Entrepreneurship and Economic Growth in Developing Countries: The Case of the Kenyan Cultural and Institutional Environment

Jacob Højgaard & Patrick Jones Vestergaard

Student thesis: Master thesis

Abstract

Over the last 50 years, Africa has not been able to keep up with other developing countries and regions (Mills, 2010). The region of Sub-Saharan Africa has largely remained poor with income levels continuing to lag significantly behind the rest of the world (Tupy, 2014). In attempts to find a solution and the cause for economic growth, the field of entrepreneurship has increasingly been drawing the attention from economists, politicians and other practitioners. The world has seen a lot of government effort in trying to actively manage entrepreneurial output, however, a new string of research argues that entrepreneurs need something entirely different and cannot only be established from the top down. Rather, the entrepreneur needs a culture that is encouraging and conducive to the basic entrepreneurial activities and that the prevailing economic, political, and legal institutions are offering the required freedom and enforces sufficient protection (Baumol 2007). From this perspective, this thesis aims to contribute to the debate by asking how the cultural and institutional environment influence entrepreneurs and how that is significant for Kenya’s economic growth? To answer this research question, this thesis is conducted following a pragmatic approach, and is based on qualitative data gathered through semi-structured interviews with stakeholders involved with the entrepreneurial scene in Kenya, all of which were conducted during a field study in Nairobi from February to March 2016. Having applied a cultural framework of five belief systems, as inspired by Grudem & Asmus (2013), Baumol (2007), and Landes (1999), as well as institutional theory based again on the ideas of Baumol (2007) and the Index of Economic Freedom (2016), the findings suggest that the cultural and institutional environment is hostile to entrepreneurs. The Kenyan government does not adequately protect property rights in order to secure the discovery of profit opportunities, nor the freedoms for exploiting them. Specifically, a weak rule of law and high regulatory complexity makes starting and running a business a tiring and troubled affair. Moreover, cultural values and beliefs discourage entrepreneurs from pursuing a career of self- employment and taking business risk. In the end, the insights of this thesis have been used to develop a set of policy recommendations, and provides additional understanding of the relationship between entrepreneurship and economic growth, and its dependence on culture and institutions, which framed the problem field of this thesis.

EducationsMSc in Management of Innovation and Business Development, (Graduate Programme) Final Thesis
LanguageEnglish
Publication date2016
Number of pages125