Building sustainable business development services: empirical evidence from Kenya
| dc.creator | Otieno, Hellen | |
| dc.date | 05/13/2013 | |
| dc.date | Mon, 13 May 2013 | |
| dc.date | Thu, 9 May 2013 13:44:44 | |
| dc.date | Wed, 15 May 2013 17:27:38 | |
| dc.date.accessioned | 2015-03-18T11:28:56Z | |
| dc.date.available | 2015-03-18T11:28:56Z | |
| dc.description | Submitted by Hellen Nyolo-Otieno, to Strathmore University as a thesis for the Degree of Doctor of Philosophy in Entrepreneurship, June 2012 | |
| dc.description | Business Development Services (BDS) refers to a wide range of non financial services provided to small enterprises (SEs) to help them operate efficiently and to grow their business with the broader purpose of contributing to economic growth, employment generation and poverty alleviation (Miehldradt and Mc Vay 2003). BDS include; Market access, Input supply, Technology and product development, Training and technical assistance, Policy or advocacy, Infrastructure and Equity financing. Small and Medium Enterprises (SMEs) play a major role at all levels of economic development in different countries. They generate much employment and are widely considered to be vital for competitiveness and economic growth (Caniels and Romijn 2005). However, smallness confers some inherent competitive disadvantages and that some sort of external support is warranted in order for small enterprises to reach their full potential (OECD 2004). Services to promote and enhance SME competitive performance therefore constitute important policy instruments in many countries, both developed and developing alike (ibid 2004). Until the early 1990s, business support model was heavily supply driven; it was predominantly centrally organized and administered by governments, and heavily financed by foreign donors (Caniels and Romijn 2005). This ‘conventional’ approach to BDS, emphasized donors’ (supply-side) view of what was good for SMEs, and focused on training and counseling while SMEs were seen as grateful beneficiaries of charity. These top-down programs suffered from widespread corruption and inefficiency, and lacked outreach, impact and relevance (ibid 2005). These failures have resulted in a number of paradigm shifts in the support models for SMEs ranging from a commercial approach to a market development approach to BDS. A key feature under the commercial approach was that service delivery was organized along commercial lines with an indirect facilitative role of donors, NGOs and developmental agencies. Under the market development approach (whose principles were borrowed from Microfinance principles), BDS must be demand driven, relevant, participatory and cost effective. The desirous result is that numerous small enterprises buy BDS of their choice from a wide selection of products offered (primarily) from unsubsidized, private sector suppliers in a competitive and evolving market (McVay and Miehlbradt 2001). The market development approach to BDS represented a move forward in an attempt to address some of the shortcomings of earlier large scale publicly funded programmes (Mayoux 2006). However despite the manifold promotion programs, the great majority of small scale enterprises in developing countries remain sluggish activities, struggling for survival (Caniels and Romijn 2005). Empirical evidence shows that many small enterprise programmes based on the market driven principles still struggle for impact (ibid 2005); that majority of the programs and institutions designed to support small enterprises have reached and assisted only a minority of them, (ILO 2003). This raises the question as to how sustainable is the provision of BDS? According to Committee of Donor Agencies (2001), BDS is sustainable if commercially-motivated revenues are at least as great as the full costs of service provision. Empirical literature shows that a number of factors influence performance namely characteristics of the business itself (size, location, legal form and the number of the owners), and the specific strategies a business adopts (Kotey and Meredith 1997). Factors that are related to entrepreneurial behaviour have also been hypothesized to influence entrepreneurial performance (e.g. Gorman 1997). MacMillan (1993) suggests that building contacts and networks are the fundamental factors in determining the success of any firm because through entrepreneurial networks, the entrepreneur can gather information; look for customers and supplies among others. Top management team (TMT) demographic characteristics have also been shown to influence performance of organizations (Hambrick and Mason 1984) while Miller and Toulouse (1986) showed that absolute performance was influenced by industry factors. BDS transactions take various forms (McVay and Miehlbradt 2001). The level or volume of exchange or transaction that occurs between sellers and buyers of a given good or service determines a market’s effectiveness (Gibson et al. 2001). Markets are effective when transactions take place. In the case of BDS, a market is effective when the consumer recognizes the causes of underperformance, concludes that a solution is required, and is willing to pay for a problem solving service while the provider has the abilities to present an attractive offer that the consumer wants and has the technical know-how to solve the problem with demonstrated positive impact on business performance (ibid, 2001). From the literature review, there are many theories on firm success. Many of these studies have focused on businesses in general and/or mostly in developed countries hence their findings and conclusions may have limited applicability in developing countries and in particular may not explain the sustainability of BDS business. Anecdotal evidence in Kenya shows that there are commercial BDS providers who are providing BDS to SMEs. The paper therefore seeks to answer the following questions: (i) How can we explain the sustainability of BDS; why do some BDS Providers succeed while others don’t? (ii) What do the successful BDS providers do differently from those who are not as successful? (iii) What factors influence actions of the BDS providers? | |
| dc.description.abstract | The aim of this study was to explain sustainability of Business Development Services (BDS) in Kenya. The study was conducted through the use of Grounded Theory methodology on eleven BDS providers, two BDS facilitators and one donor agency and four small enterprise (SE) entrepreneurs. Data collection and analysis took 12 months spread between the months of May 2008 and August 2010. The study established that BDS Providers venture into business for different motives. The motives were classified into three as extrinsic, intrinsic and philanthropic motives. The study established that there are BDS Providers who venture into and sustain their businesses mainly for intrinsic and philanthropic motives. The study showed that while it is true that BDS Providers strive to recover costs and possibly make profits, this is not the major reason why some stay in business. The study showed that there are multiple conceptions of “sustainability” depending on providers’ strategic response; background characteristics; start-up motives; ability to identify and close gaps; situational forces; perception of the business and the meaning attached to business. These multiple conceptions of “sustainability” affect the way continuity is pursued and sustained. BDS becomes sustainable in the traditional economic sense of covering costs when the provider manages to identify and fill at least 9 specific demand and supply side gaps. The gaps relate to awareness, value, trust, quality, capacity, willingness to pay, appreciation, ability to pay and perception. BDS Providers identify and close the gaps in their market using a number of strategies. The strategies were client, product, price, simultaneous collaboration and competition, trial and error and diversification which differ by situational context. The study showed that filling some of the gaps requires collaboration among service providers. Filling other gaps require the action of the industry as a whole. The study further showed that perception of the providers is a major factor that influences how they do business and whether they stay in business. The study offers a number of theoretical contributions which have both theoretical and practical implications. First BDS philanthropy suggests that evaluation of performance and/or success should not be based purely on mercantile principles but should also combine the socio-cultural impact of the business. It also suggests that the measure of success should not be generalized across business sectors or within a business sector. Philanthropic motives may also justify spending public resources on such people because they have a mission to impact on others. Regarding perception, the study recommends that policy makers should take a deliberate effort to improve perception of potential opportunities in small-scale businesses. | |
| dc.identifier.uri | http://hdl.handle.net/11071/3531 | |
| dc.language | eng | |
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| dc.subject | Business development | |
| dc.subject | Kenya | |
| dc.title | Building sustainable business development services: empirical evidence from Kenya | |
| dc.type | Thesis |
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