines the way forward as regards creation of an enabling legal and regulatory framework, funding
and skills development strategies, research and development and an effective policy co-ordination
mechanism.
13

Subscription
5,000,000
4,500,000
4,000,000
3,500,000
3,000,000
2,500,000
2,000,000
1,500,000
1,000,000
500,000
Source: www.cck.go.ke
0
Chart 1: Growth in mobile telephone services
1998/1999 1999/2000 2000/2001 2001/2002 2002/2003 2003/2004 2004/2005
Year
14
Mobile Subscribers
Fixed Line Subscriber Connections
Management of these business enterprises from sole proprietorships to established dealers entail a range of dynamic
process which requires constant vigilance. Integral to their success is the leadership model commonly referred to as
P.O.L.I.C.E. and which is grounded on a foundation of accountability and self regulation emerging and established
businesses must embrace:
P. - Planning
O. - Organizing
L. - Liability/accountability
I. - Information/communication
C. - Control/accountability
E. - Ethics/integrity
This requires an introspective assessment of oneself or more precisely making that assessment using three key
requirements;
i. A definite purpose in mind
ii. Understanding of the environment in which you are operating in and particularly the forces that affect or
impede fulfillment of that purpose
iii. Creativity in developing responses to those forces
Given a near fanatical and steady demand (speculative) and growth of mobile phone services which is over ten times the
size of fixed network subscribers, traffic in terms of entry into mobile phone vending business is expected to continue
growing. This is evidenced by and large by the fact that there are now over 5000 community payphones 7 alone in the
country. They have become apparently easy to rollout and manage while ensuring wide availability of the same at
convenient and strategic points for the public by offering ready accessibility to telephone services. Other than the pay
phones, other emerging services arising from the growth of the mobile telephone sector are after sales service of handsets
as well as charging services (both where there is mains electricity and where there is none). Interpretation of this growth
and what it portends for the small business in terms of management and leadership has to be inferred within the
framework of the entrepreneurial 8 funnel (from pre entrepreneurs to maturing entrepreneurs).
7 The two mobile service operators had obligations in their licenses to provide payphones services and have
facilitated the availability of this service through community payphones run by individuals.
8 From the time an individual starts thinking of getting into business to the time they are established
entrepreneurs running established businesses

PRACTICAL ANALYSIS TO RESOLVING KEY OBSTACLES
A quick transect walk across the city of Nairobi as well as other peri urban centres reveals a mushrooming of vendors.
And given the governments recognition of the vital role of the mobile telephone service providers in employment
creation, there is need for targeted measures to address the challenges that such emerging business persons are facing in
terms of management and leadership skills. For instance, pertinent question would be, how many of these business
enterprises have a vision or a mission or which businesses have registered remarkable success in their operations to act as
case studies? Considering that the service offered is technology based and most customers find these outlets the first
point of contact, this demands that they must ideally operate on the basis of the P.O.L.I.C.E. model.
As earlier noted, without evidence based factual information on entry and exit traffic and the reasons for or against,
success stories that can be used for mentoring may not be easily identified unlike in the agricultural sector where success
models are well documented. This may also make it quite tricky in terms of providing tools for guidance to successfully
plan and manage such businesses within the framework of entrepreneurial funnel as modified by Techno serve. Within
the mobile telephone services provision, most of the businesses according the funnel framework are at their infancy
stages or what is called start up stage as emerging entrepreneurs. However at the narrowest point of the funnel is what is
called established entrepreneurs and these are normally dealers sub contracted by mobile phone providers. They are also
fully registered with well established business premises and can only be found in major towns and cities in Kenya. To
incrementally grow in portfolio, they need in depth industry wide and value chain based technical assistance as well as up
scaling services and access to seed money. For the established businesses, there may be need for benchmarking outside the
local market niche
CONCLUSIONS
The paper has explored the realities of change as occasioned by the introduction of the mobile telephony services in
Kenya. The potency of many businesses to keep abreast with this fast and technology based market niche can at best be
described as ingenious going by the number of business installations that can be seen in many urban centers. The
confidence exhibited by consumers through their unique consumption habits that border on impulse buying portend a
number of leadership and management challenges to this first growing business. The paper shows that the efficiency of
these enterprises will first and foremost be enhanced through collection of analysis of evidenced based data and
information on trends and emerging challenges. The paper has brought out the issue of capacity as an important
constraint that can be address by either building their own capacity or having targeted measures aimed at deepening the
concept of mentoring particularly at entry level. This is because the challenges they are facing diverse and technology
laden particularly as regards the kind of services requested by clients. Another option could be use of volunteer
internships.
15

References
1. Bolden, R. and Gosling, J. (2006) ‘Leadership competencies, time to change the tune’, Leadership, 2(2): 147–63.
2. Erick Garner, 2005: The Pygmalion Effect www.managetrainlearn.com
3. Fowler, A., Ng’ethe, N. and Owiti, J. (2002) ‘Determinants of Civic Leadership in Kenya’, IDS Working Paper,
University of Nairobi.
4. Government of Kenya, 2003: The Economic Recovery Strategy Paper for Wealth and Employment Creation 2003
– 2007, Government Printer.
5. Government of Kenya, 2005: ERS review reports. www.cbs.go.ke
6. Kaplan, A. (2002) Development Practitioners and Social Process: Artists of the Invisible, London: Pluto Press.
7. Keller, Micheal 2006: Strategic leadership www.ezinearticles.com
8. Smillie, I. and Hailey, J. (2001) Managing for Change: Leadership, Strategy and Management in Asian NGOs,
London: Earthscan.
9. White, Barbara 2005: Seven personal characteristics of a good leader www.ezinearticles.com
10. Wabala, Daniel 2006: The heart of servant leader www.ezinearticles.com
11. Safaricom; www.safaricom.co.ke
12. Communications Commission of Kenya Annual Report, 2005: www.cck.co.ke
13. Government of Kenya, 2006: Making of ……Kenya Vision 2030, Transforming National development:
www.nesc.go.ke
14. Government of Kenya, 2006: Making of …….Kenya Vision 2030, A historical perspective and background brief
of Kenya’s Economy and the issues leading to the formation of the National Economic and Social Council
(NESC).
15. CEML Framework of Management and Leadership Abilities www.managementandleadershipcouncil.org
16. Investors in People Leadership and Management Model www.investorsinpeople.co.uk
16

SUB-THEME : SOCIO-CULTURAL ISSUES AND DEVELOPMENT
TOPIC : THE DREAM OF ENTERPRISE CULTURE DEVELOPMENT IN KENYA:
THE STRATEGIC ROLE OF THE KENYA INSTITUTE OF
ADMINISTRATION (KIA) TOWARDS THIS END
AUTHOR : MWANGI, Jane W J
DESIGNATION: Senior Principal Lecturer, KIA and Doctoral Student in Entrepreneurship, Kenyatta
University, Nairobi, Kenya
ABSTRACT
High entrepreneurial activity ensures employment generation, poverty reduction and sustainable development. The challenge of exploiting
entrepreneurial talents to foster such development occupies all countries, which regard abundant entrepreneurs an essential resource in
enterprise culture development.
Many researches reveal that culture and entrepreneurial propensity works in tandem in developing entrepreneurial talent. Some scholars
contend that consistently fostering culture supports entrepreneurial behaviour. Others support the development of enterprise culture through
abundant positive role images of successful entrepreneurs, small business familiarization during youth, network development, formal and
informal learning unfortunately enterprise culture is under-developed in Kenya. This paper highlights the growing need to investigate ways of
promoting enterprise culture in Kenya, a country faced with high unemployment level and little business tradition.
The problem of investigation was that a weak enterprise culture exists in Kenya in spite of the many players and efforts of the enterprise
support system of which the Kenya Institute of Administration (KIA) is part. Enterprise culture development requires such a system. A big
gap exists because reportedly the system offers entrepreneurship training, research and consultancy support necessary in enterprise culture
development. Yet, enterprise support system has been in place and in particular, KIA has continued offering training, research and
consultancy as its core business areas. Hence enterprise dream in Kenya in not realized.
The purpose of this paper therefore, is to establish the challenges of entrepreneurship examine the strategic and facilitative role that the
Institute plays in enterprise culture development. This paper has used desk research to align existing literature with underlying principles of
enterprise culture. It is based on Gibb’s (1988) theoretical framework, which leverages enterprise culture components. The role of these
components in entrepreneurial culture development is under-searched in Kenya. Data was analyzed using manually and presented mainly
using textual form.
The key finding in this study is that many entrepreneurs require entrepreneurial training, research and consultancy support. The Institute
“lives entrepreneurship” and has generally continued providing entrepreneurial support, but little of its input is purely geared towards
entrepreneurship
The paper concludes that KIA provides more entrepreneurial support. The paper has recommended that the Institute should continuously use
highly facilitative approaches and proactively up date itself on specific entrepreneurship areas relevant to its clientele. Evidence is provided that
KIA can do more towards this end by re-engineering its training, research and consultancy initiatives in collaboration with other players in the
support system. This will help in the realization of the enterprise culture dream.
ABBREVIATIONS
BDS - Business Development Services
CBS - Central Bureau of Statistics
EDP - Enterprise Development Programme
EDU - Entrepreneurship Development Unit
ERS - Economic Recovery Strategy
GDP - Gross Domestic Product
GOK - Government of Kenya
HRD - Human Resource Development
ICEG - International Centre for Economic Growth
ILO - International Labour Organization
INT - International
KIA - Kenya Institute of Administration
Ksh - Kenya Shillings
MDI - Management Development Institute
MRTTT - Ministry of Research, Technical Training and Technology
MSE - Micro and Small Enterprises
POP - Population
SSE - Small Scale Enterprises
TOF - Training of Facilitators
TOT - Training of Trainers
UNDP - United Nations Development Programme
USIU - United States International University
17

1.0 INTRODUCTION
The mobilization of individual initiative to make better use of entrepreneurial talents in fostering economic
development is a question that occupies all countries (Gibb, 1988; Khanka 2004). These countries in general
and Kenya in particular regard entrepreneurs increasingly as an essential resource. Today, there’s enhanced
awareness of entrepreneurship as a set of skills that needs to be taught and interest in finding out how
entrepreneurs emerge and behave, factors that encourage enterprise creation and growth; and what can be done
to promote entrepreneurship in Kenya a country with little business tradition. A wide range of factors
contributes towards entrepreneurship. Chief among these has been its impact on socio-economic well being of
the citizenry as the “engine of development” (GOK, 1992:1).
Some literature (Douglas, 1992; Gibb, 2002; Mullei, 1999; Khanka, 2004) on enterprise culture confirms that
entrepreneurship is a vital ingredient in the development of potential entrepreneurial talent. Harris Forbes and
Fletcher (2000) and Gibb (1988) contend that fostering such a culture where many of the values and
structures emphasize it, is consistent with entrepreneurial behaviour. Kenya has an entrepreneurship support
system that offers research training and consultancy services for entrepreneurs consisting of different
institutions. The interest in the role of these services in this process has grown considerably. Albeit, enterprise
culture development dream has not been fully realized due to many challenges that require to be redressed.
This paper therefore, has drawn the entrepreneurial picture in Kenya showing the wishful thinking on
enterprise culture as projected in the local literature. It has also, examined the actual training, research and
consultancy role that KIA plays in the development of such a culture. The paper has concluded that the
Institute can provide more service in this area. It has also suggested further inputs that the Institute would give
in this area.
1.1 BACKGROUND
Entrepreneurship development, therefore, entails changing attitudes to inculcate a “philosophy of winners”
with a visionary focus (Schumpeter, 1970; Khanka, 2004). Mullei and Bokea, 1999). This leads to the
development of enterprise culture, attempts have been made to develop enterprise culture, but this has
remained a dream.
1.1.1 Supply of Entrepreneurs
The supply of entrepreneurial talent is subject to different forces. To some extent, entrepreneurs are a product
of family influences, peer pressure, cultural conditions, educational system, strength of work ethics and religion
(Pareek and Rao, 1978 Douglas, 1992). In addition, potential entrepreneurs perform within, and are
motivated by the conditions in which entrepreneurship is embedded. The existence of a favourable
environment, socio-cultural factors and support system spawns entrepreneurs and ensures vibrant
entrepreneurial activities (Kisaka and Mokaya, 2006). The goal of a country therefore, is to have appropriate
conditions and commitment to develop entrepreneurs (Gibb 2002; Pareek and Rao, 1978). Enterprise culture
prepares a community to take advantage of all available opportunities. Kenya lacks a well-developed enterprise
culture to sustain entrepreneurship towards this end due to the challenges faced (section 3.2.1).
1.1.2 Entrepreneurial Attributes
Empiricism indicates that a large number of the self-employed display a high degree of entrepreneurial
characteristics. Entrepreneurial behaviour is identified with such traits as need for achievement, power, internal
locus of control (independence) associated with the popular entrepreneurial image (McClelland, 1961). Other
entrepreneurial attributes are: initiative taking, strong persuasive powers, problem solving, risk-taking, efficacy,
flexibility, creativity and innovation, action-orientation, perseverance, self-confidence, determination and hard
work.
Some people are stronger in some attributes or require stronger enterprising abilities than others to survive.
The attribute mix differs between persons and communities for example, some cultures embrace higher
entrepreneurial tendencies. Being in business is likely to assist the development of many attributes (Gibb,
1988). But entrepreneurs are not necessarily born with all these attributes albeit; they can be taught to
18

ecognize and nourish their capabilities (Khanka, 2004). In Kenya, entrepreneurial attributes are nurtured in
different institutions. KIA offers training, research and consultancy services to improve its clientele’s
performance. The Institute can develop other demand-driven programmes around some of these attributes.
1.1.3 Entrepreneurship Development in the World
The extent of development of enterprise culture varies with countries due to challenges and strategies
experienced. In Europe, the Lisbon European Council of March 2000 set for the European Union the strategic
objective of becoming the most competitive and dynamic knowledge economy in the world by promoting
entrepreneurship among other initiatives (Hull, 2003). The Commission analyses and studies how to
ameliorate the overall environment that enterprises have to operate in.
In 1994 Belgium introduced in Wallonia, the "Enterprise discovery open days" event for the public to have
the opportunity to discover the business world over one weekend. This raises the profile of entrepreneurs,
reveals the value of their work and improves integration in the region networking.
Greece encourages self-employment and provides the knowledge required for the undertaking of
entrepreneurial initiatives. The current network of entrepreneurship centres for young people enables them to
search for the information needed to set up their own business or to co-operate with their peers in a productive
environment. This fits in the Gibb’s enterprise culture framework used in this study. In Poland, the most
important and prestigious awards given to entrepreneurs are the President of the Republic Business Awards,
also called the Business "Nobel" as strategies to encourage entrepreneurship.
Britain launched the Enterprise Insight in May 2000 to bring about a substantial increase in proentrepreneurial
attitudes. Today, UK has 3.4m self-employed people. Entrepreneurship as a career choice is
becoming more attractive using realistic role models; and images that portray a holistic view of what it means
to be entrepreneurial. All these factors require individuals, in businesses, to spot opportunities, take initiatives
and adapt to changing circumstances. Many institutions are set to develop entrepreneurship. Entrepreneurship
needs to be seen as a positive and worthwhile activity, so that those who are attracted to it are supported and
encouraged. But, fewer people in the UK think being an entrepreneur is a good career choice in Kenya than in
the US.
Lack of poorly developed entrepreneurial capacity in Africa is one of the main factors contributing towards the
continent’s poor socio-economic performance. Africa has the highest rate of entrepreneurial development but
also highest rates of poverty and unemployment. In response, many African governments have been
implementing entrepreneurship policies and programmes aimed to develop entrepreneurial capacity with
moderate success. The economies of Southern Africa are characterized by large informal sectors Botswana has
a relatively better enterprise culture due to good macro-economic policies and governance among others factors
(Themba, 2006). But most of these countries have weak enterprise cultures.
Eastern Africa countries have weak enterprise cultures. For example, in Uganda, enterprises are one of the key
engines of growth (Balunywa, 2004). The country is however faced by high rate of business failure mainly due
to poor management. This affects the sustainability of enterprise culture. The country mainly relies on
necessity (basic) entrepreneurship, which may imply weak enterprise culture. Balunywa further raises the
concern for differences in success between the Asian and African business people and concludes that Asians
have low uncertainty avoidance among other reasons, which is high for Africans (Hofstede, 1980).
1.1.4 Entrepreneurship in Kenya
For rapid economic development, a “country requires a strategic approach to developing its entrepreneurs and
enterprises” (Mullei and Bokea, 1999). Entrepreneurial approach harnesses a tremendous amount of human
resource capabilities for faster economic growth. In Kenya the debate on enterprise culture development is old
and still ranging on. The emotion of Enterprise culture to produce a critical mass of creative and innovative
Kenyans capable of developing into a profile of entrepreneurs, especially among the youth (who are the
majority of the population), trainers and policy makers is attempted by many players where KIA plays a critical
role.
19

The acquisition of business skills in the country is regarded as one of the most critical factors necessary for
growth and development of SMEs. For this reason, the policy of providing business training, research and
consultancy services has been in place since 1986 when the SME sector emerged as one of the key strategies in
Economic Management for Renewed Growth (GOK, 1986). Since then and especially subsequent to the
publication of Sessional Paper No. 2 of 1992, the Ministry of Research, Technical Training and Technology
(MRTTT) provided the lead in promoting enterprise culture in the country. Sessional Papers No. 2 of 1992
and 2005 (GOK, 1992; 2005) contains policies and strategies to deal with limitations faced by SMEs such as
low business skills, inappropriate marketing strategies, and inadequate access to skills and technology, etc.
These are mainly caused by shortage of trained personnel, and lack of needs assessment and empirical approach
to dealing with entrepreneurial issues, etc. These are issues that KIA, in tandem with other players in the
entrepreneurship support system deals with. However, to date the country is still wallowing in these problems
and lacks a well developed enterprise culture.
Kenya recently launched, the Vision 2030 on the national dialogue on development. The strategy for
realization of Vision 2030 outlines actions to achieve rapid and sustained economic growth to transform the
country into a prosperous middle-income state (put Kenya at per with the South East Asian Tigers) and
revitalize the country’s economy. It shows how Kenya should be like in the next 2 decades. The economic
phenomena (GOK.2006:b), one of the pillars in the strategy shows how all the sectors including
entrepreneurship will contribute to the growth, create wealth and eradicate poverty. Technical and intellectual
skills are required, for the Vision to be realised especially through consultation and collaboration in all fields.
This is in line with Gibb’s network formation and sustenance. Indeed, Kenya can achieve Vision 2030 and the
enterprise culture dream realized by tapping unexploited resources (GOK 2006:b).
1.1.5 Entrepreneurial Support System in Kenya
Several organizations in the Kenyan enterprise support system of which KIA is part of, help entrepreneurs in
different ways. These include government ministries, corporations specially set to develop entrepreneurship;
and financial institutions. Others are educational institutions: institutes of technology and management and
universities; regional administration, and industries interested in developing entrepreneurship. Examples of
organizations in the support system are: universities, Kenya Institute of Business Training, Kenya Industrial
Research and Development Institute, Kenya Industrial Property Institute, Kenya Institute for Public Policy
Research and Analysis, Government Training Institutes, National Youth Service and National Polytechnics,
etc.
These complementary organizations are found in the public, private and Non-Governmental Organizations
(NGOs) sectors (GOK, 2005). The services they render include training, counseling, mentoring, advocacy,
consultancy, advice, information- sharing, lobbying and facilitating networks to help the entrepreneur.
1.1.6 Kenya Institute of Administration as Part of the Support System
KIA is a premier Management Development Institute (MDI) established in 1961 to provide varied services to
Kenyans. Like other institutions within the enterprise support system, the Institute is founded on clear
National and goals policies (which they in turn influence), corporate strategies, high standards, and contributes
incalculably towards public policy formulation, including entrepreneurship policies. According to the KIA Act
(No 2 of 1996), Section 4, “the Institute is specifically charged with the functions and mandate of offering
training, research and consultancy services to organizations, and individuals” in different management fields
including entrepreneurship.
The Institute enjoys supported strong good will from the Government, has well educated and experienced staff
who deliver service in the mandated areas, and a council that provides direction and support. It also has a
good reputation for quality products and services. The Institute highly values teamwork and productivity,
quality service delivery, creativity and innovation, integrity, transparency and accountability and high customer
satisfaction (KIA, 2006-2011) to carry out its role. KIA also values networks with customer institutions and
individuals.
KIA, however, faces many challenges such as shortage of facilities, stiff competition, reduced Government grant
and lack of proactive marketing strategies (KIA 2001 – 2006, 2006 - 2011). The Institute is specifically
20

threatened by increased dynamism in Kenya requiring continuous strival to keep pace with the changes,
development of capacity to deliver high quality services and new products as central components in its
business. More importantly, the Institute interrogates itself through self-appraisals of its performance. KIA
therefore, takes entrepreneurial approaches to transact its business entrepreneurship using prudent management
styles as reflected in its growing revenue base and increasing activities (Table 1). These are important
ingredients in enterprise culture development. In spite of the provision of these services by KIA and other
institution, to date, Kenya has a weak enterprise culture. It is against this background that this study was
undertaken.
1.2 Statement of the Problem
In spite of continued support services rendered to entrepreneurs by the enterprise support system, enterprise
culture is not well developed in many countries (Gibb, 2002). In Kenya, the government regards the
enterprise support given to Kenyans an important determinant of entrepreneurship development. Specifically,
the training, research and consultancy services continuously provided by different institutions are founded on
clear government policies and goals (GOK, 2002-2008). Significant resources have also been invested over the
years to improve such services.
Specifically, KIA in tandem with other institution in the support system has continued participating in public
policy formulation, offering training, research and consultancy services to Kenyans. Yet, the country lacks a
well-developed enterprise culture. There is little empirical evidence why enterprise culture development in
Kenya remains a gleam in spite of these efforts. Enterprise culture development debate by local scholars such as
Bwisa (1992) and Mullai (1999) is inconclusive
The problem of investigation in this paper therefore, was that a weak enterprise culture exists in Kenya in spite
of the many players in the enterprise support system of which the Kenya Institute of Administration (KIA) is
part of. This study has contributed towards filling this glaring gap of knowledge by establishing the challenges
hindering enterprise culture development. It has also examined the strategic and facilitative role that KIA,
plays in the development of this culture.
1.3 Purpose
The purpose of this paper is to examine the strategic and facilitative role that KIA, plays towards the
realization of a well-developed enterprise culture dream in the country. Such a culture would lead towards
high entrepreneurial output for national development.
1.4 Objectives
The objectives of this paper are to:
(a) Draw the entrepreneurial picture in Kenya.
(b) Describe the enterprise support system in Kenya.
(c) Examine KIA’s strategic role in the development of enterprise culture in Kenya.
(d) Suggest areas where KIA can give more support in enterprise culture development
1.5 Definitions of Key Words
Enterprise: A venture where entrepreneurial enterprising attributes are used.
Enterprise culture: Set of attitudes, values and beliefs that lead to enterprising behaviour and aspirations
towards self-employment in a community. It is made up of enterprising people prepared to challenge existing
ways of doing things, and to new ideas for the benefit of society. It supports independent entrepreneurial
behaviour in business context.
Entrepreneurship: Process of being an entrepreneur, derivative of the French word “entrepredre” - to
undertake, recognize and pursue opportunities, using innovation and creativity for business start-up (Burch,
1986). It is a spirit of taking risks and investing resources to get gainful results through increased efficiency
and productivity.
21

Entrepreneur: Individual who initiates, undertakes risks and manages resources to establish an economic
activity or enterprise. He/she identifies business opportunities and takes actions to maximize them
(Schumpeter, 1970).
Small business: Owner-managed independent business of a size arbitrarily defined as small in relation to the
structure of the business industry sector in which it operates.
Culture: Totality people’s way of life. It also has to do with learning from society.
Support System: This composes of a group of institutions that provide entrepreneurial services to enterprises.
1.6 RATIONALE
1.7 SCOPE
Past papers by the GOK (GOK: 1988, 1992, 2005) have emphasized the need to develop enterprise culture in
Kenya. For example, Sessional Paper No. 6 of 1988 on Education and Manpower Training for the Next
Decade and Beyond recommended the introduction of entrepreneurship education at all levels of education to
enable the youth opt for self-employment as a career. To date, this has not effectively been done. This paper
amplifies the hindrances to development of an entrepreneurial culture in the country.
In Kenya, employment opportunity in the modern sector is given priority but many organizations have
continued pruning unwanted labour through retrenchments. In addition, the number of school drop has also
been rising fast (Mullei, 1999). The benefits of developing an enterprise culture that would kindle
entrepreneurial thinking has been explained in this paper.
The Enterprise Development Programmes (EDPs) are not well coordinated, but focus on developing
entrepreneurs in a country whose pool of indigenous and potential entrepreneurs is small. KIA’s further input
in collaborative initiatives is explained herein.
Enterprise culture is significant in business and self-employment creation. It enables entrepreneurs exploit
business opportunities and support to realize their potentials (Douglas, 1992; Gibb, 1988 and 2002). This
culture leads to increased incomes, alleviates poverty and unemployment (ERS, 2003) as highlighted in this
study.
This study interrogates and amplifies the growing need to create an enterprise culture in Kenya to foster
entrepreneurial activity in a country with high levels of unemployment and poverty. The challenge is to drive
entrepreneurial culture especially by preparing youth. The strategic role of KIA related to policy-making,
administration, development of policy-makers and entrepreneurs is articulated and recommendations
suggested. These recommendations may lead to enhancement of enterprise culture in the country and
increased business opportunities.
The paper has only covered entrepreneurial development in Kenya with reference to the strategic role of KIA,
an Institution dedicated to the provision of training, research and consultancy services. It has reviewed the gap
between national entrepreneurship wishes and implementation in Kenya and how KIA can play more
facilitative and strategic role.
The methodology used involved reviewing of documented literature mostly from books, journals, websites and
other reference materials from foreign and local sources.
22

2.0 THEORETICAL FRAMEWORK
At the root of enterprise culture (Figure I) is a set of core characteristics (Figure 1) that are collectively valued
by the community to meet its needs and interests in entrepreneurship idea generation. Enterprise culture exerts
major pressures on individuals and enterprises to think and act in ways consistent with the culture. To
positively influence entrepreneurial performance in a country, enterprise culture must be strong.
a. Abundant positive roles images of
successful independent businesses
b. Opportunity to practice
entrepreneurial attributes reinforced by
society culture during formative years.
Figure II: The Components of Enterprise Culture
Enterprise Culture
e. Provision formally and/or informally of
knowledge and insight into the process of
independent business management
Source: Gibb, Allan A. (1988). Stimulating Entrepreneurship and New Business Development. International labour
office INTERMAN Programme for promoting entrepreneurship and New Enterprise creation (UNDP (ILO
Project INT/87/029) Management development Branch Training Department, Geneva 2 nd Impression 1991.
This figure shows that motivation through “social engineering” (Gibb, 1988; Pareek and Rao, 1978) during formative
years is important in developing enterprise culture through: provision of role models and images, and practice of
entrepreneurial attributes reinforced during formative years. Those working in small businesses are more likely to
establish businesses than those working in large firms. Familiarity with entrepreneurial phenomenon destroys some
myths of unattainable business ownership (Khanka, 2004). Small businesses therefore, provide clear indicators in
generating further enterprise. They acquaint those exposed to the phenomenon with independence to massage
entrepreneurial attributes. Gibb contends that, those whose parents/relatives/friends own small business are more likely
to set-up businesses than those without similar acquaintances or experience. Such relations also provide a network of
acquaintances with market opportunities. Lastly, enterprise culture provides knowledge, and insight into independent
business processes (Gibb, 1988). Members of a culture that supports individual business ownership are more likely to
establish businesses. Therefore, the supportive ingredients in developing an enterprise culture are: strong social networks
e.g. with suppliers and customers; leading to trustworthiness, credit provision; family vision to make members more
business-focused; close knit families; ethnic entrepreneurship; no extravagance; political, and social good-will, and strong
SMEs policy to encourage investment. The role that KIA plays/would play developing each enterprise culture
component is italised in Figure IV:
23
c. Ample opportunity for familiarization
with small businesses tasks especially
during youth
d. Network of independent
business/family contracts and
acquaintances reinforcing familiarity and
providing market entry opportunities.

a. Abundant positive roles images of
successful independent businesses
� Guest speakers during training
� Use of successful cases
b. Opportunity to practice
entrepreneurial attributes reinforced
by society culture during formative
years.
� Training in entrepreneurship to
policy makers/opinion leaders
Enterprise
Culture
e. Provision formally and/or informally of
knowledge and insight into the process of
independent business management
� Training youth trainers e.g. in business
management (TOT)
� Undertake research and develop case
studies
� Offer consultancy services
Figure IV: The Role of KIA in Developing Enterprise Culture in Kenya
Adapted From: Gibb, Allan A. (1988). Stimulating Entrepreneurship and New Business Development.
International labour office INTERMAN Programme for promoting entrepreneurship and New Enterprise
creation (UNDP (ILO Project INT/87/029) Management development Branch Training Department,
Geneva 2 nd Impression 1991.
Figure IV shows that abundant positive roles images of successful independent businesses are used in form of guest
speakers and successful cases during training. An ample opportunity for familiarization with small businesses tasks
especially during youth is provided through attachments to practice entrepreneurial attributes reinforced by society
during formative years. The Institute also participate in policy development, implementation and evaluation for policy
makers and opinion leaders. A network of independent contracts and acquaintances reinforcing familiarity, providing
market entry opportunities and emphasizing the role of contacts or ‘know who’ is encouraged by KIA to be spearhead
and by KIA alumni spearhead (KIA 2006 – 2011). Particularly, some past programme participants have formed
associations such as the “Kenya Women in Development Association”. Provision formally and/or informally of
knowledge and insight into the process of independent business management has been done through the training of
youth trainers for example, in business management (TOT) (KIA 2006 – 2011) and undertaking research and
developing case studies. In addition, research and consultancy services have been offered in these areas.
24
c. Ample opportunity for
familiarization with small businesses
tasks especially during youth
� Attachments
� Policy development and
implementation and evaluation
d. Network of independent
business/family contracts and
acquaintances reinforcing familiarity
and providing market entry
opportunities.
� Emphasizing role of contacts or
‘know who’

2.1 Dynamics of Entrepreneurial Development
According to Pareek and Rao (1978), different key factors influence entrepreneurship
(Figure II). Among them are:
2.1.1 Individual
This is the most important element in entrepreneurship that makes the decision to generate entrepreneurship
in society (Schumpeter, 1970). The individual initiates, establishes, maintains, expands enterprises and strives
to make it a success. It is necessary, therefore, to establish what influences the individual. KIA mainly deals
with individuals at senior and middle management levels from the public, NGO and private sectors.
2.1.2 Socio-cultural Factors
These include: family background, behaviour, norms, attitudes and values of immediate social circle are a
function of the socio-cultural milieu, and contribute to entrepreneurial development. They influence
development of normative behaviour of individuals who operate under high family expectations and pressure
to use reinforced values. Such behaviour reflects independence, initiative and risk taking as a result of the
socialization process in the family, school and society (McCelland, 1961; Pareek and Rao, 1978).
Entrepreneurs grow and internalize certain values and norms from their family and society. The influence of
socio-cultural factors on individuals however, varies making some individuals getting more influenced. KIA
reinforces positive values of its clientele especially through training.
2.1.3 Environment
The socio-political and economic policies and opportunities available plays a crucial role in exerting direct
influence on entrepreneurship (GOK, 2005). Knowledge about the social, economic-political environment is
important for the entrepreneur, for example, which type of enterprises are being encouraged or assistance
prioritized. To KIA, such knowledge assists in preparing to exploit the environmental opportunities available
by rendering entrepreneurial services with regard to its core business.
2.1.4 Support System
An efficient and effective support system enhances entrepreneurial success. Several organizations in the
support system in Kenya of which KIA is part of, help developing entrepreneurship. These include: financial
institutions; extension services; NGOs, private agencies carrying out research, and training; Educational
institutions: institutes of technology and management and universities; regional administration, and industries
interested in developing entrepreneurship see section. These institutions are complementary in providing
entrepreneurial support. This dynamic enterprise culture development factor is the foundation of this study.
Entrepreneurs often interact with the support system whose operations reinforce or discourage
entrepreneurship behaviour. The quality of interaction is determined by the organisational result-orientation
and working style which demonstrates the prevailing norms. Attention to such norms and inculcation of
result-orientation, indeed, has relevance for the training, research and consultancy services as offered by KIA an
institution that “lives entrepreneurship”. These factors are shown in Figure II.
En
vir
on
Indi
vidu
al
Entre
pren
25
So
cio
-

Figure II: Dynamics of Entrepreneurial Development
Source: Udai Pareek and T Venkates Wara Rao, (1978:30). Developing Entrepreneurship for Policy
Makers, Entrepreneurs, Trainers and Development Personnel. Learning Systems. New Delhi, India.
Figure II shows the factors that interact and influence entrepreneurship, which is viewed as a dependent
variable, with other factors influencing and contributing to it. It is also an independent variable that also
influences (Pareek and Rao, 1978) these components of enterprise culture. Prudently, KIA strives to
understand the individuals, their backgrounds, and environment of operation and type of entrepreneurial
support systems before rendering services. In addition, the Institute assesses the support needs of its clientele.
3.0 METHODOLOGY
This paper has used a desk research to align the existing literature with underlying principles of enterprise
culture. It is based on Pareek’s and Rao’s (1978) model of dynamics of entrepreneurial development, and
Gibb’s theoretical framework, which leverages enterprise culture components. The role of these components in
entrepreneurial culture development is under researched in the Kenyan scenario. The methodology used
involved a review of documented literature mostly books, reports, journals, websites and sessional papers and
other reference materials from international and local sources to inform this paper GOK. Data was analysed
using descriptive statistics and qualitative statements made from which conclusions were drawn.
4.0 RESEARCH, FINDINGS AND DISCUSSION
4.1 The Role of Kenya Institute of Administration
Currently, the Institute provides training research and consultancy services across a range of topical areas. This
includes although not limited to; staff performance appraisal, performance improvement and management,
development and management of performance contracts, human resources development (HRD) and
management, change management, and trainers of trainers among others. Other competency area for the
Institute include Project Planning and Management, Proposal Writing, Participatory Monitoring and
Evaluation, Environmental Impact Assessment, Waste Management, Data Management, etc. The clients for
these programmes cut across all sectors (KIA, 2001-2006).
Key among the past clients are Kenya School of Law, Horticultural Development Authority, Ministry of Local
Government, Ministry of Energy, Kenya Prisons, Kenya Maritime Authority, Nairobi City Council among others.
These organizations also deal with entrepreneurs hence creating a network web. Based on the experience gained
whilst undertaking such assignments, KIA does recognize that the specific local conditions under which the
clients work create key training needs.
KIA’s role in the development of enterprise culture in Kenya Figure I has been examined.
26

FIGURE I: THE ROLE OF KENYA INSITITUTE OF ADMINISTRATION
IN ENTERPRISE CULTURE DEVELOPMENT IN KENYA
KIA
NATIONAL POLICY & GOALS
TRAINING RESEARCH CONSULTANCY
SCHEDULED NON-
SCHEDULED
ENTERPRISE SUPPORT SYSTEM IN KENYA
BASIC APPLIED BIDED
CHALLENGES
STRATEGIES
DEVELOPED ENTERPRISE CULTURE
4.2 Services Provided by KIA
4.2.1 Training Services
The KIA has continued to train its clients from the public, private and NGO sectors in entrepreneurship through the
regular (scheduled), hosted and in-house programmes. This service takes much of KIA’s efforts. The areas of
specialization cut across a range of key management competencies (Appendix I). This shows that entrepreneurship
development is not a key area. In 2005-2006, (KIA, 2005-2006) a total of 65 scheduled programmes were run by the
Institute as shown in Table 1.
27
OTHER INSTITUTIONS IN SUPPORT
SYSTEM
NON-BIDED

Scheduled
Courses
In-house
Courses (Nonscheduled)
Hosted
Programmes
GRAND
TOTAL
Table 1: KENYA INSTITUTE OF ADMINISTRATION TRAINING STATISTICS (JULY 2001-JUNE 2006)
2001 – 2002 2002 – 2003 2003 – 2004 2004 - 2005 2005 - 2006
No. of
courses
No. of
pax
Duratio
n
(Days)
Trainin
g Days
No. of
courses
No. of
pax
Duration
(Days)
Trainin
g Days
No.
of
cours
es
The number of programmes run by KIA has increased over the reviewed years (KIA 2001-2006) from 131 in 2001-2003 to 220 in 2005-2006. This reflects an increased
revenue base with more participants including entrepreneurs from all sectors of economy attending various courses. The systematically increased number in 2005-2006 of nonscheduled
(in- house) programmes also reflects the collaboration between the Institute and the organization for whom managers are trained 53,399 training days, on average each
attended a seven (7) day programme. This is long enough to include entrepreneurs’ aspects in all progrommes. Participants in scheduled (open) programmes benefits from
interaction with others from different organizations.
Most of the programmes run at KIA between 2001 and 2006 had entrepreneurial aspect covering topics such as: management communication, training and development, project
management, finance and resource management, HRD, business development and management, administration, management and governance. Research and consultancy inputs
were also given
4.2.2 Consultancy Services
In undertaking consultancy assignments, whether bided or un-bided, the Institute normally adopts the practical learning approach. This approach entails sharing of knowledge and
skills along crosscutting issues with clients as a strategy for deepening the their conceptualization of the task. Through this approach, the Institute develops a valuable and unique
system to ensure that results are delivered both in their appropriateness and timeliness, which are key to entrepreneurship.
The Institute has carried out consultancy work for various organizations in the recent past. For example, the Restructuring for Kenyatta National Hospital,
organizational study and restructuring. This was one of the pioneer studies carried out that recommended a parastatal status for the Hospital that it now enjoys.
The Institute has also developed strategic plans and several organizations have benefited from this experience. For example, Horticultural Crops Development
Authority, Ministry of Energy. Kenya School of Law, Ministry of Local Government, Horticultural Crop Development Authority, Prison’s Service, Thika
Municipality and City Council of Nairobi. This is as a result of the Institute having developed its own plans with assistance from consultants (KIA, 1996-2001;
2001-2006 and 2006-2011).
21
No.
of
pax
56 1053 864 18848 60 1258 823 19026 81 1492 12995
34 683 326 6729 48 1073 594 12747 93 2808 31121
20 1198 84 3687 23 1416 116 5226 136 15 397 46 2733 9283
110 2934 1274
Durati
on
(Days)
Traini
ng
Days
No. of
courses
No. of
pax
Durati
on
(Days)
Traini
ng
Days
No. of
courses
No. of
pax
Duration
(Days)
29264 131 3747 1533 36999 220 7033 53399
Training
Days

4.2.3 Researches Services
This is an area that is wanting (KIA, 2006-2011). The Institute is however, working around this
inadequacy by having staff trained in research development and management is also encouraging more basic
and action research initiatives (Figure III). Additionally, evidence for researches undertaken is now a
requirement for upward mobility for the KIA faculty as an incentive while. In this year, the Institute
undertook the first internal research conference in July where ten papers were presented. To date four (4)
other researches have been completed, while three (3) are ongoing.
4.3 Contribution of KIA towards Entrepreneurship Development in Kenya
According to the 1999 Small and Micro Enterprise Baseline Survey, (GOK, 1999) there were about 1.3
million MSEs employing an estimated 2.4 million people (Table 2).
Table 2: Total Number of MSEs and their Employment by Area
Nairobi and Mombasa
Other Major towns
Rural Towns
Rural areas
Total
Area MSEs Workers
Number % Number %
204,280 15.8
157,533 12.2
81,320 6.3
845,879 65.6
1,289,012 100.0
22
394,838 16.9
279,133 11.8
135,34 5.6
1,551,930 65.7
2,361,250 100.0
Source: GOK, Central Bureau of Statistics (CBS) International Center for Economic Growth (ICEG) and K-Rep
Holdings Ltd., (1999:18). National Micro and Small Enterprise Baseline Survey 1999. Nairobi, Kenya.
The 2003 National Economic Survey further shows that employment within MSE sector increased from 5.1 million
persons in 2002 accounting for 74.2% of the total persons engaged in employment. This translates to 675, 000 jobs
per year. The new entrants into the entrepreneurial job market obviously require support services that KIA provides.
In addition, the sectoral analysis of wage employment in the modern sector as presented in Table 3 indicates an
increase of the jobs in over the years including the self-employed where the MSE’s fall. Employment in the informal
sector grows by 10.0% annually a catchment that KIA can induct.
Table 3: Total Employment: June 2001-2005 (‘000’s)
Modern Establishments- urban and Rural Areas: 2001 2002 2003 2004 2005
Wage Employees 1.677.1 1.699.7 1.727.3 1.763.7 1.807.7
Self-employed and unpaid family workers 65.4 65.5 65.7 66.3 66.8
Informal Sector 4,668.7 5,108.3 5,546.4 5,992.8 6,407.2
TOTAL 6,411.2 6,873.5 7,339.4 7,822.8 8,281.7
Source: GOK, Central Bureau of Statistics Ministry of Planning and National Development. (2006). Economic
Survey 2006. Government Printer Nairobi.
The MSE sector substantially provides employment for more (over 74.2% of the total number of persons engaged in
the country) people than does the formal sector. The average Kenyan MSE employs 1-2 workers. The sector
contributes up to 18.4% of the country’s Gross Domestic Product (GDP) and is also a driver in promoting enterprise
culture, necessary for achieving the national goal of employment, wealth creation and development (GOK, 2005). The
average income of the enterprises surveyed was Kenya Shillings (Ksh). 6,000 per month or 2.5 times higher than the
minimum monthly wage for general labourers (which in 1999 was Ksh. 2,363). However, among the main constraints
facing micro-entrepreneurs was lack of skilled personnel a gap that KIA with others in the support system have been
striving to fill, but more input is required.
Contrary to the belief, that mushrooming SMEs are an epitome of an enterprise 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 that has affected many in the country. These are rational defensive responses from unemployment
and poverty (Kisaka and Mokaya, 2006). This can only be safeguarded if an enterprise culture is developed, through
support mechanisms.
Education and training have an important bearing on the performance of MSEs and in promoting national economic
competitive advantage and prosperity (Bwisa, 1997). Most entrepreneurs (75.7%) interviewed during the National
Baseline Survey (GOK, 1999), either had primary or no education (Table 4). Although the holders of primary
education may not be the main catchment area for KIA’s training programmes, trainers of entrepreneurs are trained at
the institute. Additionally, other services: research and consultancy are also offered to them.
Table 4: Levels of Education Attained by Entrepreneurs (%) (1995 and 1999)
Education 1995 1999
None
20.4
10.6
Primary
55.3
54.4
Secondary
23.2
33.1
Higher
1.2
1.8
Total 100.1 100.0
Source: GOK, Central Bureau of Statistics (CBS) International Center for Economic Growth (ICEG) and K-Rep
Holdings Ltd., (1999:42). National Micro and Small Enterprise Baseline Survey 1999. Nairobi, Kenya.
The Survey supports Bwisa’s (1997) view, that entrepreneurship and training are inextricably linked. Training of
entrepreneurs in Kenya has been introduced in some institutions to produce persons with skills in entrepreneurship.
But, training was found to seriously be lacking in MSEs. About, 85% of the entrepreneurs had not received any
training. The disparities in lack of training by gender were 86.9% for women and 83.4% for men; (Table 5) showing
a gap that KIA can fill through training and undertaking a needs assessment to establish new needs since the 1999
survey.
Table 5: Type of Training Received by Entrepreneurs by Gender
Training Men Women Total
None
83.4 86.9 85.1
Management
0.8 1.1 0.9
Technical
9.1 7.5 8.3
Marketing
0.8 0.5 0.7
Informal
1.4 1.8 1.6
Consultancy
1.2 0.9 1.0
Counseling
2.2 1.0 1.6
Other
1.1 0.3 0.7
Total
100.0 100.0 100.0
Source: GOK, Central Bureau of Statistics (CBS) International Center for Economic Growth (ICEG) and K-Rep
Holdings Ltd., (1999:43). National Micro and Small Enterprise Baseline Survey 1999. Nairobi, Kenya.
Areas such as management, technical training, marketing and counseling were reported as key areas where training was
required. Some of the respondents mainly desired knowledge on the entrepreneurial process (entrepreneurship):
starting a business, management, accounting, and marketing (Table 6).
Table 6: Type of Training Required by Entrepreneurs by Gender
Training Men Women Total
None
50.8 53.6 52.1
Management
26.5 18.9 22.8
Technical
11.1 9.5 10.3
Marketing
8.1 11.6 9.8
Don’t Know
1.6 4.7 3.1
Other
1.9 1.8 1.8
Total
100.0 100.0 100.0
23

Source: GOK, Central Bureau of Statistics (CBS) International Center for Economic Growth (ICEG) and K-Rep
Holdings Ltd., (1999:44). National Micro and Small Enterprise Baseline Survey 1999. Nairobi, Kenya.
Table 5 shows that some entrepreneurs reported training requirements in areas that KIA can provide.
The survey also established a relationship between membership in business associations and education. The
distribution of entrepreneurs by association membership showed that many are university graduates (GOK, 1999) who
are also the main KIA trainees (KIA 2001 - 2006). Gibb, (2002) opines that networking is an important component
in enterprise culture, which provides members with potential for business contacts, protection, promotion of business
interests, assistance and avenue for advancement. Network creation and sustenance is one of the Modules popularly
taught in KIA progrommes.
4.3 KEY ISSUES AND CHALLENGES IN ENTERPRISE CULTURE DEVELOPMENT
Given the dynamic society in which KIA operates, the Institute takes cognizance of the continued challenge
posed in the process of positioning itself at the cutting edge of new developments in management practices
and governance issues with regard to provision of training, research and consultancy services. Several issues
and challenges arise out of the role of KIA as part of the entrepreneurial support system as shown below:
4.3.1 Why Kenya lacks an Enterprise Culture
It is clearly evident that in some societies, some people aspire to business ownership than others. Arguably,
this does not result from intrinsic personality differences, but existence of stronger enterprise culture (ILO,
2001). The creation of an enterprise culture needs wider and more fundamental changes in
Entrepreneurship Development Programmes (EDP). The following reasons why Kenya lacks a developed
enterprise culture are presented with reference to the components of enterprise culture as given by Gibb
(1988):
4.3.2. Abundant positive role images
Kenya suffers from scarcity of positive role images of successful independent businesses (Mullei 1999, GOK,
2005). The country has suffered from high level of corruption. This makes many people associate business
success with this vice (GOK, 2005). KIA has been giving an input integrity issues in the training
programmes
4.3.3 Opportunity to practice entrepreneurial attributes
The opportunity to practice entrepreneurial attributes is reinforced by society culture during the formative
years. However, the Kenyan culture doesn’t stand failures. Mostly, business failures are not given a second
chance. Failure is not seen as opportunity for the lessons learnt which causes self-blame. Yet, these MSEs
have “… a high mortality rate with most of them not surviving to see beyond their third anniversaries”
(GOK, 2005:6).
Further, some people who are good at identifying business opportunities, but not courageous enough to take
risks to convert them into businesses are not encouraged by society. Many Kenyans have negative attitudes
and attach a social stigma to being in business, and business attempts are mostly taken as second best after
academic failure. The first-rate academic performers are socialized to work for blue-chip corporations in
white color jobs (Mullei, 1999). This discourages Kenyans to entrepreneurial practice.
4.3.4 Ample opportunity for familiarization with small businesses
Familiarization with small businesses tasks especially during youth in a country faced with high level of
unemployment is not possible. Further, many businesses do not give youth a chance to experience
entrepreneurship. This is reflected in the lack of a clear government policy on industrial attachments.
Practically, KIA gives opportunities for industrial attachments, but further input is required at policy level.
4.3.5 Network of independent business/family contacts and acquaintances
Success in the world today calls for collaboration with different organizations (Khanka, 2004), but Kenya
has many business Associations A network of independent business/family contacts and acquaintances
reinforcing familiarity and providing market entry opportunities is impractical in a country that suffers from
lack of abundant role models. Additionally, most business related networks are young with low membership
24

(GOK, 1999). KIA has been collaborating with other institutions through strategic alliances in her mandate
areas a value emphasized in the Institute’s programmes.
4.3.5 Provision formally and/or informally of knowledge and insight into business management
The quality of education and training provided is an important determinant of social and economic
development and ability to respond to the challenges of changing times. GOK has made training a priority
in national development strategy and provided it in many institutions (GOK, 2006: a). Provision of formal
and/or informal knowledge and insight into the process of independent business management is therefore
important Generally, despite the major strides made in education and training a number of challenges still
persist which include: the cost of education and training, inequity in access, high wastage rates, problems of
relevance and quality, under-enrolment in key post-school courses for developing entrepreneurs (GOK,
2006: a). There has been failure to inculcate a modern entrepreneurial culture, imbue learners with desirable
social skills and values, a crucial element towards enterprise development and management, (Kisaka and
Mokaya, 2006). This result in lack of entrepreneurial skills Internationally, the opening up of regional
markets in Southern Sudan, Somalia and Rwanda has given the Institute a chance to offer services. More
importantly, entrepreneurship education mainly target post-secondary levels, which is too late in the lives of
youth and many of whom do not go through secondary school. It is evident that increasing poverty with
over 56% of Kenyans living below the poverty line and effect of HIV/AIDS (GOK, 2003) has also
exacerbated the school dropout rates.
In Kenya, the entrepreneurial support system is weak. The education system has also been criticized for
creating a ‘culture of dependency”, while it should lead to acquisition and exercise of different skills and
capacities to provide, the necessary basis for relevant forms of ‘educative experiences’. Poor coordination of
entrepreneurship programmes has led to their poor performance, duplication of activities, sub-optimal use of
the scarce resources and focus on training programmes that are not complementary.
There have been serious shortfalls and inadequacies in physicals facilities, teaching- learning technologies,
and methodologies. There has also been inadequate coordination of training activities leading to duplication
of efforts. Research on curricular relevance has been ad hoc, while little monitoring and evaluation has been
undertaken (GOK, 2003). KIA has been training trainers including those training entrepreneurs and also
participates in forums where training Issues are deliberated.
5.0 CONCLUSION AND RECOMMENDATIONS
5.1 Conclusion
Greater emphasis on entrepreneurship training, research and consultancy must rest upon an analysis and
projection of the world of tomorrow. It can be argued that it will be a world of greater uncertainty and
complexity for entrepreneurial behaviour evident from the impact of global pressure on societies,
organizations and individuals. The cultural enterprise construction will involve remodeling support
institutions along commercial lines and encouraging acquisition and use of entrepreneurial qualities to “live
entrepreneurship” (Crocombe et. al., 1991) through training research and consultancy where KIA gives and
will continue giving immense help. Lifelong learning aimed at producing flexible entrepreneurs, ‘education
for work’ or ‘enterprise education’ are necessary (OECD/CERI, 1989) to develop a strong enterprise
culture.
The Kenyan society is increasingly demanding entrepreneurial behaviour at all levels. Most policy statements
concerning the need for entrepreneurship and entrepreneurial education are wrapped in the rhetoric of this
need. According to Kisaka and Mokaya (2006) the increase in SME’s in Kenya unfortunately has been a
response to the harsh social, economic and political environment rather than development of enterprise
culture. They argued, “an economic turn around in the country could lead to a massive close down of many
SME’s if formal employment increases”. This leads to the confirmation that entrepreneurship culture
between SME’s in Kenya is only a dream upon which support institutions such as KIA have to lead the
country towards its realization. It is upon these dispositions that the development of such a culture is based.
A combination of these circumstances will underwrite the existence of an “enterprise culture” in Kenya. The
circumstances that lead to development of enterprise culture provide guidelines to policy actions particularly
25

with regard to training, research and consultancy. KIA can influence more policy decisions on these areas. If
KIA continues to “live entrepreneurship” it will be easier to train, research and consult in entrepreneurship
giving more support to those who train creative, innovative risk and initiative takers. If the enterprise culture
is developed in Kenya, some of the challenges facing the country today as evidenced by the Vision 2030
(GOK, 2006:6), such as: income inequalities, low savings, and unemployment among the youth may be
reduced as the country becomes more economically independent.
Finally, this paper concludes that the Institute still has a critical role to play in enterprise culture
development in Kenya by specifically providing more input in the areas of policy formulation, training,
research and consultancy.
5.1.1 Recommendations for Policy Making
Priority actions should be taken to enhance enterprise culture in Kenya in entrepreneurship. There is much
challenge in making organizations and individuals entrepreneurial. For example, in training, the challenge for
KIA is to lay emphasis on learning by doing. To surmount these challenges, the Institute has to take the
necessary measures aimed at enhancing efficiency in service delivery within the region by basically “walking
the talk”. The Institute can therefore respond effectively, efficiently and on time to research and consultancy
needs without compromising on both quality and content. The Institute works with associate trainers and
consultants whose services it utilizes on a need basis.
5.1.1.1 Abundant Enterprising Individuals
The challenge here is how Kenya and others in the support system can develop an enterprise culture to
increase the number and success rate of entrepreneurs. This paper has not exhaustively addressed these
concerns, but provided a starting point for consideration of more Business Development Services (BDS)
(auxiliary services provided for SMEs improvement) and support given to entrepreneurs, trainers and policymakers
by the Kenyan entrepreneurial support system.
5.1.1.2 Network of independent business/family contracts and acquaintances
Working methods in the world are becoming more network oriented as Hull, (2003) advises. KIA should
undertake collaborative initiatives with its stakeholders including its alumni. Formation of Association by
Alumni should be encouraged as a starting point in more networking.
5.1.1.4 Entrepreneurship Training
Many entrepreneurs in Kenya not benefited from entrepreneurship training. To fill this gap, a more
encompassing entrepreneurship development policy should be developed to cater for all entrepreneurs. The
increasing players providing training to SMEs should guided by a coherent training policy (Mullei and
Bokea, 1999). KIA can assist the government in developing a long–term training strategy and policy stating
the role of each player.
For the trainers, the entrepreneurial concept should be central to training objectives. Enterprising training
enhances participation, entrepreneurial behaviour and skills of participants with the trainer facilitating
learning to stimulate enterprising responses. Arguably, an enterprising trainer must constantly be backed up
by an enterprising organization to develop an enterprising approach (Douglas, 1992). In a bid to address
the above issues, a comprehensive public training and capacity building policy should be developed to ensure
that training is systematic, well coordinated, demand driven, and cost-effective. Capacities in training
institutions should also be enhanced. A national campaign to inspire and mobilize young people to be
enterprising should be undertaken. There is also need for feedback from employers in enterprises to training
institutions such as KIA.
Policy actions recommended in GOK documents (GOK, 1986,1988, 1992 and 2005) have partially been
implemented. Some are not properly targeted and interpreted to develop enterprise culture, increase
entrepreneurs and enterprise productivity. KIA and other players can organize strategic workshops to discuss
the implementation end evaluation of entrepreneurship policies.
Entrepreneurial curricular should contribute greatly to a more dynamic entrepreneurship culture
development by supplying more and better-prepared graduates who are tuned to self-employment. But,
26

entrepreneurship education has been relegated to provision of employable attitudes and skills. To reduce
constraints experienced in EDPs, it is necessary to improve their design and effectiveness. There is need to
reorient the curriculum to include entrepreneurial skills and to give the youth confidence to use these skills.
KIA should place enterprise management agenda top in its curriculum especially for senior management
programmes and also develop training programmes for special groups of entrepreneurs such as women and
youth and initiate confidence-building programmes to accelerate enterprise culture development. The
Institute can also stagger entrepreneur learning over time with in-built practical experiences and professional
follow-up support for participants. KIA can train policy-makers, potential and actual entrepreneurs and
their workers especially in managerial and entrepreneurship skills which is wanting.
5.1.1.5 Development of Abundant Positive role models and Image
The institute can also develop special TOT programmes to meet this need and also make more use of
successful entrepreneurs and craftsmen from successful and failed enterprises in training programmes as role
models to add more practical dimensions. KIA can also assist in designing trainers, trainee, and user manuals
for the key actors. These would inter-alia contain information on relevant issues: planning and needs
assessment, target groups involvement, identification of indicators for success, and tools for monitoring and
evaluation, coaching, mentoring and leading by example.
Priority actions should be taken to enhance access, raise quality, relevance, efficiency, effectiveness and
promote research and development. Training capacities in training institutions should also be enhanced.
5.1.1.6 Network of Independent business/Family contacts and Acquaintances
Most SME associations have weak capacities in terms of finance, management systems and human resources
(GOK, 1999). KIA can help them develop management systems, and strategic plans carry out training needs
assessment, design, run and evaluate staff training programmes on areas such as: assertivess, lobbying, staff
appraisal, supervision and team building. KIA can also facilitate the representation and involvement of
different organisations in the Institute’s programmes to enhance their relationships. Such arrangements will
encourage networking among them. Gibb (1988) confirms that existence of forums and networks of
business contacts enhances interaction of potential, emerging and successful entrepreneurs, and positively
influences the former to go into business. The Institute therefore, can collaborate with relevant institutions
to facilitate improved mechanisms for information sharing, research, consultancy and training.
KIA can also help in developing guidelines for implementation of policies and benchmarks for monitoring
and evaluation of enterprise performance, where KIA is well versed. In a bid to address the above issues KIA
could initiate and assist in developing comprehensive public entrepreneurship training and capacity building
policy. More deliberate moves by KIA constantly to position itself as excellent entrepreneurial support
provider are required through targeted advertisements, public talks and press conferences.
5.3 Recommendations for Further research
This paper recommends that further research be undertaken on enterprise culture in Kenya including
processes through which it is formed and maintained, its effects on individuals and enterprise functioning,
when and how it is subject to change. To ensure effective enterprise culture development, KIA can also
specifically:
(a) Establish additional areas of KIA’s professional input through a national needs survey.
(b) Conduct a national in-depth, periodic, targeted action-oriented, and tracer surveys on entrepreneurship
and disseminate timely information to all players in this field.
(c) Take advantage of the favourable policy environment to spur the establishment of a wide array of
entrepreneurship training programmes
(d) Carry out a baseline survey on the consultancies and researches undertaken in entrepreneurship.
(e) Undertake collaborative research in entrepreneurship with its alumni in entrepreneurship.
27

REFERENCES
1. Balunywa Waswa, (2004). Entrepreneurship and Small Business Enterprise Growth in Uganda. Kamppala,
Makerere University Business School, Kampala.
2. Bwisa, Henry M (1997) Entrepreneurship in Kenya; A paper submitted to the IDS, University of Nairobi, for
REME Project. Nairobi: Unpublished.
3. Douglas M (1992) The Person in the Enterprise Culture. In: S Heap & A Ross (eds.) Understanding the
enterprise culture: themes in the work of Mary Douglas. Edinburgh: Edinburgh University Press.
4. Gibb Allan A. (1988) Stimulating Entrepreneurship and New Business Development. International labour office
INTERMAN Programme for promoting entrepreneurship and New Enterprise creation (UNDP (ILD Project
INT/87/029) Management development Branch Training Department, Geneva 2 nd Impression 1991.
5. Gibb, A (2002) In pursuit of a new ‘enterprise’ and ‘entrepreneurship’ paradigm for learning: creative destruction,
new values, new ways of doing things and new combinations of knowledge. International Journal of Management
Reviews 4, 3, 233-269
6. GOK, (1986), Sessional Paper No. 1 of 1986 on Economic Management for Renewed Growth. Government
Printer, Nairobi Kenya.
7. GOK, (1988). Sessional Paper No. 6 of 1988 on Education and Manpower Training for the Next Decade and
Beyond (Kamunge Report). Government Printer, Nairobi, Kenya.
8. GOK, (1992) Sessional Paper No 2 of 1992, Small Enterprise and Jua Kali Development in Kenya. Government
Printer, Nairobi, Kenya.
9. GOK, (1996) – KIA ACT No 2 of 1996. GOK Nairobi
10. GOK, Central Bureau of Statistics (CBS) International Center for Economic Growth (ICEG) and K-Rep
Holdings Ltd., (1999). National Micro and Small Enterprise Baseline Survey 1999. Nairobi, Kenya.
11. GOK, (2003–2007) Ministry of Planning and National Development. Economic Recovery Strategy for Wealth
and Employment Creation. Government Printer, Nairobi, Kenya.
12. GOK, Central Bureau of Statistics Ministry of Planning and National Development. (2002-2008). Republic of
Kenya: National Dev Plan (2002-2008): Effective Management for Sustainable Economic Growth and Poverty
Eradication. Government Printer Nairobi.
13. GOK, Sessional Paper No 2 of 2005 on Development of Micro and Small Enterprises for Wealth Creation for
Poverty Reduction. Government Printer Nairobi.
14. GOK, Central Bureau of Statistics Ministry of Planning and National Development. (2006:a). Economic Survey
2006. Government Printer Nairobi.
15. GOK, Office of the president, National Socio-Economic Council, (2006:b). Making of Kenya Vision 2030
www.nesc.go.ke.
16. Hosftede, Geert, (1980). Culture’s Consequences: International Differences in Work Related Values. Sage
Publications Lonson.
17. ILO Seed: Boosting employment through small enterprise development: Dec 2001
http//www.ilo.org/public/englsh/employment/ent/sed.index.html.
18. Kenneth, King (1970) Jua Kali in Kenya: Change and Development in Informal Economy 1970-95.
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19. KIA, (2001-2006). KIA Training Programmes. KIA, Nairobi.
20. KIA, (2001-2006). KIA Annual Reports. KIA, Nairobi.
21. KIA, (June, 2006). KIA Strategic Plan 2006-2011. KIA, Nairobi.
22. KIPPRA Discussion Paper No. 20 (2002). Review of Government Policies for the Promotion of Micro and
Small Scale Enterprises in Kenya.
23. Kisaka, Sifunjo Maragia and Mokaya (2006). Entrepreneurship Culture among SMEs in Kenya: The
Entreprenuers’ New Clothes. 3 rd CEED Conference Paper. USIU, Nairobi.
24. Kisker, Carrie B, (October 2003). “Raising a young Entrepreneur.” DIGEST NUMBER 03-07. Kauffman
Center for Entrepreneurial Leadership Clearinghouse on Entrepreneurship Education. Kansas City. Kauffman
Foundation. http://www.celcee.edu/publications/digest/Dig03-07.html
25. Louise Hull, (26 Jul 2003). A Promotion of Enterprise Culture: Theory and Practices - Working Paper.
Research, Evaluation and Monitoring Team, Industry and Regional Development Branch. London.
26. Louise Hull, (2003). Creating an Enterprise Culture: Discussion Paper. A Britain in a Global Economy
27. McClelland, D C, (1961). The Achieving Society. J Van. Nos Trand Princeton.
28. Mullei, Andrew and Crispin Bokea (Ed.) (1999). MICRO and SMALL ENTERPRISES in KENYA: A
AGENDA for IMPROVING the POLICY ENVIRONMENT International Center for Economic Growth
(ICEG) Africa Program. Nairobi, Kenya.
29. Murene, D C, (1997). Culture and Entrepreneurship. Paper presented to the international conference on research
Agenda on African Entrepreneurship and small business Management” while sands hotel Dar es Salaam, 23 rd –
24 th October 1997.
30. OECD/CERI 1989 Towards an Enterprise Culture. Educational Monograph, A Chance for Education and
Training. International Journal of Management Reviews No. 4 Paris: OECD.
31. SARTOR, Information from http:wwww.ukspec.org.uk/sartor/index.asp
32. Schumpeter, J A (1970). The Entrepreneur as Innovator. Readings in Management. New York. McGraw Hill.
33. Themba, G., (May, 2006). Fostering Entrepreneurial Development in Botswana. Lessons for other Developing
Countries. CEED International Entrepreneurship Conference. (29 th May- 31 st May 2006 USIU, Nairobi.)
29

APPENDIX I: SCHEDULED PROGRAMMES RUN BY KIA (2005 – 2006)
� Management Communication
o Effective Management Communication
o Report Writing
o Conduct of Meetings and Minute Writing
o Corporate Speech Writing
� Training and Development
o Training of Trainers
o Training Needs Assessment and Programme Design
o Managing the Training Function
� Environment Management
o Environmental Impact Assessment and Audit
o Preparing for and Managing Disaster
o Waste Management
� Information and Communication Technology
o Information and Communication Technology
o Computer Application Skills for Managers
o Computer Skills for Secretaries
o Computer Based Records Management
o Computer Network for E-Government
o Visual Basic Programming
o Computer-Based Presentation Skills Course
o Computerized Project Management
o Website Development and Management
o Statistical Packages for Scientists
� Finance And Resources Management
o Financial Management
o Financial Management for Non-Finance Managers
o Managing Donor Funds
o Public Expenditure Management
o Fraud Investigation and Prevention
o Financial Monitoring and Evaluation
o Budgeting and Budgetary Control
o Debt Collection and Credit Control
o Internal Auditors’ Course
o Audit Management
o Procurement Management
� Research And Consultancy
o Developing Research Skills
Consultancy Services Management
Source: KIA (2006:a). KIA Training Programme 2005 – 2006. KIA Nairobi, Kenya.
30
� Human Resources Development
o Human Resources Development and Management
o Staff Performance Appraisal
o Developing and Managing Performance Contracts
o in the Public Service Workshop
o Performance Improvement and Management
� Personal Development
o Public Relations
o Building High Performance Teams
o Preparing for Retirement
� Business Development and Management
o Entrepreneurship Development and Management
o Investment Management
� Management of Project
o Project Planning and Management
o Proposal Development Workshop
o Project Development, Implementation and Management
o Participatory Monitoring and Evaluation
� Management, Administration and Governance
o Senior Management Seminar for the 21 st Century
Manager
o Strategic Planning and Management
o Change Management
o Supervisory Skills Development
o Total Quality Management
o Management for Non-Governmental Organizations
o Local Government Management Training
o Conflict Management
o Gender Perspectives in Development
o Top Secretaries Management Training
o Secretarial Management Training
o Public Prosecution
o Mainstreaming Professionalism and Ethics in the Public
Service
o Improving Public Service Delivery
o Good Governance for Effective Service Delivery
o Capacity Building on Preparation of Cabinet Memoranda
o Preparing Policy Papers and Briefs

Corporate Governance of Kenyan SMEs For Economic Development
By
Jimmy Macharia, Assistant Professor of Information Systems, School of Business.
United States International University
PO BOX 14634 Nairobi 00800 Kenya. Tel. 254-20-3606299 254-0722-779770
Email: kmacharia@usiu.ac.ke
Abstract
There is a wide gap between the big and smallest firms that must be filled if African countries like Kenya has to grow
and meet the millennium development goals (MDGs) by 2015. One such gap is the practice of corporate governance
in the Small and Medium Enterprises(SMEs). Consequently this paper examines the status of corporate governance of
SMEs in Kenya. This study, has presented the need for this and described the specific background of corporate
governance in Kenyan SMEs. Then, the consequences and risks arising from the current situation with special regard
to corporate governance have been discussed. The important question here is: What are the consequences of neglecting
Corporate Governance in Kenyan SMEs? Further, some advice has been given on the necessary steps to overcome this
problematic situation.
The methodical background of this paper is a review of the existing relevant literature on corporate governance in
SMEs in general and the particular case of Kenya. This research has established that SMEs should embrace and
practice "corporate governance" to reduce the risk and consequences of business failure.
Key words: Corporate Governance, SMEs, MSME, Economic Development.
I. INTRODUCTION
The need to ensure that the economic entities and other forms of businesses such as small and medium sized
enterprises (SMEs) are well governed and managed has been recognized by many researchers in the past (Strenger,
2003). Corporate Governance is concerned with holding the balance between economic and social goals and between
individual and communal goals. The corporate governance framework is there to encourage the efficient use of
resources and equally to require accountability for the stewardship of those resources. The aim is to align as nearly as
possible the interests of individuals, corporations and society" (Cadbury, 2000). By and large, the concept of
"corporate governance" is more familiar to large private corporations, publicly-listed companies and public
organizations. But many researchers have satiated that the concept is equally relevant for SMEs (Armstrong, 2005).
Indeed, most SMEs as well as their representatives such as industry and employers’ associations assume corporate
governance to be not really relevant to them. Similarly, banks and financial institutions and development agencies try
to play down the need for any initiatives in this respect. Last but not least, most academic experts concentrate on large
joint-stock companies and do not touch the topic of SMEs or even consider it pernicious or irrelevant. Nevertheless,
this situation needs further enlightening since the described aversion seems somewhat bizarre especially considering the
important role that SMEs play in economic development.
Good governance of SMEs has the effect stimulating economic development which manifests in many dimensions
including attracting investment, creating jobs and wealth especially in a developing countries like Kenya. In addition it
is essential in ensuring an SME’s long-term growth, competitiveness and meaningful sustainability of the business
enterprise. It has been recognized that small and medium enterprises (SMEs) play a vital role in economic development
and income growth in many countries including Kenya. They have been the primary source of job or employment
creation world-wide; not only in less developed countries (LDCs) but also in developed/industrialized countries.
II. SMEs IN KENYA
In Kenya, the definitions used to describe the SME sector are based on employment size which includes both paid and
unpaid workers. A micro-enterprise is defined as having no more than ten workers, a small enterprise with between
eleven and fifty employs while a medium enterprise with more than 50 employees (CBS, 1999). Farm enterprises are
excluded from the definition of SMEs, except those farm enterprises which undertake some sort of processing before
marketing. Thus the term ‘small-and-medium enterprises’ covers the range of establishments, including informal
31

economy activities that include one or more persons or enterprises in the formal economy employing up to 50 persons
(Stevenson and St-Onge, 2005). The Ministry of Labour and Human Resource Development (MLHRD, 2004),
which is the lead agency for the SME sector, makes provision for both formal and informal enterprises, classified into
farm and non-farm categories, employing 1 – 50 employees (MLHRD, 2004).
Considering the fact that Kenya has unemployment rate of 50%, and a labour force of 9.2 million (1998 est.) of
which agriculture takes 75%-80%, the importance of SMEs in economic development especially the aspects of job
and wealth creation in Kenya cannot be more emphasized (1Up Travel (n.d)). Njeru (2006) has underscored this
point by arguing that “Small Medium Enterprises (SMEs) play a major a role economic development as they generate
jobs hence eliminating poverty that afflicts people; however, they are faced with challenges such as small local markets,
inadequate region integration, poor infrastructure, failure to access credit and adopt information and communication
technologies (ICT) among others.” They employ more than half of the workforce (Mahinda, 2004). It is hence
imperative that the capabilities of the SMEs be increased for the future of Kenya’s economic deveopment. Research has
shown that with the increase in access and affordability of Information Technology and Communications (ICTS),
companies have adopted technologies to make their management more effective. However, this is not the case with
most SMEs in Kenya (Njeru, 2006) .
According to the (CBS, 1999), there were approximately 1.3 million SMEs, creating employment for 2.3 million
people. An estimated 26 percent of households were involved in some kind of non-primary business activity.
Approximately two-thirds of Kenyan SMEs are located in the rural areas which provides home to over 80 percent of
the population (CBS, 1999). The survey indicated that only 11.7 per cent of SMEs indicated they were registered and
39.4 per cent operated with licenses. About two-thirds of all enterprises were in the trade of buying and selling
commodities while 13 and 15 per cent were in manufacturing and services respectively.
According to the Department of SME development, the SME sector experienced growth from 2000 – 2002,
increasing to 2.8 million enterprises with employment of 5.1 million persons, accounting for 74.2 per cent of total
employment in 2002 (MPND, 2003; ERS, 2003). This dramatic increase was largely due to retrenchment in both the
public and private sectors. In 1999, the average size of an SME was 1.8 persons. The owners themselves accounted for
almost 75 per cent of total SME employment. In fact, 80 per cent of total SME employment involved only the owners
and their family members (CBS, 1999). Only 11.6 per cent accounted for regular hired employees in SME
employment. Ninety six point seven percent of SMEs employ less than five employees, 2.6 per cent employ 6 – 10
persons. There were no employees in the rural towns and areas with more than 15 employees and none in the major
towns with more than 25 employees (Stevenson and St-Onge, 2005). The SME sector in Kenya is mainly
concentrated in the micro enterprise segment. Only 9041 SMEs fell into the category of small. These small firms
accounted for an estimated 154,267 workers or a paltry 5 per cent of total SME employment. This lack of enterprises
in the 11- 50 employee range comprises a missing middle both in terms of numbers of enterprises and their
contribution to employment (Stevenson and St-Onge, 2005)
United States Agency for International Development (USAID) support to the (MSME) sector has had major impacts
on its development which is important to the overall welfare of the population in Kenya. To illustrate this
importance, a 1999 survey estimated that there are 1.3 million micro-enterprises employing 2.4 million people, two
thirds of whom are in rural areas. This figures increases to 5 million people, an equivalent of 30% of Kenya's labour
force, when informal businesses are included. They contribute 18% of the country's Gross Domestic Product.
According to figures released by IFC (2006) Statistics, the total number of SMEs in Kenya in 2004 was about
22,104 giving a figure of 0.7 SMEs per 1000 people (IFC, 2006). A Comparison of 11 African countries shown in
Figure 1 reveals that the 0.7 SMEs per 1000 people index for Kenya is the lowest in the group, yet SMEs contribute
74.2% of total employment (IFC, 2005). The Kenyan Government realizes this and aims to groom SMEs into
globally competitive business entities. To foster growth of a strong SME sector, the government has embarked on a
number of SMEs sector reforms.
32

SMEs per 1000
90.0
80.0
70.0
60.0
50.0
40.0
30.0
20.0
10.0
0.0
Kenya
0.7 3.1
Uganda
Botswana
9.7 13.7 15.2
Tunisia
Morocco
SMEs per 1,000
Algeria
18.8 22.0
South Africa
Egypt, Arab Rep.
Country
42.2
Mauritius
33
62.2
Malawi
72.5 76.7
Tanzania
Figure 1: SMEs per 1000 people in 11 African Countries (Source data: IFC, 2005)
SMEs per 1,000
These efforts on SMEs sector will make Kenya fulfil its potential as an engine of growth in East Africa. However its
economy has for several years been stagnating because of poor management and uneven commitment to reform (Safaris
& Travel. n.d). In the year 2001, analysts warned that Kenya's economy faced "collapse" after parliament rejected a
bill to set up an Anti-Corruption Authority (BBC News, 2001). In addition to endemic corruption, the other longterm
barriers to economic development and SMEs growth included electricity shortages, inefficient government
dominance of key sectors, and high population growth ( 1Up Travel, n.d).
Kenya which is among the developing countries of sub-Saharan Africa is ranked the 17 th poorest country in the world
in 1997, and categorized as the 2 nd most inequitable economy in the world, with the top 10% owning 47% of the
countries income (PRSP, 2000). According to the recently published Government of Kenya’s Poverty Reduction
Strategy Paper (PRSP, 2005), Kenya’s economy was growing at the rate of 6.6% in the 1970’s and 4.2% in the
1980’s, compared to population growth rate of 3.3% in the 1970’s and 3.8% in the 1980’s. The gross domestic
product (GDP) slackened to 1.4% for the 1999/2000 fiscal year. These statistics clearly indicate that Kenyans are
become poorer as the world enters the 21 st century.
SMEs can play a major role as an intervention to the above phenomena where Kenyans are becoming poorer, and the
gap between the few rich and the majority poor is widening, calls for an elaborate plan of action that includes
strengthening the SMEs sector is required urgently. Kenya has at present an unemployed population conservatively
estimated at over three million, which requires creation of at least 492,000 new jobs annually for the foreseeable future
(PRSP, 2000). The informal sector presently provides some 1,881,000 regular jobs in Kenya that represent 15% of
the total employment in the country (Mwiti and Bowen 2003). This is a significant factor that requires a good
governance model. The role of SMEs in jumpstarting the economy has been recognized by Government.
Owners of small scale businesses in rural areas also practice farming at the same time run their businesses. Maalu et. al.
(1999), found that 67% of small scale businessmen are also engaged in farming activities with growing of crops and
rearing of livestock as two of the main activities. The business and the farming activities complement one another.
This nature of multi-activity livelihoods may make corporate culture very difficult to be implemented in the majority
of SMEs in Kenya. Improved governance of SMEs has therefore been proposed among the key strategies required to
be adapted to curb the incidence of poverty in the country (Mwiti and Bowen 2003). This paper therefore advocates
for the need for efforts to facilitate good governance in SMEs.

III. SMALL AND MEDIUM ENTERPRISE (SMEs) SECTOR DEVELOPMENT
The Kenya government’s commitment to foster the growth of SMEs emerged as one of the key strategies in the 1986
report Economic Management for Renewed Growth. It was reinforced as a priority in the 1989 report, The Strategy
for Small Enterprise Development in Kenya: Towards the Year 2000, a document that set out the mechanisms for
removing constraints to growth of SME sector. In 1992, the government published the SME policy report, Sessional
Paper No. 2 Small Enterprises and Jua Kali Development in Kenya. This report was reviewed in 2002, leading to a
new policy framework that provided a balance focus to SME development in line with the national goals of fostering
growth, employment creation, income generation, poverty reduction and industrialisation. The overall goal is to, in
partnership with the public, private and development partners, create 500,000 jobs annually over the next four years.
The bulk of these jobs are expected to be created in the SME sector, 88 per cent from new enterprises and 12 per cent
from the growth of existing enterprises (Sessional Paper, 2004). However, in this latest sessional paper on
development of SMEs, it is acknowledged that a number of constraints need to be addressed if the SME sector is to
realise its full potential(Ibid). Among these are;
� A deteriorating infrastructure which negatively impacts on SME competitiveness
� A high cost of credit and unavailability of long-term and medium term financing
� A burdensome and costly regulatory environment
� An unfavourable tax regime
� An inefficient legal and judicial system
� Limited access to reliable market data and trade-related information and poor access to markets
� Limited opportunities for international linkages and linkages with large enterprises
� Scarce IT resources
� Poor coordination of SME association and institutions
� Inadequate access to business skills and technology
� Insecurity of tenure
Unlike the years before 1990, where the Government was locked up in the much discredited Schumpeter theory, that
only big business can produce innovation and economic growth(IDRC 2006), the Government of Kenya has, in the
last decade, shown keen interest in the development of Small and Medium Enterprises. Its effort to promote and
support SMEs has been aided by assistance from donors and development partners such as the World Bank, United
Nations Development Programme (UNDP), Overseas Development Agency (ODA), United States Agency for
International Development (USAID), the European Union, Ford Foundation and Canadian International
Development Agency (CIDA) (Penderson and Kiiru 1996). SMEs are traditionally closely connected with the
Kenyan management model, majority are managed by one person or family, their incomes are tiny and irregular; most
compete with each other and make similar products, which they try to sell to the same markets. Profit margins are low.
Under its current Economic Recovery Strategy, Kenya needs to create 500,000 jobs each year to absorb approximately
half a million graduates from various tertiary academic institutions that enter the job market each year. However, due
to low economic growth, rampant corruption, nepotism and demand for experience by potential employers, a majority
of job market entrants remain unemployed (Mahinda, 2004). Therefore, the growth of SMEs is a needed
intervention in the Kenyan economy for purposes of wealth and job creation. In 1993, for example, it grew 20%; the
large-enterprise sector, on the other hand, recorded a rather sluggish 2.3% growth in the same year. The implication of
these growth rates, if they continue at their present levels, is that in the foreseeable future small enterprises will employ
three out of every four people looking for a job in the nonagricultural sector of the economy.
The importance of this sector to the overall welfare of the population in Kenya cannot be underestimated. To illustrate
this fact, a 1999 survey estimated that there are 1.3 million micro-enterprises employing 2.4 million people, two thirds
of whom are in rural areas. This figures increases to 5 million people, an equivalent of 30% of Kenya's labour force,
when informal businesses are included. They contribute 18% to the country's Gross Domestic Product
(USAID/KENYA 2005). In addition to its importance in job creation and contribution to the GDP, the smallenterprise
sector contributes 33% of the value added in manufacturing and retail trade in Kenya. (Onyango and
Tomecko, unpublished). So to touch the SMEs means to question the fundaments of the Kenyan economy. The
particularity of Kenyan SMEs constitutes the key argument to block a wider discussion about corporate governance
among SMEs.
34

A specific SME-code of governance does not yet exist in Kenya and there is no strong political or market pressure to
create one. Instead of this, the myth of “the good entrepreneur” who cares for his company in hand and who does not
need this kind of bureaucratic regulations (Bernhardt 2003) remains dominant. For example, K’Aol and Ochanda
(2003) found that the SMEs in the micro finance sector in Kenya operate under a very ambiguous environment, with
no particular framework of operation. In addition they are forced to contend with a hostile environment towards their
clientele. Consequently this research indicates that a conducive regulatory environment is required for the growth of
the SMEs sector. The research further indicates that there is a dire need for a bill that will give SMEs due recognition.
The regulatory environment would be enhanced if there was a specific legislation governing the affairs of the SMEs. A
good policy environment would go a long way in ensuring that the SMEs industry thrives and is thus able to empower
many poor people by creating wealth and employment in Kenya. Many researchers have underscored the dire need for
the intervention in the governance of SMEs. Indeed issues of leadership and governance have tended to be ignored in
most capacity building programs hence the poor performance of some of the SMEs such as rural MFI in Kenya (Kibas
and Wasike, 2003). The lack of proper address of the pertinent issues concerning institutional governance, ownership
and accountability, have made these factors subsequently to a large extent, contribute to the failure and closure of
many promising MFIs in Kenya (Omino, 2005)
There has been a growing call for the application of corporate governance to SMEs. The argument is that similar
guidelines that apply to listed companies should also be applicable to SMEs. According to the OECD Principles of
Corporate Governance (2004), “The corporate governance framework should promote transparent and efficient
markets, be consistent with the rule of law and clearly articulate the division of responsibilities among different
supervisory, regulatory and enforcement authorities.” Armstrong (2005) emphasizes this fact by stating that
Corporate Governance is a mechanism through which boards and directors are able to direct, monitor and supervise
the conduct and operation of the corporation and its management in a manner that ensures appropriate levels of
authority, accountability, stewardship, leadership, direction and control.
Corporate governance is concerned about such values as openness, integrity, accountability and transparency. These
concepts and practices have become the lynchpin of all well-organized and successful companies and indeed the
hallmark of professional management. Corporate governance is one major element in improving economic efficiency
and growth as well as enhancing investor confidence. It involves a set of relationships between a company’s
management, its board, its shareholders and other stakeholders (Director General of Trade and Industry, 2005). It also
provides the structure through which the objectives of the company are set, and the means of attaining those objectives
and monitoring performance are determined (OECD, 2004). More importantly, good governance is fundamental to
attracting investments, building corporate image and furthering Kenya’s status as an East Africa business hub. It is no
wonder that large corporations, publicly-listed companies and public organizations in Kenya have placed great
emphasis on fostering good governance standards. Indeed, the corporate governance standards in Kenya will be the
yardstick of its success as a business hub in the East African Region.
Corporate governance is largely associated with larger companies and the agency problem. Becht, Bolton and Roell
(2002) assert that corporate governance is concerned with the resolution of collective action problems and the
reconciliation of conflicts of interest between various corporate claimholders. The agency problem comes about when
members of an organization have conflicts of interests and within a firm, the separation between ownership and
control of firm is often cited. As such at first sight, corporate governance would not apply to SMEs since the agency
issues are less likely to exist. Since majority of SMEs in Kenya only comprises of only the owner who is the sole
proprietor and manager, SMEs fall under this category described by Hart (1995). The SMEs are likely to have a few
employees who might be the kin of the owner. Since there is no separation between management and owner in SME,
some argue there is no need for corporate governance guidelines. Further, SMEs are not accountable to the public since
they have not accessed the investing public for funding leading to the questionable applicability of the disclosure and
transparency often associated with corporate governance. Under absence of agency problems, profit maximization,
increasing net market value and minimizing costs are the common aims of members of an organization. These
members disregard outcomes of organization activities and are prepared for all these aims. Since these members will be
remunerated directly, incentives are not needed to motivate them. The absence of disagreements would also mean the
absence of governance structures to resolve them.
The discussion of corporate governance cannot be held in isolation of corporate culture in SMEs. Indeed much
research work has been done on corporate culture. In their book "Corporate Culture and Performance" published
some 9 years ago, Professor John Kotter and James Heskett - both from the Harvard Business School - presented an
analysis of the financial performance of 207 U.S. companies over a period of eleven years from 1977 to 1988. The
35

two professors used a survey questionnaire, and constructed an index measuring the relative cultural strengths of these
companies. They then evaluated these companies' 1977-1988 financial performance using three different measures,
namely average yearly increase in income, average yearly return on investment and average yearly increase in stock price.
Correlations were used to test the assertion that companies with strong cultures performed better than their weaker
counterparts. Their work concluded that corporate culture could have a significant impact on a firm's long term
economic performance and that corporate culture would probably be an even more important factor in determining
the success or failure of firms in future.
The correlation between corporate cultures and economic performance was further illustrated by the results of the reanalysis
work undertaken by Terrence Deal and Allan Kennedy, the joint authors of the book "Corporate Cultures:
The Rites and Rituals of Corporate Life". They calculated the average performance of the top twenty culturally robust
companies and compared these to ratings for the bottom twenty. The remarkable results showed that the culturally
strong companies averaged 571% higher gains in operating earnings, 417% higher returns on investment and 363%
increase in stock prices respectively than their culturally deprived counterparts over the eleven years.
In so far as SMEs in Kenya are concerned, the concepts of "corporate governance" and corporate culture are still
somewhat foreign to the majority of them. At its most basic, it's described as the personality of an organization. It
guides how employees think, act, and feel. Corporate culture is a broad term used to define the unique personality or
character of a particular company or organization, and includes such elements as core values and beliefs, corporate
ethics, and rules of behavior. Corporate culture can be expressed in the company's mission statement and other
communications, in the architectural style or interior design of offices, by what people wear to work, by how people
address each other, and in the titles given to various employees (Hansen 2006). Few are aware of their importance.
Still less have actual experience of implementing good corporate governance standards or cultivating strong, consistent
corporate culture in their own firm.
IV CORPORATE GOVERNANCE OF KENYAN SMEs
The widespread neglect of the corporate governance practices, with regard to SMEs in Kenya bears some considerable
risks which can be concluded in several points.
1. High staff turnover: This would result to high costs attributed to repeated recruitment, training and replacement
affect the image of the organization and the income level. (Mubibo, 2005)
2. Increase of financial difficulties: Many entrepreneurs lack awareness on where to obtain business finance. This has
been indicated by the study by Ngoze (2003) on Micro Finance Institutions (MFI) type of SMEs which play a
major intervention role in the development of the small and micro enterprise sector in the developing world
today. Several studies (Kenya 1996, Kibas 1995) have shown that one of the prevailing impediments to growth
and expansion by SMEs is lack of credit for both working and capital expenditure. Its accessibility, where it is
available, has been noted as another problem (Kibas and Wasike 2003). Not only bankers and investors look for
properly run SMEs for business and investment, so would overseas and Kenyan SMEs who are looking for
strategic partners with Kenyan SMEs. Overseas SMEs in particular are likely to be very demanding on the
background of their strategic partners. Without any experiences in collaborating with Kenyan SMEs, they would
naturally assess a Kenyan SME in terms of its corporate governance standards and corporate culture, as these are
more easily observable indicators of the extent of openness, integrity, accountability, trustworthiness and
capabilities of a corporation.
3. Loose business opportunities: First, the advent of information technology, particularly e-commerce and Internet,
has cut cross all national boundaries. This means greater and easier access to new markets and new customers, not
only in the Common Market for Eastern and Southern Africa (COMESA) for promoting regional
economic integration through trade and investment, but almost anywhere in the world at very low cost. In the
past, only multinational corporations (MNCs) could afford to establish market presence in places away from
their home grounds. However, with internet and e-commerce, even an SME could be transformed overnight into
an MNC, in terms of market coverage if not in terms of company size or turnover. While SMEs which are
adaptive to these technological changes could successfully ride on the IT superhighway and expand their markets,
those that fail to take advantage of what IT can offer would not just be left behind, but would find their markets
contracting. For a Kenyan SME to be visionary and aggressive SME as opposed to a non-performing one in an
36

era of rapid and constant changes, the mindset of the management need to operate like that of a manager in an
MNC. SMEs that are well-run and have the right corporate culture would stand a much better chance of having
the right mindset to cope with such changes.
Another point to note is Kenya's SMEs accession to the World Trade Organization (WTO), COMESA, African
Growth Opportunities Act (AGOA), and New Partnership for Africa's Development (NEPAD which is an
economic development program of the African Union, will lead to the further opening up of the market and
hence greater business opportunities to SMEs. First, SMEs in the import and export sector, which account for a
significant percentage of the import and export firms in Kenya, would certainly benefit from the relaxation of
export and distribution rights of the East African Community. Secondly, SMEs in the services and professional
sectors would benefit as there would be strong demand for imported professional services in the economies of
Southern Sudan, Somalia and other neighbouring regions to fill up the emerging demand/supply gaps. But
opportunities do not stop here. More important still, the further opening up of the East African Community
market would not only attract overseas SMEs to enter the Kenyan market. Many Kenyan SMEs would also be
tempted to explore new opportunities in overseas markets. For SMEs in Kenya or overseas, the markets they are
going to explore could be entirely strangers to them. It would therefore make sense for them to look for strategic
partners who know the markets well, to minimize risks and to avoid beating about the bush. Given the profound
knowledge of SMEs in East Africa, Kenyan SMEs would naturally be the preferred strategic partners to both
Uganda and Tanzania SMEs. So ample opportunities are awaiting Kenyan SMEs now and in the years to come.
But it all depends on how they embrace corporate governance.
4. Worsening of the climate between SMEs and financial institutions: The extent to which corporate governance
and corporate culture impact on SMEs abilities to embrace new challenges and opportunities is determined also
by identifying the need to expand in order to leverage on these opportunities. However to expand, they most
probably need additional funding. Be they Kenyan banks, MFIs, individual investors or venture capitalists from
whom SMEs are seeking financing, all these parties would be more inclined to provide lending to or to invest in
well-run SMEs. This is because bankers, investors and venture capitalists know too well that SMEs that are not
well managed tend to be more risky entities, as they often lack clear and proper financial accounts and
bookkeeping records and are therefore high risk business partners or borrowers. They would rather choose not to
form strategic partners or do business with risky SMEs.
5. Decrease of public confidence: The more corporate governance standards are publicly acknowledged to be
important criteria of companies’ seriousness the more problematic becomes the widespread attitude of SMEs of
ignoring them. The MFI sector for example has suffered greatly in Kenya due to some fraudulent MFI
institutions having swindled prospective customers millions of shillings. The citizens have increased pressure for
corporate governance which has seen a microfinance bill tabled in parliament.
6. Increase of problems with top-management succession: The problem of top-management succession will most
probably increase in the near future (Strenger 2002, Blanc 2003). The generation of the current Kenyan
entrepreneurs particularly will definitively resign and might open up some considerable black holes behind them
since many Kenyan SMEs keep ignoring this process. The succession issues will be critical as SMEs embrace
partners from COMESA, AGOA, NEPAD and neighbouring countries and regions.
7. Increase of criminality in the SME sector: Although the myth of “the good entrepreneur” is still widespread,
economic criminality such as misappropriation of funds, loss of track of operations, tax evasion, corruption, in
addition to theft and fraud are considerable problems among SMEs in today’s Kenya (Mubibo 2005). The clear
deficit of “good” corporate governance around SMEs provokes these problems. The central bank of Kenya has
indeed helped banks and insurance companies by having relevant acts, laws and code of corporate governance
enforced. Consequently in these companies the crime level is very low.
8. Reduced profitability: This affects the SME’s reward level (dividends) to the member-owners thus weakening
their confidence in the organization and the subsequent degeneration into possible oblivion (Mubibo 2005).
37

V. RECOMMENDATIONS : ADDRESSING THE CHALLENGES
These challenges are risks have spread owing to the lack of political commitment and crisis of legitimacy largely due to
the concentration of political and economic power as well as the wealth of the nation in hands of a few well endowed
individuals. SMEs have not been able to grow out of the tiny family outfits that they are. This is because mistrust
between members of the populace has made people unwilling to pool their resources together to build viable
enterprises. This has constrained growth and expansion.
To address these challenges and risks, there is an urgent need to focus on public policy and uphold the virtues of a
pluralistic society. The government must play its role of putting in place an effective policy framework and the social
capacity needed for the growth of corporate governance. However, creating an enabling is not the prerogative of the
government alone. Rather it calls for the establishment of effective partnerships between the public sector, private
sector and civil society that will enhance the spirit of participatory development and increase citizen engagement in
creating secure and stable environment in which corporations can grow and thrive.
From the above discussion three implications can be derived. First, a Corporate Governance Code for SMEs in Kenya
must be created. These standards could be established with the help of an expert group with members of all relevant
institutions of the field and should be based on three main principles, namely:(i)a strong orientation towards the
particular needs of SMEs (Timmermann 2003), (ii) a flexible framework that can be adapted to the heterogeneous
field of SMEs (Timmermann 2003), as well as (iii) a clear and easily understandable content by which it can be
adapted to the daily problems of SMEs. This corporate governance code for SMEs should include four important
components (Strenger 2002, 2003), namely principles for:(i) the transparency of management (i.e. strategies,
structures, and processes),(ii) a supervisory or advisory board with external members,(iii) a planning and risk
management system (e.g. cost accounting, financial planning, internal reporting), and (iv) a human resource
management including a top-management succession planning (Hennerkes 2003, Loistl 2003).
And secondly, since there is a consensus among the majority of SMEs researchers that Corporate Governance Code
could be adapted to SMEs, the academic discussion of corporate governance should widen its focus. To include
corporate culture in the SMEs in Kenya. The narrow focus of most academics has fostered the aversion of SMEs to
the corporate governance topic in the past. Now a clear step ahead is needed which especially includes corporate
culture as well as other dimensions of enterprises, alternative approaches beyond the classic principal-agents perspective
and a more differentiated spectrum of actors (Steger 2004b). This way, academic experts of corporate governance will
lead the way to considerable improvements for SMEs in the future, through widespread use of corporate governance
practice.
Gatamah (2002) stresses that, although there may be differing views on what constitutes corporate governance, some
of which are culturally determined, there is need to develop a core of principles that transcend borders and which are
viewed as representing the moral consensus of the international community of nations. SMEs in Kenya need to see
corporate governance as vital to social and economic development of the country. This means that they must meet
global standards of good corporate governance practices if they are to exploit the opportunities in the liberalised global
market, be and remain competitive and achieve sustainable growth.
Last but note least, it is important to set a benchmark for high corporate governance standards. This together with
proper corporate culture would help to foster team work, enhance staff morale, motivate resources, minimize staff
wastage and could have positive effect on a corporation's long-term economic performance.
VI. CONCLUSION
The importance of corporate governance in SMEs cannot be more emphasized as it forms the organizational climate
for the internal activities of a company that will intern increase its output to the national economic development goal.
If corporate governance is confined to broad governance, and beyond the board level and one that does not counterdemand
innovation, research and development and corporate entrepreneurship strategies, it would have limited
operational impact on SMEs. Since corporate governance brings new strategic outlook through external independent
directors, it would enhance firm’s corporate entrepreneurship and competitiveness, which is much desired and which
will lead to higher contribution of SMEs in Kenya’s economic development. It is not a threat to value creation in
entrepreneurial firms should the guidelines on corporate governance be applicable.
38

However, corporate governance is not an exclusive label or luxury reserved for big boys. It has become a necessity for
small and medium firms. The importance of practicing good corporate governance and cultivating strong corporate
culture can no longer be ignored in the SMEs sector as well as the economic development agenda in Kenya. To help
the sector come to this awakening, the Ministry of Trade and Industry and the Chamber of commerce will need to
work closely with all partners in the SMEs sector to bring home the message to our SMEs. In this regard, many
seminars to raise the awareness of SMEs on the importance of corporate governance and the proper roles of company
directors will need to be organized as the first move in the right direction.
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41

DEVELOPING INTRAPRENEURSHIP IN SMALL BUSINESSES
Esther Njiru,
M.Ed, PhD Candidate (Entrepreneurship Development)
ABSTRACT
The performance of small businesses has come to the forefront with the realisation that a vast majority of business
start-ups do not survive beyond the second year. Various reasons have been levelled to this problem of business
closures: the main problem is the lack of demand for individual enterprise products and services resulting from stiff
competition. This is closely related to the lack of markets access. There is also reportedly a lack of credit, lack of
security and poor cooperation from public authorities, lack of raw materials and problems related to the worksite.
The need to be self-sustaining demands the continuous improvement of service and/or product provision and
marketing the products or services in a liberalised market. In the context of increasing market globalization and free
trade, firms must innovate constantly to improve their flexibility, competitiveness, and reactivity. As Stevenson and
Jarillo (1990) pointed out, intrapreneurship has grown in importance over recent years because large firms wishing to
compete have sought out the characteristics of flexibility, growth, and innovation more generally associated with
entrepreneurship. Many authors have highlighted the importance of intrapreneurship as a stimulus to innovation in
organizations. This paper posits that many businesses that start with high notch do not survive because the
entrepreneurial spirit is not sustained since they have not become intrapreneurial. In a review of literature, this paper
explores the concept of intrapreneurship and describes how small businesses organisations can survive through
developing intrapreneurship.
1.0 INTRODUCTION
There has been a great deal of attention paid to the subject of entrepreneurship over the past few years,
stemming primarily from the discovery by economic analysts that small firms contribute considerably to
economic growth and vitality. Moreover, many people have chosen entrepreneurial careers because doing so
seems to offer greater economic and psychological rewards as well as some level of independence than does
the large company route.
In Kenya, a mushrooming informal sector has been the response to stagnating employment growth in the
formal economy and the downsizing of parastatals and of private companies as they reduce costs in a
liberalizing environment. These causal factors are combined with one of the fastest population growth rates
in the world, requiring the economy to absorb annually about 500,000 new labour market entrants. Micro
and small enterprises (MSEs) account for more than 90% of businesses worldwide and create 50 to 60
percent of employment (Kangari, 2006). It is estimated that today, Kenya’s informal sector constitutes 98
percent of all businesses in the country, absorbs annually up to 50 per cent of new non-farm employment
seekers, has an employment growth rate of 12-14 percent, contributes 30 percent of total employment and 3
percent of Gross Domestic Product (GDP) ( Riley and Steel, 2000).
1.1 Challenges facing small businesses
For the purposes of the paper, small businesses will be defined as organization with less than 50 employees.
Small businesses have a long-term vision to grow into big enterprises. To this end the small businesses
attempt to overcome any obstacles to expand. They tend to be very robust with high growth rate. Numerous
challenges hinder growth and hence a high rate of collapse. The Small Business Administration website
shows that "two-thirds of new employer establishments survive at least two years, and 44 percent survive at
least four years." In Kenya, 50 percent of businesses fail in the first year and 95 percent fail within five years
(Central Bureu of Statistics, et al, 1999).
Opinions abound about what a business owner should and shouldn't do to keep a new business afloat in the
perilous waters of the entrepreneurial sea. Below is a list of some reasons why businesses fail from a variety of
writers: starting the business for the wrong reasons e.g. to get rich quickly; Poor Management; Lack of
Planning so the business has grown too fast; Over expansion; the business doesn't make profits; the owner
42

hasn’t saved enough money; the owner hasn’t defined their market and the owner doesn’t understand
customer's buying habits; the owner thinks they can do it all on their own; depending on one customer; not
pricing the product or service properly; not managing cash flow well; not reacting to competition, changes in
technology, or changes in the market; The basic idea is wrong; Start-up capital was inadequate; There was
wasteful use of capital; A lack of stubborn staying power; A lack of business / financial know-how; A lack of
common sense; Inability to deal with a variety of people: suppliers, customers, employees, governmental
agencies; Ignorance of governmental restraints; Taking the competition too lightly; Getting wedded to a
single idea and sticking with it too long; Ignoring cash position; Letting Unproductive Employees Linger;
Selling too hard; Not setting up support structures; Too Many Targets; Technology/Product Mindset;
Structure (founding an ad hoc company not a planned company); Rigid roles (unwillingness to roll up the
sleeves and do whatever it takes to succeed) ; Hire Bodies, Not Skills and Abilities (selection process for the
team: executives, managers, board members and staff; No Plans (strategic or financial, including cash
management, funding, and spending plans (budgets); Not Narrowing the Focus (not going after the smaller
customer or niche that will generate early success and revenues; Getting caught up in "fun stuff" and not
minding the business issues; Procrastination; Ignoring the competition; Sloppy or ineffective marketing;
Ignoring customers´ needs; Lack of versatility; Poor location; Cash flow problems; A closed mind;
Inadequate planning; High cost of borrowing; Insolvent customers; and Domestic and family situations
(Richardson et al, 1994; Lisa et al, 1995; Haggen 2006, Cornwall [undated]; Tough [undated]
Tushambomwe-Kazooga, 2006).
This paper posits that for small businesses to survive and grow there is need to sustain the entrepreneurial
mode. In established organisations, it is called intrapreneurship, where entrepreneurship is encouraged in an
existing organisation.
1.2 Objectives
The aim of this paper is to outline critical issues that can enable entrepreneurial ventures to survive and
grow. Specifically the paper shall:
1. Define the concept of intrapreneurship as it relates to small businesses
2. Describe success factors in intrapreneurship
3. Discuss and recommend how small businesses revamp themselves to ensure survival and growth
1.3 Significance of the paper
Organisational development and economic development of a country can be enhanced through developing its
micro and small enterprises (MSE). However, research carried out in Kenya shows that more than 50% of
new business start-ups do not survive more than 2 years due to various reasons. This paper will add to the
understanding of how business can be assisted to survive and grow through developing internal
entrepreneurship, also called intrapreneurship.
1.4 Methodology
The researcher studied a collection of published and unpublished works on the subjects of entrepreneurship
and intrapreneurship. The desk research formed the basis of the thoughts presented in this paper on how
small businesses can be remain viable instead of the failures we are currently witnessing.
1.5 Synopsis of the paper
The rest of the paper starts by highlighting a definition of entrepreneurship and intrapreneurship. From
these findings, a recipe for successful intrapreneurship is analysed and presented. A case of successful
intrapreneurship is also presented.
2.0 FINDINGS
2.1 What is entrepreneurship?
43

� Innovators
� Leaders
� Independent
� Creators
� Aggressive
� Energetic
� High drive
The term "entrepreneurship" comes from the French verb "entreprendre" and the German word
"unternehmen," both, which mean to "undertake." The Merriam-Webster Dictionary presents the definition
of an entrepreneur as one who organizes, manages, and assumes the risks of a business or enterprise.
Filion (2000) in his article “From Entrepreneurship to Entreprenology” states that more than 1000
publications now appear annually in the field of entrepreneurship, at more than 50 conferences and in 25
specialized journals. Researchers tend to perceive and define entrepreneurs using the premises of their own
disciplines. For example, the economists have associated entrepreneurs with innovation, whereas the
behaviourists have concentrated on the creative and intuitive characteristics of entrepreneurs. However,
Schumpeter really launched the field of entrepreneurship, by associating it clearly with innovation. He stated
that:
The essence of entrepreneurship lies in the perception and exploitation of new
opportunities in the realm of business ... it always has to do with bringing about a
different use of national resources in that they are withdrawn from their traditional
employ and subjected to new combinations (Schumpeter, 1928).
Not only did Schumpeter associate entrepreneurs with innovation, but also his imposing work showed the
importance of entrepreneurs in explaining economic development. From this standpoint, the economists
viewed entrepreneurs as "detectors" of business opportunities, creators of enterprises and risk-takers. They
also showed that the role of entrepreneurs was to inform the market of new elements. They showed that
entrepreneurs assumed a risk because of the state of uncertainty in which they worked, and that they were
rewarded accordingly by the profits they made from the activities they initiated. They have a higher level of
tolerance that enabled the entrepreneurs to work in conditions of ambiguity and uncertainty (Filion 2000).
One of the criticisms that can be levelled at the economists is that they have not been able to make economic
science evolve. They have also been unable to create a science of the economic behaviour of entrepreneurs.
The economists' refusal to accept non-quantifiable models clearly demonstrates the limits of this science in
entrepreneurship. In fact, it was one of the elements that led the world of entrepreneurship to turn to the
behaviourists for more in-depth knowledge of the entrepreneur's behaviour.
The term "behaviourists" includes the psychologists, psychoanalysts, sociologists and other specialists of
human behaviour. The behaviourists’ movement had a goal to define entrepreneurs and their characteristics.
Generally, behaviourists view entrepreneurs as innovators, independent people whose role as business leaders
convey a source of formal authority. McClelland (1971), one of the behaviourists, defined an entrepreneur as
someone who exercises control over production that is not just for his personal consumption. Thousands
of publications describe a whole series of entrepreneurial characteristics. The most common are shown in
Table 1.
Table 1 Some Characteristics most often attributed to entrepreneurs by behaviorists
� Tenacious
� Original
� Optimistic
� Results-oriented
� Flexible
� Initiative
� Learning
� Resourceful
� Need for achievement
� Moderate risk-takers
� Self-awareness
� Long-term involvement
� Tolerance of ambiguity
and uncertainty
44
� Problem solving ability
� Use of resources
� Sensitivity to others
� Tendency to trust people
� Money as a measure of
performance
� Self-confidence
Source: Kibas and K’Aol (2004), Bird (1989), Hornaday (1982), Meredith, et al. (1982), Timmons (1978)
All this research produced highly variable and often, contradictory results. For example, although risk
bearing is an important element of entrepreneurial behaviour, many entrepreneurs have succeeded by
avoiding risk where possible and seeking others to bear the risk. Likewise, creativity is often not a
prerequisite for entrepreneurship either. Many successful entrepreneurs have been good at copying.

There are similarly many questions about what the psychological and social traits of entrepreneurs are. The
same traits shared by two individuals can often lead to vast different results; successful and unsuccessful
entrepreneurs can share the characteristics commonly identified. As well, the studies of the life paths of
entrepreneurs often show decreasing 'entrepreneurship' following success, which tends to disprove the
centrality of character or personality traits as a sufficient basis for defining entrepreneurship Bird (1989).
Kigundu (2002) sums up that both negative and positive correlates may lead to entrepreneurial success. See
the correlates listed in Table 2:
Table 2 Negative and Positive Correlates That Lead to Entrepreneurial Success
Positive correlates Negative correlates which could sometimes be positive
depending on other factors
a) Achievement orientation
a) Systemic corruption
b) Risk taking propensity
b) Community leadership
c) Hard work and high energy
c) Industry/sector
d) Technical and managerial skills
d) Sources of capital
e) Business acumen
e) Octopus
f) Innovativeness
f) Training
g) Necessary infrastructure
g) Consultancy
h) Corporate governance
h) Subsidies
i) Competitiveness
i) Social capital
j) Political representation
Source: Kigundu (2002)
The focus of study in the field of entrepreneurship has shifted over the years. Increasingly there has been more focus
on examining entrepreneurship from an organisational perspective. Corporate entrepreneurship, corporate venturing
and intrapreneurship are all terms that are used to classify entrepreneurial activities within organisations. Viewing
entrepreneurship from an organisational perspective is consistent with the views of Schumpeter (1942), who argues
that entrepreneurship will eventually be dominated by firms that are capable of devoting more resources to innovation.
Schumpeter (1942) presents some interesting reasoning for why a firm should increase its entrepreneurial activity. He
points out that a single entrepreneur creates new profitable avenues. As a result, he indicates that more entrepreneurs
innovating are good for the economy as a whole. Applying these ideas to the firm level, the more sources of
entrepreneurial activity within the firm, the more the opportunity is created for the firm. Schumpeter (1942) also
proposes that entrepreneurial-driven economic activity leads to higher levels of income and that this relationship does
not suffer from diminishing returns.
This paper adopts the definition by Hirsh and Peters (2002), that entrepreneurship is the process of creating
something new with value by devoting the necessary time and effort, assuming the accompanying financial, psychic,
and social risks, and receiving the resultant rewards of monetary and personal satisfaction and independence. Further,
Bird’s (1989) definition of entrepreneurial behaviour will be adopted: “entrepreneurial behaviour is opportunistic,
value-driven, risk accepting, creative activity where ideas take the form of organisational birth, growth or
transformation” (pg 5).
2.2 The Concept of Intrapreneurship
The word ‘intrapreneur’ or ‘intrapreneurship' has evolved over the last decade or so into ‘business English’. It
is coined from the word ‘entrepreneur’ and represents the practice of the intrapreneur. The American
Heritage Dictionary (2000) defines the intrapreneur as a person within a large corporation who takes direct
responsibility for turning an idea into a profitable finished product through assertive risk-taking and
innovation. The intrapreneur is the one who comes up with new ideas, who pushes for change, who develops
creative responses in the organisation, who takes full advantage of opportunities. S/he should have moved
from an 'administrative mode’ to an ‘entrepreneurial mode’.
45

The intrapreneur is really the corporate equivalent of the entrepreneur. We could also call him the corporate
or internal entrepreneur. The intrapreneur could be the non–owner manager, business unit manager, Chief
Executive Officer or Chief Operating Officer. He could be the Chief Information Officer who transforms
his unit from being an information technology (IT) Management Support Unit to being a Strategic Business
Unit, offering IT based products and services on a commercial basis in – house and to third parties.
Intrapreneurship is entrepreneurship within an existing organisation. It can be defined as a process by which
individuals inside organisations pursue opportunities without regard to the resources they currently control,
and as doing new things and departing from the customary to pursue opportunities (Vesper, 1990).
Intrapreneurship can also be conceptualised in terms of the pursuit of creative or new solutions to challenges
confronting the firm, including the development or enhancement of old and new products and services,
markets, and administrative techniques and technologies for performing organisational functions. In this
context, changes in strategy, organisational structures and systems, and methods of dealing with competitors
may all be seen as innovations in the broadest sense of the term. Intrapreneurship means bottom-up business
building, spearheaded by people who yesterday were working as line managers or employees. It is
inconsistent with reengineering, downsizing, and other efficiency methodologies.
Intrapreneurship has been classified by its characteristics into four dimensions: (a) new business venturing,
(b) innovativeness, (c) self-renewal, and (d) proactiveness (Hisrich and Peters, 2002). New business
venturing is the most salient characteristic of intrapreneurship since it can result in new business creation
within an existing organisation by redefining the company's products or services and/or by developing new
markets. In large corporations, it could also include formation of more formally autonomous or semiautonomous
units or firms. For all organisations regardless of size, the new business-venturing dimension
refers to the creation of new businesses that are related to existing products or markets regardless of the level
of autonomy.
In contrast, the innovativeness dimension refers to product and service innovation with emphasis on
development and innovation in technology. The third dimension, self-renewal, reflects the transformation of
organisations through the renewal of key ideas on which they are built. This has strategic and organisational
change connotations that include the redefinition of the business concept, reorganisation and the
introduction of system wide changes for innovation, new strategic direction and continuous renewal of the
organisation. The final dimension, proactiveness, is related to aggressive posturing and leadership relative to
competitors, risk-taking, initiative taking and boldness and aggressiveness in pursuing opportunities.
The impact of intrapreneurs can be felt on the corporate level or within their business unit. They go beyond
being manager. They may not be partly or wholly owners of the business but get a benefit [usually in the
short – term] for their performance. They should be rewarded appropriately through a performance based
bonus plan i.e. tied to the bottom – line. They should have positions of authority and be decision – makers.
Like wise, Intrapreneurship has been operationalised in empirical research in many diverse ways. Some of the
variables used to model intrapreneurship are as follows: Innovativeness/innovation; risk taking;
proactiveness; competitive aggressiveness; prior venture experience; slack resources/ resource availability;
autonomy; rewards and sanctions; centralisation of decision making; specialisation; organisational support;
time availability; organisational structure; organisational communication; environmental scanning;
organisational values/culture; self renewal; new business venturing and ownership (Maes, 2003, Antoncic
and Hisrich, 2001; Kuratko et al, 1990, Zahra 1995, 1991; Zahra and Covin, 1995). These variables refer
to practices or circumstances that can in some degree be controlled by the organisation.
Studies on intrapreneurship by Zahra (1991and 1999) focused on the manufacturing corporations in the
USA and found that internal organisational characteristics impact on intrapreneurship. The paper also found
that intrapreneurship improves performance. This paper was confirmed by Rusell and Rusell (1992) in a
study of 77 strategic business units in the USA and Antoncic and Hisrich (1998) in a study of Slovenian
firms. In addition, improved organisational results, usually in terms of growth and profitability, are thought
to be a result of intrapreneurship (Zahra, 1991; Zahra and Covin, 1995; Antoncic and Hisrich, 1998).
Smart and Conant (1994) captures not only the dynamic process in dimensions of innovation, risk-taking
46

and Proactiveness but also attitude towards strategic planning processes that reflects the extent to which a
firm practices business venturing.
2.3 A Theoretical Model of Intrapreneurship
Theoretically this paper is based on intrapreneurship research. Intrapreneurship is a concept closely related to
entrepreneurship emphasizing the entrepreneurial process and innovativeness (Guth and Ginsberg, 1990).
Intrapreneurship, however, takes place within the organisation (in this paper in small businesses). The
intrapreneur acts like an entrepreneur in that he/she realizes his/her own ideas without necessarily being the
owner of the enterprise. Intrapreneurship is here defined as an entrepreneurial way of action in an existing
organisation. The basis of intrapreneurship is recognizing an opportunity, exploiting it and trusting that
exploiting an opportunity in a new way that deviates from previous practice will succeed and support the
realization of the organization’s aims and profitability.
Research into the nature, prerequisites and effects of firm-level entrepreneurial activities has grown over the
past 25 years. The seminal paper of Peterson and Berger on entrepreneurship in organisations (1972) sought
to identify organizational and environmental factors affecting small business entrepreneurial activities.
Miller’s (1983) paper was a key turning point in the research on firm-level entrepreneurship. After that
researchers have used Miller’s theory (illustrated in figure 1) and research instruments to examine the
linkages between environmental, strategic, and organizational variables, and a company’s entrepreneurial
activities.
In this paper the researcher explains Miller’s (1983) model, organized the prerequisites and outcomes of
intrapreneurship, as well as the phenomenon of intrapreneurship into the following variables:
1. The phenomenon of intrapreneurship
a) A-type: venture creation and innovation
b) B-type: strategic renewal
2. The prerequisites of intrapreneurship
a) Management activities
b) Organisation culture
c) Organisation setting
d) Skills and attitudes of employees
3. The organisational outcomes of intrapreneurship
a) Customer satisfaction
b) Job satisfaction
c) Financial performance
The model that displays the interrelationships and the hypothesis is displayed in figure 1
47

Figure 1 The Model of Intrapreneurship
2. PREREQUISITES:
Potential Elements
Organisational
characteristics
� Organisational
culture
� Organisational
setting
Skills and attitudes
of managers and
employee
Source: Adapted from Miller (1983)
Key
Variables
Direction of dependence of variables
2.3.1 The phenomenon of intrapreneurship
1. PHENOMENON
Intrapreneurship
A.
Venture
creation and
innovation
Miller (1983) stresses that the phenomenon of intrapreneurship is displayed in a firm’s commitment to
innovation. There are three related components of innovation: product innovation, proactiveness, and risk
taking. Product innovation refers to the ability of a small business to create new products or to modify
existing ones to meet the demands of current or future markets. Proactiveness refers to a small business’s
capacity to compete in the markets by introducing new products, services, or technologies. Risk taking refers
to small business’s willingness to engage in business ventures or strategies in which the outcome may be
highly uncertain (Zahra and Covin, 1995).
Together these components form – as referred to here – an A-type manifestation of intrapreneurship,
emphasising the creation of innovations and ventures as well as conducting research and development
activities aiming to improve organisation’s competitive position and performance.
Another dimension of the phenomenon of intrapreneurship is strategic renewal of the existing business – Btype
manifestation of intrapreneurship, as referred to here. This strategic renewal of an existing organisation
entails areas such as mission reformation, reorganisation as well as system-wide changes within the
48
B.
Strategic
renewal
3. OUTCOMES:
Firm performance
Customer
satisfaction
Job
satisfaction
Financial
performance

organisation (Zahra, 1996). The renewal activities relate to the concept of a firm’s business and its
competitive approach in the markets. Renewal is achieved through the redefinition of a firm’s mission
through the creative redeployment of resources (Guth and Ginsberg 1990). Renewal requires developing or
adopting new organisational structures that promote innovation and venturing. Renewal also covers systemwide
changes, which enhance creative organisational learning and problem solving. These changes usually
refocus small business’s basic values.
2.3.2 The prerequisites of intrapreneurship
Several researchers have attempted to understand the factors that stimulate or impede intrapreneurship. Areas
such as external environment, organisation, its strategy, and management activities have been presented as
factors affecting intrapreneurship (Guth and Ginsberg 1990, Miller 1983, Kuratko et al. 1990).
Management activities refer to the role of management as a facilitator and promoter of intrapreneurship
(Thompson 1999). Management activities ensure that the organisation has a clear and understood vision and
direction. Management activities also affect the organisational culture in terms of the extent to which the
basic assumptions of intrapreneurship (e.g. risk taking, innovation and creativity, learning, change) can be
found within the organisation. Organisation culture is a system of shared meanings within an organisation
that determines to a large degree how employees act (Robins and Coulter, 1999).
The organisational setting includes the way work is being organised in the small businesses: power and
responsibility, division of work, rules etc. Altogether, these organisational factors both direct the employees
in their intrapreneurial efforts, as well as ensure that employees are empowered and committed (Thompson
1999). Previous studies indicate that managerial support; organisational structure as well as reward and
resource availability affects intrapreneurial activities within the organisation (e.g. Hornsby et al. 1993,
Antoncic and Hisrich 2001).
All the potential elements of intrapreneurship mentioned earlier are factors assumed to affect
intrapreneurship at organisational level. However, within the practice of intrapreneurship the individual is
the key actor, making it understandable why the intrapreneur herself/himself (either her/his personal
attributes or her/his roles and functions) is also a focal area of intrapreneurship research. The individual
skills and attitudes, also referred to in literature as the entrepreneurial orientation, describe the capabilities
and willingness of any potential intrapreneur to act intrapreneurially (Sembhi, 2002).
2.3.3 The outcomes of intrapreneurship
It is evident that intrapreneurship can give grounds for competitive advantage of an existing organisation.
The manifestations of such competitive advantage may be e.g. differentiation or cost leadership in the
markets, quick response to any changes, new strategic direction or new ways of working or learning within
the organisation (Covin and Miles, 1999). Prior research proposes that intrapreneurial processes are
associated with an organisation’s financial performance (Zahra 1991, Zahra 1995, Zahra and Nielsen et al.
1999, Antoncic and Hisrich 2001). For example, Zahra and Nielsen et al. (1999) raise the importance of
organisational learning and knowledge creation as outcomes of intrapreneurial activities, and, thus, as
grounds for competitive advantage and a basis of superior performance of the organisation. In this study
organisation, performance does not include only financial performance, but also non-financial
manifestations, such as customer satisfaction as well as job satisfaction of the employees.
3.0 ANALYSIS OF KEY ISSUES AND CHALLENGES
3.1 How does an intrapreneurial organisation look like?
Intrapreneurship is partially responsible for successful management of service organizations. Nevertheless,
public service organizations need to be well understood by entrepreneurs. They have multiple constituencies,
long-standing organizational structures, employees with lifetime employment, and to say the least, "unique"
decisions making processes. In addition, they have many subgroups bound together in a common goal of
finding a ‘parking’ place. For success inculcation of intrapreneurship, the following aspects are crucial:
49

1. Leadership - Any organizational entrepreneurship team must have leadership. Leadership involves the
discerning ability to strike to the significant part, to clear away the fluff and arrive at reality. Leadership
involves vision, asking what an institution or program or department might become. However, vision is
more than intellectual. It involves the affective realm. The entrepreneur makes that vision effective and
determines ways to make it into a reality.
2. People and their Empowerment - It is people who help successfully complete an entrepreneurial project,
and it is people who will use it.
3. Learning - Entrepreneurship, empowerment, and successful innovation involve learning.
4. Organizational Cultures - Culture is unseen, highly influential, difficult to change, but impossible to
ignore. It affects our perceptions, desires, goals, actions and feelings. Doing entrepreneurship in
organizations means developing a high awareness for the various cultures one encounters. Culture is
shared meaning.
5. Rewards - The three most powerful rewards I have observed in academe are (a) money, (b) time, and
(c) an intrinsic feeling of a job well done.
6. Technology and bureaucracy – involves adequate technology with less bureaucracy
7. Commitment and Community – in intrapreneurial ventures
8. Efficiency and Effectiveness
9. Relentless Dedication
Case study
Mr Maina* (not his real name) quit his job in the 1970s after working for 3 years with the East African industry to
start a transport business, delivering materials for clients within Kenya and outside to as far away as Zambia. The
future looked very bright.
Then the unthinkable happened. Over the years the East African community crumpled and the Tanzanian border was
closed down. At that point in time he hard hired 19 lorries and they were trapped in Tanzania while ferrying
perishable goods. All negotiations could not allow the release of the vehicles across the border so the goods were sold
on the roadside to residents at throwaway prices. The solutions could only be reached at intergovernmental level at it
took six months to reach a solutions. Meanwhile the owners of the trucks were baying for his blood. Things became so
bad that he had to go into hiding.
Driving past a shopping centre in Kiambu one day he stopped to give a lift to a woman who was carrying a heavy load
of maize that she had brought to Kiambu from Kariobangi in Nairobi (about 70 away) to a posho mill. He discovered
there were no posho mills in Nairobi. So he bought a posho mill and set it up at Kariobangi. Waiting for the first
customer with anticipation started. None came. One day, one week, two weeks, three weeks, still no customer.
It was time for a reality check. What had begun as an exiting idea was turning into nightmare! His first experience in
business was still fresh in his mind. Upon investigation of this turn of events he found out that as a result of a
drought/famine that was raging through the land at that time maize was hard to come by particularly in Nairobi. He
was just in the verge of despair when a brilliant idea hit him. Why not buy maize from the cereals and produce board
so he could sell it to people who required maize flour? That way he could rescue his business from a possible stillbirth.
He still had to overcome the hurdles of acquiring a licence to operate a mill in Kariobangi, purchase more maize from
the cereal and produce board especially due to rationing due to the famine. With time his reputation as a reliable miller
grew. He secured a contract to supply maize to prisons in Nairobi and this kept him going even after the famine.
50

‘We developed our capacity to cope with the demand hence the need to reinvent ourselves”. Soon more mills were
mushrooming all over and he started facing stiff competition. He discovered that medium sized posho mills were
surviving well, so he approached a technician from one of his suppliers. They worked out an arrangement where they
would together work on the design of a posho mill and share the profits from any sale they made. The shift in business
was good. Most of the mills that had mushroomed were put out of work by power rationing in 2000. They realised
that their continued success was dependent on the success of their customers business so as to attract new entrants..
They also realised that some people interested in the products were putting in their life savings. It is for this reason
that they designed a training programme for people interested I the product to give advise on business survival. The
other challenge was that many budding entrepreneurs were not in a position to get the capital to buy the mill.
Depending on the viability of the proposed project, the company started a credit scheme where the client pays 60
percent of the total cost of the mill and the balance is paid in instalments.
His final advice to people wishing to venture into business, “constantly look for opportunities, don’t just quit. If it
doesn’t work today, it might tomorrow”.
51
Adapted from: Weru (2006)
The Sunday Nation November 5 2006 p 24
The above case shows how a business man did not allow the various hitches that affect small businesses put
him out of business but revamped and became intrapreneurial. There is evidence of:
� Renewal of business
� Innovation and creativity
� Customer needs identification and satisfaction
� Activities towards recognising market needs and trends
� Use of technology
� Relentless dedication
� Proactiveness in search of solutions and new business ideas
3.2 The Role of The Business Manager
Intrapreneurial behaviour is discouraged when the business manager/owner does not support the efforts of
the employees and is not tolerant of their mistakes (Kamffer, 2004; Hisrich and Peters, 2002; Kolveried and
Amo, 2002).
To promote innovation and intrapreneurial behaviour in the organisation the business manager/owner
should:
a) be dissatisfied with the status quo;
b) talk to employees, suppliers and customers;
c) create a vision which will empower employees but will also guide the independent and innovative
employee;
d) allow employees to come up with creative ideas to find and implement the opportunities that lie within
the overall strategy;
e) remove anything that blocks innovation in the organisation;
f) search for and reward sponsors – sponsors, find, nurture, guide, educate, question and redirect
innovators;
g) keep the system open to all kinds of innovation from value improvement, process breakthroughs, line
extensions, new products and services, new ways of working together, new internal services and new
organisational patterns;
h) create a flexible organisation by building choice into the system such as allowing operating divisions to
find their own ways to satisfy internal customers, letting employees choose which projects they prefer to
work on, and how much time to spend on new ideas;
i) Measure innovation and the climate for innovation by measuring the progress of each division.
Kamfer (2004) concludes that ‘great leaders create conditions that bring out people’s ability to produce extra
ordinary results’ (pg 13). People contribute to innovation when they are asked to and the way they are asked

to (Kolveried and Amo, 2002). This implies that if the business manager/owner is not intrapreneurial, the
whole organisation will not be intrapreneurial, and vice versa.
3.3 The Intrapreneur
The intrapreneur is the key to the successful launch of any business opportunity. He or she is the person who
perceives the market opportunity and then has the motivation, drive and ability to mobilise resources to meet
it. The major characteristics of intrapreneur that have been listed by many authors (Maes, 2003, Antoncic and
Hisrich, 2001; Kuratko et al, 1990, Zahra, 1991; Zahra and Covin, 1995) include:
a) Self confident and multi-skilled. The person who can 'make the product, market it and count the money,
but above all they have the confidence that lets them move comfortably through unchartered waters'.
b) Confident in the face of difficulties and discouraging circumstances.
c) Innovative skills. Not an 'inventor' in the traditional sense but one who is able to carve out a new niche
in the market place, often invisible to others.
d) Results-orientated. To make be successful requires the drive that only comes from setting goals and
targets and getting pleasure from achieving them.
e) A risk-taker. To succeed means taking measured risks. Often the successful entrepreneur exhibits an
incremental approach to risk taking, at each stage exposing himself/herself to only a limited, measured
amount of personal risk and moving from one stage to another as each decision is proved.
f) Total commitment. Hard work, energy and single-mindedness are essential elements in the
entrepreneurial profile.
g) Desire for autonomy
h) Ability to overcome barriers
i) Task/goal orientation
Organisational characteristics include a culture and setting that encourages intrapreneurship. According to
Hornsby, et al, (1992), some characteristics include:
1. Management support
2. Work discretion
3. Rewards/reinforcements
4. Time availability
5. Organisational boundaries
6. Resource availability
Summary of Findings
This study of literature has discussed the concept of entrepreneurship, where in it looked at the definitions from
economists and behaviourists’ point of view. Indeed many definitions have been levelled on to what is an
entrepreneur and what attributes contribute to the success of an entrepreneur. This discussion formed the basis
of introducing intrapreneurship, arguing that the intrapreneur is the entrepreneur but acting within an existing
organisation. The entrepreneur seeks to start a business; the intrapreneur seeks to expand the existing business
through developing new ideas. Intrapreneurship was thus characterised into innovativeness, self-renewal,
Proactiveness and new business venturing.
The study also discussed a theoretical model of intrapreneurship, positing that developing intrapreneurship will
have rewards that will sustain the organisation. These rewards include customer satisfaction, employee job
satisfaction and financial success. In giving the pill for intrapreneurship development in small businesses the
study has outlined the role of the business manager in encouraging intrapreneurship and the role of the employee
in developing their individual intrapreneurial characteristics. As well, the findings have outlined how an
organisation’s settings and culture can support intrapreneurship.
4.0 CONCLUSIONS
This paper has outlined critical issues that enable entrepreneurial ventures or small businesses to survive and
grow. Specifically the paper defined the concept of intrapreneurship, described success factors in
52

intrapreneurship and gave recommendations on how small businesses revamp themselves to ensure survival
and growth. Arising from the information presented in this paper, the following conclusions can be made;
1. The survival and growth of small businesses is vital for the economy. It is therefore crucial that the
businesses work towards this realisation.
2. Factors that cause business failures are numerous and the small business owners should be on the
lookout to avoid being caught up.
3. Though start-ups in business are important, the small businesses owners need to realise that the
sustenance can only be made from a continuous self-renewal and innovativeness to seek for new
opportunities in the face of stiff competition.
4. Intrapreneurship should not just be the reserve of the business owner but should be encouraged within
all employees through recognition and incentive system.
5. The business owner/manager has a key role in encouraging intrapreneurship and being intrapreneurial.
He/She should therefore develop intrapreneurial competencies through continuous learning and selfdevelopment.
6. Intrapreneurship is closely determined the outcomes of the business venture. There are also certain
prerequisites to its development in the organisation that the business owner/manager should
institutionalise.
5.0 RECOMMENDATIONS
The Survival of Small Businesses
1. There is need to develop and train small business owners in intrapreneurship. This will guarantee
survival in the turbulent globalized market.
2. There is need to create forums where successful business people, who have been intrapreneurial, share
and mentor the upcoming business people in intrapreneurship.
3. Intrapreneurship is curtailed in small business because of fear of the ‘entrepreneurial flight’… that the
employees can move to start their own ventures and take with them the customers. It is therefore
recommended that the business owners can establish a reward system so that the intrapreneur feels
adequately compensated and safe to be creative and innovating in the organisation. For example
through gain sharing and encouraging creativity.
Recommendation for Future Research
1. There is need to study the factors that impede or discourage intrapreneurship in established small
businesses.
2. Empirical studies on cause and effect relationships of the various factors in intrapreneurship need to
be carried out. These would develop a model of intrapreneurship ain Kenya.
3. More cases and tracer studies need to be carried out on businesses that have survived beyond the 5year
threshold to bring out the role of intrapreneurship.
53

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58

TOPIC: FOSTERING SOCIAL ENTREPRENEURSHIP IN UGANDA.
BY
TUKAMUSHABA KUROBUZA EDDY
HEAD OF DEPARMENT LEISURE & HOSPITALITY
MAKERERE UNIVERSITY BUSINESS SCHOOL
1.0 Introduction
Social entrepreneurship is a new and rapidly rising field of practice that is, as yet, under-researched in Uganada. Social
entrepreneurship involves innovative approaches to address issues in the domains of education, environment, fair-trade,
health and human rights and is widely regarded as an important building block of the sustainable development of
countries. Social entrepreneurship is likely to become even more important than for-profit entrepreneurship (Gendron
1996)
Social entrepreneurship is the process of founding ventures, both for profit and not-for-profit whose missions focus
on creating positive social change. According to Dees, (1988) the term “social entrepreneurship” involves: adopting a
mission to create and sustain social value; recognizing and relentlessly pursuing new opportunities to serve that
mission; engaging in a process of continuous innovation, adaptation, and learning; acting boldly without being limited
by resources currently in hand; and exhibiting a heightened sense of accountability for the outcomes created.
Social and business entrepreneurs share common traits including an innovative, risk-taking approach to a challenge, the
ability to seize opportunities, transforming “business as usual” and mobilizing scarce resources towards that end. The
economist Joseph Schumpeter called business entrepreneurs the “change agents in the economy”. He wrote that “by
serving new markets or creating new ways of doing things, they move the economy forward”. Social entrepreneurs are
the change agents in the social sector.
However, in contrast to business entrepreneurs, the way to best measure their success is not how much profit they
make, but the extent to which they improve the lives of those they mobilize through their actions. Social entrepreneurs
can set up their initiatives as for-profit or not-for-profit organizations, and that choice will be a function of their
vision and theory of change. Most social enterprises are hybrid organizations. That is to say,
they operate along business lines and may indeed aim to make a profit, but their primary goal is to promote social
change.
In Uganda, most organizations formed with the prime of objective of improving social welfare of the urban and rural
poor end up exploiting the very people they are supposed to help. For example, in a standard micro finance institution
operation, members of a society who can’t access normal financial markets like commercial banks are required to form
groups so that they can be aided through micro-lending program to start small businesses that improve their lot in life.
The loan agreement is organized under group loan arrangement. In order to get a loan, the individual must put up
their reputation as collateral – say five non-family members of the community must vouch for them and being willing
to pay their debt if they default. Under this arrangement, the groups formed are artificial and have no natural
characteristics, which create artificial bonding that does not reflect the benefits of social capital, characterized by
mistrust, sabotage, and lack of disclosure, which eventually leads to failure of enterprises formed (Radio talk show held
on Voice of Kigezi July, 2006).
Although entrepreneurial initiatives aimed at social and economic wealth creation are not new, they only recently raised
increasing interests among scholars (Wallace, 1999). Thus there is still relatively little known about the particular
dynamics and processes involved in Social entrepreneurship.
1.1 Statement of the problem
Social entrepreneurship has raised increasing interest among scholars, yet we still know relatively little about
the particular dynamics and processes involved. Women organizations formed in Kabale district with a
mission to create and sustain social value has continually failed to achieve their goal due poor perceived
desirability and feasibility of businesses formed, lack of cognitive and emotional characteristics, and Social
capital, poor behavioral intentions, leading to failure of Social enterprises formed.
59

Perceived
desirability
Perceived
feasibility
1.2 Purpose of the study
To examine the relationship between perceived desirability and feasibility, cognitive and emotional
characteristics, behavioral intentions, social capital and social enterprise.
1.3 Objectives of the study
1. To examine the relationship between perceived desirability and feasibility and cognitive and emotional
characteristics
2. To establish the relationship between cognitive and emotional characteristics and social capital
3. To establish the relationship between social capital and social entrepreneurship behaviour.
4. To examine the relationship between social entrepreneurial behaviour and formation of a social enterprise.
1.4 Research questions
1. What is the relationship between perceived desirability and feasibility and cognitive and emotional characteristics?
2. What is the relationship between cognitive and emotional characteristics and social capital?
3. What is the relationship between social capital and social entrepreneurship behaviour?
4. What is the relationship between social entrepreneurial behaviour and formation of a social enterprise?
1.5 Analytical Framework
Emotional
&Cognitive
� Empathy
� Moral judgment
attitudes
Social capital
� Trust
� Networks
� Reciprocity
The above model suggests that perceptions of desirability and perception of feasibility among individuals
leads to emotional and cognitive attitudes (empathy and moral judgment) which lead to building of social
capital (trust, networks) which all lead to formation of social entrepreneurial behaviour and a result a social
enterprise is formed.
2.0 Literature review
While social entrepreneurs have existed throughout history, the concept of social entrepreneurship is
relatively recent one. The term “entrepreneur” made its first appearance in the English language around 1475
as “one who undertakes; a manager, controller; a champion” (OED 2003). Unlike Adam Smith, whose
“invisible hand” de-emphasized the value of the entrepreneur, JB Say celebrated the entrepreneur as a value
creator who shifts economic resources out of an area of lower and into an area of higher productivity and
greater yield.
Many facets of the social entrepreneurship process are parallel to the traditional corporate entrepreneurial
process; social entrepreneurs can learn much from traditional business management practices to make for
more effective and innovative social organizations (Gendron 1996).
Social entrepreneurs combine innovation, opportunity and resourcefulness to transform social systems and
practices in a wide variety of fields, including, for example, health, employment, education, environment,
housing and technology (Prabhu, 1999).
For many social entrepreneurs, charity is essentially about philanthropy, whereas social enterprise is about
empowering people who are socially disadvantaged to improve their financial, social and moral status and
well-being. These entrepreneurs are individuals who seize the initiative to tackle the problems affecting those
60
Social
entrepreneurial
behaviour
Social enterprise
(co-operative,
mutual or voluntary
organisation)

who are socially disadvantaged. Deeply committed to generating social value, these entrepreneurs identify
new processes, services, products or unique ways of combining proven practice with innovation, driving
through pattern-breaking approaches to resolve seemingly intractable problems. These are men and women
who seize the problems created by change as opportunities to transform societies” (Fiet, 2000).
2.1 Relationship between perceived desirability, Perceived feasibility and cognitive and emotional characteristics.
Perceived desirability refers to the attractiveness of generating the entrepreneurial event; while perceived
feasibility refers to the degree to which one believes that he or she is personally capable of forming a
company (Shapero & Sokol, 1982). This suggests that individuals vary in their perceptions of what they find
feasible and what is desirable. These perceptions, which are shaped by the individuals’ cultural and social
environment, largely determine which actions are taken in order to set up a company (Shapero & Sokol,
1982). While not explicitly referring to intentions, intentions are embedded in the behavior that produces
the entrepreneurial event.
The theory of planned behaviour (TPB) suggests that behavioral intentions are affected by attitude towards
the behaviour, subjective (social) norms and perceived behavioral control (Ajzen, 1991). It ca be implied
from this that perceived desirability corresponds to social norms and attitudes, while perceived feasibility
relates to self efficacy beliefs, a concept associated with behavioral control (Krueger Jr. & Brazeal, 1994).
Literature also shows that stable individual traits and situational factors do not exert a direct effect on
intentions and behaviour but indirectly through perceptions of desirability and feasibility (Krueger Jr. &
Reilly, 2000).
Kim and Hunter,(1993) empirically show that intentions predict behavior but also that attitudes predict
intentions. TPB emphasizes attitudes towards behavior as powerful antecedents of intentions. In the context
of entrepreneurship, Kruger related these attitudes directly with perceived desirability (Kruger Jr & Brazeal,
1994). Mair and Naboa, (2003) suggest that attitudes involving cognitive and emotional dimensions are
helpful in understanding the social entrepreneurial process. These include empathy and moral judgment.
Traditionally the literature has distinguished between affective (emotional) and cognitive empathy
(Lopez,Apodaka et al.,1994;Mehrbian &Epstein,1972). Authors following the former approach refer to
empathy as an affective response, as something to be aroused. Oswald provides a very straightforward
definition and refers to empathy as a feeling, a “vicarious affective arousal” (Oswald, 1996:614). For the
purpose of this paper empathy is defined as the ability to intellectually recognize and emotionally share the
emotions or feeling of others.
Empathy has been studied extensively in the context of helping behavior, a concept that is related to the
spirit of social entrepreneurship Bannet et.al found that perceived helping skills increased the likelihood that
empathy triggers a helping response (Barnet, Thomson &Pfeifer, 1984). Goldman et al also proposed that
direct requests for help also positively affect the empathy-helping response link (Goldman, Broll, & Carril,
1983). Building on this evidence that empathy is positively associated with helping responses, it is implied
that a person who is capable of intellectually recognizing and emotionally sharing another person’s emotions
and feeling will develop a desire to help and do whatever is necessary to avoid another’s suffering. In this
paper, a suggestion is made to add a set of moderating variable of social capital to further explain its
influence on social entrepreneurial behavior.
Lopez,Apodaka et al (1994) in support of social entrepreneurship identified certain conditions regarding the
beneficiary(who receives help) and the provider (who offers help) that facilitate empathy. The greater the
amount of help needed, and the closer the ties between the beneficiary and the provider, the greater the
likelihood the beneficiary will receive help. The more positive the provider’s psychological state, the more
familiar the beneficiary’s problems, and the lower the cost of helping, the greater the likelihood the provider
will offer help. Goldman, Broll et al. (1983) also found that a direct request for help, i.e. explicitly asking
someone to help, is more likely to obtain an empathic response than an empathic response than an indirect
one.
Specific research in social entrepreneurship indicates that sensitivity to other’s feelings motivates social
entrepreneurs to create social enterprise (Prabhu, 1999). However, not everybody with the ability to
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experience empathy is a social entrepreneur. This implies that empathy is necessary but not sufficient
condition in the SE process. A certain level of empathy is needed in order to trigger perceived social venture
desirability, which in turn will lead to intentions to create a social venture.
Moral judgment represents an additional concept that is frequently employed to explain helping responses
(Comunian &Gielen, 1995). Under the assumption that moral norms regulate the actions of individuals,
Lopez, Apodaka et al.(1994) define moral judgment as the reasoning an individual follows to justify his/her
actions in the face of moral dilemma. For the purpose of this research moral judgment was defined as the
cognitive process that motivates an individual to help others in search of a common good.
Kohlberg and Hersh (1977) claim that, moral judgment develops in human cognition through a sequential
series of six stages, which increasingly demonstrate a higher capacity for empathy and justice. The most basic
form of moral judgment is when individuals consider the goodness or badness of actions depending on their
physical consequences regardless of their human meaning or value (punishment-and-obedience orientation).
As an individual educates his/her moral judgment, he/she passes through more sophisticated stages of moral
reasoning until reaching the sixth stage (the universal-ethical-principle orientation), the most developed form
of moral judgment.
Individuals moral judgment is affected by exposure to social experiences that make an individual deal with
the needs, values, and viewpoints of others (Comunian &Gielen.1995); perceived magnitude of the
consequences (i.e. the perceived harm or good done to an individual) and the social consensus (the level of
agreement on the goodness or evil of a proposed act) (Morris & McDonald, 1995).
Prabhu (1999) found that social entrepreneurs are motivated by a need to be loyal to their own principles,
and to socially responsible. Johnson (2000) claims that; social entrepreneurs crave for social justice and I
propose that this can only be achieved if social capital is prevalent in the community social entrepreneurs
intend to establish a social enterprise.
2.2 Relationship between cognitive & emotional characteristics and social capital
In organizations like the Grameen Bank, we may well find examples of what Sfeir-Younis (2002) calls
“spiritual entrepreneurship”: a paradigmatic shift away from traditional entrepreneurship expressed in the
form of a personal challenge: “How can I encourage everyone associated with this enterprise to work from
the highest possible level of awareness?” (p. 44). Such a vision entails profound commitments to ethics in the
treatment of others (including competitors), the linkage of the organization to the idea of a self-realization,
and constant reflection on the contribution of the organization to society. Although coming out of a United
Nations agency context, Sfeir-Younis argues for the application of this term and model to the private sector
as well. All commentators on social entrepreneurs agree that exceptional personal characteristics, usually held
by a single person though sometimes manifested by a group, are not only helpful but essential to success.
Waddock and Post (1991) argue that significant personal credibility is a key to the social entrepreneur's
work and to her ability to enlist the commitments of others. Like the term “strategic philanthropy”, “social
entrepreneurship” is an articulation (Hall, 1986; Slack, 1996), a combination of two concepts that do not
naturally fit together and yet which seeks acceptance as common sense. It is the lack of a natural fit that
renders the term open to resistance and challenge. Challenges, implicit or explicit, range from different
interpretations of how the terms might justifiably be joined to denial that they should be used together at all.
If the colonization of the social and public sectors by the language of business is accepted, the breakdown of
barriers between the sectors becomes normalized. However, the terms cited are in contrast to the distinction
made by Thompson (2002) between entrepreneurs who create social or artistic capital rather than financial
capital, with social capital referring to that which is valuable to communities (p. 413). The concept of social
capital, without a financial element, also emerges in descriptions of social entrepreneurs, with examples that
include the Crimean War nurse, Florence Nightingale (Bornstein 2004).
An extract from a speech by UK Prime Minister Tony Blair in January 1999) emphasizes the role of social
capital in fostering social entrepreneurship.
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In the first half of this century we learned that the community cannot achieve its aims without the help of
government providing essential services and a backdrop of security. In the second half of the century we
learnt that government cannot achieve its aims without the energy and commitment of others – voluntary
organizations, business and, crucially, the wider public … I have always believed that the bonds that
individuals make with each other and their communities are every bit as important as the things
provided for them by the state … Every year thousands of social entrepreneurs achieve extraordinary things
in difficult
circumstances … For all the millions who get involved [in community initiatives and the voluntary sector]
there are millions more who would get involved if they knew how … So I set down a challenge: That we
mark the Millennium with an explosion in “acts of community” that touch people’s lives.
In The Rise of the Social Entrepreneur, Leadbeater (1997) concludes that the UK welfare system is in need
of radical reforms if it is to deal effectively with the social and other demands and he further noted that a
major contribution to this can be made by social innovations – new, creative and imaginative community
initiatives. The need is to innovatively develop new forms of social capital, which, in turn, will help empower
disadvantaged people and encourage them to take greater responsibility for, and control over, their lives.
Social capital is here taken to mean the creation of community-based tangible and intangible assets, which
would otherwise not exist. Tangible examples would include buildings, services and support networks;
intangibles might be trust, identity, reputation and respect for some achievement. This emphasis differs from
the definition adopted by authors such as Fukuyama (1995) who see social capital as “the ability of people
to work together for common purposes in groups and organizations”. Leadbeater’s social entrepreneurs are
all community-based and they are endeavoring to regenerate some locality, which over time can spread from
a neighborhood base to have a national or even an international identity. Nevertheless, many initiatives stay
small and local, mirroring the tendency of many micro and small businesses not to grow into medium-sized
enterprises.
Social entrepreneurship needs some combination of people with visionary ideas, people with leadership skills
and a commitment to make things happen, and people committed to helping others. The process of
entrepreneurship brings together people and ideas, and whilst the “true” entrepreneur does have the requisite
visionary, technical and leadership skills, entrepreneurship can still – and often does – happen when
enterprising or intrapreneurial people are linked up with the visionary idea and opportunity. Arguably, if the
idea or need is strong enough, the appropriate champion will be attracted. Unpublished research by the
Gallup Organisation argues that whilst leadership and entrepreneurship are not synonymous terms, there are
some overlapping characteristics. Charismatic leaders, then, will champion some – but not all –
entrepreneurial ventures. Bendix, (1966), describes charismatic leader-entrepreneurs to be all creative and
innovative, disruptive of the status quo, catalysts for change, and responsive to situations, needs and
opportunities. It can be argued that there are people in the community who are keen to work for their
community, but need leadership and guidance. These people are more likely to be found in abundance than
are true entrepreneurs who choose to work for the community rather than, say, for personal financial gain.
People closest to the community and in the caring professions – such as vicars, doctors, teachers and social
workers – will have opportunities to see and appreciate needs and opportunities, but individually they may
have neither the time, skills nor inclination to do anything about them.
2.3 Relationship between social capital and social entrepreneurship behaviour.
The Theory of Planned Behaviour (TPB; Ajzen, 1988, 1991) proposes a model about how human action is
guided. It predicts the occurrence of a specific behaviour provided that the behaviour is intentional. The
model is depicted in Figure 1 and represents the three variables, which the theory suggests will predict the
intention to perform behaviour. Intentions are the precursors of behaviour.
63

ATTITUDES
(Behavioral beliefs x
Outcome evaluations)
SUBJECTIVE NORMS
(Normative beliefs x
Motivation to comply)
PERCEIVED
BEHAVIOURAL
CONTROL
(Control beliefs x influence
of control beliefs)
Adopted from the Theory of Planned Behaviour (Ajzen, 1991)
BEHAVIOURAL
INTENTIONS
The theory above can be used to explain why organizations formed without considering the natural settings
that bring with them the element of social capital (trust, reciprocity, and networking) for purposes of
accessing micro finance funding are failing to realize their objectives in most parts of Uganda. The original
motivation is getting the funds and formation of groups is secondary. Although there is not a perfect
relationship between behavioral intention and actual behaviour, intention can be used as a proximal measure
of behaviour.
The theory assumes that human beings are rational and make systematic use of information available to them
and that people consider the implications of their actions before the decide to engage or not to engage in
certain behaviors. Ajzen (1991) theorized that, intentions are a function of two basic determinants that is
attitude towards behavior and subjective norms of behavior.
There is clearly both scope and need for more social innovation and social entrepreneurship if, on the one
hand, the identifiable requirements of the community are to be met more effectively, and, on the other hand,
new opportunities to create additional benefits are to be found and exploited proactively. To accomplish
this, more social champions need to be found and many of the people involved in existing ventures need to
be encouraged to become more ambitious and more professional – in the context of increased efficiency.
This increased incidence implies increased visibility and new forms of support. The former can be achieved
by widening awareness – one key purpose of this paper and the associated research project – and the latter by
introducing new training and development opportunities for people willing to support the ventures – and
maybe ultimately start a new initiative. Here, the issue of the “right people” is important. Some people who
are willing to volunteer their services and time may be inadequately skilled and qualified, and without
appropriate training will inhibit rather than enhance the initiative.
In terms of efficiencies, because many ventures of this nature can avoid the rigorous monitoring found in the
profit-generating sector, it is important to ensure that the appropriate performance measures are adopted. By
and large the real effectiveness of anything deemed socially entrepreneurial implies “soft” or qualitative
evaluation – but quantitative measures such as the number of clients benefiting, external monies raised, the
number of jobs created and the numbers of volunteers (or honorary professionals) attracted are all ideal for
benchmarking purposes.
In recent years the concept of social capital has been widely used in both economics and sociology.
Increasingly, the significance of social capital for those interested in studying organizations in general and
entrepreneurship in particular has also become apparent (Adler and Kwon, 2002; Anderson and Miller,
64
BEHAVIOUR

2002; Galunic and Moran, 2000). The essence of social capital is that network relationships, including
family, friends, casual relationships and even contact with strangers; provide a rich resource in terms of
knowledge, information and support. Some of the most significant contributions to our understanding of
social capital studied have come from studies of ethnic entrepreneurs. There is also some work that has
examined the topic of corporate entrepreneurship in terms of social capital.
Contemporary accounts of social capital usually begin with the work of Coleman (1988) who attempts to
reconcile two conflicting explanations of social action. According to structural accounts, individual actors are
socialized into the acceptance of social norms, rules and obligations, which constrain their behaviors
(Wrong, 1961). The alternative view is that individuals set goals independently and act in a manner, which
is entirely self-interested. Some, critics of neo-classical economics (Williamson, 1981) examine ways in
which particular institutional arrangements (social organization) influences the functioning of the system.
Similarly, Granovetter (1985) used the concept of embeddedness to describe the importance of close
personal networks in generating trust and in enforcing social norms. Such revisionist trends in economics
(endogenously) and sociology (exogenously) impose the concept of rational action on social and institutional
organization.
2.4 Relationship between social entrepreneurial behaviour and formation of a social enterprise.
Social enterprises along with other organizations within the voluntary and community sectors, are part of the
social economy in that they have social objectives, are socially owned, are often accountable to local
communities and frequently do not distribute profits (The Department of Trade and Industry, 2002).
Where surpluses are realized these are reinvested principally in the business or in the community to further
its social objectives. Therefore, social enterprises can have a distinct role in helping create a strong,
sustainable and socially inclusive economy and are intended to create real opportunities for people working
in them and the communities that they serve. Social enterprise is therefore a business with primarily social
objectives whose surpluses are principally reinvested for that purpose in the business or in the community,
rather than being driven by the need to maximize profit for shareholders and owners (The Department of
Trade and Industry, 2002).
Social enterprises compete in the market place like any other business, but they use their business skills to
achieve social aims. Social enterprises are part of the broader social economy, but whereas many voluntary
organizations and community groups may be involved in some kind of trading activity for goods and
services, social enterprises see trading as significant and defining part of their business (Roberts 2004).
Tomamasini (2004) defines social entrepreneurship as a professional, innovative and sustainable approach to
systemic change that resolves social market failures and grasps opportunities. The organizations formed are
as a result of engagement of both non and for profit organizations and the success of their activities are
measured first and foremost by their social impact.
In social entrepreneurship, social wealth creation is the primary objective, while economic value creation, in
the form of earned income, is necessary to ensure the sustainability of the initiative and financial selfsufficiency.
An additional distinctive feature of social entrepreneurship lies in the limited potential to capture
the value created. Social entrepreneurs who address basic social needs, such as food, shelter or education, very
often find it difficult to capture economic value because, although the ‘‘customers’’ are willing, often they are
unable to pay even a small part of the price of the products and services provided (Seelos & Mair, 2005a).
3.0 Methodology
The paper is a product of desk research. Thirty research articles were down loaded from Emerald site and
using other search engines like google on the subject of social entrepreneurship.
The information got was used to explain the forms of social enterprises that are formed in Uganda. Social
capital variable was introduced in the model that was originally in one of the research paper to come up with
the model used in this paper.
4.0 Findings
Social capital was broadly described by researchers as actual and potential assets embedded in relationships
among individuals, communities, networks and societies (Burt, 1997; Nahapiet & Ghoshal, 1998).
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Sociologists and organizational theorists have elaborated three highly interrelated dimensions of social
capital: structural capital—the structure of the overall network of relations (Burt, 1992); relational capital—
the kind and quality of an actor’s personal relations (Granovetter, 1992); and cognitive capital—the degree
to which an individual shares a common code and systems of meaning within a community (Nahapiet &
Ghoshal, 1998).
The structural dimension refers to the overall pattern of connections between actors—that is, whom one
reaches (Burt, 1992). Various authors have emphasized the importance of networks for social
entrepreneurship. Structural capital defines the potential or possibilities that the social entrepreneur has to
access information, resources and support. It is important to understand the structural dimension of social
capital, how it can be built, increased and, most importantly, maintained, since it is one of the factors that
will determine whether and to what extent social entrepreneurs are able to solve and alleviate social problems,
and elevate them to the public sphere. The relational dimension of social capital focuses on the quality of
relationships, such as trust, respect and friendliness. There is growing evidence that when trust is built up
between parties, they are more eager to engage in cooperative activity, through which further trust may be
generated (Fukuyama, 1997). The Grameen Bank’s credit delivery system is a good
example. Borrowers are organized into small homogeneous groups, sharing responsibility for loans granted to
other members of their group, and facilitating solidarity, as well as participatory interaction. It is important
to understand how trust is created among the different members of the group, but also how trust between
the members and the Grameen Bank is sustained and downward leveling norms (Portes, 1998).
Consider the characteristic of the Grameen Bank credit delivery system: it enhances solidarity. While
solidarity is generally thought to be positive, in some circumstances it may backfire. Various authors have
emphasized the downside of over embeddedness. For example, Gargiulo and Bernassi (1999) claimed that
strong solidarity within group members may result in over embeddedness, which reduces the flow of new
ideas into the group and can result in parochialism and inertia.
For social entrepreneurs, the social mission is explicit and central. This obviously affects how social
entrepreneurs perceive and assess opportunities. Mission-related impact becomes the central criterion, not
wealth creation. Wealth is just a means to an end for social entrepreneurs.
Therefore, any definition of social entrepreneurship should reflect the need for a substitute for the market
discipline that works for business entrepreneurs. We cannot assume that market discipline will automatically
weed out social ventures that are not effectively and efficiently utilizing resources. The following definition
combines an emphasis on discipline and accountability with the notions of value creation taken from Say,
innovation and change agents from Schumpeter, pursuit of opportunity from Drucker, and resourcefulness
from Stevenson. In brief, this definition can be stated as follows:
Social entrepreneurs play the role of change agents in the social sector, by:
Adopting a mission to create and sustain social value (not just private value),
Recognizing and relentlessly pursuing new opportunities to serve that mission,
Engaging in a process of continuous innovation, adaptation, and learning,
Acting boldly without being limited by resources currently in hand, and
Exhibiting heightened accountability to the constituencies served and for the outcomes created.
This is clearly an “idealized” definition. Social sector leaders will exemplify these characteristics in different
ways and to different degrees. The closer a person gets to satisfying all these conditions, the more that
person fits the model of a social entrepreneur. Those who are more innovative in their work and who create
more significant social improvements will naturally be seen as more entrepreneurial. Those who are truly
Schumpeterian will reform or revolutionize their industries.
Change agents in the social sector: Social entrepreneurs are reformers and revolutionaries, as described by
Schumpeter, but with a social mission. They make fundamental changes in the way things are done in the
social sector. Their visions are bold. They attack the underlying causes of problems, rather than simply
treating symptoms. They often reduce needs rather than just meeting them. They seek to create systemic
66

changes and sustainable improvements. Though they may act locally, their actions have the potential to
stimulate global improvements in their chosen arenas, whether that is education, health care, economic
development, the environment, the arts, or any other social field.
Adopting a mission to create and sustain social value: This is the core of what distinguishes social
entrepreneurs from business entrepreneurs even from socially responsible businesses. For a social
entrepreneur, the social mission is fundamental. This is a mission of social improvement that cannot be
reduced to creating private benefits (financial returns or consumption benefits) for individuals. Making a
profit, creating wealth, or serving the desires of customers may be part of the model, but these are means to a
social end, not the end in itself. Profit is not the gauge of value creation; nor is customer satisfaction; social
impact is the gauge. Social entrepreneurs look for a long-term social return on investment. Social
entrepreneurs want more than a quick hit; they want to create lasting improvements. They think about
sustaining the impact.
Recognizing and relentlessly pursuing new opportunities: Where others see problems, social entrepreneurs
see opportunity. They are not simply driven by the perception of a social need or by their compassion, rather
they have a vision of how to achieve improvement and they are determined to make their vision work. They
are persistent. The models they develop and the approaches they take can, and often do, changes, as the
entrepreneurs learn about what works and what does not work. The key element is persistence combined
with a willingness to make adjustments as one goes. Rather than giving up when an obstacle is encountered,
entrepreneurs ask, “How can we surmount this obstacle? How can we make this work?”
Engaging in a process of continuous innovation, adaptation, and learning: Entrepreneurs are innovative. They
break new ground; develop new models, and pioneer new approaches. However, as Schumpeter notes,
innovation can take many forms. It does not require inventing something wholly new; it can simply involve
applying an existing idea in a new way or to a new situation. Entrepreneurs need not be inventors. They
simply need to be creative in applying what others have invented. Their innovations may appear in how they
structure their core programs or in how they assemble the resources and fund their work. On the funding
side, social entrepreneurs look for innovative ways to assure that their ventures will have access to resources
as long as they are creating social value. This willingness to innovate is part of the modus operandi of
entrepreneurs. It is not just a one-time burst of creativity. It is a continuous process of exploring, learning,
and improving. Of course, with innovation comes uncertainty and risk of failure. Entrepreneurs tend to have
a high tolerance for ambiguity and learn how to manage risks for themselves and others. They treat failure of
a project as a learning experience, not a personal tragedy.
Acting boldly without being limited by resources currently in hand: Social entrepreneurs do not let their own
limited resources keep them from pursuing their visions. They are skilled at doing more with less and at
attracting resources from others. They use scarce resources efficiently, and they leverage their limited
resources by drawing in partners and collaborating with others. They explore all resource options, from pure
philanthropy to the commercial methods of the business sector. They are not bound by sector norms or
traditions. They develop resource strategies that are likely to support and reinforce their social missions.
They take calculated risks and manage the downside, so as to reduce the harm that will result from failure.
They understand the risk tolerances of their stakeholders and use this to spread the risk to those who are
better prepared to accept it.
Exhibiting a heightened sense of accountability to the constituencies served and for the outcomes created:
Because market discipline does not automatically weed out inefficient or ineffective social ventures, social
entrepreneurs take steps to assure they are creating value. This means that they seek a sound understanding
of the constituencies they are serving. They make sure they have correctly assessed the needs and values of
the people they intend to serve and the communities in which they operate. In some cases, this requires close
connections with those communities. They understand the expectations and values of their “investors,”
including anyone who invests money, time, and/or expertise to help them. They seek to provide real social
improvements to their beneficiaries and their communities, as well as attractive (social and/or financial)
return to their investors. Creating a fit between investor values and community needs is an important part of
the challenge. When feasible, social entrepreneurs create market-like feedback mechanisms to reinforce this
67

accountability. They assess their progress in terms of social, financial, and managerial outcomes, not simply
in terms of their size, outputs, or processes. They use this information to make course corrections as needed.
5.0 Conclusion
The ideas of Say, Schumpeter, Drucker, and Stevenson are attractive because they can be as easily applied in
the social sector as the business sector. They describe a mind-set and a kind of behavior that can be manifest
anywhere. In a world in which sector boundaries are lurring, this is an advantage. We should build our
understanding of social entrepreneurship on this strong tradition of entrepreneurship theory and research.
Social entrepreneurs are one species in the genus entrepreneur. They are entrepreneurs with a social mission.
However, because of this mission, they face some distinctive challenges and any definition ought to reflect
this.
6.0 Recommendations
1. In order to foster Social entrepreneurship in Uganda, there is need to create organizations based on
natural bonds built on trust, networks that are building blocks of social capital. Artificial bonds formed
in most social enterprises in Uganda explained by theory of planned behaviour continue to hamper
meaningful development of social enterprises which are the product of social entrepreneurship.
2. Government bodies responsible for regulating formation of business in Uganda should exhibit a
heightened sense of accountability to the constituencies served and for the outcomes created. This will
create a sense of ownership in the organizations formed with the aim of improving the social status of
poor members in the community.
3. In the implementation of prosperity for all (Bonnabagaggawale) scheme, government should start with
giving incentives that will arouse social entrepreneurial abilities. What people lack is not money, but
most Ugandans cannot translate their skills into productive ventures because there are no incentives like
good roads, ready markets and proper leadership to exploit naturally occurring abilities that matter most
in social entrepreneurial ventures.
4. There is need to increase out-reach of social services to the chronically poor and marginalized as well as
the remote rural and geographically disadvantaged areas while emphasizing the benefits of social capital
ie networking, trust, reciprocity, norms and beliefs that promote change of behaviour aimed at
alleviating poverty levels one of the aims of PEAP.
5. Government should adopt the system of micro credit to help to pull the poorest out of destitution
following the Grameen model. This is based on the assertion that the poor do not create poverty, it is
the institutions and policies that surround them that create it.
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69

DETERMINANTS OF AGRICULTURAL OUTPUT IN A RURAL SETTING
A CASE OF BANANA PRODUCTION IN NTUNGAMO DISTRICT
By
Mr. Turyahikayo Willy
Lecturer, Makerere University Business School
Finance Dept.
P.O.Box 1337 Kampala
E-mail: wturyahikayo@yahoo.com
Tel: +256-772-957295
Abstract
The study on determinants of agricultural output was done in Nyakyera Sub-County in Ntungamo District. The study
used Banana production as a case study. The study had the following objectives;
i)To estimate the effect of Land, Labour and Capital on banana production in Nyakyera Sub County.
ii) To find out the effect of Social, Economic and Environmental factors on banana production in Nyakyera Sub County
To achieve the above, 200 respondents were chosen using a systematic random sampling technique from four parishes.
A Poison regression analysis was conducted to estimate a Cobb-Douglas Production function. It was found that Land,
Labour, Capital and Manure application are all significant determinants of Banana production in the area. A qualitative
technique was used to explore other factors which influence banana production. From this qualitative analysis, it was
found that culture, government policy, cultural division of labour, land tenure systems and land ownership systems
influence banana production negatively. The study also offered policy prescriptions for improving agricultural
production. Among these were the need for massive sensitisation to break the cultural beliefs on the use of improved
varieties which have for a long time impeded agricultural output and gender division of labour. The study ended by
suggesting other areas for future research.
1.0 INTRODUCTION
In a continent in which the urban employed population is tiny, in which only a small proportion of the
population derives their living directly from non- agricultural source, the development of agriculture is
almost synonymous with economic development. Until intermediate demand has grown to a level sufficient
to support a nascent capital goods industry, the bulk of the population must rely upon increasing agricultural
output for an improvement in the standard of living. According to Nypan and Astrid, the connection
between economic development and agriculture was noted as early as 1914 to be as close as to be identical.
Agriculture is an important branch of the whole economy in most less developed countries. More than 70%
of the labour force in sub Saharan Africa finds its livelihood in agriculture. However, Africa has performed
poorly in agriculture and specifically in food production with more than half of Africa living on food
emergencies. More than half of sub-Saharan African countries are said to live on food emergencies. Africa as
a whole was noted to have been experiencing a drop in per capita food out put. As early as 1981, Uganda
was noted to be amongst those countries faced with per capita food output problem. The per capita food
out put had fallen by more than 30% within that period. (Glantz 1987).
In Uganda, the importance of agriculture can be gauged from the percentage of the population engaged in
agriculture compared to the total population, from the size of agricultural GDP in relation to the total GDP
or else from the place held by the agricultural produce in total exports.
Judging by the three criteria considered, Uganda is amongst most agricultural countries in the sub- Saharan.
The corollary is that GDP per person engaged in agriculture is lower than the per capita GDP. This lower
GDP per “agricultural worker” suggests that the productivity of agricultural labour is low and that the level
of agricultural income is likewise very low.
When the NRM government came to power in 1986, there was a need to reverse the trend of major macro
economic variables so as to regain a stable and more sustainable macro economic structure. An economic
recovery programme (ERP) was introduced in 1987.
70

In agricultural sector, the focus was on the rehabilitation of infrastructure for traditional exports (coffee,
cotton, tea and tobacco) removal of physical, technical and institutional constraints for agricultural pricing,
trade and marketing liberalization and strengthening agricultural research and extension.
The government further reaffirmed its commitment in 1999 when it laid down a plan for modernization of
agriculture. This is a strategic and operational framework for effectively transforming the livelihoods of the
majority of the subsistence farmers in Uganda through reforming institutional and organizational structures
and changing the type and method of production and service delivery in the agricultural sector.
Despite the above efforts, the increase in agricultural output has not increased substantially. Food security
for example is not guaranteed. At any one time, 40% of the population in Uganda is food insecure (EPRC,
1998). The volume and value of traditional agricultural exports (coffee and cotton) declined in 2000
/2001(statistical abstract 2002 UBOS). Coffee exports continue to dominate the sector yet its export value
continues to decline. Its contribution to total exports declined from 31% in 2000 to 22% in 2001.
Extension services in the country are not adequate and reach few farmers, while rates of technology adoption
are below 30% (poverty status report, 1999). Whereas all these have been done, it is important to note that
little attention has been made to analyze the traditional and socio- cultural systems of access to resources
such as land. This has prompted the researcher to investigate what actually determines the agricultural output
with a special case of Nyakyera Sub County.
The Banana Crop
Historically, very little is known about the origin and time of introduction of banana cultivation in Uganda.
A lot of information about the origin is speculative. The earliest records of the banana crop in East Africa
indicate that it came from Mombasa in 1300 AD (Rubaihayo, 1993) whereas others speculate that banana
crop may have come from Java via Madagascar to East African cost. Despite the conflict in its origin, the
banana is a very important food crop in Uganda. It is estimated that 75-80% of the farmers in Uganda grow
banana and that 70% of the urban population feed on banana as their staple food. In 1989, banana
production stood at 68,657,000 metric tons with Africa being the highest producer (FAO, 1989). East
Africa accounts for more than 23.7% of banana production in Africa. Uganda produces about 44.12% of
the banana in East Africa. (Bagamba, 1994).
The Importance of Bananas in Ugandan Economy
The banana is the most widely cultivated and consumed fruit world wide (INIBAP, 1992). Uganda is the
leading producer and consumer of bananas in the whole world (Serunkuma,1992).Over 7.0m of its people
and over 68% of the urban dwellers depend on it as their staple food (Rubaihayo 1991).The banana is
cultivated for quite a number of purposes. About half of the bananas produced are eaten ripe and half are
eaten as a cooked vegetable or as a starchy staple food, Matooke.
Bananas are easily digested and are rich in carbohydrates, vitamin C and minerals such as Calcium, Potassium
and Phosphorus. In Uganda, it has been estimated that an average Ugandan eats up to 200Kg of bananas per
annum (Anon, 1994). Apart from a cooked banana meal, juice and beer are important products made from
bananas (Aked, 1994). The diluted juice is utilized in infant feeding and is claimed to encourage the flow of
milk when taken by nursing mothers. Also, banana beer and its distilled form, Waragi are alcoholic beverages
important in rural communities and social functions.
Statement of the problem
Since the 1987 economic recovery programme, the government of Uganda has put much emphasis on
increasing Agricultural productivity. The government has recruited graduate Agricultural officers for
Agricultural extension on most sub counties, Agricultural inputs such as improved seeds and animal breeds
have been provided, some feeder roads to ease transport of Agricultural outputs have been constructed and
expenditure on agriculture related programmes has been increasing to support Agricultural production since
the 1993/94 district budget.
Despite the efforts made to increase agricultural output, the per capita food output has been declining in
Ntungamo District with most families becoming less able to escape from famine (Three-year district
development plan, 2004/2007). There is therefore a need to investigate the factors that affect the
Agricultural output in a rural setting with a special emphasis on Ntungamo District.
71

The Objective of the study
The objective of the study was to investigate the factors that impede banana production in Nyakyera Sub
County-Ntungamo District.
Research objectives
i)To estimate the effect of Land, Labour and Capital on banana production in Nyakyera Sub County.
ii) To find out the effect of Social, Economic and Environmental factors on banana production in Nyakyera
Sub County.
Research questions
i) What is the effect of Land, Labour and Capital on banana production in Nyakyera Sub County?
ii) What is the effect of Social, Economic and Environmental factors on banana production in Nyakyera Sub
County?
Significance of the study
The government of Uganda has initiated a number of Policy prescriptions aimed at reducing poverty. To
achieve this, Agriculture has been identified as the major tool through which poverty can be made history.
This campaign however, depends on the ability of the government and other development practitioners in
identifying what determines Agricultural output. In this study, major factors that have hindered banana
production have been stipulated. This will help Policy makers and farmers to formulate workable policies in
the fight against rural poverty.
It will be of great importance to all non-governmental organizations engaged in poverty eradication since
Agriculture is a backbone to rural areas. The study will help future researchers in the same area.
Fig 1: Conceptual framework for the study
Social Factors
� Culture
� Land tenure systems
Environmental Factors
� Climate
� Pests & Diseases
Economic Factors
� Markets
� Prices
� Inputs
� Infrastructure
� Information
Household
� Resource Base
� Decision Making Unit
Resource availability
� Farm size
� Labour
� Capital
� Effective
resource use
Source: Self developed, Turyahikayo Willy 2005
At the top of the production process is the decision-making unit, the household, which undertakes proper allocation of
the scarce resources, land, labour, capital and management for efficient resource use. Amidst this decision-making
process are environmental, social and economic factors that largely affect the effective allocation of these resources.
Therefore, the farmer’s major decision-making task is to allocate the resources profitably under the above constraints.
Profitability of the production process at commercial level continuously sustains the incomes of households to be able
to acquire more resources for investment and expansion of the enterprise and to meet household living needs. Once the
enterprise is unprofitable the production process brakes down due to lack of sustainability.
72
Banana Output

2.0 Methodology of the Study
Data Collection and Research Design
The survey focused on collection of data for estimating the empirical banana production function. In this
survey, a self-administered questionnaire was orally administered on 200 respondents from the sub-county.
Data on labor, land, capital, culture, land tenure systems and markets were collected. The study followed a
cross sectional survey design, exploratory in nature. Both quantitative and qualitative techniques were used
for analysis. The Qualitative technique was chosen because the researcher wanted to probe for more
information regarding the social and cultural dimensions of agricultural production.
Data Collection and Research design
Data and its sources
Primary data was the major source. This was collected from visits and surveys made in the district so as to
investigate the factors that determine agricultural output in the district. Secondary data was however used to
supplement the primary data. This was collected from annual reports at the district and other relevant
documents.
Study Population, Sample size and Sampling technique
Nyakyera Sub County has a population of 30,509 people distributed in 7 parishes. It also has 6,698
households. This constituted the study population. A sample of 4 parishes was purposively selected. There
are 957 households on average in each Parish. Fifty households were selected from each parish using
systematic random sampling. According to Carl et al (1995), the systematic random sampling technique is
widely used because of its simplicity in application. The researcher skips a certain number of the population
in selecting the sample.
SI=PS/SS
Where; SI=Skip Interval, PS=Population Size, SS=Sample Size
Data Collection Techniques
Questionnaires were designed for the 200 heads of households. The questionnaires were arranged into
sections or themes such as, land, labour, technology, capital, division of labour and all other factors as
stipulated in the literature. Respondents were asked to give their views on each of these factors.
The results obtained from the questionnaire were tallied and tabulated to indicate the importance of each
factor in explaining agricultural output. Both quantitave and qualitative techniques were used for analysis.
Graphs, tables and charts were used to present the findings in a more interpretable form. Focus group
discussions were also held with local communities and local council leaders at various levels to investigate
factors explaining agricultural output in the sub-county.
Data Preparation and Analysis
Data from the field was edited to ensure accuracy, consistency, uniformity and completeness. Open-ended
responses were coded where necessary. Using SPSS (statistical package for social sciences) and STATA, data
was summarized into descriptive statistics. A Cobb-Douglas model specification was formulated and a
Poisson regression analysis was performed to establish the degree to which Land, Labour, Capital and
manure application affect Banana Production.
The production Function
The production function describes the technical relationship that transforms inputs into output (Debertin,
1992) and for this case transformation of labour, capital, land and manure into banana output. Martian
(1918) quotes that a series of whole farm production function studies have been conducted. And so,
William et al (1977) used the production function to estimate the contribution to total output of not only
the quantity of traditional inputs (land, labour, fertilizers) but also the quality of certain inputs particularly
irrigation, technology, environmental factors, soil type, rainfall etc and infrastructure (transportation,
markets etc). In this study, total value of banana yield was considered to depend on farm labour supply,
capital, land and manure use was used as a Dummy variable.
73

A production function portrays an important input-output relationship. It describes the rate at which
resources are transformed into products (Doll and Orazem, 1984). Cobb-Douglas production function has
been the most common production function in use.
It provides the following benefits (1) adequate fit if data, though sometimes it may fail hence the need to
perfume model selection tests before endorsing the use of the model (2) computational feasibility and (3)
sufficient degrees of freedom are used to allow for statistical testing. Due to these numerous advantages of
the Cobb- Douglas type of production function, it has been widely used in agricultural studies and in this
study.
The major shortcomings have been identified as, mis-specification, input measurements and multicollinearity.
These have led to unreliable biased results in most cases and have necessitated precautionary
measures for reliable results to be achieved.
Multicollinearity and the Cobb-Douglas production function
The Cobb-Douglas production function estimated by least squares method has been widely applied in
agriculture, but estimates based on cross sectional samples of farms, most typical elasticities of labour and
land are negative. These negative coefficients have been attributed to the existence of multicollinearity in
random sample or non-stratified farm samples where farms with large labour inputs are also those with larger
inputs of land and various forms of capital (Roy et al. 1975). In addition, reporting or measuring bias and
other inadequacies of labour have been similarly attributed to the cause of multicollinearity. Doll (1974)
confirms that modern theory suggests that multicollinearity may lead to problems of structural estimation
and specification errors.
Many studies have proposed ways of minimizing the effect of multicollnearity. Heady (1968) cited many
ways like combining variables in the same units, developing an index of sets of related variables through use
of principle component analysis and inserting the index into the regression as a proxy for the original
variable. However, Doll (1974), noted that if inputs are not perfectly correlated no aggregation is needed.
Similarly, many others have proposed aggregation as one of the ways of overcoming multicollinearity within
variables. Unfortunately, there has not been any standard way of aggregating inputs and consequently Earl
(1961) realized that a high degree of aggregation may imply that the resultant function may be of little
relevance in decision-making. Though aggregation serves the purpose, the categorization should depend on
the investigator’s assessment of the strategic inputs in the production process. Faced with these constraints, it
is important to dwell on the procedures for input use and measurement while applying the Cobb-Douglas
type production function.
To be able to counteract the problem of muliti-collinearity in this study a procedure of aggregating inputs,
which have the same measurement unit, was adopted. For instance all tools and equipment were grouped into
one variable. Family and hired were assumed to be homogenous and so were represented by a proxy for total
labour measured in person-days. During data analysis a test for collineraity among all the independent
variables was done and variables were found to have very weak relationships.
Input use and measurement
Labour use measurement
Many methods of estimating the cost of labour have been put forward. Krause (1982) gave an alternative of
adding up family and hired labour then multiply by the average area wage rate and length of time required
for all operations. Considering that hired labour becomes a purchased input the wage rate represents the unit
cost as stated by Martin (1973). Mahmood et al. (1979) suggested that the wage rate for family labour
obviously must be an imputed rate, and the imputation used was that chosen by the respondents. Therefore,
this study considered average area wage rate as the labour cost per person-day.
Land use measurement
Heady et al. (1969) notes that the major difficulties in measuring land are so inflexible not like in measuring
labour and capital. For example, differences in land quality are likely to be indicated by the market value. In
74

this study, land was measured in physical units of hectares, although the method did not allow an expression
of land quality differences across farms.
Capital use measurement
It is very difficult to measure and identify capital as indicated by Heady et al. (1969). The historical
tendency has been to reduce capital input categories and measure input of durable assets by actual
maintenance and depreciation costs associated with their use, rather than by their capital value on inventory
basis. Similarly, in this study only actual flow of services of farm equipment within the selected production
period were considered. A summation of annual straight-line depreciation charges on all tools and
implements that were directly involved in banana production represented an investment in capital. On the
basis of this, a Cobb-Douglas production function was formulated as;
Y=aLD b1 C b2 LB b3 M b4 e ui ………………………………………………………………(1)
Where a = Constant
Y = Banana output
LD = Land
C = Capital
LB = Labour
M = Manure use
b1, b2---ui are coefficients of determination
Manure application M was used as a dummy variable. M took the value of 0 if no and 1 if yes.
Estimation procedure
Banana production enterprise involves the use of inputs that include labour, land, and capital. These
variables in combination at various levels impact on the level of banana output. The individual contributions
of these variables to total yield can be established with a Cobb-Douglas type of production function
specified as follows;
Ymi=aLD b1 CP b2 LB b3 M b4 e ui …………………………………………………..……. (2)
Where: Ymi = banana yield (bunches ha- 1), a = constant, CP = Capital, LD = Land, = Manure use, LB =
labor, e = error term and bi = coefficients for the various inputs. Equation (2) is then expressed in natural
logarithms leading to a function linear in the parameters except for the dummy variables.
Ln Ym=lna+b1lnLB+b2lnCP+b3lnLD+b4lnM+Ui………………………………….(3)
Estimation of the function with transformed elasticities leads to straight measurement of elasticities. In
equation (3), coefficients bi s then give an estimate of returns to scale associated with banana production
process in rural Uganda. When the sum is greater than one, there are increasing returns, less than one
indicates decreasing returns, and one shows constant returns to scale. Elasticity of coefficients are similarly
derived using mathematical calculus principles. The coefficients in Equation (3) represent elasticities of
production with respect to the various inputs. As proved from mathematical calculus procedures by taking
the first derivatives of the model, it follows then that:
�Yi
�
� bi
ax x
�X
i
je
bi
1 b ui
i j
.......... .......... .......... .......... .......... .......... .......... .......... .........( 4)
Where xj, xi = vector of inputs, j≠i, Yi = banana output (bunches ha -1 ) with the assumption that the Cobb-
Douglas production function assumes constant elasticity (Ep) of production over the entire input-output
curve then.
�y
�x
1
1
x
*
y
1
1
�y
�
�x
2
2
x
*
y
2
2
�y
� .......... ... �
�x
n
n
x
*
y
Therefore the elasticity of production (Ep) is given by;
75
n
n
.......... .......... .......... .......... .......... .......... ...( 5)

But,
Y � ax j
i
i
bi
xj
b
ui
je .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... ....( 6)
It follows that elasticity with respect to a particular input is equal to the exponent (b).
b b ui
axi
ix j je xi
E p � bi
* .......... .......... .......... .......... .......... .......... .......... .......... ( 7)
bi
b ui
x ax x je
� E
p
� b
i
i
i
j
.......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......( 8)
Elasticity of production is used in deriving marginal products with respect to the various inputs.
3.0 Presentation, Interpretation And Discussion Of Findings
Introduction
This section presents, interprets and discusses the findings of the study. Findings were presented both
quantitavely and qualitatively. Findings were presented by use of tables for easy interpretation.
Demographic characteristics
Most of the respondents interviewed were men.69% of the respondents were males.
Most of the respondents had not attended school at all (42%). This means that agriculture has been left into
the hands of the uneducated. Participation in agriculture tends to reduce as the level of education increases.
This could mean that agriculture is left into the hands of the unskilled and old people. Most participants are
in the age group 31-40 and 41-50.
Most men and women below 30 years migrate to urban areas leaving agriculture in the hands of few
uneducated parents. This is because agriculture is traditionally viewed as a “dirty” business.
Regression Results of the major variables
This section first dealt with Land, Labour, Capital and manure. As noted earlier in methodology, a Poisson
regression (for use with regression based on count i.e. Number of bunches of bananas) was done to
determine the influence of these factors in determining Banana production in the area of study. Stata
software was used to carryout the analysis.
Test for normality was done and the independent variables, labour, land and capital were found to be
violating the normality principle. They were found to be positively skewed and in this case they were
transformed into logarithim form to simulate the normality component for regression.
Test for collinearly was done and all the independent variables were found to have a very weak relationship.
For instance, between land and labour variable the correlation coefficient was found to be –0.02556 while
between capital and land was found to be 0.1524. Between capital and labour was found to be 0.
Poisson Regression Number of Obs = 200
Prob > chi2 = 0.0000
Pseudo R 2 = 0.5892
Table 3.1: Regression results
-------------------------------------------------------------------------------------------
Output | IRR Std. Err. Z P>|z|
-------------+----------------------------------------------------------------------------
lnlbr | 1.470545 .0291346 19.46 0.000
lnland | 1.736113 .0222952 42.96 0.000
lncap | .7108875 .0102124 -23.75 0.000
Manure | 1.731499 .0357789 26.57 0.000
-----------------------------------------------------------------------------------------
76

From the regression above, all the four factors were significant in explaining banana production. Land was
noted to be the major factor with the incidence rate ratio (IRR) of 1.736. This IRR means that a one unit
increase in land will increase banana output by 1.736. From the qualitative data gathered, the vital question
was the size and quality of land. As Feeder (1988) noted, a critical issue for smallholders is the shortage of
good quality farming land. Increasing population pressure and fragmentation of holdings have sharply
reduced cultivated area per person.
A unit increase in capital was found to increase output by only 0.71.This is less compared to land and
labour.Increase in agricultural implements is not likely to increase output like other factors if labour is not
applied to it. From the qualitative data, the reason for this is that most agricultural activities are left into the
hands of the elderly and women as young people spend most of their time in towns and trading centres.Men
also spent most of their time drinking thus leaving some agricultural implements unutilized. Capital is
therefore left unutilized.
According to Chambers (1982) Much as Labour shortage causes low agricultural output, it is important to
note that the problem at times ceases to be Labour shortage in reality, but rather people's unwillingness to
supply their Labour in certain agricultural activities. In such a situation there will always be lack of Labour to
increase output within the available manpower. Hence the amount of output produced will always
disproportionably rhyme with the number of those to consume thus leading to low output.
Application of manure was found to determine banana production in the area. Respondents were earlier
divided into two groups (i.e. those who applied manure and those who did not). From the study, those who
applied manure were likely to increase output more than those who did not apply manure. From the table
below, there was a 95% confidence interval of 34.88-45.67(for non users of manure) and 96.30-120.50(for
users of manure).
Table 3.2: CONFIDENCE INTERVAL
77
95% Confidence Interval for
Mean
Lower Bound Upper Bound
.00 96 40.2813 26.62792 2.71770 34.8859 45.6766 2.00 156.00
1.00 104 108.4038 62.22719 6.10188 96.3022 120.5055 11.00 236.00
Total 200 75.7050 59.21860 4.18739 67.4477 83.9623 2.00 236.00
Application of Manure was found to be statistically significant in explaining variations in output. The
ANOVA Table shows a significant difference between the two categories.
TABLE 3.3: ANOVA Table
Sum of Squares df Mean Square F Sig.
Between Groups 231663.150 1 231663.150 98.390 .000
Within Groups 466198.445 198 2354.538
Total 697861.595 199
The statistical significance of the variables (Land, Labour, and Capital) together with positive coefficients
confirms that these factors determine banana production in the area. Qualitative data from the field confirms
this as indicated below.

Land
Land size and land fragmentation
This was found to be the major problem affecting agricultural output. The average household size was 7
persons while the average land holding is 2.5 acres of land per household according to 2002 National
Housing and Population census. The findings of the study however indicated that all households interviewed
own at least some pieces of land. The vital question was the size and quality of land. Out of the 200
respondents, 163 reported that the size of land was not enough for increased production. Because of limited
size of land, most farmers cannot enjoy the scale economies of production.
The problem of land size has been aggravated by land fragmentation. This refers to a situation where land
has been divided and sub – divided into smaller prices owing to the independence of married sons. The
findings indicate that out of 200 respondents, 152 indicated that they own more than one plots of land
detached from each other. It is this problem of land fragmentation that has limited the mechanical
transformation of agriculture. The problem of land fragmentation was found to be getting worse as families
expand in size. The problem of land size has its roots in the traditional systems of land transfer in which
boys are given parts of land after getting married. It should be noted that efforts to consolidate this land
most often becomes futile since under a traditional setting these fragmented plots of land fall under different
ownership.
Land quality
The problem of land size is aggravated by the quality of this land. A critical issue for small holders in the
Sub County is the shortage of good quality farming land. One hundred and seventy three (173) respondents
indicated that the quality was poor. The quality of land was found to be declining following the expansion
of most families that puts pressure on land. The quality of the farming land is also deteriorating because of
many factors. The traditional practice of cut and burn or shifting cultivation, which enables land to
regenerate, has declined owing to a weak male labour to perform the tasks of land clearing. This has sharply
reduced the capacity of the area to supply food to the neighboring towns.
Land Ownership
Under the traditional settings, land is owned by men who are the heads of households. Although this is
changing, it remains a problem in Nyakyera sub- county since men have to determine the allocation of land
and sometimes men have to rent out some plots of land to get money for drinking.
One hundred and two (102) respondents reported that land is owned by men while 92 said that land is
owned by the whole family members. Four (4) respondents were not sure of who exactly owns their land.
Whereas most women do not own land, it is important to note that they are most active members of the
family in agriculture. Men concentrate on light work such as clearing the bush and building perimeter fenced
around the gardens and looking after the goats. A positive relationship is expected between individual land
rights and productivity. Feeder (1988) hypothesized that increased individualization of rights improves a
farmer’s ability to reap returns from investments on land, resulting in greater demand for land improvements
and complementary inputs.
Labour
The average household size from sample was seven (7) persons but the average number of people involved in
day to day activities in agriculture was three (3). This according to the respondents is attributed to high
number of young people how spend most of their time in trading centers in hat has been termed as assumed
urbanization operating boda- boda but never bring money home. The skills of those who remain in rural
areas are very low
Skills
Most of the respondents rated themselves as semi-skilled due to lack of regular trainings and workshops.
It was further indicated that 172 respondents has not received any training in the last 2 years. Of all those
who had received some raining, 75 % indicated that this training had not increased their output.
Results showed that although there are trainings received by some farmers, there have been little changes in
the output level. Because of this, many are reluctant in attending seminars organized by District farmers’
78

association and Sub country extension staff. Traditional methods of farming have persisted whose output is
very low.
The findings further indicated that 89% of the respondents use only family labour. This implies that those
without enough skills have to keep on using traditional methods of farming which yield low returns. The
reason for failure to hire labour was attributed to low income and small scale farming where employing
agricultural experts does not pay.
Traditional division of labour
The traditional division of labour prohibits agricultural outputs because a lot of work is left to women. The
table below summarizes the findings on sharing the agricultural activities.
Table 3.4: A Table showing the Division of labour in Agriculture
Activity Men Women Children Hired Labour
Bush clearing 102 45 08 45
Bush burning 133 37 08 -
First ploughing 40 113 - 37
Second ploughing 38 112 08 12
Sowing 88 102 02 08
Weeding 12 175 05 10
Harvesting 60 125 02 13
Drying crops 98 94 08 -
Building granaries 182 02 10 6
Selling the produce 163 32 04 01
Source: Primary Data
The table shows that women do most of the hardest agricultural activities such as ploughing, sowing and
weeding. Children and hired labour are not highly used in all the activities. Most farmers use hired labour
during bush clearing and first ploughing. The traditional division of labour indicates that men participate
more in bush burning building granaries and selling the produce.
Inputs
Implements
Lack of both capital and variable inputs was noted to be among the major determinants of agricultural
output. Most farmers are still using the traditional agricultural tools such as hoes and pangas. Although some
farmers have big chunks of land where tractorisation would apply, there incomes are too low to allow the use
of tractors and later alone machine operators. The major agricultural implement used is a hoe. 97.5 % of the
respondents indicated that they use a hoe. This is because hoes are cheap and easy to use.
Crops grown
Respondents were asked to indicate the nature of the crops grown. The 152 respondents indicated that they
grown their traditional crops because they have high nutritional content but most importantly that they do
not have side effects on their soil.
Table 3.5: A Table showing the reasons for using the traditional crops
Reasons for growing traditional crops No %
Have no side effects on soil 72 47.2
High nutritional content 50 32.8
The are cheap 12 7.8
Do not require too much labour 18 11.8
Total 152 100
Source: Primary Data
79

Agricultural Extension
Because of limited skills of the peasants, agricultural extension is essential for improved farming. Whereas
the farmers had heard of NAADS services over the local FM stations, most respondents had not seen the
activities of NAADS on the ground. Extension services in the Agricultural sector have remained weak
because of very poor remuneration of the extension staff at the sub- County. However, the major problem
seems to be the reluctance of the farmers in adopting new methods of farming. The main reason was that
where extension services have been provided, little or no impact on output has been realized.
Ranking the problems of increasing Agricultural output by Respondents
From the table below, it is clear that problems relating to land size and quality are the major causes of low
agricultural output according to the respondents. Results also revealed that land ownership and lack of
agricultural tools are perceived as least determinants of banana production.
Table 3.6: A Table showing the major problems to increased output
Problem NO %
Land size 61 30.5
Land quality 52 26
Shortage of labour 32 16
Lack of seeds and fertilizers 19 9.5
Land ownership 15 7.5
Lack of capital 14 7.0
Gender division of labour 04 2
Poor tools 3 1.5
Total 200 100
Source: Primary Data.
4.0 Conclusion and recommendation
Introduction
The main objective of this study was to find the factors that determine agricultural output. The findings
were presented in both qualitative and quantitative form.
Conclusion
With respect of land, what actually determines agricultural output was found not to be the traditional system
of land ownership but rather the size and quality of land. Most of the families have divided and sub –
divided land due to family expansion. This has left families with small plots of land, which make it difficult
for mechanicals transformation path of agriculture.
With labour, the problem is two fold. In the first case, the problem of rural urban migration where the
youths migrate to trading centers and towns to look for “easy” work such as boda boda, shop attendants has
let agriculture into the hands of few and old parents whose productivity is very low. Secondly, the few who
remain in agriculture o greater heights.
The other problem was found to bee the traditional division of labour. Men allocate themselves “easy”
activities in agriculture such as bush burning or clearing, building granaries thus leaving the hard agricultural
activities such as ploughing into the hands of women. Women have therefore been overworked which
reduces their productivity.
Agricultural extension was found to be non- existent. The very few who had received some extension has
paid for it through attending workshops and seminars organized by the district farmers association.
Policy recommendations
On the basis of the findings, a number of policy recommendations can be put forward to increase
agricultural output.
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Since mechanical transformation is difficult in situations of small pieces of land, the government should out
much emphasis on biological transformation. Fertilizers and improved seeds and animals should be provided
to farmers to help theme increase output within the existing pots of land.
1. The government should endeavor to educate farmers on the advantages of small families. This will reduce
population and eventually reduce pressure on land.
2. The traditional gender division of labour should be broken down by massive sensitization and training in
rural areas. Agricultural activities should be allocated on the basis of ability not gender.
3. To attract youths in agriculture, agriculture should be made attractive. Markets for agricultural produce should be
sough and the government should put a policy on prices for agricultural output in place so as not to cheat
farmers. With high prices, the youths will be attracted back to agriculture.
4. Training farmers on modern methods of farming should be initiated at lower levels. This is because training has
always concentrated on big and progressive farmers leaving small holders behind.
Area for further research
The researcher recommends future studies on;
1. Determinants of prices for agricultural output
2. The impact of privatization of extension services on agricultural output
3. The effect of fluctuating prices on agricultural output.
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REFERENCES:
1. Chambers R. (1983) Rural Development: Putting the last first: Harlow, long man.
2. Cuny, C.F & Hill B.R (1999) Famine Conflict: A Basic Guide and Response, Kumarian Press.
3. District Planning Unit, Three Year District Development Plan (Ntungamo District) 2000/2007.
4. Gakou M. L (1987), The Crisis of African Agriculture: London Zed Books.
5. Ghai DP (1984) Agriculture policies, policy and equity in Sub-Saharan Africa.
6. Glantz MH (1987), Drought and Hunger in Africa Cambridge. Cambridge University
7. Gooneratre W. & Mbilinyi, M (1992) reviving local self-reliance. United Nations Center for Regional
Development Press.
8. Kumar (1988) Effects of seasonal food shortages on agricultural production in Zambia. The Journal of world
Development vol. 16 No. 2 pp 10511063.
9. Maxwell, DG (1956), after the famine, perspectives on the agricultural crisis in sub-Sahara Africa. Mawazo
Journal of social sciences vol. 6 No. 3 pp 18-30.
10. Mbithi P (1969) Rural levels of living and farm development in eastern Kenya
a. A Unidimensional approach, Master of Science Agriculture. This is corwell
b. University Ethica.
11. Ministry of Planning and Economic Development (1997). Agricultural policy
a. Committee reports on economics of crops and livestock production, agric
b. Secretariat, Kampala
12. Mkandawire T1997: The state and agriculture in Africa; London Codeseria book Series.
13. National research council (1989) Alternative agriculture, national Academy press. Washington
14. Nguyen, T (1996). National Food strategy: a Response to overcome the Challenge of poverty and growth,
ministry of planning and Economic development
15. Opio F and kamanyire M (1997) ‘The evaluation of the liberation of the maize chain in Uganda’ Makerere
university, Kampala
16. Reutlinger S (1977) Food insecurity magnitudes and Remedies, World Bank working, Paper no. 267 World
Bank Washington D.C.
17. Socio-economic survey (2001): Uganda national household survey 1999/2000. Uganda bureau of statistics
18. World Bank (1986a). Poverty and hunger: issues and options for food security in Developing countries.
Washington D.C.world bank.
19. Yair, M and Larson, F (198)”The determinants of agricultural production. A cross-Country analysis” .A World
Bank publication, New York.
82

The Impact of Entrepreneurship Training Programmes on Small Enterprise Development and Growth in Kenya
By
Samuel Obino Mokaya 9
Jomo Kenyatta University of Agriculture and Technology, Kenya
Abstract
Any entrepreneurship training should be designed to include or at least reveal and develop entrepreneurship in an
individual. Carefully designed training programmes should be based on needs; linked to opportunities and
complimented with follow-up and evaluation to determine whether trainees start new enterprises or make
improvements on existing ones.
The purpose of this study was to determine the contribution of entrepreneurship training prgrammes to the
development and growth of small enterprises in Kenya: the extent to which the training had helped the entrepreneurs
improve performance of their businesses. This was a descriptive study involving a survey of the perceptions of the
participants in the training programmes conducted by three institutions and the impact of the skills provided to the
development and growth of their businesses. The study covered past trainees of entrepreneurship training programmes
at the Kenya Management Assistance Programme, Federation of Kenya Employers and Improve Your Business. Data
was collected using semi-structured questionnaires administered through personal interviews at their business premises.
Results indicated that most of the trainees had experienced improved business performance as result of the training.
Further, the improvements made were not exclusively due to the training but in combination with other factors.
However, the training had been a major factor in the improvements made. The study concluded that the training was
useful and instrumental in the improvements made despite existence of other factors. The study recommends that
training providers should assess needs of entrepreneurs as basis for training; have sector-specific sessions; practical
training techniques; establish linkages with credit providers for credit provision to trainee and inclusion of a session on
prudent financial management practices in the training can also expose entrepreneurs to innovative ways of mobilizing
their own funds through savings either individually or in groups for reinvestments; assist trainees prepare statements of
what they propose to do in form of business plans, action statements or proposals as commitment to implementing
what they have learnt and also provide basis for future evaluations.
Keywords: Assessment, impact, entrepreneurship training, enterprise development and growth
1.0 Background to the Study
Entrepreneurship training has been widely recognized as an important component in the strategy for small
scale and jua kali enterprise development in Kenya (G.O.K., 1992). According to the Sessional Paper No. 2
of 1992 and the National Strategy for Small Scale and Jua Kali Enterprise Development: Towards the Year
2000, deficiency in managerial skills has been cited as one of the major bottlenecks in the development and
growth of small enterprises.
As a result several public and private sector institutions have been established to address this need. It is on
this background that the Kenya Management Assistance Programme (K-MAP), Improve Your Business
(IYB) and the Federation of Kenya Employers (FKE) with assistance from International Labour
Organization and United Nations Development Programme among others, conducted a number of business
development and growth training programmes. The training was aimed at enhancing the performance of
small enterprises in the country through business improvement and expansion. The training programmes are
targeted at entrepreneurs who were already in business so as to enable them identify growth potential of their
businesses and plan for strategic business growth for employment creation.
9 Samuel Obino Mokaya is an Assistant Registrar (Production) and Part-time Lecturer in Entrepreneurship
& Management at Jomo Kenyatta University of Agriculture and Technology. He is also a 2 nd year Ph.D.
student in Entrepreneurship Development at Kenyatta University (skomokaya@yahoo.com)
83

The training approach to small enterprise development has also been successfully used in other countries
such as India (Awasthi, 1989). In India, the Entrepreneurship Development Institute, established in 1983
has been conducting new enterprise creation (NEC) and business growth training (BGT) programmes for
small enterprise development with tremendous results. In his impact study, Awasthi found out that at least
75% of trainees in the new enterprise creation training programme started manufacturing enterprises, where
some were employing as many as 300 workers.
To support this viewpoint, Fluitman (1990) contends that training for work in the informal sector should
involve an organized transfer of skills to enable people start their own enterprises. He further suggests that a
carefully designed training programme should be based on needs, linked to opportunities for immediate
results and complimented with follow up services. He says that there is need for periodic evaluation to
determine whether those trained start their own enterprises or not and therefore important to find out
whether the training has been adequate and effective or not, as a basis for establishing and correcting
weaknesses, which may be associated with it.
2.0 Research Problem
The three training institutions had conducted a number of training programmes with a number of
entrepreneurs going through them. However, despite the wide participation in the training programmes, it
had not been determined whether the trainees made any significant improvements to their businesses or
introduced new business activities as a result of the training. In the absence of such a study, it was difficult to
make an objective judgment on the effectiveness of the training conducted. Sometimes it may be assumed
that the training has been effective based on the number of people trained without proof that the changes
made in the management and performance of their businesses are actually a result of skills acquired from the
training. Arising thereof, there was need to carry out an impact study of the training programmes: whether
business performance had improved and whether the performance improvements experienced were a result of
the training or other factors outside the training.
3.0 Research Objectives
The major objective of the study was to assess the impact of entrepreneurship training programmes on small
enterprise development and growth. The specific objectives of the study were to:
i Determine the trainees' perceptions on the usefulness of the skills acquired to the growth of their
businesses.
ii Determine significant business improvements made as a result of the training and those made as a result of
other factors
iii Identify other factors, besides training which affect small enterprise development.
iv Determine the adequacy of the skills provided to the improvement and growth of their businesses.
Research Methodology
This was a descriptive study involving a survey of the perceptions of the participants on the training and its
impact on performance of their businesses. The study covered trainees in Nairobi area who had undergone
training on business growth between 1993 and 1995. The sample for the study was 30 respondents drawn
from the total number of 72 respondents. The period 1993 to 1995 was selected because it gave a time
difference of at least two years since the training was conducted and this provided an adequate period within
which trainees were expected to have made significant improvements to their businesses as a result of the
training. Data was collected using a questionnaire administered through personal interviews at the
respondents’ business premises. Analysis and interpretation was done using simple statistical tools such as
means, frequencies and percentages presented through tables and charts.
4.0 Research Findings and Discussion
Composition and Age
Of the total 30 respondents interviewed, 57% were male while 43% were female, an indication that more
male entrepreneurs attend training programmes than female entrepreneurs. 17% of the respondents were
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found to be between 20 and 30 years of age. 60% were between the age of 31 and 45 years while 23% were
between the age of 46 and 61. This shows that male entrepreneurs value acquisition of more business skills
than female entrepreneurs do and that entrepreneurs in the middle age group attach great importance to
training and this tends to decrease towards the old age.
5.0 Education
On educational background, 33.3% of the respondents had completed University/College level, 13.3% had
completed "A" level of education, and 43.3% had completed "O" level, while 10% of the respondents had
completed standard 7. This shows that entrepreneurs with higher educational levels understand and attach
great importance on the acquisition of more business skills than those with low education levels.
Nature of Business
The respondents were in a number of businesses namely Woodwork (30%); tailoring (10%) and
dressmaking; retailing (10%); training and consultancy (10%); printing (7%) and fabrication (7%);
pharmaceuticals and chemicals (7%); Juice processing (3%) and restaurants (3%). 3% were engaged laundry
and dry-cleaning and 1% in saloons (Table 1).
Business Type No. of Male No. of Female Total Percentage
Woodwork 9 0 30%
Tailoring & Dressmaking 1 2 10%
Retailing 1 2 10%
Training & Consultancy 0 3 10%
Printing 2 0 7%
Tours & Travel 1 1 7%
Metal Fabrication 2 0 7%
Pharmaceuticals & Chemicals 1 1 7%
Juice Processing 0 1 3%
Restaurants 0 1 3%
Laundry & Dry-cleaning 0 1 3%
Saloons 0 1 3%
Total 17 13 100%
Table 1: Business Ownership types based on Gender.
As revealed earlier, a higher percentage of the respondents were male and this implies that they concentrated on
manufacturing than retailing and services. Therefore, it is not surprising that many of the respondents were engaged in
woodwork, which is male dominated.
6.0 The Training
The study found out that the training programmes conducted by the three institutions for business
improvement and growth were relatively similar in content. The programmes covered topics such as business
planning, costing and pricing, customer care, total quality management, human resources management, sales
and marketing, record keeping, financial management, product design and improvement, purchasing, cost
reduction and credit control. However, the one conducted by K-MAP had Time and Stress Management,
which others did not have.
Amongst the topics covered (Table 2), the respondents were asked to indicate the ones they found to be
more relevant and appealing to their expectations. As shown in Table 2, Sales and marketing had the highest
score of 50% of the total respondents. This was followed by business planning with 40%. Customer care,
product design and improvement had 33% each. Total quality management had 23%, costing and pricing,
record keeping and financial management had 20% each respectively. Human resource management and cost
reduction and credit control had 13% each while purchasing had 3% of the total respondents.
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Topic of Training No. of Respondents % of Respondents
Sales and Marketing 15 50%
Business Planning 12 40%
Customer Care 10 33%
Product Design & Improvement 10 33%
Total Quality Management 7 23%
Costing & Pricing 6 20%
Record Keeping 6 20%
Financial Management 6 20%
Cost Reduction & Credit Control 4 13%
Human Resources Management 4 13%
Purchasing 1 3%
Table 2: Topics, which the Respondents found to be more Relevant and Appealing to their Expectations
The training programmes offered ranged between 7 to 12 days. Generally, entrepreneurs focus on increased
sales as a way of making profit. Therefore, it is no surprise, that, sales and marketing were valued by many
respondents as being the most crucial topics amongst the ones covered. This can effectively be achieved
through careful planning and the provision of quality product/service, which they regarded as basis for
business success.
On whether the respondents had attended other training programmes besides the ones under study, 33%
indicated they did on Taxation and Record keeping, Sourcing for Funds and Business Development. The
reasons for attending other training programmes were a search for additional skills and ideas for business
improvement (97%) and other training programmes having had attachments to credit provision (3%)
especially those conducted by Kenya Women Finance Trust and Faulu Kenya. Those who did not attend any
traditional training cited lack of finance as the major hinderance.
All the respondents interviewed felt that all the topics covered during the training, were relevant and
appealing to their expectations. However, some topics were more relevant and appealing to some of the
respondents than others. 90% of the respondents felt that the training programme was comprehensive and
did not need any new topics while 10% suggested the incorporation of Computer Operations.
Effect of Training on Business Improvement and Growth
In the study a comparison was made in regard to their business performance before and after the training. It
was found that 80% of the respondents had recorded some improvements and changes while 20% did not.
57% of the respondents had experienced increase in average annual income of between 20% to 50% while
13% experienced a decrease. 33% of the respondents had experienced increase in the number of employees
while 17% had experienced a decrease. 53% of the respondents had increased their capital investment while
13% did not. 17% experienced an increase in business activities while 3% did not. 60% of the respondents
had experienced an increase in average annual sales of about 50% while 10% had experienced a decrease.
This implies that a higher percentage of the respondents had experienced improved business performance.
According to the study findings, 43% of the respondents interviewed felt that the skills provided were very
useful while 57 % felt that the skills were useful. None of the respondents indicated that the skills provided
did not have any usefulness to his/her business performance and growth.
On the relationship between the skills provided and business performance, 60% of the respondents felt that
there was a direct relationship while 40% felt that their business performance was partly related to the skills
provided. The relationship was explained in terms of the training having improved their managerial
competence for business improvement. In relation to this question, the respondents were also required to
give brief comments in support of their responses. Those who felt that their business performance was
directly related to the skills provided said that their business performance was largely dependent on the skills
and ideas they had acquired during the training. The higher percentage of those who made significant
business improvements is an indication that the training had improved their management skills for better
business performance.
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Those who felt that the two aspects were partly related, attributed their business performance to so many
factors, where the training or the skills provided was only one of them. Even though there was a direct
relationship between the skills provided and business performance, those respondents who had this feeling
recognized the contribution of other factors as having also contributed to their business improvement.
The other factors identified were other training programmes attended, personal business experience, personal
commitment and drive, established clientele and assistance from other family members but the training had a
larger share in that it enhanced their managerial competence in recognizing and fully utilizing these other
factors.
Business Performance Improvements
According to the study findings the respondents could not easily distinguish between improvements made as
a result of the training and those made as a result of other factors, which were in play. However, the business
improvements were made with training having played a greater role. There were other factors involved and
therefore, the business improvements could not be ascribed wholly to the training alone. 90% made
significant business improvements while 10% never made any significant business improvements. However,
those who made significant business improvements recognized training as having played a greater role in the
improvements made.
As shown in Figure 1, 33% of the respondents made improvements in form of more capital investments and
23% of the respondents in form of increase in sales through advertising and promotion. The sales increase
ranged between 30% and 50% among the respondents. 33% of the respondents made improvements in
form of increase in profits of 14% and 60% while 13% of the respondents made business improvements in
form of new product designs. 13% made business improvements in form of new products/services and 13%
of the respondents made business improvements in form of quality improvement. 17% of the respondents
made business improvements in form of new business activities, 10% of the respondents made improvements
in form of good customer service and 10% of the respondents made improvements in form of good
accounting system and record keeping. 10% of the respondents made improvements in form of
improvements in management styles while 7% of the respondents made improvements in form of business
planning and budgeting. 7% of the respondents made improvements in form of employment of qualified
staff. 3% of the respondents made improvements in form of market research while another 3% of
respondents made business improvements in form of cost reduction through staff reduction.
Response in Percentage
35%
30%
25%
20%
15%
10%
5%
0%
Figure 1: Bar-Chart showing Significant Business Improvements made as a
Result of the Training and Other Factors.
A B C D E F G H I J K L M N O
Areas of Business Improvement
87

Key to Figure
A - More capital investments; B - Increase in profits; C - New products services; D - Increase in sales; E -
New product designs; F - Quality improvement; G - New business activities; H - Good customer service; I -
Accounting system/record keeping; J - Improvement in management style; K - Business planning/budgeting;
L - Employment of qualified staff; M - Business expansion; N - Market research; O - Cost reduction
through staff reduction.
The percentage shown in the table for each business improvement was calculated based on the 30
respondents who were interviewed.
Other Factors which Affected Business Performance and Growth
The respondents identified several other factors (Table 3) besides training, which affected their business in
terms of improvements. The other factors identified were personal/business experience (37%); personal
efforts and drive (27%); acquisition of additional skills (23%); business problems/challenges (20%); family
support and assistance (17%); established customer base and available market/business opportunities
(13%); credit acquisition (10%); provision of quality products/services and personal creativity (7%). Those
who never made any significant business improvements to their business cited economic instability and
competition from well-established businesses, as the main factors that affected their business performance.
Factor No. of Respondents Score in Percentage
Personal/business experience 11 37%
Personal commitment and drive 8 27%
Other training programmes 7 23%
Business problems/challenges 6 20%
Family support/assistance 5 17%
Established customer base 5 17%
Market/business opportunities 4 13%
Credit acquisition 3 10%
Quality product/service 2 7%
One’s own creativity 2 7%
Table 3: Other Factors that contributed to the Improvements and Growth of the Enterprises
Under the other factors, which affected performance improvements in their businesses, the respondents were
also asked to state the critical problems/challenges, which affected their business performance and growth
(Table 4). The problems/challenges cited were inadequate capital (80%) as a major problem; competition
(50%); inadequate market opportunities (23%); economic instability (23%); inaccessibility to modern
technology and bad debts (17%); high operational costs (7%) and, poor credit and stock control (3%).
Problem No. of Respondents Score in Percentage
Inadequate capital 24 80%
Competition 15 50%
Inadequate market 7 23%
Economic instability 7 23%
Inaccessibility to modern technology 5 17%
Bad debts 5 17%
High operational costs 2 7%
Poor credit and stock control 1 3%
Table 4: Problems/Challenges, which affected Business Performance
From the analysis, it can be said that business performance cannot be wholly attributed to one single factor.
As the study findings revealed, no respondent was able to distinguish between business improvements made
as a result of the training alone and those made as a result of other factors. This finding also confirms a
contention by Odiorne (1970), that a major limitation on evaluating training programmes is the existence of
other factors, which may have occurred at the same time with the training. So business improvements made
cannot be ascribed to the training programme alone unless one is certain that no such other factors
88

Response in Percentage
influenced performance. However, the recognition that the training played a greater role in business
improvement and growth shows the significance of training over the other factors. The training prepared the
entrepreneurs to recognize and utilize the other factors for business improvement. For instance, one may not
be able to discover or identify an existing opportunity or gap in the market or know how to make and design
a quality product unless he/she has related skills, which in most cases can be obtained through training.
Therefore, training enhances the confidence and opens chances for the entrepreneur to recognize and utilize
these other factors for better business performance. This means that all the factors identified together with
the training work in a complimentary manner for any business improvement to take place.
The Adequacy of the Skills provided to Business Improvement and Growth
On the adequacy of the skills provided (Figure 2), results indicated that, 27% indicated that the skills were
very adequate to the improvement and growth of their businesses. 70% of the respondents felt that the skills
were adequate while 3% of the respondents felt that the skills provided were inadequate.
Concerning the satisfaction and meeting of their training needs, 60% of all the respondent felt that their
80%
70%
60%
50%
40%
30%
20%
10%
0%
F igure 2: B ar-C hart showing R espondents'P erceptions on the A dequacy of the
S kills P rovided.
V ery A de quate A dequate N ot A dequate
training needs were adequately satisfied and met while 40% of the respondents indicated that their training
needs were partly satisfied/met. Where some of the training needs were not met, it could be because there
was no needs assessment carried out as basis for designing the training programme and this could be a major
weakness where all the real business problems and opportunities of individual entrepreneurs were not
addressed. As Gibb (1991), argues, entrepreneurship training requires a business like and entrepreneurial
approach which involves careful assessment of the needs and characteristics of small businesses and
entrepreneurs to be trained at different stages of growth which should be a basis for designing the training
programmes.
Overall Assessment of the Training Programme
In the overall assessment of the training programme (Figure 3), 33% of the respondents felt that the training
programme was very good, 50% of the respondents rated it as good. Only 17% of the respondents described
it as average. It is interesting to note that despite the absence of a needs assessment before the training
89
S k ills Adeq uacy

Conclusion
programmes were implemented, many entrepreneurs felt that their training needs were adequately met and
therefore, the training had been instrumental in the improvements made.
The explanation could be that the training institutions had been conducting such training programmes for a
long time and therefore, likely to have mastered the needs and requirements for business improvement and
growth. It may also be possible that due to the comprehensiveness of the training programmes offered, the
respondents’ needs were easily captured. However, the fact that some of the respondents’ needs were not
adequately met, is an indication that the training institutions need to carry out a needs assessment, so that the
requirements for business improvement and growth are adequately covered in their training programmes.
Figure 3: Pie-Chart showing Respondents' Overall Assessment
of the Training Programme.
The study concluded that the training had been useful and instrumental in the business improvements made, a
testimony that training is a key factor for business improvement and growth and without which other factors can have
little or no impact on business performance.
It is also evident that the business improvements were not as a result of single factor but a result of the training and the
other factors such as credit, business experience, additional skills acquired and established customers among others,
where both worked in a complimentary manner. This shows that for any meaningful business improvement and
growth to occur, both the skills and other supporting factors credit, market availability, entrepreneur’s creativity and
commitment among others have to be in place.
It can also be concluded that, the requirements for business improvement and growth are relatively similar among
entrepreneurs as illustrated by the respondents' needs and objectives for attending the training programmes and the
contents of the training programmes offered by the three institutions which were almost similar.
The study also concluded hat the training programme was a key factor in the business improvements made by the
respondents as it had addressed a higher percentage of the respondents' needs for business improvements and growth
as demonstrated by the positive changes and performance improvements made.
The study also concluded that even though the training may have been general and not based on real identified needs,
it addressed the trainees’ needs because it was comprehensive enough.
90
Very Good
Good
Average

Recommendations
The study recommends the following measures to make the training more focused and applicable in addressing the
entrepreneurs’ challenges for business improvement and growth.
i The training for business improvement and growth should be based on real needs and problems of the trainees
so that they have a direct bearing on their businesses. This requires a careful needs assessment as a basis for
designing the training programmes and hence, having high chances of assisting the entrepreneurs improve their
business performance.
ii The training should be broken into sector-specific sessions to enable entrepreneurs with common business
interests exchange and share their experiences and challenges for the common good.
iii The training providers should use successful entrepreneurs as trainers and guest speakers, as trainees are more
likely to take great interest in people with similar experiences in business. Such kind of trainers serve as role
models and are likely to be more practical and realistic to their needs and aspirations for business growth.
iv The training for business improvement and growth should include more practical demonstrations to enable
trainees apply the concepts learnt. The use of video presentations and demonstrations by the experts in the
relevant areas is likely to achieve this.
v The training providers should make arrangements with credit providers to extend credit to facilitate
implementation of ideas generated for business improvement and growth. To achieve this, the training
institutions should make arrangements with banks and other financial institutions to support their clients where
the former can act as guarantor. Inclusion of a session on prudent financial management practices in the training
can also expose entrepreneurs to innovative ways of mobilizing their own funds through savings either
individually or in groups for reinvestments.
vi At the end of the training, trainees should be made to provide statements of what they propose to do in terms
of business improvements and growth. These statements may be in form of business plans, action statements or
proposals for business improvement. The statements will not only commit trainees into implementing them but
will also provide basis for future evaluations.
91

Bibliography
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I.L.O. Geneva.
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Paper: I.L.O. Geneva
92

The Influence of Work Environmental Characteristics on Training Outcomes in Agribusiness: Case of the Rift Valley
and Central Provinces of Kenya
By:
Samuel Obino Mokaya 10 , Jomo Kenyatta University of Agriculture and Technology, Kenya
Damary Sikalieh 11 , United States International University, Kenya
Paper presented at 12 th Annual Makerere University Business School International Management Conference, 21 st –
24 th November 2006, Kampala, Uganda
Abstract
The influences of work environment on the transfer of training of participants in an Enterprise Development
Programme were examined in this study. Training is considered a major strategy to improve enterprise performance
since it equips entrepreneurs with knowledge, skills and abilities (KSAs) for application. However, training does not
automatically translate into practice, creating the transfer problem. Therefore, the challenge lies in the ability of the
trainees to apply the KSAs acquired. Measurement of the impact and role of training on enterprise performance is a
vehicle for establishing accountability and effort justification. The study sought to determine whether the transfer
climate matters when it comes to the transfer of training in an agricultural context. Thirty participants in enterprise
development training from Rift Valley and Central Provinces of Kenya were used in this qualitative study. Data was
collected through semi-structured questionnaires, administered through personal interviews. To authenticate the
results, data was triangulated through observations and document analysis. Results indicated that the trainees had
experienced improved business performance as a result of the training. All participants experienced increased
income/profits and better living standards. A major notable difference in the two Provinces was that participants in
Central Province were more entrepreneurial engaging in more diversified activities than those in Rift Valley Province.
The study also revealed other contextual factors in addition to the generally documented factors. Inadequate funds
affected the application of KSAs in both provinces, as the training did not have any credit provision and linkage. The
study concluded that training had played a major role in improved enterprise performance; culture had an influence in
the application of the KSAs. The study recommended that training for the MSE sector should be participant needsdriven
to enhance transfer and application; be linked to credit provision; provide an opportunity to practice during and
after the training and have in-built follow-up and evaluation so as to facilitate required changes and adjustments to
improve training effectiveness.
Key words: Training, skills transfer, work environment factors, enterprise performance
Background to the Study
Training is a planned process aimed at modifying attitudes, knowledge or skills through learning experience to achieve
effective performance in an activity or range of activities (Osborne, 1996). It is providing entrepreneurs with
information and knowledge, which they translate into practice with a view to enhancing enterprise effectiveness and
productivity (de Silva, 1997). Research that examines the influence of the work environment on post-training
behaviour is valuable because it can help to move beyond the question of “whether training works” toward a better
understanding of “why training works” (Campbell, 1988; Tannenbaum & Yukl, 1992).
Training has often been regarded as a major mechanism for equipping people with knowledge, skills and abilities
(KSAs) to enable them engage into productive activities. This view is further strengthened by Fluitman (1989), who
contends that training involves the transfer of knowledge, skills and attitudes, which is organized to prepare people for
organized activities. In addition, it is expected that the KSAs acquired during training will be transferred and applied
effectively as a factor for improved job performance (Machin & Forgarty, 1997). However, there appears to be a
widespread failure of learners to apply the knowledge acquired during training to their jobs. Thus training does not
automatically translate into practice, creating the transfer problem (Broad & Newstrom, 1992 and Ford, 1994).
Fluitman (1989), suggests that a carefully designed training programme should be based on needs, linked to
opportunities for immediate results and complimented with follow-up services and periodic evaluation to determine
10 Samuel Mokaya is an Assistant Registrar (Production) and Part-time Lecturer in Entrepreneurship &
Management at Jomo Kenyatta University of Agriculture and Technology, Kenya. He is also a 2 nd year
Ph.D. student in Entrepreneurship Development at Kenyatta University, Kenya (skomokaya@yahoo.com)
11 Dr. Damary Sikalieh is an Assistant Professor of Entrepreneurship & Management at the United States
International University (USIU), Nairobi, Kenya (dsikalieh@usiu.ac.ke)
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whether those trained start their own enterprises or not. His sentiments are supported by Harper (1983), who says
that any entrepreneurship training programme should be designed to include or at least reveal and develop
entrepreneurship in an individual. Such a training designed so as to increase entrepreneurship should be offered as part
of an integrated programmed which includes technical and management aspects and an opportunity for trainees to put
together proposals for their new business or expansion of existing ones.
Whether a training programme has contributed to improved business performance or not, should be a major concern
for training providers. As budgets are tightened and return on investment is closely scrutinized, measurement of
training effectiveness is a vehicle for establishing accountability (Fenwick & Parsons, 2000), making evaluation of
training urgent for both internal and external customers who are asking for evidence of programme effectiveness
(Fluitman, 1990 and Harper, 1983). This viewpoint is further strengthened by Louks (1987), who argues that good
training programmes should include rigorous evaluation as an important part of their on-going activities. He further
says that, just as the owner of a successful business takes action to make changes to certain departments not performing
up to standard, so too must an entrepreneurship development programme be prepared to change, add or delete a
component that is not in line with the programme objectives. This will also improve future services to clients and
ensure efficiency in programme delivery (Gibb, 1991 and Oakland, 1999). Training providers are, therefore, under
pressure of being evaluated not only on their ability to elicit positive reactions from trainees and to show evidence of
learning, but also on the extent to which they are able to improve human performance and to show a bottom-line
result, which is a positive return on investment (Holton, 1996). Even when training provides relevant knowledge,
utilization of that knowledge on the job is usually difficult and when the knowledge gained during training is not
utilized, the training is considered a waste of money, time and resources.
Without a thorough understanding of the complex relationships between training and the use of the knowledge on the
job, transfer problems will continue to be an obstacle to enterprises seeking superior performance through training.
Many studies into the transfer of training have shown that only 10% to 15% of knowledge from a training session
transfers to the job (Baldwin & Ford, 1988; Broad & Newstrom, 1992; Garavaglia, 1993; Georgenson, 1982). In
addition, several efforts have been made to expand the training perspective (Tannenbaum & Yuki, 1992). Researchers
(Baldwin & Magjuka, 1991; Hicks & Klimoski, 1987; Noe & Schimitt, 1986) have recognized the importance of
several environmental characteristics and have examined variables outside the immediate training environment that may
be important to the success of the training effort.
The transfer climate here is defined as the work environment factors perceived by the trainees to encourage or
discourage their use of knowledge, skills and abilities learnt from training on the job (Broad & Newstrom, 1992;
Goldstein, 1993; Baldwin & Ford, 1988). In this regard, course information provided to trainees, accountability to the
supervisor and programme status (Baldwin & Magjuka, 1991); supervisor support (Broad, 1982; Huczynski & Lewis,
1990; Michalak, 1981; Nadler, 1971; Tannenbaum & Yukl, 1992, Zemke & Gunkler, 1985) and organizational
management and peer support (Cohen, 1990; Cromwell & Kolb, 2002), all affect the extent to which training is
transferred on the job. Therefore, the transfer of training must be a concern for all those who plan, teach and evaluate,
and those who support the programmes.
Whereas the role of training in the corporate context seems to receive much-needed attention, the same is not the case
in an entrepreneurial context, especially in micro and small enterprises (MSEs), which seems to have been neglected
(Paul, Ickis, & Levitsky, 1989). Efficiency of performance is not just critical for the survival of large and medium
organizations only, but MSEs, equally need to address the transfer problem in order to be able to transform themselves
into medium and larger enterprises that can compete globally. In addition, various trainee characteristics, training
design and the transfer environment factors have been identified from previous research. Most of these factors have
been identified using the corporate or medium and large businesses but not many factors have been established in
agricultural-based micro enterprises. This study is one of those attempts to explore the transfer environment factors on
enterprise performance in an agricultural context.
Purpose of the study
The purpose of this study was to determine the work environment factors that influence the transfer of training in an
agricultural MSE context and how this in turn influences enterprise performance. The study observed the socioeconomic
changes in the lives of the participants both at the individual, household and business levels. Specifically, the
94

esearch questions examined the participants’ perceptions regarding the environmental factors that seemed to influence
the transfer of training. The research questions were:
1. What work environment factors influence the transfer of training in agri-businesses?
2. Is there a difference between the environment factors that influence transfer of training in agri-businesses and in
other business organizations?
3. What socio-economic changes in the agri-businesses can be attributed to training?
Research Methodology
The study used a qualitative research design. A fundamental characteristic of qualitative research is its in-depth
exploration of a phenomenon and its context (Denzin & Lincoln, 1994; Fryer, 1991; Patton, 1990).
Data was collected from the total population of thirty (30) participants – twelve (12) in Rift Valley Province and
eighteen (18) in Central Province through semi-structured questionnaires, administered through personal interviews at
their work places. To authenticate the results, data was triangulated through observations and document analysis.
Data collection and analysis were simultaneous as a requirement for a qualitative study (Merriam, 1988; Marshall &
Rossman, 1989). At the same time there was an identification of both the trainee and environment factors that seemed
to influence transfer of training in an entrepreneurial context and the specific business performance improvements
made as a result of the training, thus bringing out its role.
Scope of the Study
The study covered thirty (30) participants who had gone through a one-month enterprise development programme
conducted by the African Institute for Capacity Development (AICAD). The participants were drawn from Rift
Valley and Central Provinces of Kenya. In Rift Valley Province, the study covered two districts namely Narok and
Nakuru while in Central Province; the districts covered were Thika and Kiambu. The study focused on the application
of the KSAs acquired and changes in business performance arising thereof.
Results and Analysis
Generally, all the participants in both provinces were involved in a variety of farm and non-farm entrepreneurial
activities such as crops, dairy, poultry; merchandizing; public transport and food processing.
However in Rift Valley Province, the participants in Narok District were mainly farming onions and tomatoes as
major crops; grown under irrigation served by permanent rivers (Osupuko and Kanunga areas) and a dam (Maji Moto
area). Farming in Nakuru and Kiambu Districts was restricted to rain water, as the area is not served by any river.
Participants in both Districts tended grade, high milk-yielding cows, while those in Narok District kept local
traditional breeds except for one farmer who had both breeds. There were cases where some trainees had introduced
new breeds revealing risk-taking propensity. One such case was noted in Nakuru District where one farmer had
purchased a new hybrid sheep from Kenya Agricultural Research Institute (KARI) on a trial basis. He intended to
increase the number if they proved successful so as to enhance milk production and income generation. Within the
same province, there were notable differences in the entrepreneurial intensity among the participants. Though all the
participants in both provinces were engaged in poultry farming, those in Narok District (Maasai community) were
involved in small scale traditional poultry, mainly for domestic consumption, while those in Nakuru District (Kikuyu
community) were engaged in large-scale poultry farming with one of them trying out a new breed, “Kenbrew” which
he had acquired from Ken Chick Ltd. The same was true of the intensity and variety of entrepreneurial activities.
Participants in Narok District engaged in common farm activities such as tomatoes, onions, maize and dairy on limited
scale with no one in non-farm entrepreneurial activities unlike their counterparts in Nakuru and Kiambu Districts, who
were involved in a number of farm and non-farm entrepreneurial activities. However, in both cases there were notable
changes as a result of the training: In Narok District, participants had embraced crop farming which they never did
before while in Nakuru and Kiambu districts, participants had introduced new varieties and diversified into new
entrepreneurial activities such as merchandizing of agricultural inputs and processing which they never did before.
95

Changes were also noted in business management practices in both districts, with participants having introduced
proper record keeping and better farming practices.
Common across participants in the two provinces was production and sale of primary farm produce. However, twelve
of them were involved in merchandising activities such as food groceries, agro-vet, hardware stores and supply of eggs
to supermarkets. One participant in Nakuru District was processing milk into youghurt and making crisps, which she
supplied to schools and retail shops in the neighbourhood. One other participant was running a nineteen (19)-seater
passenger service vehicle (“matatu”), while another had started a private school with the assistance of his retired
mother who worked as a teacher.
Participants in both provinces introduced new business activities and made improvements on existing ones in the form
of new breeds and crops, expansion in scale, crop rotation, intercropping, more employees, value addition and
processing, reinvestments, networking, access to new markets, action planning and record keeping; business-like
approach to farming with Maasais effectively embracing crop farming as a major entrepreneurial activity. However,
none of them had prepared a business plan, though this was covered during the training. Asked to explain why they did
not prepare a business plan to guide their entrepreneurial activities and operations, the respondents indicated that as
much as they appreciated the importance of business planning, they did not fully comprehend how to prepare a
business plan. This was a new concept and perhaps they should have been given an opportunity to prepare one during
the training.
All the participants lauded the training as having been instrumental in the business improvements and changes made.
They particularly pointed out the follow-up, which they said was an element lacking in most training programmes they
had attended before. Knowing that they would be followed up made them apply the KSAs acquired because they
would not want to disappoint the training provider. Appreciating the role of follow-up was two-dimensional: one, it
served as a motivation to implement the training and because the participants knew that there would be follow-up by
the training provider, they worked hard to apply the skills acquired. In addition, they introduced new business
activities as a result of the training. This meets the accountability aspect of training - the worth of the time and funds
spent on training. On the other hand, the appreciation of follow-up confirms what is in the evaluation literature - that
follow-up provides feedback on the quality and quantity of performance (Tosti, 1986).
The content was relevant to the participants’ needs, hence they attributed the many changes and improvements in their
business activities to the training as one participant in Rift Valley Province remarked:
“Before I attended the training, I was not clear on what I was doing. I used to try many things with limited
success. However, from the time I completed the training, I have experienced better yields from my farming
activities. I do farming as a business. I focus on the market and only engage in farming activities, which have
potential for success and high returns. I tell you, my income has since increased tremendously”.
This remark does show that the participants’ expectations were met and that the training had played a major role in
transforming the way in which the participants conducted their entrepreneurial activities: pursuing farming as a
business, something they never did before. They could also gauge when to farm, what farm and when, meaning they do
not engage in farming as a routine, but as an entrepreneurial activity for income generating (agri-business). This
finding was true of the two provinces.
The respondents noted a number of weaknesses in the training programme, such as training sessions being short, with
no provision to practice and discuss the concepts learnt and the training not linked to any credit arrangement to
facilitate effective application of the KSAs acquired.
From the analysis and observations made, there is no doubt that the training had a positive impact on the beneficiaries
and their business activities. The participants in both provinces were able to engage in productive farming and nonfarming
entrepreneurial activities in variety and intensity. The participants were found to have made good use of their
farmlands as seen in the variety of crops grown, the crop rotation systems and use of organic manure processed from
harvest wastes.
All the participants were working more closely with the Extension Officers and other development agencies in their
localities than they did before. They also introduced new business activities and made improvements on existing ones
such as new crops and animal breeds, crops, expanded in scale, practiced crop rotation, intercropping, value addition
96

and food processing, reinvestments, networking, access to new markets, action planning and record keeping. Most
outstanding was the business-like approach to farming and adoption to farming by Maasais who are traditionally
pastoralists.
All participants experienced increased income/profits ranging from 20% to 60% and better living standards.
However, most changes were noted among the Kikuyus than was the case with Maasais. This was both in intensity and
variety, and performance. Whereas average performance improvement was 40% among Kikuyus in both provinces,
performance improvement among Maasais was an average of 25%. Among the Kikuyus, 30% of the participants had
installed solar power, which they used for lighting, as well as powering their electronic gadgets. The study revealed an
improved standard of living across participants in the two provinces: they ate quality and variety foods, were able to
dress better, take their children to school, cater for extended family members and engaged in socio-economic
development activities which involved contributing to community’s development activities such as churches and
schools.
Most striking was the zeal with which the Narok District participants had taken to crop farming as a major activity as
opposed to their cultural animal rearing practice. These farmers were found to be trendsetters as some other members
of the community were beginning to embrace crop farming too. This is a clear demonstration of what the training can
do in changing attitudes to long held unproductive cultural beliefs and practices. For instance, due to the training, one
of the participants foresaw approaching drought and sold his animals to avoid loosing them during the dry spell
despite the great opposition from his father. He indicated that he had banked all the money to restock when the
weather was more conducive, an indication of pro-activeness and the ability to make informed decisions. Another
participant was under pressure to marry another wife because he had become wealthy according to Maasai standards,
but he could not give in to the pressure. Instead, he had opened a savings bank account for future expansion and
school fees for his children.
The study also revealed that the participants were able to determine the performance of their entrepreneurial activities
from proper records, which they kept. Before the training, they never kept any meaningful records of the expenditures
and incomes and therefore, could not know when they were making profits or losses. Further, they had some form of
action plans, which they used to guide their entrepreneurial activities and they were found to have adhered to them.
This is an indication of good management practices at work.
A number of personal and environmental factors were found to have influenced the application of the KSAs acquired.
They included long draught especially in Rift Valley Province, which was worst hit, with most respondents especially
in Narok District experiencing serious animal feed shortage, which led to family separation, with some taking the
animals to distant lands in search of pasture, while others lost their livestock to the drought. Marketing of farm
produce was another challenge the participants encountered as they lacked the ability to market their produce directly
to the end user and therefore, had to use middlemen despite being aware of their exploitative tendencies. This was
made worse by the huge transportation costs as well as the poor road infrastructure, especially in Narok District, where
people walked long distances, as far as fifty (50) kilometres to reach the nearest market. The researchers too had this
same experience: while conducting the study in the district, they had to drive through the jungle and undefined roads
to reach the respondents. Inadequate credit access and availability also affected effective application of the KSAs
acquired. However, on the contrary, the study revealed that most participants used community micro-finance
programmes and reinvesting of profits as major financing strategies. Whereas the training may not have had credit
linkage, it had enhanced the trainees’ capacity to source for investment credit because they were more confident and
focused in what they were doing.
Variations in the levels of entrepreneurial behaviour manifested themselves in the entrepreneurial and management
practices among respondents from the two provinces. One major reason explains this: in Kenya, Kikuyus are known to
be hardworking and successful business people with many role models unlike the Maasais. This was true to the study.
The Kikuyus were more organized and practiced modern business management practices such as keeping proper
records, action planning, new and improved varieties in farming, diversified business activities such as merchandising,
sub-contracting, networking, working in groups, direct marketing, pro-activeness and focus on business growth, all
practiced to a very limited scale among Maasais.
97

Conclusions
From the findings, there is no doubt that all the participants experienced improved business performance as a result of
the training. Therefore, the training had played a major role in business performance improvements experienced among
participants in the two provinces. This is an indication that the training had a positive impact on their entrepreneurial
activities. The environmental factors found from this study, include information from the training provider that there
will be follow-up after the training. This agrees with findings from previous researches that when trainees are informed
that there will be follow-up, they become more motivated to transfer training. It can be concluded that prior follow-up
information and supervision are important for transfer of training in an agricultural context.
Peer support and networks were also found to have played a significant role in the transfer of training in this context.
Most of the participants consulted one another and had gone on to form community mobilization groups. In addition,
they worked closely with extension officers. Consultation and guidance are crucial for transfer of training in an
agricultural context.
Community micro-finance programmes were also significant in the transfer of training in this context. The training
programme did not have an in-built credit component and therefore, participants had to access funding from
community micro-finance programmes to enable them participants implement their action plans.
Other environmental factors included the availability of markets for the farm produce. With ready markets like
schools, neighbours and supermarkets, most of the participants were able to farm and sell their produce. This was an
aspect that motivated them to transfer as seen in the expansion of their farm activities. However, climatic conditions
became a hindrance to the transfer of training to an extent. Most of the participants were not able to transfer the skills
to their farming activities due to prolonged draught periods.
Most of the participants had their attitudes towards farming changed; they were doing it as a business, not a routine
activity as was the case before. Without a changed attitude, the participants would not have learnt any KSAs and
would also not have applied them to their business activities. For instance, the Maasais had embraced crop farming as
opposed to animal farming only.
The one trainee ability that emerged as important across tasks and context was the general cognitive ability. This was
true of this study as reflected in the participants’ ability to employ major cognitive processes such as evaluation,
judgement, memory, recognition and action planning which were used in their daily activities. For instance, they made
decisions regarding what crops to farm, when and in what quantity. This was further manifested in their innovative
and risk-taking tendencies as well as their ability to keep business records, which they used to gauge which business
activities were more productive and to ascertain their business performance levels.
From the study findings and analysis, it can be concluded that though other personal and environmental factors such
as markets, changing climatic conditions and credit inadequacy were at play, the training played a major role in the
business improvements made. The training had enhanced the trainees’ capacity to assess the environment for
opportunities, which they exploited to improve their performance. This was clearly manifested in new business
practices, breeds and varieties and high risk-taking propensity in a rural context. However, the situation was not the
same across participants from the two communities. Kikuyus were more entrepreneurial than Maasais as revealed by
the study findings in both provinces.
The study also concluded that follow-up and evaluation of training serves both to enhance application of KSAs
acquired and determines its effectiveness and impact on target beneficiaries, thus satisfying the accountability
requirement in training. The environment factors common to other organizations such as networking, credit, facilities
and peer support were confirmed in this study. However, supervisory support was not the case since the participants
were owner-managers who made and implemented their business decisions.
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Recommendations
To enhance the practice and role of training in enterprise performance, the study made the following
recommendations:
First, training programmes for the MSE sector should be participant-needs driven to enhance their transfer and
application of skills learnt. What this implies is that all training programmes focused on enhancing entrepreneurs’
capacity to improve their entrepreneurial ventures should be preceded by thorough needs assessment
Second, all training programmes should include both entrepreneurial and managerial components with provision to
practice the concepts learnt during and after the training so as to motivate the participants, enhance understanding and
focusing of concepts for ease application.
Third, training providers should establish links with credit providers to enable trainees access affordable credit to
implement the skills acquired for improved business performance. This could be achieved by training providers acting
as guarantors for those trained as the training enhances that trainees’ capacity to effectively utilize the funds.
Fourth, participants should be encouraged to form entrepreneurial networks and associations as they were found to
have had a significant role in the transfer of training in this context by way of situation and consequence cues. The
networks and associations formed the necessary contacts, support and synergies that enhanced application. This can be
supplemented by encouraging trainees to establish group credit programme.
Fifth, entrepreneurship training should consider cultural aspects of the trainees as springboards for training as culture
was found to have influenced application in both provinces. Whereas the Kikuyus are culturally known to be
entrepreneurial, the same is not the case with the Maasais. With this background information, the training emphasized
on the need to change from traditional livestock to modern dairy and crop farming which a number of participants
from the Maasai community embraced. The same was the case with participants from the Kikuyu community, as the
training incorporated secondary level processing and value addition due to their entrepreneurial orientation.
Sixth, appreciating the role of business planning as a roadmap to business success and noting that this was covered
during the training but none of the participants in the two provinces had prepared one, the study recommends the
business planning should be simplified and made more practical with an opportunity for the participants to develop
one during the training. Design of a simple fill-in business planning template through which trainees can practice with
during the training is one to achieve this.
Finally, every training programme should be subjected to rigorous monitoring and evaluations to ensure
implementation of concepts learnt and determine its effectives on target beneficiaries as justification for resources used.
However, to facilitate smooth and focused monitoring and evaluation, trainees should be made to prepare statements
or proposals of what they plan to do after the training, thus providing the yardsticks for measuring performance.
99

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