Empirical Generalisations

6.1.1 The lack of capital in emerging markets

With regards to the underlying premise of this research, that there is a lack of capital

hindering the flow of investments and the growth of SMEs in emerging markets, our

primary data raises questions around this premise. In particular, our research highlights

the importance of acknowledging the complexity and the roles of institutions in the

discussion around unlocking capital in emerging markets. In relation to venture capital,

we find that there is an abundance of capital and that the number of VC firms in the

industry is reaching saturation in relation to the amount of investable ventures in

Kenya. Hence, our findings show that there is a lack of investable ventures, particularly

ventures tied to the local population through local founders or managers. It is shown in

our findings that these ventures suffer particularly from the liability of outsidership as

an effect of institutional barriers such as lack of reporting standards, early stage

financiers and adequate technological support. Thus, it is our finding that the appraisal

of Kenya as the startup hub, Silicon Savannah, mainly points to the development of

foreign founded ventures. Despite also facing particular challenges related to liability of

foreignness it is emphasized in our findings that such ventures have the capacity of

circumventing institutional barriers in Kenya much due to the effects of institutional

stability in their home countries; relating to their overall governance and reporting

standards, early stage financing support through business angels and well established

accelerator programs, in addition to their strong networks stemming from educational and professional backgrounds.

Therefore, our findings show that the perception of a lack of capital, as the overarching challenge to SME growth and economic development, requires further investigation. in particular around the institutions which support this development. Acknowledging that the issues surrounding VC investments in developing countries and emerging markets are complex, we see our findings to be an important contribution. As in fact many international organisations and development programs take their point of departure in the very same premise about a lack of capital, this finding from our empirical analysis is an important contribution to academia and to the public debate about the correlation between early stage investments and economic development in developing countries and emerging markets.

6.1.2 Institutional barriers and strategic implications

By assessing the validity of our propositions, we bring forward unique empirical

findings, which connect previous contributions to institutional theory in emerging

markets with challenges facing the actors in the VC industry. Additionally, our research

discloses aspects of previous contributions to institutional theory, which our findings

have revealed as less prevalent in the context. As such, we highlight that some

institutional challenges are more significant than others in relation to the VC funds life

cycle. The lack of capacity around acquisitions and IPOs heavily influences the VC firms'

ability to exit their investments. As such, the exit opportunities currently held by foreign

VC networks are portrayed as limited. Despite positive attitudes among the VCs on the

recent tax reformations, political fluctuations and regulatory uncertainty is increasing

the perceived risk to invest in ventures in Kenya. Particularly, inadequate governance

and reporting requirements and capacity building organisations as well as the lack of

early stage financiers such as business angels are barriers to proceeding investments in

local ventures. To cope with these challenges we find that VCs seek to diversify their risk

by investing in numerous industries and countries. Additionally, our findings show that

VCs are increasingly investing in foreign founded ventures, perceived to be less affected by institutional barriers. Although this may give rise to some initial liability of foreignness, many VCs cope with this by inserting local teams with the capacity to support their ventures in navigating the local context. We do find that the sustainability of proceeding with an investment strategy that largely focuses on foreign ventures was questioned. Not only because of the societal debate, which this phenomena pertains to, but also the capacity of long term business success these ventures may achieve considering the liability of foreignness, which the founders are facing in relation to product-market fit.

Furthermore, we perceive our findings to contribute to the discussion about venture capital as a supporting mechanism to entrepreneurship and SME growth. In relation to the notion highlighted by Lerner (2010), that the VC firms support and professionalize ventures, our research shows limited proof of this. As our findings show that most VCs pursue investments in ventures with foreign founders who have proven business acumen, the capacity of the VC to contribute to the entrepreneurial development in Kenya is questionable. Looking at the entire VC industry, we find indications highlighting a risk of economic enclaves where foreign capital is being strategically invested by foreign investors into foreign entrepreneurs.

Furthermore, we perceive our findings to confirm previous issues related to the business context of emerging markets as suggested by Peng (2001), Hoskisson et al.

(2000) and Khanna and Palepu (1996). As such it is our belief that the findings from this research may to a large extent be generalized when considering facilitative mechanisms for VC investments in other emerging markets.

6.1.3 Can we generalise from the empirical findings?

Given our research approach, this thesis generates important, in-depth knowledge about the empirical world of venture capital in developing countries and emerging markets.

Through the multiple-case study strategy, we are furthermore able to compare and see

whether the observations made in one case also occur in other cases. Hence, as our cases

are different in their nature, i.e. the type of VC firm, composition of staff and investment focus, the maximum deviation selection criteria implies that our findings are based on representative and reliable foundations for generalisations across investment firms that operate in Kenya. This relates to the fact that the VC firms experience almost the exact same institutional barriers, despite their organisational and structural differences. Since we can confirm many of the barriers highlighted in the IB literature on institutional theory in emerging markets to be present in our case study of Kenya, it is our perception that these findings can to a large extent be generalised across VC industries, not only in sub-Saharan Africa but in developing countries and emerging markets in general.

Additionally, we find that the coping strategies related to these institutional barriers can be used to explain how VC firms operate in emerging markets in general.

The topic of VC in emerging markets has been highlighted by other scholars to be an under-researched topic (Hain & Jurowetzki, 2018). As such, this is particularly interesting as publications about venture capital in emerging markets mostly focus on VC investments in China and India (Dossani & Kenney, 2002; Ahlstrom & Bruton, 2006;

Dai et al., 2012). Additionally, the specific industry focus on Kenya is a contribution to

the exploratory reports and publications on economic and institutional development of

Kenya.