Evaluation of the Relationship Between Incubation Practices, Entrepreneurial Orientation and Performance of Incubator Centres in Kenya

Abstract

Small businesses are the fundamental drivers of Kenya’s economy. However, empirical evidence shows that in a highly turbulent business environment, 46.3 percent of small businesses tend to fail in their first year of operation in Kenya. It was assumed that, with appropriate use of Entrepreneurial Orientation (EO), these businesses would take off and become successful. Despite EO intervention, the failure rate of 46.3 percent of small businesses is high, a great concern to the government and development partners. To reduce this failure rate, the Government of Kenya licensed and mandated incubators to nurture small business owners. Despite their presence, small businesses in Kenya still face unique problems of uncertainty, poor innovations and slow evolution. The purpose of this study was to investigate the relationship between incubator practices, entrepreneurial orientation and performance of incubator centres in Kenya. The study was guided by client selection criteria, incubator funding and entrepreneurial management as independent variables, EO as the moderator and performance of incubator centres as dependent variable. The study was anchored on Resource Based Theory which supports the strategic entrepreneurship concept. The study used a correlation design because it focused on a causal-effect relationship. The study population was 51 incubator managers. Secondary data was obtained from published sources such as institutional reports, manuals and research done by other scholars. Structural Equation Modelling (SEM) approach was used to analyze the measurement model and test the hypothesized relationships in this study. Hierarchical moderated regression model was used to measure the strength of the relationship between incubation practices, EO and performance of incubator centres in Kenya. The joint effect model results indicated that client selection criteria had the most significant relationship with performance of incubator centres (Regression coefficient=1.441, p-value<0.05=0.001, followed by entrepreneurial management (Regression coefficient=-0.041, p-value<0.05=0.856). In addition, analysis showed that entrepreneurial orientation had a moderating effect on incubation practices and performance, yielding a significant R2 change of 0.075 that is 7.5 percent additional variance. The study recommends that, the incubator centres should put proper institutional systems in place to track and categorize graduate incubatees through proper record keeping of the previous incubatees history, to minimize failure of incubators, the state department of Industrialization should embark on developing policies that will assist in incorporation and management of incubators whether public or private. The department should also develop entrepreneurship skills and capacity building programmes that match the technical and entrepreneurial skills and mind-set within the incubation process. Sensitize and re-orient the growing labour force towards the entrepreneurial development programmes. Partnerships with relevant stakeholders are established to ensure relevance of our youth in the job market. It is envisaged that the findings of this study offer positive insights to entrepreneurs, academicians and financiers contribution to reshaping government policy as far as optimal management of business incubators is concerned. CHAPTER ONE