AFRICAN

JOURNAL
ECONOMICS - AJOBE

VOLUME 2, NO. 1, 2007

OF

BUSINESS

&

VOLUME 2, NO. 1, 2007

Table of Contents
Understanding Entrepreneurship and Entrepreneurial Behaviour: Towards
A Three-Stage Process Model
Michael K. Korir and Peter K. Kibas

Debt as a Tool for Monitoring and Controlling Firms in Emerging Economies:

The Kenyan Experience
Samuel O. Onyuma, Thomas K. Cheruiyot and Agatha N. Okumu

24

The Effects of Accessing and Controlling Capital on the Performance of

Horticultural Food Producers and Sellers in Eldoret, Kenya
Violet Mugalavai, Harry Ododa and Grephas Opata

46

Reorganizing Corporate Governance Structures in African Stock Exchanges

Samuel O. Onyuma and Alfred Ouma Shem

60

The Moderating Effects of Socio-Demographics on Business Start-Up Motives

Among Small Business Entrepreneurs in Eldoret Municipality, Kenya
Michael K. Korir and Thomas K. Thoruwa

86

Challenges Facing E-Tourism Adoption in Kenyas Tourism Sector

Pius O. Odunga, Shem W. Maingi and Stephen L. Ongaro

112

Wildebeest Migration and Tourism Seasonality Pattern and Dynamics

In the Mara Ecosystem, Kenya
Noah W. Sitati and Bob E. L. Wishitemi
Liberalization and Technology Transfer Dilemma in Kenyas Industrial
Development: The Case of Small and Micro Enterprise Sector

144

Daniel K. Tarus, Stephen I. Nganga and Peter I. Omboto

158

An Analysis of the Factors Influencing Access to Agricultural Finance

Small Holder Horticultural Farmers in Uasin Gishu District, Kenya
Hellen Mutai, Thomas K. Cheruiyot and Daniel K. Tarus

170

Call for Papers

187

ABSTRACT
Understanding Entrepreneurship and Entrepreneurial Behaviour:
Three-Stage Process Model

Towards a

Michael K. Korir and Peter K. Kibas

Abstract
Studies on entrepreneurship and entrepreneurial behaviour have often proceeded without
a common ground or model. This paper reviews the various strands argument on the
concept of entrepreneurship and builds a process model for studying entrepreneurial
behaviour in an African context. From the extant literature, a three-stage process
framework on entrepreneurial behaviour is suggested. The first stage of entrepreneurial
behaviour involves the development of the entrepreneurial mindset. This involves the
conception of the business ideal and sporting of a business opportunity. The second stage
is to have the drive and motivation to start or run a business venture. This stage involves
the development of the will and courage to actualise the conceived business idea.
Finally, the third stage is to develop a strategic posture by invoking the entrepreneurial
orientations at the post start-up level. This paper thus discusses these three phases
extensively in the light of entrepreneurial process models.
Key words: Entrepreneurial behaviour, Entrepreneurial mind-set, Entrepreneurial
motives,
Entrepreneurial
orientations

Debt as a Tool for Monitoring and Controlling Firms in Emerging Economies: The
Kenyan Experience
Samuel O. Onyuma, Thomas K. Cheruiyot and Agatha N. Okumu
ABSTRACT
Given the current financial problems facing most bank and non-bank firms, monitoring
and control of debtors activities becomes very crucial. Based on the concept of
corporate governance, a firms ownership structure and the degree to which such
structures impose monitoring and control determine how a firm is managed and may
reflect on its performance. The diverse and widespread share ownership in developing
economies has resulted in weak monitoring and control by firm shareholders.
Consequently, debt is currently emerging as a strong tool for monitoring and controlling
Kenyan firms. To establish effective, competitive, and sustainable businesses that can
contribute to the welfare of society through wealth, employment and economic
development, effective debt monitoring and collection play a crucial role. This paper
provides a critical analysis of the emerging role of debt as mechanism for monitoring and
controlling debtors. It argues that to continue being in business, the survival of creditors
depends on debt repayment by borrowers, and that without dependable debt-collection,
no amount of supervision or competition can make lenders operate efficiently. Finally, it
suggests important requirements if debt is to critically play a role in corporate governance
of debtors.
Key Words: Corporate governance, Financial System, Credit, Bank stress

The Effects of Accessing an Controlling Capital on the Performance of

Horticultural Food Producers and Sellers in Eldoret, Kenya
Violet Mugalavai, Harry Ododa and Grephas Opata
Abstract
In many developing countries, urban agriculture is a pro-poor livelihood initiative for the
urban poor who are involved in various micro-activities such as production, processing,
preservation and selling of horticultural food crops. This study was carried out among
the low income horticultural food producers and sellers in Eldoret municipality.
The Purpose of this paper is to highlight how accessing and controlling the resources
required for horticultural food production and selling affects the livelihoods of the low
income producers and sellers engaged in urban agriculture. An exploratory survey design
was used to collect both quantitative and qualitative discussions among 220 respondents.
Quantitative data was analyzed using the SPSS (13.0) software whereas qualitative data
was triangulated into the discussions of the quantitative findings. The results revealed
that the low income producers are more able to access the more financially oriented
capital whereas sellers survive on the more socially oriented capital. However, sellers,
more than producers are able to control both financial and social capital within their
means. Sellers were also found to be more oriented to using the knowledge and skills
required for good entrepreneurship. The livelihoods of the study groups were thus
affected differentially by the access and control of resources required, and by the
knowledge and skills used, which had an effect on the dependable livelihoods.

Reorganizing Corporate Governance Structures In African Stock Exchanges

Samuel O. Onyuma and Alfred Ouma Shem
Abstract
Demutualization is the process by which stock exchanges streamline governance issues
relating to ownership and management, improve and expedite decision-making, and raise
new capital. Worldwide, demutualization is driven by forces of globalization,
competition, donor influence, governments and advances in technology of trading
securities. Converting a stock exchange from a member-owned, managed to a for-profit
shareholder-owned corporation triggers many issues relating to ownership, management
and regulation. Many articles have examined the governance of stock exchanges;
however, those devoted to African stock markets are scanty. This articles evaluates the
relevance of factors driving demutualization and reviews the challenges and opportunities
it presents to African stock exchanges. For African exchanges to realize their full
potential as financially viable, liquid and emerging markets status, they have to
restructure. There are both prospects for, and problems of demutualization. African
stock exchanges must have market justification reflected in a critical mass of trading
activity to support financial viability. Government support is critical in managing
demutualization process and hastening the regulatory approval. They must desist from
donor pressures to demutualize and move when it is favourable to do so cautiously
through preparation, process, and post-demutualization.

The Moderating Effects of Socio-Demographics on Business Start-Up Motives

among Small Business Entrepreneurs in Eldoret Municipality, Kenya
Michael K. Korir and Thomas K. Thoruwa
Abstract
The motivations to start a business are well explored in the Western countries particularly
in the U.S. Research efforts to examine the same are, however, scanty in an African
context like Kenya. To fill this knowledge gap, a study was specifically necessary to
validate the Push-Pull theory on motivations to start a business and further explore
whether entrepreneurs socio-demographic backgrounds of gender, age, level of
education, religion and parental occupation, could have confounding moderating effects
on these motives. A self-administered structured questionnaire was distributed to a
sample of 387 entrepreneurs operating small business within Eldoret Municipality. Area
clustering combined with systematic and simple random sampling strategies were applied
in selecting the respondents. Factors analysis resulted to the formation of four underlying
dimensions of business start-up motives namely: Status maintenance, Economic
independence, Status withdrawal and Sense for responsibility. The results further
indicate that the positive-pull factors account for a greater proportion of variance of starup motives as opposed to the negative-push factors. Analyses of Variance results of the
extracted start-up motives factors as dependent on socio-demographics, shows that,
gender, level of education, religion, parental occupation and marital status have
significant effects. The results have practical implications for development of role
models, entrepreneurial education and training in Kenyan context.
Key Words: Entrepreneurial motivation, Small business formation, Push-pull theory

Challenges Facing E-Tourism Adoption in Kenyas Tourism Sector

Pius O. Odunga, Shem W. Maingi and Stephen L. Ongaro
Abstract

The Tourism sector has been a pioneer in adopting new ICTs. It has been by three main
innovation waves: Computer Reservation System in the 1990s. Despite the fact that the
Tourism sector has been a pioneer in the adoption of new ICTs, the adoption of Internet
based e-Business has not been as much receptive globally (OBrien (2004).
This study aims at developing a thesis surrounding the issues that influence the adoption
of Internet based travel reservation technology in Kenya by identifying challenges that
face the adoption of E-Tourism in Kenya. The study was in Nairobi province. Data were
collected using a Questionnaire and a structured Interview schedule. Subjects were
drawn from randomly selected travel agents and tour operators. Interviews were
conducted on KATA and KATO.
The Questionnaire findings indicated that, the organizations highlighted the rate of return,
Language differences globally, integrity of the reservation systems over the Internet,
Over-reliance on Global distribution systems, and competition based on price as the
generic challenges.
However, identified contextual challenges were: The treat of competitors establishing
substitute products and services over the Internet: The lack of legal or regulatory
precedents to regulate the development of e-commerce in Kenya: Local and foreign
competition; Poor Internet connections and bandwidth; and Insecurity concerns over the
Internet.
On the other hand, it is also valuable noting that the interview findings from KATA &
KATO partly complemented major findings from the questionnaire. The identified
challenges were:- Airlines Zero commissioning hence disintermediating the travel
agent; Airlines were using the internet to approach clients upfront; There were
inadequate regulations on Electronic commerce; Customer relationship management
(CRM) over the Internet; Sophisticated tourism product and that; The lack of
standardization in the industry.
A logit regression model was developed to investigate the level of significance of the
explanatory/antecedent variables to the depended variable (transactional use of the
internet). Based on the results of the study, several key recommendations were made to
various institutions so as to counteract with some of the problems noted. A key
recommendation was that Institutions of higher learning, Airlines and GDS providers
should provide induction and educative programmes for Agents, Tour operators, local as
well as foreign travelers on the use of online reservation systems.
Keywords: Internet; E-Tourism; Travel distribution; Online travel; Tourism.

Wildebeest Migration and Tourism Seasonality Pattern and Dynamics in the Mara
Ecosystem, Kenya

Noah W. Sitati and Bob E. L. Wishitemi

Abstract
Seasonal pattern and the general population trends of resident and migratory wildebeest
(Connochaetes taurinus hecki Neumann) and their influence on tourism attraction in
Masai Mara ecosystem were investigated. Population trends were analyzed using aerial
census data collected through systematic reconnaissance flights by the Department of
Resource Survey and Remote Sensing (DRSRS). Regression analysis was used for
population trend analysis. The impact of changes on wildebeest migration on tourism
was analyzed by comparing changes in tourism numbers during migration and nonmigration periods.
Relationship between tourism and wildebeest movement.
Comparison of tourist densities during migration and non-migration was used to get an
insight into possible attractions between tourists and wildebeest. The result show that
migratory wildebeest population in the Masai Mara ecosystem has declined from about
1.5 m in 1977 to about 220, 000 in 1997, a 91% decline. Tourism seasonality in the Mara
correlated with wildebeest migration and rainfall pattern.
Keywords: Migratory wildebeest, Resident wildebeest, Trend analysis, Rainfall, Tourism
seasonality,

Liberalization and Technology Transfer Dilemma in Kenyas

Development: The Case of Small and Micro Enterprise Sector
Daniel K. Tarus, Stephen I. Nganga and Peter I. Omboto

Industrial

Abstract
Technology is an essential ingredient in the growth and development of both small and
large firms. It influences the performance of products and processes by way of reducing
costs, improving quality and functionality. Although there are several methods of
acquiring new technology, several studies shows that international trade and direct
foreign investment are the main conduits of technology transfer. Developing countries
have been known to be takers of technology offered by developed countries.
This paper interrogated the appropriates of imported technology especially for small and
micro enterprises (SME). The thesis of this paper is that SME may not fully utilize
technology emanating from developed countries due to inadequate institutional capacities
to support their adaptation and absorption; such as training, research, model
demonstration sites, credit among other constraints; hence the need to develop their own
technologies. This need is even compounded by international policies of protecting
intellectual property rights. This notwithstanding, the government policies have focused
on transfer of technology from developed with minimal policies for domestic technology
development.
Therefore for meaningful domestic technology development to take place there is need to
build capacity of universities and technical institutions to undertake technological
research. More importantly, the role of technical institutions in technological
development especially in the SME sector is paramount; hence the current wave of
upgrading of such institutions to universities may be a blow to domestic technology
development. Similarly, effective and efficient linkages between research institutions
and SME sector need to be in place and lastly a conducive environment for business to
thrive must be created and nourished.

An Analysis of the Factors Influencing Access to Agricultural Finance by Small Holder

Horticultural Farmers in Uasin Gishu District, Kenya

Hellen Mutai, Thomas K. Cheruiyot and Daniel K. Tarus

Abstract
This study was set out to establish the factors that hinder horticultural smallholders from
accessing AFC loans for revamping the sub sector production. Agriculture is touted as
the mainstay of the Kenyan economy, employing over 70% of the working Kenyans.
Increased land scarcity in Uasin Gishu District may be attributed to high population
growth in the district and hence the need to increase per acre farm productivity. This
study sought to analyze the factors influencing access to AFC loans by smallholder
horticultural farmers. The general objective of the study was to identify the level of
benefit of AFC loans among smallholder horticultural farmers in Uasin Gishu District
and also to analyze the factors that limit accessibility of the AFC loans by smallholder
horticultural farmers in the district.
The study was analysis smallholder horticultural farmers in Uasin Gishu District. The
study used multistage random sampling method, a total population of 300 farmers
interviewed after being selected. The study used questionnaires in collection of the
primary data. A binary logit model was used to undertake the analysis whereby a total of
eleven variables were considered.
The logit model used had the Cox and Snell R Square of 0.659 and Nagelkerke R Square
of 0.879 and hence proved reliable in explaining the factors influencing smallholder
horticulture production in Uasin Gishu District. The results showed that only 31.2% of
the smallholder horticulture farmers in the district benefit from AFC loans and that
acquisition of title deeds for their farms, the sizes of their farms and also the availability
of other sources of loaning facilities hinder them significantly from obtaining AFC loans.
It was recommended that the government should institute policies that are friendlier for
the farmers should be issued with title deeds of their farms with fewer bureaucracies in
order to enable them secure AFC loans by using the title deeds as security. As a result of
the implementation of farmer driven policies in agricultural extension, farmers should be
on the fore-front in consulting the most appropriate technologies capable of increasing
farm productivity.
Key words: Adoption studies, logit regression, economic modeling, agricultural finance
corporation