Factors Affecting Growth of Information Communication Technology Firms in Nairobi, Kenya

Abstract

Entrepreneurship plays an important role in the socio-economic development of the country. Its significance can be seen in terms of contribution towards economic growth, employment creation, poverty reduction and development of an industrial base. Kenya is going through a paradigm shift from an industry based economy to a knowledge based economy anchored on ICT. The government has reiterated the development of ICT industry in the country given its strategic importance. These commitments manifest in the various policies and strategies that the government has put in place over time, aimed at the growth and expansion of ICT in the country. Despite the policy and strategy pronouncements, there are various constraints that are currently facing the growth and expansion of ICT in the country especially amongst ICT providers. This study sought to assess the factors that affect the growth of ICT firms in Kenya by focusing on the ICT providers in Nairobi. The Purpose of the study was to establish the factors affecting growth of ICT Firms in Nairobi. The study involved a case study of ICT firms in Nairobi. The target population constituted ICT service providers located in Nairobi. The study targeted 92 firms out of 304 registered ICT service providers in the CCK database. The sampling frame used was acquired from the CCK directory of licensed ICT providers 2012. Stratified random sampling technique was used based on categories of ICT service providers registered by CCK. Questionnaires were used to collect data from a sample of 92 ICT Firms. The respondents were owner/managers and selected employees. The study findings indicate that access to markets significantly affects growth of ICT firms negatively or positively. Access to market information, The presence of a wide market for ICT products and services, ICT usage and penetration and presence of ICT-related services promote growth and expansion of ICT firms. Competition in the ICT sector inhibits growth of ICT firms. The study recommends the following: Pertaining access to markets; the government should undertake to make markets work. This can be achieved by promoting the number and competitiveness of ICT firms by reducing the cost of doing business and, generally, creating a more favourable environment for businesses to thrive while improving the quality of employment in the sector. The government should allocate at least 25 percent of its procurement requirements to the sector. The Government should encourage sub-contracting arrangements between large and medium firms, and the SMEs. Capacity building of SME Associations will further promote business linkages within the sector. The Government should restrict dumping of ICT products and facilitate marketing of SME products in both local and international markets. [PUBLICATION ABSTRACT]