A Reflection Approach on Business Incubation Services: Accelerating Startup Businesses in Kenya

A Reflection Approach on Business Incubation Services: Accelerating Startup Businesses in Kenya

Victor Otieno & Stephen Muathe
School of Business, Economics & Tourism Kenyatta University

DOI: https://doi.org/10.47772/IJRISS.2023.70605

Received: 02 May 2023; Accepted: 09 May 2023; Published: 16 June 2023

ABSTRACT

The focus of this study was to determine how business incubation services accelerate the growth of start-ups in Nairobi City County, Kenya. The specific objectives were to examine the effect of networking services, physical incubation infrastructure, management advice, financial resources, and business planning on the growth of startups. The theories of the firm, stochastic theory, social network theory, real option theory and trait theory of entrepreneurship anchored the study variables. A descriptive research design was used, and a sample of 227 respondents was selected using proportionate stratified and simple random sampling techniques from a target population of 567 startups that had been in an incubation process. A questionnaire was used to collect primary data, and the data was analyzed using descriptive and regression statistical techniques. The findings indicated that there was a significant and positive relationship between networking services, physical infrastructure, management advice, financial resources, and business planning and the growth of startups. In order to have access to physical infrastructure, startups are encouraged to join startup associations like the Association of Startups and SME Enablers of Kenya, the Association of Countrywide Innovation Hubs, and other independent incubation facilities. A clear act governing startups can offer tax incentives to startups, reducing costs in the form of financing and providing tax breaks to startup investors, improving their financial standing. Incubator owners are encouraged to take startups through business planning courses that are critical to ensuring they scale up their businesses. Finally, through the triple helix model, business incubators can partner with universities and government agencies to create synergy instead of competing among themselves.

Keywords: Business Planning, Startups, Networking Services, Incubation Infrastructure, Management advise, Financial Resources and Triple helix model

INTRODUCTION

Worldwide, new ventures are formed with the intention of being successful. This is not always the case, as failure is a constant possibility in the competitive and dynamic environment in which start-ups operate (Rompho, 2018). According to evolutionary theorists, this phenomenon is a force of selection designed to eliminate uncompetitive enterprises, thus contributing to the population’s maintenance of health organizations. On the other side, evolutionists say that natural selection should not be used to estimate the optimal number of enterprises that should exist in a given economy. They claim that this number should be determined empirically (Afriana, 2018). As a result, more initiatives have been taken to reduce the startup failure rate. Building strong institutions and a supportive business climate are both essential components of this novel phenomenon, known as business incubation, which aims to lower the likelihood of startup failure (Rompho, 2018).

In this situation, business incubation is defined as a unique institutional structure devised by governments worldwide to assist start-up businesses in surviving and growing in today’s competitive business environment. The survival, turnover, and job creation of start-up businesses are all positively impacted by the low-cost strategy of business incubation. The Organisation for Economic Cooperation and Development’s (OECD) 2018 report pointed out that the newest businesses fail within their first five years, often because they don’t have enough management skills or money.

In Africa, startup businesses face a number of challenges, some of which are a deficiency in managerial skills, financial issues, and a lack of credit. Most business incubators are physical locations where one can establish a firm under one roof with employee disinterest and insufficient institutional backing. As a result, most governments have gradually increased their commitment to company incubation as part of broader support for the small business economy. For example, in South Africa, where government incubation programs are designed to help budding entrepreneurs develop their entrepreneurial skills and knowledge, most business incubators are physical locations where one can establish a firm under one roof (Lose, Maziriri, Choto, &Madinga, 2017).

Despite the importance of business incubators for start-ups, most countries, particularly those in Sub-Saharan Africa, are lagging behind in adopting the incubation process as a way of supporting startup firms (Rogerson, 2018). This was echoed by Asikhia et al. (2020), who argued that in Sub-Saharan African countries, compared to countries where startup incubation has a longer history, such as Eastern Europe, the Asia-Pacific region, Brazil in Latin America, and North America, the growth of startups is dismal. There are a number of countries in sub-Saharan Africa with rates of business incubation that are as low as 2%. According to the analysis, the only countries with rates higher than 10% are Nigeria and South Africa (Rogerson, 2018).

The history of incubation in Kenya can be traced back to 1967, when Kenya Industrial Estates (KIE) Limited was established as a subsidiary of the Industrial and Commercial Development Corporation (ICDC) with the major role of promoting indigenous entrepreneurship by financing and developing small and micro enterprises. KIE was established to facilitate the development and incubation of micro, small, and medium enterprises (MSMEs) countrywide by establishing industrial parks and providing credit and business development services (BDS) in a sustainable manner. Kenya Industrial Estates is mandated to provide finances, work space, business development services (BDS), and promotion of subcontracting linkages to MSMIs in order to foster the development of indigenous industries countrywide (KIE, 2010).

Over the last decade, commercial and public business incubators have grown in number. In Kenya, there are two bodies that regulate incubation firms: The Association of Startup and SME Enablers of Kenya (ASSEK) has innovation hubs located throughout Kenya. ASSEK (2021) describes the organization as an association that supports the development and expansion of SMEs and startups by bringing together the organizations that do so and representing their interests. There were 42 incubatee firms that were registered with ASSEK by the end of 2021. According to Countywide Innovation Hubs (2021), an organization that promotes the activities and programs of member hubs while also supporting their ambition of establishing and testing enterprises that would have an impact over the long term in the rural parts of Kenya, there are 23 incubation firms that have registered with them and support businesses in rural areas. In total, 63 firms have registered with the two bodies and offer incubation services to different startup firms. KEKOBI Business Incubator, IHUB, NAILAB, and Netfund are recent examples. Among the newest public incubators in Kenya are the Chandaria Innovation Centre situated at Kenyatta University, the C4D Innovation Hub at the University of Nairobi, and the JKUAT Innovation Hub. Business incubation is growing in Kenya, but its efficiency in assisting new businesses is unknown (Kihugu, 2017). As a result, an in-depth study is required to determine how much business incubation assists local startups.

Kenya has become a major source of new ideas and big technological changes in the last few years (Chirchietti, 2017). This is mostly because the new entrepreneurs are willing to take a risk with their crazy ideas. When people in Africa make this leap of faith, they often go on to have a good life. Many great new ideas have come to fruition (Nzomo, Mwangi, Matu-Mureithi, Muchiri, & Rutenberg, 2020). From mobile money transfer and mobile banking services to ethical sports betting platforms, Kenya has become a point of interest for investors as new ideas keep coming and more and more innovators have the courage to take on the risk of putting their unique ideas into action (C4DLab, 2021). In particular, start-up businesses require a slew of incentives to ensure their survival, considering the severe limits on their expansion (Muatheet al., 2022a; Muatheet al., 2022b). When people in Africa make this leap of faith, they often go on to have a good life. Many great new ideas have come to fruition. As a result, it’s natural for businesses and entrepreneurs to seek out all available assistance, which is where business incubators come in.

The majority of startup founders are against having formal structures because they claim it kills creativity. However, in order to grow, execution becomes paramount, so hiring specialists and having structure are important. The specialists are able to use their knowledge to make the organization more efficient and bring about best practices within their areas of expertise. This helps catalyze future growth by creating slack in the rest of the firm. According to IBM (2013), since 2000, half a dozen small innovation hubs and incubators have been established in Nairobi, making it the startup capital of Africa, and the city seems to be crawling with budding entrepreneurs. Over time, tech hubs to help this emerging crop of young entrepreneurs and businesses have grown from two in 2010 to the existing sixteen in Nairobi. Muiru and Moronge (2013) pointed out that these hubs range from open innovation spaces and co-working spaces to more formal incubators and accelerators.

Several collaborative hackathons to bring in new improvement ideas have also been run at the same time that millions in grants were awarded to guide upcoming technology ventures (Matheri, 2014). However, there have been increasing reports that Kenya’s technological boom has been shrouded in hype and is not based on the creation of truly successful businesses (iHub, 2014). One of the primary concerns is the scarcity of resources. A study by Wachira (2017) found that only one out of every five start-up businesses survives for five years, and one out of every three start-ups survives for ten years. A number of different factors contribute to the high failure rate of new businesses. One of the most immediate concerns is that there are not enough resources. The firm theory argues how important a company’s money is to its overall success through profitability. Therefore, a business incubator can fail if it doesn’t have the required financial resources as well as other necessary resources (Muatheet al., 2022a).

Statement of the Problem

In most developing nations, including Kenya, startups are the foundation of the entrepreneurial landscape, particularly in urban areas. They are vital to the nation’s economic success (Karitu, Wangondu, & Muathe, 2022; Muathe et al., 2022a; Muathe et al., 2022b). As a result, their prolonged expansion may assist in reducing unemployment. According to a report by OECDE (2018), the vast major ity of new businesses are doomed to fail within their first five years of operation due to a shortage of financial resources and management competence; hence, the development of incubators is an absolute requirement to provide the necessary incubation services that increase the survival rate of startups. Numerous studies on company incubation and startup growth have been conducted both locally and abroad. Asikhia et al. (2020) assessed the role of business incubators in fostering entrepreneurship and the growth of small and medium-sized enterprises (SMEs) in Nigeria.

In Nigeria, at least 70% of Nigerian startups that are still in operation after three years use incubation. In contrast, this study was conducted in Nigeria, while the subsequent one was conducted in Kenya. Dvalidze and Markopoulos (2019) found that the chances of these businesses being able to work and being successful are still not very high, despite the fact that the rate at which new businesses are being formed is increasing. In Kenya, startups confront a number of hurdles, such as those resulting from their size, age, and depletion of resources, which might hinder their growth and survival. According to Karitu and Namusonge (2019), insufficient financial resources, a lack of markets, and subpar managerial skills are among the biggest things holding back the growth of new businesses in the country. In addition to their peers, new enterprises face intensifying rivalry from established firms operating in their respective industries’ specialized marketplaces. Omweri (2016) conducted research at the Nailab Centre in Kenya on the role of business incubation centers in encouraging young people to launch their own firms. The result of the study showed that incubators are a crucial component of an ecosystem that helps business owners test their ideas, launch their companies, grow, and identify the appropriate strategic investors so they can compete on a local, national, and international level. This study, however, solely looked at young entrepreneurs at an incubation facility, while the current study looked at all new enterprises that have undergone the incubation process at incubation hubs in Nairobi City County, Kenya.

Tiren (2020) evaluated the performance of business incubation in Nairobi County and found a correlation between business incubation resources, entrepreneurial traits and skills, and the profitability and exit time of incubated businesses. This study, however, only looked at the overall efficiency of firm incubation. Given this background, most of the studies have concentrated on business incubation and organization performance, leaving a gap on how business incubation results in entrepreneurial culture and business growth. Thus, this research aimed at examining the effect of business incubation services on the growth of start-ups within Nairobi City County, Kenya.

Objectives of the Study

1. To determine the effect of networking services on growth of startups in Nairobi City County in Kenya.
2. To examine the effect of physical infrastructure on growth of startups in Nairobi City County in Kenya.
3. To establish the effect of management advise on growth of startups in Nairobi City County in Kenya.
4. To investigate the effect of financial resources on growth of startups in Nairobi City County in Kenya.
5. To examine effect of business planning on growth of startups in Nairobi City County in Kenya.

THEORETICAL REVIEW

Theory of the Firm

This theory was developed by Churchill and Lewis in 1983. It centers on the notion that the growth and productivity of any firm, regardless of its size, are likely to follow a pattern that can be predicted, and that this pattern is represented by successive phases of increasing complexity. The firm theory observes that every small or medium-sized organization is a result of the growth of infrastructure as well as technological advances. This theory explains the connections that exist between the inputs of the manufacturing process and the finished products, which may be thought of as goods and services (Churchill & Lewis, 1983). In this scenario, one could consider the raw materials, labor, and machinery utilized in the manufacturing of goods and services to be examples of inputs. This contributes to the growth of micro and small enterprises, which was the main interest in this study.

The stages of existing, surviving, being successful, taking off, and reaching resource maturity are included in this growth model (Churchill & Lewis, 1983). Because acquiring new clients was the primary focus during the time the company was in operation, there was either no formal system in place or its scope was severely constrained. In addition, the organization is structured in a flat hierarchy, which necessitates that managers and owners utilize a management style that is characterized by direct supervision of staff members. This is a requirement of the organization. The adoption of the formal system and the expansion of the organization’s structure to include more layers are both processes that start when the organization enters the survival phase and continue as the organization matures. This expansion of the organization’s structure to include more layers begins when the organization enters the survival phase. It is common practice for managers or owners to delegate particular obligations to staff working under them.

When a business has reached the stage of success, its owners and managers have the option of either continuing to run the company in the same operational and performance state it is in at the moment or adopting an expansion strategy instead (Churchill & Lewis, 1983). Proper financial management, maintaining relationships with other businesses, and adapting to shifting customer demands and entrepreneurial methods are the fundamental priorities of the owners and managers of the company. The organization’s present systems are well established. Due to the fact that Churchill and Lewis’ theory of firm growth explains the process of growth and expansion, it is intrinsically tied to the growth of startup enterprises in Nairobi County. It describes the development of a startup from inception to maturity.

Stochastic Theory

The theory emerged from the economics discipline (Hirschmans, 2008). The expansion of small and micro companies is influenced by a variety of factors (Hirschmans, 2008). There is no one factor that has a greater impact on the expansion of new or small enterprises, including microbusinesses and startups, than the others combined. In his law of proportional effect, the size of the business is not correlated with the rate of its expansion (Gibbs, 1997). This demonstration that other variables such as the development of infrastructure and financing affect the growth of small and micro enterprises and not dependent on their size. People are able to access tiny and micro companies thanks to these features, which enables them to make purchases of the goods and services offered by these businesses (Gibbs, 1997).

Hirschman (2008) asserted that the growth rate of small and micro firms drops at varied rates as the size of an organization increases, whereas the growth rate of large organizations remains constant. When the size of the company increases, its performance tends to get better as a consequence of a rise in the number of customers as well as the amount of credit that is offered to the market. Small and micro enterprises struggle to succeed because they frequently incur financial losses and must also address other challenges, such as the development of appropriate infrastructure. This theory was used to explain how physical infrastructure in incubators and availability of financial resources influence the growth of startup businesses. These factors are independent of one another, and none is more influential than the others.

Social Network Theory

Birley advocated the theory of social networks in 1985. The spirit of entrepreneurship was the impetus behind the development of the theory, which described a network as the interaction that exists between business owners and the external environment in which they conduct their operations. This theory was developed as a result of the work done by entrepreneurs. This environment might include players such as consumers, suppliers, the government, research institutions, or financial institutions. Other stakeholders might also be included. Developing a robust network is essential to the success of every company, regardless of its age or size, and this is true regardless of the industry in which the firm operates. According to this school of thought, networking is one of the most effective ways for business owners to gain access to information, advice, legitimacy, and other helpful resources that are relevant to their company or field of work (Kaberia&Muathe, 2019).

Kanini, Muathe and Bula (2022) noted that the ease with which one can acquire knowledge and direction through the utilization of various networks is one of the most significant advantages associated with the process of beginning a new business. For instance, having links to venture capitalists and businesses that provide professional services enables access to important talent as well as market intelligence. Another example would be having connections to professional service providers. In order to identify potential business possibilities, entrepreneurs frequently draw on their networks for a variety of purposes, including gathering information and generating new ideas. The start phase is not the only phase in which reliance on the network is present. Business owners continue to rely on their networks as their major source of information, assistance, and problem-solving, with particular relationships providing access to a wide array of resources. In the terminology of network theory, the concept of multiplicity refers to the practice of including numerous forms of interaction in a single relationship. Relationships with distributors, suppliers, competitors, and client organizations can all be quite important in and of themselves for the information and knowledge that they facilitate.

According to the social network theory, effective business owners are those who are able to capitalize on the existing social and professional connections they already have in order to generate economic advantages for both themselves and their companies. According to Kaberia and Muathe (2019), favorable social networks can facilitate the rapid growth of start-ups. This rapid growth may be the impetus for the evolution of networks in order to accommodate the shifting requirements of the ventures. In addition, Kaberia and Muathe (2019) claim that positive social networks can also help existing enterprises rapidly expand, which can be facilitated by the rapid growth of existing businesses. As a result, this theory is useful for this research since it explains the significance of entrepreneurial networks in new businesses.

Real Option Theory of Business Incubation Process

The real option theory supports the contribution of the business incubation process to the growth of startups. This theory was advocated by Hackett and Dilts in 2004. It looks at the sustainability of incubatee startups in terms of incubatee growth and financial performance at the time of incubator exit as a function of the incubator’s ability, developed over time and through the accumulation of innovative venture development capabilities and resources, to create options through the selection of weak but promising intermediate potential firms for admission to the incubator and to elicit innovative venture development capabilities and resources from these firms. Hackett and Dilts (2004) showed how to see the incubation process through the lens of real option theory. According to their research, this article connects the business incubation process with real option theory and identifies real options in the business incubation process.

According to Kogut and Kulatilaka (2001), the real option is an investment in physical assets, human resources, and organizational capabilities, which provides an opportunity to respond to possible future events. Real option theory deals with the management of uncertainty through the challenges of today’s economic environment and the rapidly changing business environment (Dixit &Pindyck, 1994). According to Mohammed et al. (2017), business incubation plays a crucial role in sustaining failing businesses by providing a wide range of assistance in the form of office equipment, computer equipment and services, business plans and product development, affordable office space, training facilities and coaching, legal advice and intellectual property, and business networking.

From an operational or business perspective, business incubators are regarded as a great support for entrepreneurs, as they provide a suitable ecosystem for the development of new companies, assist entrepreneurs in identifying new business opportunities, and provide assistance in the three fundamental functions of entrepreneurship: innovation and technological development; financial risk; and administrative management of the business to ensure its sustainability (Zapata-Guerrero et al., 220). The business incubation theory justifies this study as it expands on some of the variables that are to be investigated in this study. The need to integrate theoretical foundations and practice motivated the researchers to further investigate the relationship between business incubation practices and the sustainability of incubated start-up firms in Kenya.

Trait Theory of Entrepreneurship

McClelland was a pioneer in the development of the trait theory of entrepreneurship (1961).Individuals are able to acquire entrepreneurial characteristics through the process of learning, and this learning can be advanced to higher levels if the individual desires to do so. This is how McClelland’s theory claims that individuals acquire these traits. McCLelland (1961) asserts that successful businesses can be distinguished from failed ones by examining both their internal and external loci of control. The drive to achieve one’s goals is one of the characteristics of an entrepreneur’s personality that helps explain why their company may maintain a competitive advantage even when the market shifts. According to Boudreaux, Nikolaev, and Klein’s (2019) research, entrepreneurship requires a person to possess all of these attributes.

Entrepreneurs are self-disciplined and innovative individuals, which enables them to make better-informed judgements when faced with difficult circumstances (Boudreaux, Nikolaev, & Klein, 2019). This characteristic of a person’s personality is characterized by a natural drive to take action, combined with the ability to be patient and persistent while concentrating on achieving and maintaining high activity performance standards. Personality traits associated with entrepreneurship include a strong desire to be successful to the point that one can adequately explain a company’s competitive advantage even when the market environment changes (Ndofirepi, 2020). A person’s capacity to make proper decisions in hard circumstances and adjust to changing conditions is what we mean when we talk about their tolerance for ambiguity.

Empirical Review

Effect of Networking Service on Growth of Startups

Networking is a way to create business ties, help entrepreneurs overcome feelings of isolation, and push for a better business climate. To make up for the absence of entrepreneurial networks among the businesses they nurture, incubators sometimes turn to a process known as network mediation. Networks that aid new businesses in acquiring essential information, expertise, and skills may also assist these businesses in reducing the amount of uncertainty they are subjected to. In their research, Hoang and Yi (2015) found that the provision of incubator networking services assists new businesses in acquiring a good name, market expertise, intangible resources, and financial backing from investors.

Albourini, Ahmad, Abuhashesh, and Nusairat (2020) conducted research to determine the extent to which networking practises have an impact on the level of success that entrepreneurial enterprises in Jordan experience. Their findings indicated that networking activities do have an impact. According to the conclusions of the study, there are a total of six different approaches to social networking that ought to be utilised. These include cultivating relationships within the company, growing one’s network of contacts outside the company, participating in social events, having an interest in one’s professional activities, becoming active in one’s community activities, and working to improve one’s reputation within the organisation all of which contribute to having a positive image. A questionnaire was distributed to newly founded businesses in the city of Amman, Jordan, so that a quantitative investigation could be carried out. According to the findings, the extent to which an entrepreneur is successful at engaging in the activities associated with networking is directly linked to the degree to which he or she is able to exert a significant amount of control over the direction that their company takes. The three things that have the most potential to have an effect on a person’s career are the establishment of internal relationships, the expansion of one’s network of external contacts, and active participation in professional activities.

In India, Eveleens, Van Rijnsoever, and Niesten (2017) conducted a thorough study of management theories to determine how network-based incubation might boost new business performance. They compared their findings to those obtained from earlier investigations that had been carried out on the subject. According to the research that was conducted on the topic of network-based incubation, it has been proven beyond a shadow of a doubt that this kind of business incubation may offer emerging companies access to resources, capacities, information, learning opportunities, and social capital. On the other hand, it is not clear to what extent these intermediary benefits affect the performance of new enterprises.

Abou-Moghli and Al Muala (2017) conducted research on the effect that entrepreneurial networks have on the success of ongoing company operations in Canadian manufacturing companies. There are a total of 248 businesses that specialize in the production of rubber and plastics that make up the population of this study. In order to obtain a representative sample for the study, a stratified random sample was used. We conducted an analysis of reliability, as well as one using descriptive statistics and one using multiple regression. The investigation resulted in a number of significant findings, the most significant of which was the assertion that entrepreneurial networks (including social networks, business networks, and inter-organizational strategic networks) have a big enough effect on a company’s long-term performance to be statistically significant. This was the most significant of a number of significant findings produced by the investigation. This was the most important finding to emerge from the investigation.

Pettersen, Aarstad, Hvig, and Tobiassen (2015) published their findings from a study they conducted on start-up network resources and firm incubation in Norway. Interviews with residents at a technology incubator in Bergen, Norway, were carried out in a qualitative format. The study’s findings indicated that at all stages of business development, start-ups’ ability to obtain network resources on their own was more important than the network resources made possible by an incubator. They were crucial for the acquisition of special (non-generic) knowledge that served as an innovation engine, a financial donor incentive, and a method of enhancing the company’s reputation and market access. Internal networking with other incubator firms and external network resources made possible by the incubator were both vital and complementary to one another, despite the fact that they were more general in nature and offered fewer specialized resources. The study’s findings indicate that while incubator network resources are not path-dependent, they share many traits with identity-based network resources. This is because the incubator network’s resources are not primarily controlled by financial considerations. Inter-tenant network resources can therefore provide information that is not duplicated and contains nonbinding weak links.

In Nigeria, Aladejebi (2020) conducted research on the effect that entrepreneurial networks have on the performance of small businesses. The respondents were chosen based on a well-defined sample that was used. Two small and medium-sized enterprise (SME) groups in Lagos were given questionnaires to fill out. The research instrument included a Likert scale with five points for respondents to choose from. Questions concerning networking were incorporated into the survey that was sent out. According to the findings of the poll, the general public’s opinion on networking opportunities for small and medium-sized enterprises (SMEs) in Nigeria is positive. Both of the respondent groups agreed that networking was beneficial to their respective firms.

In Tanzania, Nyangarika (2016) conducted research to determine small and medium-sized firms’ overall performance as affected by networking. For the primary data collection, questionnaires were employed, and for the secondary data collection, an analysis of documents from SMEs, which included financial and sales information, was carried out. The researcher conducted interviews with Dares Salaam City’s SMEs, and the population encompassed all of the city’s SMEs. This research focused primarily on the qualitative aspects of the topic. The findings of the study reveal that SMEs utilized networking through ICT in their everyday operations, and that it increased their firms’ productivity, marketability, and profitability by enhancing business functionality, boosting profit margins, and allowing them to advertise their products. According to the poll, networking through the use of ICT is vital for SMBs, and as a result, SMBs require support with knowledge management in order to achieve their business objectives.

Turyakira and Cathy (2018) did research on startup networking in Uganda. Using a standardized questionnaire, quantitative data was collected, and the Statistical Program for Social Scientists was used to analyze it. This inquiry utilized exploratory factor analysis. According to the study’s findings, enhancing a startup’s networking with other businesses could be a solid starting point for enhancing its competitiveness. The outcomes of networking factors can aid in firm survival and provide enormous opportunities for company competitiveness, both locally and globally.

Karanja and Odhiambo (2018) conducted research in Kenya to find out how business networking services affect the success of new companies that got money from university incubators. The research was carried out utilizing a methodology consisting of descriptive surveys. A random sample of university-sponsored graduate incubators was utilized to obtain both qualitative and quantitative data. Out of a total of 372 participants, primary data were collected from 189 of them for this study. The research made use of a semi-structured questionnaire that was interviewer and administrator administered and included open-ended comment sections. Both descriptive and inferential statistics were utilized in order to carry out an analysis of the aforementioned data. Regression analysis was utilized in order to perform the task of evaluating both the dependent and independent variables. According to the results of the research, there is a correlation that can be considered positive and significant between the utilization of business networking services and the degree of success attained by university incubator-funded startup businesses in Kenya.

Wanambisi (2022) investigated the expansion of small and medium-sized businesses in Kenya as well as the importance of networking among entrepreneurs. A mixed research technique was used for the purpose of this study, which aimed to analyze the impact that entrepreneurial networking had on the expansion of small and medium-sized businesses. In Kenya’s Trans Nzoia County, there were a total of 2,354 small and medium-sized businesses (SMEs), and 363 were chosen from that pool utilizing techniques that included both stratified and straightforward selection. SMEs were segmented into the following categories: wholesale trade, retail trade, manufacturing services, restaurants, and agriculture. Using questionnaires, the primary data were collected. Using SPSS, the information was analyzed. In this study, data were compiled using descriptive statistics, and inferential statistics (regressions) were employed to test the hypotheses and determine whether the data supported the hypotheses. Descriptive statistics were used to determine whether or not the data supported the hypothesis. The link between independent and dependent variables was examined using a multivariate regression model. Entrepreneurial networking has been found to have a significant impact on the growth of Kenya’s small and medium-sized firms.

Effect of Physical Incubation Infrastructure on Growth of Start-Ups

Physical infrastructure refers to the fundamental resources made available by business incubators to new ventures. Incubators typically offer subsidized office space and other tangible shared resources as a fundamental component of their operational framework. Incubators for new businesses often offer their tenants what is referred to as “physical infrastructure,” which is a concept that has gained popularity in recent years. In most cases, this infrastructure is connected to other shared physical things, as well as office space that is rented to incubators at a rate that is discounted relative to the going market rate. According to Njau, Mwenda, and Wachira (2019), start-up companies in the early phases of their development require office space in order to function properly. Tenants, in addition to benefiting from the shared value offer, have the opportunity to save money by utilizing larger areas for their respective businesses. This phenomenon is referred to as economies of scale. Renters have an advantage when shared infrastructure is present since it cuts down on the total length and width of a property. It is possible for incubators to lower their operating costs by sharing resources within their own infrastructure. Second, new businesses are provided with help from services that they are unable to get on their own, such as receptionists and conference rooms. Thirdly, making a room available to work in alleviates the stress that is caused by interacting with several providers. Because of this, they have the opportunity to spend more time working on venture-related things, which ultimately results in them having more time.

In Australia, Bliemel, Flores, De Klerk, and Miles (2019) conducted research on the role of accelerators as entrepreneurial cluster infrastructure for Austrian startups. This paper provides a comprehensive analysis of how accelerators can play a crucial role at the cluster level. This study aimed to demonstrate how accelerators provide real and intangible components of start-up infrastructure in order to create a cycle of entrepreneurial activity that reinforces itself. This was accomplished through the analysis of empirical evidence from three separate investigations. This was made possible by placing an emphasis on the manner in which accelerators provide a cycle of entrepreneurial activity that is mutually supportive. In addition, the data make it possible for us to promote the idea that the development of startup infrastructure might be an organic process involving participants from a variety of clusters. The empirical findings and theoretical insights that came out of them have crucial consequences not only for the study that was discussed above but also for individuals who work with start-ups and policymakers who want to assist entrepreneurial clusters.

Arumugam and Ravindran (2014) conducted a study on the factors that influence the incubation environment in India as well as the components that lead to the success of incubated firms. The study focused on enterprises that had been nurtured in five different incubators. A total of 35 of the 53 businesses that were still in the incubation stage when the survey was conducted responded to it, for a response rate of 66.04 percent. The data on infrastructure accessibility as a potential success indicator was examined, and a mean score of 3.91 was found. The average score for access to facilities for product development was 3.74; the average score for access to facilities for testing and validation was 3.63; the standard deviation of the scores given for access to other common facilities, such as libraries, conference rooms, and training facilities, was 3.37; and the average score for access to these facilities at a reduced or subsidized price was 3.89. This suggests that one of the reasons organizations seek incubation help could be to receive aid with the establishment of infrastructural facilities.

In Nigeria, Ubom and Ubom (2014) did a study on how investments in infrastructure affect the country’s growth rate of entrepreneurship. Various secondary data sources were utilized for the research. These sources include publications, journals, textbooks, bulletins, the internet, and the annual abstract of statistics. To collect the data, a substantial amount of time was spent conducting research in libraries, retrieving documents from archives, and investigating websites. The gathered data are analyzed both descriptively and inferentially using fundamental percentages and ratios, which are presented in table format in the section that is presented after this one. It was discovered that infrastructure encourages the expansion of entrepreneurial endeavours; nevertheless, Nigeria’s inadequate stock and poor quality of infrastructure have created substantial barriers to the growth of entrepreneurial endeavours in the country.

Ngoma, Ntale, and Castro (2021) conducted research on the emergence of new businesses in the Albertine Graben region of Uganda. Their investigation focused on the role that infrastructure development played as well as entrepreneurial orientation. Quantitative information was collected from 118 businesses, the vast majority of which were considered to be of a smaller size. There were a total of 118 self-administered surveys that were made available, and 93 acceptable questionnaires were returned, contributing to a response rate of 79%. The use of SPSS 21 allowed for the management and analysis of quantitative data. It was found that infrastructure development was a strong predictor of growth in startup activity (ß = 0.432, p 0.01), and it was found that infrastructure development was responsible for 21.6% of the region’s entrepreneurial activity.

Kyunga (2017) conducted research on the rise of small and microbusinesses as well as the growth of the underlying infrastructure along the Nairobi stretch of Thika Road in Kenya. Within the scope of this study were 597 microbusinesses and small businesses located along the Thika Superhighway. The selection of 179 respondents from the target group was accomplished through the use of straightforward random sampling. A standardized questionnaire was used throughout the entirety of this investigation to compile the primary data. According to the findings, advances in infrastructure, including roads, water and sewerage systems, and communication networks, have an effect on the growth of small and medium-sized businesses (SMEs) along the Thika expressway.

Njau, Mwenda, and Wachira (2019) conducted research to determine how the provision of infrastructure facility support by Kenyan business incubators affects the growth of small and medium-sized businesses in the nation. A descriptive approach was taken for the investigation. The sample included 384 business incubators in Nairobi and nine managers. The incubator’s administration was based on census and stratification data. Incubators responded at 82.2%, while incubator managers responded at 88.9%. 460 people answered all the questionnaires. The incubator managers were interviewed using a structured interview schedule and a standardized questionnaire in a cross-sectional survey. Both descriptive and inferential statistics were applied to the analysis of quantitative data. Qualitative data analysis was performed to analyze qualitative data for the investigation. Infrastructure support boosts the creation of tech-based startups, according to the findings.

Kibuchi (2016) conducted research into the various business incubation opportunities available to Kenyan start-up companies. A case-study methodology was utilized throughout the course of the investigation. For the study, a semi-structured questionnaire was used to gather information. The significance of the effect that Kenya’s physical infrastructure has on the success of incubated businesses was found to be 0.91, and the F value of the one-way analysis of variance was found to be 1.69. This significance threshold was higher than 0.05, indicating that there is no meaningful association between physical infrastructure and the performance of iHub-incubated enterprises. This could be because iHub largely incubates technological business ideas on virtual platforms that require little physical resources, particularly office space.

Effect of Management Advise on Growth of Start-Ups

Successful entrepreneurs provide a source of management expertise for incubators. This service provides access to world-class business expertise, problem-solving counsel, professional mentoring, and coaching for firm presentations to clients, investors, and venture capitalists. In addition to this, it provides guidance on how to communicate with other stakeholders, including investors, customers, and others (Eveleens, Van Rijnsoever, &Niesten, 2018). These services are designed to cut down on the operational costs of a new business. When it comes to providing support for businesses, the effectiveness of incubators is measured by the continued growth and prosperity of new businesses after they have graduated from the incubator (Eveleens, Van Rijnsoever & Niesten, 2018).

Advice on business management encompasses a wide range of professional services, including accounting, legal support with incorporation and tax concerns, the structure of ownership, and employee stock option programs, to name just a few examples. These services are geared towards reducing a starting company’s operating costs to the greatest extent that is practically possible. When it comes to providing assistance to existing firms, the success of business incubators is measured not only by the birth and growth of new companies but also, and more particularly, by the continued viability of these existing companies. According to Eveleens, Van Rijnsoever, and Niesten (2018), the most important thing that incubator management can do to help start-up founders in Czechoslovakia is to commit right away to reflexive learning in order to assist them in avoiding or minimizing key moments like these in the future. This is the most important thing that incubator management can do to help start-up founders in Czechoslovakia.

Lee and Cobia (2013) undertook a study with the aim of analyzing the impact of management accounting systems on the growth of new businesses. In order to overcome the difficulties brought about by its shifting market strategy and rising departmentalization, a new firm that was going through an entrepreneurial crisis made the decision to turn to forward-thinking management accounting solutions. The company was able to continue to foster an entrepreneurial culture despite its expansion because of the utilization of these strategic tools, which included not just profit forecasts but also variance analysis and a system for performance monitoring.

Chatterji, Delecourt, Hasan, and Koning (2019) evaluated the impact that management advise had on the overall success of Indian startup businesses. The research was carried out in India as a randomized field experiment with one hundred high-growth technology businesses whose founders received personal support from other business owners whose managerial styles were different from one another. The businesses were all managed in different ways. Entrepreneurs who received advice from their peers who managed people in a formal way, such as holding regular meetings, setting goals all the time, and giving employees feedback often, saw their businesses grow by 28% and had a 10% lower risk of failing in comparison to those who did not receive advice from their peers who managed people in a formal way. This was the case in spite of the fact that those who did not receive advice from their peers who managed people in a formal way did not have a formal way of managing people.

In Japan, Houston (2022) did a study on how business management affects the growth of new businesses. In this study, articles, peer reviews, journals, and books were looked at to determine how the performance of new enterprises was affected by different types of business management advice. The owner of a company must pay attention to business management, which is among the most important aspects of the company but can often be neglected. Effective management of a firm can be challenging for new businesses to implement for a variety of reasons. However, any corporation needs to have capable business management in order to be successful. It may be challenging for small and medium-sized businesses (SMBs) to acquire support, either because the price of services is too high or because they are unsure of where to turn for help. The research came to the conclusion that new business owners are able to build a vision and set goals for their firm through the use of business management, in addition to managing their finances.

Matotola and Bengesi (2019) conducted an empirical study in Tanzania to investigate the effects that desire, as a potential resource, has on young people who have been trained to become entrepreneurs. The research evaluated thirty different incubators and included interviews with two managers of university-based business incubators (at the University of Dares Salaam and Sokoine University). According to the findings of the research, there is a connection between BSS and motivation (p = 0.05, Cramer’s V = 0.135). Furthermore, it was found that there is a connection between inspiration and both the management of businesses and the marketing of products (p 0.05, Cramer’s V = 0.507), as well as a correlation between motivation and mentoring and coaching (p 0.05, Cramer’s V = 0.676). Both of these correlations were statistically significant. It is more likely that young people will establish new businesses if they have access to coaching and mentorship, as well as if they have good marketing and managerial abilities. Young people who are interested in starting their own enterprises should have easier access to training programs that teach them marketing and business management skills.

Mungai and Njeru (2018) did research to find out how business incubator services affect the success of new businesses in Kenya. The correlational methodology was used for this study. The Nairobi Incubation Lab (NaiLab) carried out an inquiry into each of the company ideas that were presented to it. Questionnaires were adopted to gather data. Within the scope of our investigation, we utilized both descriptive and inferential statistical methods. In order to demonstrate the existence of a connection between the two variables, the research project made use of inferential techniques, including the chi-square test and the Pearson correlation coefficient. The hypotheses were measured using a one-way analysis of variance (ANOVA). The study’s conclusions show that there is a significant connection between the success of new businesses and the assistance provided by business management. A study found that a variety of company incubation services should be available to help businesses operate more efficiently.

Effect of Financial Resources on Growth of Start-Ups

Businesses require substantial financial resources to expand, generate profits, restructure operations, enter new markets, or make substantial purchases. These businesses desire to raise capital for a total overhaul of their operations. A significant number of well-established businesses look to personal equity investors for growth financing. Financial institutions are more willing to offer cash to companies that are capable of generating a profit but lack the resources to expand (Cole & Sokolyk, 2018). According to Calopa, Horvat, and Lalic (2018), there has been an increase in the number of new businesses emerging in both the global and traditional business sectors. Recent research has focused on the importance of entrepreneurial initiatives as well as the best ways to finance them, which is particularly relevant in this day and age of increased technological development and globalization. According to Korostelevae and Mickiewicz (2018), an increase in capital results in an increase in capital for newly established companies. This includes both money that was borrowed and money that was owned.

Fielden, Davidson, and Makin (2019) carried out research to look into the difficulties faced by micro and small businesses in the North-West of England. Similar studies were done in Kenya by Muathe et al. (2022a) and Muathe et al. (2022b). These studies on the pre-startup, six-month, and six-hundred-and-twelve-month periods of micro and small firms were carried out with the intention of finding solutions to the issues that have been brought to light. These studies looked at the requirements that new business owners need to meet, the challenges that they face, and the solutions that they implement to overcome these obstacles so that they can get their businesses off the ground. The findings indicate that concerns about one’s financial condition and the manner in which one’s bank treats newly created business owners are the most significant factors that stand in the way of the efficient expansion of firms. The findings of the poll indicate that mentors and more specific guidance are the two aspects that are most beneficial for aspiring and newly established business owners (Fielden, Davidson, & Makin, 2019).

Cui, Zha, and Zhang (2018) conducted a study on the financial support system and incubation strategy for SMEs in China. The research was based on several stages of a company’s life cycle (SMEs). This study is going to concentrate primarily on medium- and small-sized businesses. In terms of its technique, the study opted to take a descriptive approach instead. This article examines the characteristics of the financial demand of SMEs that are still in the incubation period of their existence by applying the theory of the company life cycle to the investigation. As a result of the fact that SME incubators go through distinct financial cycles at various stages of development, the conclusion that can be drawn is that different phases of development call for unique forms of financial support. Recommendations have been offered after the technique of financial assistance for incubators was created to suit the cycle requirements of SMEs incubators.

In South Africa, Fatoki (2018) investigated the factors that influence commercial bank financing of new businesses. It was determined whether or not the websites of the four most prominent banks complied with the lending guidelines. The objective of the study was to identify the determinants that banks evaluate when selecting whether or not to offer credit to new small and medium-sized firms by conducting interviews with four bank employees responsible for credit. Findings suggested that a business strategy, collateral, strong relationships, management skills, and a decent credit score are all critical for securing financing.

Hossain (2020) conducted extensive research on Bangladesh’s financial resources, financial literacy, the expansion of small firms, and the assistance provided by private organisations. The majority of Bangladesh’s small enterprises are in three divisions, where 407 owner-managers of small firms were surveyed. Self-administered questionnaires were given to respondents to complete the survey. Using partial least squares analysis, this study discovered a favourable and statistically significant correlation between finance, financial literacy, and small business growth. The study also discovered that private group support mediates the linkages between financial growth, financial literacy, and small business growth in both financial and nonfinancial ways. This was demonstrated by demonstrating how the relationship between financial expansion and small business growth is moderated by private group help. The results imply that if small businesses have better access to financial resources, acquire financial skills, and receive sufficient assistance from private groups, they will contribute more to the economy through both financial and non-financial growth.

Emenike (2021) conducted research in Nigeria to investigate the influence that entrepreneurial funding has on the launch of new companies in the state of Rivers. The research was based on the agency theory framework. The collection of data and information consisted of the administration of surveys, the delivery of information face-to-face, the sending of emails, and the use of social media (WhatsApp). Chi-square was applied in the process of assessing the hypotheses, and descriptive statistics such as frequencies, tables, and the mean were utilized in the process of analyzing the replies to the research questions. Chi-square was utilized in the process of evaluating the hypotheses. In the state of Mississippi, there was no correlation between the number of new enterprises and the amount of money they raised in their first fundraising efforts. A major portion of capital for new businesses comes from consumer credit card debt. The lack of industry expansion may be a result of the lifestyle choices made by new corporate management.

Onsiro (2017) conducted research to examine the relationship between financial resources’ accessibility and the success of Kenyan businesses. The findings of this investigation are presented in the article. A descriptive research design was used in order for the study to be successful in achieving its goals. In addition to quantitative and qualitative approaches to the data collection process. A sample size of 25 was taken from the region that was being analyzed as part of the investigation. For the purpose of this particular investigation, the instrument of research that was utilized was a questionnaire. According to the findings of the survey, the vast majority of new firms are started with financial backing provided by loans from friends and family. According to a minority, there are government programs that support nascent enterprises. Capital availability and legal regulations are cited as the two greatest obstacles businesses face.

Effect of Business Planning on Growth of Start-Ups

An incubation program can secure its financial viability by developing and implementing a realistic business plan. The development of a sensible and well-organized company plan serves as the foundation for the implementation of a dependable method of budgeting, the observance of reliable accounting regulations, and the ongoing examination of each of these procedures (Baltrunaite & Sekliuckiene, 2020). In the SME sector, efficient business management and careful strategic planning are of the utmost importance. According to Trimi and Berbegal-Mirabent (2018), the process of planning a company’s strategy consists of strategic analysis, strategy design, strategy implementation, feedback, assessment, and ex-post evaluation. All of these components are connected to long-term corporate goals in some way. The plan for the MSME’s business should seek finance for the company’s expansion as one of its primary goals. Additionally, micro, small, and medium-sized businesses (MSMEs) play a key role in the creation of jobs as well as the growth of the national economy. According to Sugiarto (2019), the performance of a significant number of organizations is hindered since they do not have a well-defined business plan. They fail to recognize the competitive advantages that their own products offer in the market.

In the United States, Nazar (2018) did a study to establish the influence of business planning on the growth of startup businesses. The study established that there were around 543,000 new businesses beginning operations every single month. However, only seven out of ten will make it through the first two years, and only five out of ten will make it through the fifth year. It is noteworthy to know that around 70 percent of organizations that are still operational after five years adhere to a strategic business strategy. According to the findings of a survey that was carried out by Barclays, one out of every four small enterprises that can be found in the United Kingdom does not have a business strategy. Greene and Hopp (2017) argued that in the UK, over 47% of small businesses have formal business plans, which are written, while the remaining 25% have informal business plans, which are spoken about most of the time.

Burke, Fraser, and Greene (2020) did research to investigate the myriad effects that proper business planning can have on the success of newly established companies. According to the conclusions of the study, the effectiveness of business plans is primarily dependent on the manner in which they are utilized and the conditions under which they are put into action. The study outlines an empirical methodology that is able to take into consideration all of these different effects while at the same time differentiating between selection effects and actual impact effects. The research leads to the conclusion that the expansion of employment prospects is encouraged by company goals after applying this concept to data from England. This is not due to the impacts of selection but rather to the effects of the plan that was put in place.

Odame (2017) carried out research with the purpose of determining the value of business planning for entrepreneurial enterprises in Uganda. The study relied on qualitative data gathered from a sample that was not selected using probability. The information was gathered through the use of an online survey questionnaire, and then statistical analyses of both a descriptive and a variance nature were carried out. The research presented in this paper demonstrates that emergent strategies are more prevalent than prescriptive ones and that small businesses make use of strategic planning tools and approaches for management purposes. In addition, there is a correlation between a company’s level of formalized strategic planning and the amount of long-term growth that the organization has achieved. Because of this, the formally organized process of strategic planning is an absolute requirement for the success of a firm. It was also discovered that the level of education had a correlation with the degree of formalization, and a lack of knowledge of the tools for strategic planning was proposed as the cause and process that could lead to the adoption of an informal planning approach.

Research on the topic of business planning as a growth strategy for micro and small businesses in the town of Meru was carried out by Mungania, Karanja, and Okwang’a (2015). As part of the methodology for this descriptive survey study approach, interviews were carried out with a number of different small businesses. The study used both descriptive and inferential statistics in order to undertake an extensive analysis of the data. The research found that small enterprises engage in planning regularly, that they involve their staff in the planning process, and that their planning procedures confront problems. However, only a minority of organizations adopted formal integrated planning systems, with the vast majority allowing information to flow manually. Prior to planning, respondents perform industry research, and there is a correlation between the planning horizon and company planning.

RESEARCH METHODOLOGY

The study used a descriptive research design, specifically a cross-sectional design, as recommended by Muathe (2010), Mugenda and Mugenda (2003). Applying this method, it is possible to determine whether or not a person will behave in a particular manner or have a particular opinion by using predictive modeling. Moreover, if a researcher has the ability to conduct a field survey by going directly to the people, they are trying to learn more about, then they should employ a descriptive research strategy (Mugenda & Mugenda, 2003). The target population was 567 start-up businesses, as per the Business Incubation Association of Kenya (2021). However, a sample of 227 respondents was selected using proportionate stratification and random sampling techniques. Mugenda and Mugenda (2003) note that when working with populations of less than a thousand people, 10 to 40 percent of the total population is adequate. Hence the sample size translates to 40% and thus meeting Mugenda and Muganda (2003) assertion. This study used primary data which was collected using questionnaires. Questionnaires are useful in collection of data that is abstract in nature, such as thoughts, attitudes, motives, achievements, and experiences (Mellenbergh, 2008).  In comparison to other methods of data gathering, questionnaires are both more affordable and more efficient in terms of time spent. The collected data was analyzed using multiple linear regression as recommended by Mugenda and Mugenda (2003) to determine the effect of the independent variables to the dependent variable. However, prior to the regression analysis descriptive statistics was carried out to summarize the characteristics of the data.

RESEARCH FINDINGS AND DISCUSSION

Pilot Testing

The study began with a preliminary test consisting of a questionnaire administered to nine respondents from startup companies that have gone through the incubation process at Chandaria Business Innovation and Incubation Centre. The nine respondents didn’t form part of the final sample size. The purpose of the pilot testing of the questionnaire was to ensure the accuracy of the research and the dependability of the instrument so that the study has a greater possibility of being accepted by others (Joppe, 2000).

Validity

The degree to which the findings of the study truly represent the issue that is being investigated is what is meant by the term validity (Mugenda & Mugenda, 2003). The researcher used constructs obtained from a literature review. Moreover, the researcher used the expertise of the supervisor to ensure the validity of the questionnaire by checking that the data instrument contained all the variables related to business incubation services. This consultation was helpful to the researcher in developing instruments that were valid in terms of their face, material, and construct validity. The phrase construct validity refers to the efficiency of the research tests in terms of their intended purpose, whereas the term face validity describes the attractiveness of the instrument to the people who are being tested.

Reliability

Individuals use dependability to determine how well measurements function when various people do the same thing in different ways, which can be used as alternative instruments to measure the same thing. This allows people to see how well measurements work when people do the same thing in different ways (Sekaran, 2003). It is essential that the content of an exam be the same throughout, not just on the surface. The accuracy of an instrument can be determined by looking at its internal consistency, which examines how effectively the instrument measures and reacts inside its own state (Sekaran, 2003). Cronbach (1951) was the one who first recognized the value of the coefficient alpha, which led to its subsequent rise in popularity. When more and more things are added up to a certain degree, the level of internal consistency gradually improves. How a measure is used can have a significant impact on the typical degree of reliability it possesses. Nunnally (1978) proposed a number of hypotheses for construct measures, and he stated that it was necessary for the reliability of the items to be at least 0.7 in order to assess whether or not the items were consistent. For this study, a Cronbach’s alpha of 0.7 or above was considered reliable.

Table 1 Findings of Test of Reliability

Source: Pilot Data (2022)

The results of the pilot study indicate that the Cronbach’s alpha value for networking services was 0.762, which is higher than the 0.7 Cronbach’s alpha value that is considered reliable. In addition, the physical infrastructure had a Cronbach’s alpha value of 0.734, management advice had an alpha value of 0.728, financial resources had a Cronbach’s alpha value of 0.712, and business planning had a Cronbach’s alpha value of 0.754. According to the findings of Sekaran (2003), an instrument is considered to have a higher level of reliability if its alpha value is greater than or equal to 0.7. As a result, it was concluded that the instrument had a better level of dependability as a result of all of the values of the variables that were investigated as well as the overall value of 0.732.

Study Response Rate

Table 2 below shows the response rate for this study.

Table 2 Study Response Rate

Source: Survey Data, 2022

The sample for the study consisted of 227 respondents from startup companies that have undergone the incubation process in Nairobi County and are from various industries. The questionnaires were delivered to all of the intended participants. However, of the 227 questionnaires that the researcher distributed, only 179 were returned with all questions answered, a response rate of 79%. A response rate of 79% was considered high enough for the purposes of this study. According to Mugenda and Mugenda (2003), you can adequately analyze data, write a report, and draw conclusions with a 50% response rate being acceptable, 60% being good, and at least 70% being excellent. The method of collecting data, which consisted of the researcher dropping off the questionnaires in person, educating respondents on the purpose of the study, and picking them up later after giving respondents ample time to complete them, was responsible for the high response rate, which was attributed to the fact that the researcher educated respondents on the purpose of the study.

Respondents Demographic Characteristics

The respondents’ demographic data was examined, and the findings were presented in tables and figures. These characteristics included how long the respondents had been working at their current firm, how long the business had been in operation, and how many employees the business had.

Working Duration in the Organization

The objective of the study was to determine how long respondent have worked at the startup company.

Table 3 Working Duration in the Organization

Source: Survey Data, 2022

As shown in Table 4.2, the majority (70%, 126) had worked in their individual startup firm for 6–10 years, whereas 16% (28) had worked for 1–5 years and 14% (25) had worked for 11–15 years. Therefore, the respondents possessed a great deal of knowledge regarding the startup growth procedure.

Duration of Operation of the Startup Firm

The research was conducted to ascertain the company’s age as a startup. Results from the study are shown in Figure 1. Half of those surveyed said their companies had been going for 1-5 years; 22 percent said 6–10 years; 20 percent said 11–15 years; and 8 percent said 16–20 years. This illustrates that most of the firms that sought the services of incubation were in their early stages of growth and thus needed the services to realize growth in their respective sectors.

Figure 1 Distribution of Operation of Startup Firm

Source: Survey Data, 2022

Number of Employees

The study established the number of employees employed by each startup. The findings illustrate that the majority (52%) of the firms had 1–10 employees, 23% had 11–20 employees, 19% had 21–30 employees, and 6% indicated that they had 31–40 employees. The findings illustrate that most startup businesses have kept the number of employees’ low in order to cut the cost of employing a large number of employees.

Table 4 Number of Employees

Source: Survey Data, 2022

Regressions Analysis

The previous section presented the results of descriptive statistics, which were made to summarize characteristics of the collected data. The preceding section presents the results of regression analysis, which tested the effect of the independent variables (networking services, physical infrastructure, management advice, financial resources, and business planning) against the dependent (growth of startups).

Table 5a. Model Summary

Source: Survey Data, 2022

According to the results that are displayed in Table 5a, the value of R2 is 0.779, which demonstrates that the five independent variables that were investigated for the purpose of this study contribute to 77.9% of the expansion of new firms in Nairobi County. This suggests that the remaining 22.1% of the expansion of startup companies is attributable to other factors that were not investigated in this study.

Table 5b. Analysis of Variance

Source: Survey Data, 2022

As illustrated in Table 5b, the level of significance is 0.000, which is below 0.05, implying that the model is statistically significant where independent variables had an influence on the dependent variable. In addition, the value of F 6.745 is greater than 92.367, representing the tabulated value with a 5% allowance for error. This implies that the model was significant.

Table 5c Coefficients

a. Dependent Variable: Growth

Source: Survey Data, 2022

The results indicate that holding all the independent variables (networking services, physical infrastructure, management advice, financial resources, and business planning) constant, the growth of startup businesses would be 0.855. It was established that when networking services are increased by a single unit, the growth of startup businesses will increase by 0.608; when physical infrastructure is increased by a single unit, the growth of startup businesses will increase by 0.584; when management advice is increased by a single unit, the growth of startup businesses will increase by 0.566; when financial resources are increased by a single unit, the growth of startup businesses will increase by 0.635; and when business planning is increased by a single unit, the growth of startup businesses will increase by 0.614.

The study observed a significant positive relationship between networking services and startup business growth in Nairobi County (t = 2.887, P.000). Abou-Moghli and Al Muala (2017) conducted a study on the impact of entrepreneurial networks on the success of ongoing business in Canadian manufacturing companies, lending credence to their findings. The findings of the investigation point to the fact that entrepreneurial networks (including social networks, business networks, and inter-organizational strategic networks) have a statistically significant bearing on the success of businesses in their ongoing stages.

The study also noted a favourable and significant association between physical infrastructure and startup business growth in Nairobi County (t = 1.700, P.000). The study’s findings are corroborated by a study on the growth of startup enterprises in the Albertine Graben region conducted by Ngoma, Ntale, and Castro (2021), with an emphasis on the role that infrastructural development and entrepreneurial orientation play in the success of these businesses. The results indicate that improvements to the region’s infrastructure are a key influence in the development of startup activity, accounting for 21.6% of the region’s entrepreneurial activity.

The study established a favorable and significant association between management advice and startup firm growth in Nairobi County (t = 3.050, P.000). This study’s findings are congruent with those of Chatterji, Delecourt, Hasan, and Koning’s (2019) research on the effect of managerial mentoring on startup growth. According to the study’s findings, entrepreneurs who received advice from peers who used a formal approach to managing people developed their businesses by 28% more and were 10% less likely to fail than those who received advice from peers who used an informal approach. This was discovered by creating regular meetings, continuously defining goals, and offering frequent feedback to staff. Furthermore, the study pointed out that entrepreneurs who got guidance from peers who used an informal approach to people management were more likely to fail.

The study noted a favorable and significant link between financial resources and startup business growth in Nairobi County (t = 5.151, P 0.000). The conclusions of this study are in agreement with those of a study conducted by Onsiro (2017) on the influence of financial resources on the growth of new businesses beginning to operate in Kenya. One of the most significant factors that contributed to the growth of new businesses was the availability of financial resources. In Rivers State, Nigeria, Emenike (2021) conducted a study on the impact of entrepreneurial funding on new firm start-ups. The conclusions of this study contradict those of Emenike’s earlier study, which was based on the same subject matter. According to the findings, there is no significant correlation between the number of recently established businesses in Rivers State and the amount of initial fundraising cash generated by venture start-ups in the state.

According to the findings of the research, there is a significantly positive relationship between having a business plan and the rate at which new businesses in Nairobi County are expanding (t =2.590,00, P <0.000). The findings of this study are in agreement with a study that was carried out by Van Tonder (2017) on the role of business planning in small and medium-sized firms within Absa Bank Limited. This study concurs with the findings of the current study. According to the results of the survey, owners and managers of small and medium-sized businesses (SMEs) believe that business planning is an important managerial role that contributes to the success of their companies.

CONCLUSION

The study found that physical infrastructure had a positive and significant effect on the growth of startups in Nairobi County. Therefore, it implies that a conducive working environment, administrative facilities, and availability of infrastructure greatly enhance the growth of startups. Thus, the study concludes that physical infrastructure should be considered by startups since it influences their growth positively within Nairobi County. In addition, the study revealed that management advice affects the growth of startups within Nairobi County, Kenya. Therefore, through professional mentoring, business consulting services, and business operation advice, start-ups can realize high growth. Accordingly, the study concludes that management advice can enhance the growth of start-ups since it has a positive and significant effect. Moreover, the research found that financial resources affect the growth of startups within Nairobi County. This means subsidized services, access to finance, and bookkeeping services can greatly affect the growth of startups within Nairobi County, Kenya. Thus, the study concluded that startups can rely on financial resources to promote their growth. Finally, the research found that the effect of business planning on start-up growth within Nairobi County, Kenya, was positive and significant. Start-up business creation services, regular business advice, and business organization structure can affect the growth of start-ups to a great extent. Therefore, the study concluded that startups should rely on business planning services offered by incubation firms since business planning services affect startup growth positively.

Policy Implication

From the research findings, several policy recommendations can be drawn for this study. Given that networking was found to be significantly affecting the growth of startups, it is recommended that policymakers strengthen the Association of Startups and SME Enablers of Kenya (ASSEK), the Association of Countrywide Innovation Hubs (ACIH), and the SME Founders Association, among others. This will enable hub owners to enhance their networking levels. Moreover, the government of Kenya can facilitate startup networking by attracting startup investors to set up shop in Kenya through favorable tax breaks, increasing the likelihood of interaction with local startups; hosting an annual startup innovation week, similar to the Kenya National Innovation Agency’s Kenya Innovation Week, that brings together local and international stakeholders such as corporations, investors, and researchers; and sponsoring top startups. Using a portion of their product development, marketing, or corporate social responsibility budgets, corporations might engage with nimble and inventive startups who lack resources, thereby exploring corporate innovation through startup collaboration.

 As part of networking, the incubators should be encouraged to adopt the triple helix model of innovation, where the key players in the innovation ecosystem are brought together to form synergy instead of competing. Such players include a set of interactions between academia, industry, and the government (both the national and devolved governments in Kenya). Through their collaboration, the players will be in a strong position to advance social and economic development in Nairobi City County and Kenya in general. Furthermore, Nairobi City County can use the triple helix model to create a private-public partnership framework where the private sector can provide or invest in the needed incubation infrastructure, provide financial support, and also bring in the required mentorship services.

Startups are encouraged to join ASSEK, ACIH, and independent incubation centers in order to gain access to physical infrastructure, such as subsidized office space rent and internet connections. In order for incubation centers to help startups and provide physical infrastructure, they must have a viable income model that is not dependent on grants from outside sources. This can be accomplished by exploring commercial opportunities with corporations and public service organizations and collaborating with national and county governments to foster the digital economy and innovation.

The government can repurpose Huduma and Biashara facilities not only for informational reasons but also to provide physical incubation to fledgling companies. Similar to the Makueni innovation hub in Makueni County, county governments may build county incubation centers. As a value-added service, corporations such as banks can provide physical infrastructure to startups within their branch network. The government will ensure top Kenyan startups have access to Konza Tech’s physical infrastructure. Moreover, business incubator owners should be encouraged to specialize in nabbing specific specialized startups in areas like health, agriculture, and fintech, among others.

Startups are encouraged to join incubation hubs where they can gain access to reasonably priced management guidance. Startups are also encouraged to investigate the business development services provided by organizations such as The SNDBX, a permanent residence of more than 30 professional disciplines that provide the appropriate support to startups; government agencies such as Kenya Industrial Estate; and civil society organizations’ programmes offered by Hand in Hand East Africa and USAID, among others. The Nairobi City County, through the County Chief Officer for Digital Economy and Startups, should work with elected leaders at the ward level to operationalize and decentralize business incubation services to the ward level because of the unique problems in the different localities within the Nairobi City County. This will provide the required tailor-made business incubation services for startups in those localities.

The government should consider passing a bill recognizing startups comparable to those in Tunisia, Senegal, and Nigeria. This bill should establish a specific-purpose startup fund linked to the government agenda that is accessible to incubators since financial resources were found to significantly affect the growth of startups. Moreover, a clear act that governs startups can provide tax incentives to startups, reducing costs in the form of financing and offering tax breaks to startup investors so they can establish and grow their businesses in Kenya.

In addition, academic institutions should collaborate with venture capitalists to invest in student and faculty entrepreneurship, thereby fostering academic entrepreneurship. Corporates can run innovation hackathons to tap startup potential in technology-led innovation and provide commercial contracts to winners, a revenue share model for winning solutions that are incorporated into the corporate product portfolio, or purchase and share revenue on intellectual property developed by startups after the hackathon. Startups are encouraged to enroll in business planning courses or through incubation hubs, corporations, including financial institutions, startup investor networks, civil society programmes, and government organizations, among others. Incubation centers must include business modelling and business plan creation as essential training topics. Finally, through the triple helix model, business incubators can partner with universities, especially where deep research in such specialized areas as health, agriculture, and climate change is required.

LIMITATION AND SUGGESTIONS FOR FURTHER STUDY

The scope of this study was Nairobi City County, which is the capital city of Kenya. The city is one of the fastest-growing in Africa and the largest in East Africa, and thus it has good infrastructure and good internet connectivity. Though the findings present a fair account of the effect of business incubation services on the growth of startups. The findings are true to Nairobi City County and therefore cannot be generalized; thus, future studies should focus on more counties, both urban and rural, in order to establish the true picture of the Kenyan context.

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