How necessity, fear give rise to entrepreneurs

Kenya thrives as a hotbed of entrepreneurship. Entrepreneurial intentions, dreams, aspirations, and desires run deep in our national culture. We read elegant stories about the founding of Microsoft and its prolific growth and feel inspired. We attend talks on how NaiLab supported a generation of Kenyan technology entrepreneurs and have hope. We watch videos about the birth and eventual domination of Facebook on the global stage and ponder if we can achieve similar success.

However, researchers look into different types of entrepreneurial journeys. Not all of us will have the time, financial resources, human capital, supportive government environments, or technical know-how to launch behemoth viral technology sensations.

Unlike Bill Gates, Sam Gichuru, or Mark Zuckerberg, sometimes we turn to entrepreneurship out of urgent necessity or fears of future uncertainty. A corporate accountant, Njeri, working for a large insurance company may leave her post to take a more senior position in a startup microfinance company as the chief accountant but the startup nature of the new organisation delays her salary by months and she must get a second income source through entrepreneurship.

Alternatively, an NGO program officer, Ogenda, starts sending out his CV six months before the donor-funded programme end-date. By the time the two months point reaches and he still has not found other employment, he begins to panic and look for a quick business to start in case he does not secure a new job. The uncertainty avoidance drives him for an immediate alternate income stream as a proverbial insurance policy.

Others may form a sole-proprietor business as a means for basic survival. Maybe Musyoka scored a B+ on his KCSE 10 years ago, but because of family finance needs as the firstborn, he could not proceed to university despite the government sponsorship for a degree and instead slowly over several years finished a diploma in business management in a college. Upon diploma completion and tarmacking for jobs for eight months to no avail, he copies his neighbour’s kiosk business concept and sells sweets, tissues, and snacks to passersby. It stands as axiomatic that Musyoka does not aspire to build an international colossus, but survival for him and his brothers and sisters. When an entrepreneur struggles in the physiological and security or safety phases of Maslow’s hierarchy of needs, the entrepreneur lacks the luxury of pondering with prototypes and brainstorming with target customers and just gets on with quickly implementable business venture options.

New research just published this month from John Dencker, Sophie Bacq, Marc Gruber and Melvin Has delineates the conditions under which aspect guides entrepreneurs. They argue that different levers dictate how entrepreneurs approach business startups in developed versus developing country contexts. In a developing nation scenario, the researchers theorise that the two biggest drivers of how entrepreneurs set up their businesses are the human capital skill level and how much institutional support exists from governments and non-profits. If one’s human capital is low and institutional support available to them is absent, then entrepreneurs will steer towards replicating other small-scale ventures simply mimicking nearby low startup cost businesses. The chief executive of SNDBX, Joram Mwinamo, calls such a phenomenon “copycat businesses”.

Alternatively, still in the absence of institutional support, but if their human capital and skills are high, then entrepreneurs veer towards businesses that can preserve their already acquired skill sets. The earlier examples of Njeri and Ogenda fall into this category.

However, in a regional environment with high levels of institutional support but still in a developing country context, then those with low human capital angle for experiential replication while those with high human capital skills launch businesses that leverage their skills via new networks, products, and service in creative ways. In contrast, entrepreneurs in developed countries, according to John Dencker and his research team, thrive with business differentiation and ambitious path-dependency that come with strong institutional support.

In summary, before we judge the trajectory of businesses around us, let us examine the ability of entrepreneurs at the bottom-of-the-pyramid who must meet necessities that precludes them from building the ventures of their dreams.

Entrepreneurs desirous to foster creativity must acquire more skills in business, marketing and strategy, among others, all while pursuing support mechanisms from incubators, accelerators, universities, mentors, and coaches.

Dr Scott may be reached on [email protected] or on Twitter: @ScottProfessor