The Convergence Innovativeness of Agro-Based Medium Sized Firms and Their

Performance in Kenya

By

Christopher Okoth Onyango

Introduction
Innovativeness has been touted as one of the fundamental instruments of growth strategies to
enter new markets, to increase the existing market share and to provide the company with a
competitive edge. But little activities of innovative nature are encountered in the agro-based
medium sector. Although increasing competition in global markets is motivating innovation,
agro-based medium sector is yet to grasp the importance of innovation, although swiftly
changing technologies and severe global competition are rapidly eroding the value added of
existing products and services (Gunday, Ulusoy, Kilic & Alpkan, 2011; Bwisa, Kihoro & Patrick,
2013; Feige, 2015). Thus, although innovations constitutes an indispensable component of the
corporate strategies for several reasons that include applying more productive manufacturing
processes, to perform better in the market, to seek positive reputation in customers perception
and as a result to gain sustainable competitive advantage, these have not been experienced on a
large scale in agro-based medium sector (Bainbridge & Roco, 2006a; Bainbridge & Roco,
2006b; Sharp & Langer, 2011; Hoffman & Furcht, 2014). Innovation is, therefore, a complex
concept, because of its multidimensionality hence when pursued can bring value adding to agro-
based small and medium sector in Kenya and the rest of the world.

It is globally recognized that small and medium-sized enterprises (SMEs) play critical role in
both developed and developing economies. Countries such as USA, Asia, Europe and Africa,
Kenya not exempted, medium enterprises especially agro based sector are key to food security,
innovation stimulation and employment creation. The sector is also critical for rural employment
and income generation, poverty eradication, hunger leading to improved rural livelihood
(Waithaka, Bwisa & Kihoro, (2016). It acts as a tool of rural entrepreneurial strategies and
poverty eradication, job creation, income generation and rural-urbanization (Waithaka, et. al.,
2016). Wolff and Pett (2006) contended that SMEs and entrepreneurial firms are a key segment
and driver for most national economies. Kenya is a large agricultural nation, and her rural
population accounts for more than 85% of the overall population.

The benefits of innovation has resulted in channeling of foreign direct investment in research and
development activities. This is aimed to leverage agro-based enterprises performance. These
patterns could accelerate the future convergence process leading to improved performance.
According to Feige (2015) it can result in keeping up with stable employee size, improving
profitability rates, increased returns on capital and commanding market demands. However,
agro-based medium enterprises continue to experience inadequate and seasonal raw material
supplies, and low levels of technology. The sector players also experience dominance of
subsistence and rudimentary nature of agricultural production, high production and raw material
costs, faulty distribution and marketing, and the high cost of credit. In addition value addition

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remains very low, with a domestic agro-market dominated by trade in raw produce. This has
resulted in medium-scale level, using low cost, labour intensive technologies operation.
Furthermore, few medium enterprises focus on regional and international markets (Bwisa,
Kihoro & Patrick, 2013).

With a tendency to locate closer to their sources of raw materials, agro-medium enterprises
favour attraction of investment to the rural space. This can be an important driver in the creation
of non-farm rural employment. Yet youth unemployment rate in rural Kenya is still very high.
Majority of youth migrate to urban centres in search for jobs. This has necessitated continued
high poverty rate, food insecurity-hunger and high rate of unemployment experienced
(Bainbridge & Roco, 2013). Apart from that, most of these firms operate in products leaner
scope, few new products ideas; little evolving ideas denying the customer access to innovate and
integrated larger products sizes in the market (Bainbridge & Roco, 2006a). Innovation promoter
convergence can provide cutting-edge and high-tech techniques that can be used to create
enabling environments for the development of agribusiness, agro-industries and agro-based value
chains (Bainbridge & Roco, 2006b).

Moreover, growth rate of agro firms is not matching population changes and global market
demands. Given the competitive and dynamic nature of current market, the agro medium sector
has several opportunities presenting potential for growth. But it is worrying that agro firms keep
posting poor performances. It implies that agro enterprises pursue goals such as improving on
return on capital, high profit margins and increased products lines. While small and medium size
agro enterprises are the drivers of growth of large companies and industries, many fail to survive
beyond startup (Roco, 2012; Roco, & Bainbridge, 2001). These organisations cannot close the
gap between incubation, startups and generation of successfully innovated small to large
companies and industries realisation. This has enhanced massive failures of small and medium
sized enterprises resulting in poor profitability rates, low return on capital, lack of value adding
employees and increased rate of product development. The drive to become sector leadership in
innovation is minimal. This is evident as the firms fail to launch new products, companies and
industries, and created high-paying jobs (Sharp & Langer, 2011). In agro-based sector, the
players require strategies, a competency synergy that will re-energise and shape market demands.
Such competencies can stimulate the potential to use agro-based products in different ways. This
will lead to stimulate production and make prices more competitive. This because the more
options the actors enjoy, the more vibrant and effective the market will be particularly for
producers (Hoffman & Furcht, 2014).

The desire to add value to agricultural raw materials through processing and handling operations
has never been realisable (Dowling, Lechner, & Thielmann, 1998). The productivity of agro-
medium sector is generally lower than in other sectors. This can be attributed to limited
economies of scale and low level of integration across markets. Since innovation do not just
happen automatically, enterprises must equip themselves to face global challenges. Furthermore
innovation activities are often challenging and risky (Waithaka et., al., 2016). Therefore the fact
that businesses innovate does not guarantee profitability. In fact, as much as 33% to 60% of all
new product innovations turn out to be financially unsuccessful (Schilling and Hill, 1998).
Therefore pursuing radical innovation requires a willing champion to put the initial product idea

2
on course. Firms that innovate more than others seem to do better than firms that fail to innovate
(Khandwalla, 1977; Kuln, & Marisik, 2010; World Bank, 2006).

So the drive to identify alternatives uses and users of agro products and services is critical. This
can be the engine to enhance product innovation to exceed market needs. Such innovations can
include starch for glue in textile, the packaging and paper industries. Furthermore, fuel making,
and animal feed among others can be produced. This can stimulate particular attention to users of
products or by-products from common direct purposes. But agro medium enterprises keep
producing non-popular products that are not demand creators (World Bank, 2014). Most of these
products are raw in nature, lacking innovative inputs.

Moreover, companies innovate for increased competition and possible profit. It is a process that
has become a matter of survival for many companies. Yet not all executives are innovators.
According to Hoffman and Furcht (2014) innate barriers and resistance of willingness and ability
in organisations can cause varying outcomes. Agro medium sector must pursue approaches to
provoke, translate, and transform intellectual concept and product prototyping. This means
ability to translate various possibilities such as emergence of nutrition, diet into potential market
demands. But without creativity, interdisciplinary collaboration, learning approaches, disrupting
markets demands is not achievable (Kuln, & Marisik, 2010). While telecommunication
companies are become media houses; banks, healthcare providers, music, film, TV and other
entertainment, agro-based medium enterprises are not realizing any tangible outcomes. They are
operating on a single firm size with few new ideas thus lacking huge new investment in diversity
(Koira, 2014; Kelly, 2012).

Workers of many agro enterprises have never attracted knowledge skills, innovation, creativity
and advanced technologies (Bwisa, Kihoro & Patrick, 2013). Having workers with innovative
knowledge skills, creativity can drive the process that can deliver operational efficiency, business
visibility, and agility. This can enable agro enterprises to conduct their activities in a cost-
effective, dynamic way (Feige, 2015). But they lack such a drive to access and discover many
ideas, and to create new ones. The current dwindling performance in this sector indicates that all
is not well. However, they can tap and leverage on the latest technology solutions and practices
to equally benefit with other sectors (Pachouri, & Sharma, 2016).

It is recognised globally that innovation promoters are critical to organisational innovation

activities. The convergence of innovation can be useful technique that drive penetration of
essential platforms of human activity and create new industries and jobs, improve lifelong
wellness and human potential, achieve personalized and integrated healthcare and education, and
secure a sustainable quality of life for all (Gupta, 2013). But agro enterprises continue to miss on
its basic goal. This has necessitated continued high rate of youth unemployment, low income and
low paying jobs, global food crisis and hunger, persistent poverty, low agricultural productivity,
poor quality products, non-value added products, low rate of new idea creation and poor
innovation experienced among rural dwellers in developing countries, Kenya included (Asthana,
Kumar, and Dahotre, 2006; Finston, 2015).

Furthermore, creating a backward, forward, vertical or horizontal integrated environment has

never been realized; although this can be an engine for work arrangement environment that

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creates various tools to continually create new information, its benefits have not been felt in agro
enterprises (Pachouri, & Sharma, 2016). Since modern customers demand to interact with
companies via new technological channels, such demands are hardly accessible in agro sector; it
implies that customers are not able to place their orders using mobile phones and tweet about
their issues; agro enterprises lack the ability to meet these expectations according to the
customers demands (Bwisa, Kihoro & Patrick, 2013). Many of agro based firms, in the long run
fail to grow into larger corporations; which has been impacting on the declining rate of economic
growth (Lee, and Olson, 2010). While customers demand value added newly improved products
with integrated features and functions, little achievements have been realized (Castells, 2000).

The players in this sector have not mastery knowledge, skills and experience to position and
establish a disruption to existing market and value networks. This can lead to inability to displace
established market leading enterprises, products and alliances. At the same time, there is little
achievement in mastering the current games that drive innovation. So they discover, design and
deliver non value added products that do not stimulate market demands and attract unstable low
prices having little impact on financial earnings.

Apart from that, convergent innovation promoters can facilitate specialty and diversity creating
pools of various innovative minds leading more innovative idea source that may have otherwise
been overlooked. It is believed that convergence of innovation promoters can provide a
coordinated, networked unified spirit that can inspire learning and adoption from experience.
However, most agro medium sized firms keep clinging to unchallenged company traditions. It
implies that medium sized agro-sector continue to attract low level return on capital, high profit
margins and increased products lines. These enterprises performs below their potential failing to
meet market expectations. They cannot achieve novelty and newness of products (Farsi &
Toghraee, 2014). Thus there is lack of interdisciplinary and collaborated products. Such products
of single faced but with multi features and function that can attract different kinds of uses.

Furthermore there lack of ability to develop a closer connection with agro-medium enterprises
markets lacking global competition. Even where there are funds accessibility, fail tail to delivery
with global market expectation. There is also little indication that agro medium enterprises are
able to identify and select the most promising opportunities for product releases. This means that
the desire to embrace collective ideas from around the world to generate new products is not easy
to realise (Finston, 2015). Even converting new discoveries into commercial innovation and
create financial outcomes has not been possible (Ali, 2016). Yet the current market demands are
driven by merging trends where firm sizes increases based on interdisciplinary and collaboration
innovations. These firms have not attracted expansion, for example, for a long time; sugar millers
often produce single product lines with no induced skills and knowledge to disrupt this kind of
product line.

Most agro medium enterprises endeavor to identify and direct innovation process, stimulate
transformative interactions among seemingly different disciplines, technologies, communities,
and domains of human activity to achieve mutual compatibility, synergism, and integration, and
through this process to create added value and branch out to meet shared goals. But most of
players in this sector hardly produces products that are demanded across different sectors (Ali,
2016). Apart from that, there is lack of predictability owing to various ways they introduce

4
divergent goals, different assessment of what's going on. This can threaten organisational
resource utilization for routine outcome. This can cause a practice of survival rewarding and not
taking experiments, not trying things or making the world a better place.

The dynamic integration of knowledge, technologies, and society is recognised as a fundamental

opportunity for human progress as expansion in harnessing Earths resources since availability of
larger investments have reached limitations. It is reflected in bridging the divide between
research, education, innovation, and production needs in national and global activities. But not
much progress is seen at the agro-based enterprise. They activities lack interconnected
knowledge, technology, and societal development that leads to creation of added value and
progress. These enterprises cannot command the aspect of bringing together all relevant areas of
human, machine, and natural resource capability. They have continued to pursue isolated
capabilities thus failing to facilitate society to answer questions and resolve problems. Detecting,
designing and delivering on new competencies, technologies, synergism, new pathways,
innovation, efficiency, simplicity and products are all not realised.

Accordingly, general concepts and ideas should be developed systematically in interdependence,

with cause-and-effect pathways, for improved outcomes in knowledge, technology, and
applications. At the same time, industrial and social applications rely on integration of disciplines
and unification of knowledge. Thus, convergence is both a fundamental principle of nature and a
timely opportunity for human progress. The discrepancy in most of the worlds economies
between the accelerated growth of discoveries and innovations and the relatively slow growth
underlines the unmet potential of enterprises in any sector to improve technology deployment for
social and economic benefit, and the need for a best alternatives.

Development of a highly dynamic market with increasing rivalry among competitors. The threat
of substitutes is high and increasing. These markets have a mutually high substitutive power in
terms of feeding, nutrition, dieting and manufacturing. If agro-enterprises access market with
more attractive feeding products, the consequences might be diminished income for nutritious,
dieting and manufacturing products and service markets. The market and customer might not be
willing to buy nutrition and diet products given almost equally products intended for feeding
with direct impact on the advertising revenues. Products with combined features and functions in
a single product are rapidly becoming substitutes as users are not maintaining eating time as
before apart from lifestyle health concerns. With these threats, market entry is low and
decreasing, the barriers of entry are numerous and high.

The more competitive a market becomes, the more difficult it is to differentiate products on the
basis of cost and quality. The agro-based enterprises have not successfully proved they own
competent synergies on product novelty, newness for organization and market and the part of the
value chain. Based on current practice, it is hard to determine the degree of product novelty as
dependent on agro-based medium enterprises previous knowledge concerning the innovation.
Similarly, whether a market is familiar with the innovation will determine the innovations
novelty in that market. Producing new products and entering new markets represents a high
degree of novelty. But agro-based medium enterprises have not successfully influenced
innovation patterns within companies. These organisations have continued to provide products
with direct uses and users when the markets expects products with multi features and functions

5
integrated in single product. Agro-based firms must constantly innovate to provide complement
and substitute products and services that indicate novelty and newness.

In Kenya, successful implementation of convergence innovative approaches by agro enterprises

is timely, as recent statistics show a deceleration of GDP per capita growth rate (Mouw and
Kalleberg 2010). Furthermore agro enterprises have continued to receive foreign direct
investments in research and development activities with little success on the growth rate on
converting research findings into commercial products indicating slow future trends in
knowledge growth and the rate of GDP growth in several countries.

Although agro based firms have the potential to transform any economy through large-scale food
manufacturing that will not only benefit consumers in the long run but also provide future
employment and export earning opportunities this is not realized (Lee, and Olson, 2011). The
use of technologies and business practices social computing, mobile computing and business
process management can be a driving force of becoming more innovative, nimble, and adaptive
to change, but the organizational structure of agro enterprises lacks the ability to integrate these
tools (Teece, 2009).

Performance of Agro Industry in Kenya

Agro-industry constitutes all the post-harvest activities involved in the transformation,
preservation and preparation of agricultural products. This is done to enhance the consumption of
food and non-food products. For Africans living in rural areas, agriculture remains the single
largest source of employment and income. The agro-industry consists of six main groups: food
and beverages, tobacco products, paper and wood products, textiles, footwear and apparel,
leather products and rubber products. Captured within agro-industry are a diverse range of
primary and secondary post-harvest activities, and involves varying levels of scale, complexity,
labour, and capital and technology intensity.

Over the last two decades, Kenyas economic growth has not corresponded with employment
opportunities to its youth 60 percent of whom are between the ages of 15 and 24. A large
percentage of these young people live on less than USD $2 a day. While part of this is due to the
rapidly growing labour supply, a large part is also attributed to the inability of Kenyan economy
to generate enough jobs. It is worrying that Africa represents 12 percent of the worlds
population, yet only accounts for one percent of global gross domestic product (GDP) and 2
percent of world trade. The continent is faced with four key challenges: a global food crisis,
profound climate change, soaring energy prices and persistent poverty.

Agro-industrial enterprises also provide crucial inputs and services to the farm sector for those
with no access to such inputs, inducing productivity and product quality improvements. High
food prices, caused by a high population growth, low agricultural productivity, limited access to
technology and high transportation costs all contribute to Africas economic picture. In addition,
the creation and retention of the capacity for development remains a significant challenge, and
technical and vocational training is poorly funded and managed.

Consequently, African countries face high youth unemployment, combined with a shortage and a
mismatch of skills. Rural youth often migrate to urban areas in search of job opportunities which

6
are usually not readily available. There is little value chain added to tools, manpower,
knowledge, skills, and other raw materials. It implies that the phases where products value
increases are not achieved. Thus there is lack of upgrading, the acquisition of technological,
institutional and market capabilities for greater competitiveness or movement into higher-value
activities

The agro based medium sectors contribution could be significantly enhanced by strengthening
linkages with industry. This can be pursued through agro-processing and providing value-
addition to agricultural products. Apart from that improving post-harvest operations, storage,
distribution and logistics are also critical.

Convergence of Innovation Promoters

Context factors such as work arrangements, firm size, and organization structure and employee
characteristics can all influence innovation patterns within companies, (Damanpour, 1991).
There are two perspectives on the role of innovation for economic development (Barras, 1990;
Fagerberg, 2005 & Sanidas, 2005) but emphasis is on the role of incumbent, established firms as
the primary source of innovation for economic development (Barras, 1990 & Schumpeter, 1942).

These entrepreneurial and corporate models are better associated with creative destruction and
creative accumulation, respectively, (Sanidas, 2005). Innovation concerns creating something
new (Zaltman, Duncan and Holbek, 1973). It may be an idea, an action or a material object,
(Francis and Bessant, 2005).

Convergence of organizational innovativeness portrays organizational willingness and a

tendency to achieve the desired innovation demonstrated in terms of behaviours, strategies,
activities and processes, (Garca-Morales, 2008). As a consequence, innovativeness usually result
in new products/services or changes in service/product lines, developing new R&D processes,
new methods of production, developing new systems/applications or introducing and
implementing new procedures, (Stewart, 2005).

Convergence of organizational innovation is the specific tool of entrepreneurs, the means by

which they exploit change as an opportunity for a different business or a different service; it is
capable of being presented as a discipline, capable of being learned, capable of being practiced,
(Schillo, 2011).

Convergence of organizational innovation has become vitally important for many organizations
and is considered to be essential for many public social enterprises to attain performance. Many
studies have shown that organizations that possess a range of particular advantages are most
likely to effectively apply organizational innovation strategies in order to achieve greater profits
and market share (Prajogo & Ahmed, 2006).

It is important for a firm to innovate; studies confirm that innovative businesses are more
successful than those that do not (Han, 1998; Knowles, 2007; Rogers, 2003; Wheelwright &
Clark, 1992). Innovation is a novel output through the generation of new combinations, and is
distinguished among five types of innovation: new products, new methods of production, new

7
markets, new sources of supply, and new ways to organize business (Fagerberg, 2005;
Schumpeter, 1934).

Innovation is viewed as a concept central to the creation of new industries, competitive

advantage, performance of firms, and effective management of business and public organizations
(Damanpour, Walker, & Avellaneda, 2009). Innovation is a dynamic process through which
specific individual entrepreneurs create and develop organizations (Defourny & Nyssens 2008b;
Mair & Marti 2006).

Low level of innovative attractiveness to investment in agro-sector is a global concern. Despite

the support from the government, the agro-based firms have continued to face enormous
challenges with many companies closing down (PDA, 2010). In the year 2015, agro sector,
Kenyas largest contributor to GDP experiences significant hurdles. Exports were hit by a
slowdown abroad, and the continued exportation of non- single multi features and functions
products, non-value added products that led to provision of poor quality products that cannot
command stable market prices and strongly compete in the world trade. The agro based
enterprises have continued to produce products of direct uses against demanded alternative
product uses and users.

Even the continued support of the sector from the government has never saved the situation
either. The agro-based enterprises portray a picture of non-preparedness to create a linking point
of innovation process and factors driving innovation forward. There is lack of novelty, newness
to the enterprises and newness to the market and value chain on which the innovation impacts
performance of agro-medium sized enterprises.

Most of these enterprises lack knowledge and skills that stimulate innovation promotion, steer
forward growth of small and medium enterprises into large companies and industrial
development. Although agro-based sector is considered the backbone of Kenyas economy and
the source of livelihood for majority of the rural population contributing 26 percent of the
countrys GDP and employs about 75 percent of the population, majority of rural population still
face direct product uses, high rate of malnutrition and imbalanced diets, high rate of youth
unemployment, food crisis, persistent poverty and hunger among others. For example, in 2014,
agro- sector recorded a lower growth rate of 3.5 percent in 2014 compared to the 5.2 percent
growth in 2013. The sector amongst others therefore influenced the reduced national economic
growth in 2014.

The available studies have not pursued the reasons why ago-sector has not been able to position
itself to address the convergence of innovation promoters in agro-medium enterprises. Despite
two decades of growth, structural adjustment and poverty reduction plans, rural poverty rates
have remained consistently high at over 40%, with significant regional differences. About 80%
of agricultural production comes from Kenyas 2.9 million smallholders, yet only 30% of them
are net sellers of maize, whereas 10% of larger farms account for 75% of maize marketable
surplus. Farm productivity is increasing but it is not sufficient to improve incomes and in several
high population density regions farm size is now limiting sustainable intensification.

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Although the sector is a major source of revenue, the country is still exporting non processed
value added raw materials realizing low foreign income to the country. This has resulted in
Kenya maintain imbalanced trade. The sector also lacks ability to gear itself towards realisation
of knowledgeable workers, large firm sizes or products lines, structure that can enhance
establishments of innovative and creative worker skills. Such dismal performance in firm size,
work arrangement, organisational structure, and employee characteristics has necessitated
continued poverty, food insecurity and other forms of social difficulties among sub Saharan
countries in Africa, Kenya included.

Moreover, over 50% of dairy companies in the coastal region had closed down in the period
between 2003 and the year 2010 while almost all the remaining dairy based companies were
operating at below capacity (KDB, 2010). Similarly PDA (2010) reported a similar trend with the
crop based companies in the region closing down or operating at below capacity. The study
therefore envisages establishing the convergence of organizational innovation promoters and
performance effects in agro-based medium sized firms in Kenya.

On the first concept, work arrangements is an invaluable construct in organisational performance

(Thompson, 2009). Entrepreneurial initiative has proved to be an imperative and ongoing
construct in entrepreneurship theory and research (Carr & Sequeira, 2007; Hmieleski & Corbett,
2006; Wilson et al., 2007). Entrepreneurship is often a difficult and challenging task, as majority
of new businesses fail. There is enough evidence that the output of the new entering businesses is
superior to that of the older businesses that they swap (Haltiwanger, 2000).

On second concept of entrepreneurial programs, Dyer (2003) has suggested that entrepreneurship
courses, or training regarding start of new business, contributes towards starting a new business
and it gives confidence and courage to them. Krueger and Brazeal (2005) recommended that
education in entrepreneurship can improve the perceived feasibility for entrepreneurial business
through increased knowledge base of students, confidence building and promoting self-efficacy.
Recent research proves relationship between entrepreneurial knowledge and identification
of entrepreneurial opportunities (Shepherd & DeTienne, 2005). Some of the earlier studies refer
to an individual's distinct information regarding a particular area of study (Venkataraman, 2002)
or it may be the result of work experience as well (Gimeno et al. 2002). Entrepreneurial
education program are sources of entrepreneurial attitude and overall intentions to become future
entrepreneurs (Souitaris et al.2007).

The third concept on new venture creation, prior research has shown that new venture creation is
a planned and consequently, intentional behaviour (Shapero & Sokol, 2000; Bird, 2003; Autio et
al., 2004; Tkachev & Kolvereid, 2006). The intention conception presumed that new business
formation is a deliberate and designed behaviour (Krueger & Carsrud, 2003). The theory of
designed behaviour (Ajzen, 2002), exploited in entrepreneurship ever since the 1990s, has
facilitated a new approach to the intention conception. Several studies have shown the
importance and effectiveness of university education in anticipating and clarifying individual
behaviours connected to the creation of a company (Kolvereid, 2001; Krueger, 2004). Education
and training in entrepreneurship have an instant influence on the approach of students and their
behavioural intention (Kolvereid & Moen, 2004), which indicates that there should be a

9
considerable disparity among students who have pursued an entrepreneurship course and those
who have not.

On the fourth concept of innovativeness, It was observed that higher degree knowledge of
diverse entrepreneurial characteristics had unquestionably added extra practical insights
regarding entrepreneurial action among young graduates and thus in some way persuading
intentions (Ajzen, 2002). The importance of know-how and learning has broadly drawn attention,
specifically to the enhanced information the education is providing (Cooper, 2002). The
judgment to be an entrepreneur is conceivably well thought-out as intentional and careful mind
set and this judgment is influenced by innovation (Krueger et al., 2000).

Entrepreneurial intentions are found to be important to explain entrepreneurship and a number of

intention models have been developed, including various variables. Most of the models of
entrepreneurial intention focus on the pre-entrepreneurial event and make use of attitude and
behaviour theory (Peterman and Kennedy, 2003). Institutional and social factors and forces, and
involves also a social acceptance of entrepreneurial behaviour, individuals who are willing to
deal with the risk of creating new firms and favourable business environment (Audretsch 2001).
Hence, entrepreneurial initiative of individuals is regarded as an important factor of economic
growth, whereas a major role in working up attitudes towards life is played by educational
system, which should be developing and propagating entrepreneurial initiative among students
and graduates.

A previous study (Kolbre et al. 2005) has confirmed a great potential in the form of university
graduates for increasing entrepreneurial initiative at Tallinn University of Technology. However,
the research showed that the students had knowledge for starting a business, but not so much
motivation for starting a business. This result referred to a need to study more profoundly
students attitudes and intentions to start a business, their personality traits and contextual factors
of business environment, including the role of university in supporting students entrepreneurial
attitudes and intentions.

Fostering entrepreneurship among students has become an important topic in colleges and
governments as well as in research. As studies show, student interest in entrepreneurship as a
career choice is growing (Brenner et al. 2001, Fleming 2004, Kolvereid 2002), while interest in
professional employment in businesses is declining (Kolvereid 2004). The positive role of
universities in developing entrepreneurial intention and to explore the factors influencing
entrepreneurial behaviour of students are confirmed by a number of studies (Autio et al. 2004,
Duijn 2005, Fayolle et al. 2005, Gibb 2001, Hannan et al. 2004, Hannon 2005, Lthje & Franke
2003, Reitan 2001) that help to explain the emergence of entrepreneurial intention among target
groups as well as suggest the stimulation of entrepreneurship education that can influence the
students attitudes and intentions towards entrepreneurship.

Many previous studies have suggested certain personality traits or different demographic
characteristics (for example age, gender, origin) as prerequisites for starting entrepreneurship
(McClelland, Hisrich and Peters, 2003). Literature provides a lot of definitions of the personality
traits and analyses of the development of these definitions on the basis of various business
researches (Landstrm 2004).

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Theory of Planned Behaviour
The theory of planned behaviour postulates that behaviour is a function of beliefs relevant to the
behaviour. It is these salient beliefs that are considered to be the prevailing determinants of a
persons attitudes, intentions and behaviour (Ajzen, 2002).

Therefore, people automatically acquire an attitude toward the behaviour. In this way, people
form favorable attitudes toward behaviours believed to have desirable consequences and
negative attitudes toward behaviours associated with undesirable consequences (Ajzen, 2002).

In Shapero (2002) examined the concept of desirability using data on the family, peer groups,
ethnic groups, educational and professional contexts of potential entrepreneurs. In the case of the
family, he states that particularly the father or mother plays the most powerful role in
establishing the desirability and credibility of the entrepreneurial action for an individual. In the
same way, the larger the number and variety of entrepreneurs in a particular culture, the greater
the probability that the individuals in that culture will form companies (Veciana, 2004).

Perceived Behavioural Control plays an important part in the Theory of Planned Behaviour
(Ajzen, 2002). According to this theory, the resources and opportunities available to a person
must to some extent dictate the likelihood of behavioural achievement. However, of greater
psychological interest than the actual control is the perception of behavioural control and its
impact on intentions and actions. Perceived behavioural control is defined in the Theory of
Planned Behaviour as the peoples perception of the ease or difficulty of performing the
behaviour of interest (Ajzen, 2002).

Theory of Entrepreneurial Events

The theory of entrepreneurial events advanced by Shapero (2002) argued that entrepreneurial
intentions depend on individuals perception of the desirability, feasibility and propensity of the
entrepreneurial action. Individuals behaviour is theorized to continue along the same path until
something (job insecurity, job loss, receiving an inheritance) interrupts the inertia. This
interruption makes individuals consider and evaluate other opportunities, including the start of a
business. The model was developed specifically in order to explain entrepreneurial behaviour.
The theory of planned behaviour was developed to explain planned behaviour. Here it is argued
that an individuals intention, whether entrepreneurial or other intentions, depends on the
individuals attitudes, adherence to norms and perception of feasibility (Ajzen, 2002).

The entrepreneurial event model has received empirical support (Krueger, 2003; Krueger et al.,
2000; Shook et al., 2003; Segal et al., 2005). Krueger (2003) found in his study of 126 business
students that desirability, feasibility and propensity to act explained more than half of the
variance in the intentions toward entrepreneurship. The planned behaviour model has also
received empirical support (Kolvereid, 2002; Krueger et al.; Shook et al., 2003).

Social Learning Theory

This study also utlised literature of social learning. Social capital is made up of the relationships,
either formal or informal, generated by individuals in their interaction with other individuals
trying to obtain an expected reward in the market. That is, social capital could be defined as

11
capital captured in the form of social relationships (Lin 2003). Social capital results from a
process of investment in human relationships, which requires resources and, more specifically,
time (Lin 2003). Besides, social capital makes it easier to access information, reduce transaction
costs by allowing the coordination of activities, and, finally, facilitate collective decision-making
(Grootaert and van Bastelaer 2001). Also, as indicated above, it allows access to other forms of
capital, such as human capital (Coleman 2001). Again, social capital, the same as physical
capital, may be accumulated with its use and also depreciated or destroyed (Svendsen and
Svendsen 2004).

The strength or weakness of the linkages of the individual or organization with other individuals
and organizations is an important element related to social capital (Granovetter 2003). Both
strong intra-community ties (among members of a family, an association, or an ethnic group of
immigrants) and weak inter-community ties are necessary to guarantee the efficacy of social
capital (Woolcock and Narayan 2000). On the other hand, social capital has a multidimensional
level (Grootaert and van Bastelaer 2001). First, the macro-social level focuses on the potential
benefits for individuals and organizations social networks, such as improved income levels
(Fukuyama 1995; Knack and Keefer 2002; Dakhli and de Clerq 2004). Second, the micro or
individual level focuses on the potential benefits of network relations for the person, such as the
entrepreneurial start-up or firm success (Lin 2003; Davidsson and Honig 2003).

Theory of Entrepreneurial Intention

Methodologies used so far to study the entrepreneur have been changing along the years (Santos
and Lin, 2005). Traits and demographic variables differentiating entrepreneurs from non
entrepreneurs were initially looked for (Gartner, 2000, 2003; Robinson et al., 2004). Both lines
of analysis have allowed the identification of significant relationships among certain traits or
demographic characteristics of the individual, and the fulfillment of entrepreneurial behaviours.
However, their predictive capacity has been very limited (Reynolds, 2004). On the theoretical
side, many authors have criticized those approaches (Gartner, 2000; Robinson et al., 2001;
Baron, 2005; Veciana et al., 2005), so much for their methodological and conceptual limitations
as for their low explanatory capacity.

From a third perspective, since the decision to become an entrepreneur may be plausibly
considered as voluntary and conscious (Krueger et al., 2000), it seems reasonable to analyze how
that decision is taken. Entrepreneurship may be viewed as a process that occurs over time
(Gartner et al, 2001; Kyr and Carrier, 2005). In this sense, entrepreneurial intentions would be
the first step in the evolving and sometimes long term process of venture creation (Lee and
Wong, 2004). The intention to start up, then, would be a previous and determinant element
towards performing entrepreneurial behaviours (Kolvereid, 2002; Fayolle and Gailly, 2004). In
addition, intentions toward a behaviour would be the single best predictor of that behaviour
(Fishbein and Ajzen, 2002, Ajzen, 2004, 2005).

In turn, the intention of carrying out a given behaviour may be affected by several factors, such
as needs, values, wants, habits, and beliefs ( Lee and Wong, 2004) Obviously, situational factors
also influence entrepreneurial intentions (Boyd and Vozikis, 2004; Tubbs and Ekeberg, 2004).
Variables such as time constraints, task difficulty, and the influence of other people through
social pressure could be examples of these situational factors (Lee and Wong, 2004).

12
Entrepreneurial Initiatives
The theory of designed behaviour is exploited in entrepreneurship ever since the 1990s, and it
has facilitated a new approach to the intention conception. In line with the popularity of designed
theory of entrepreneurship, a visible increase in the field of entrepreneurship education and
training has also taken place in recent years. Planned behaviour (Ajzen, 2002) has been defined
as, one of the most common psychological theories used to explain and predict human behaviour,
including entrepreneurship (Carr & Sequeira 2007; Kolvereid, 2007; Krueger & Carsrud 2008;
Tkachev & Kolvereid, 2004). Entrepreneurship scholars generally argue that entrepreneurial
behaviour is intentional and so best predicted by the measure of intentions of an individual (Bird,
2002). Ajzen (2001) defines intentions as indications of how hard individuals are willing to try,
of how much of an effort they are planning to exert, and to perform the behaviour.

Participation in Entrepreneurial Programs

Shortages in college Entrepreneurial Programs are congruent with the poor involvement of
young College graduates in business initiatives. Spanish entrepreneurs rely on higher education,
they tend to start their business years after finishing the College Education (De la Vega et al.
2009). The same pattern of results has been observed in other European countries with a similar
economic level (European Commission, 2007; Bosma and Levie, 2009).

In the same regard, some studies carried out in Spanish universities point to the conclusion that
students of all types of faculties and degrees perceive a general under representation of
entrepreneurship issues in the College agenda, and express a global desire of a greater curricular
and extracurricular treatment of the enterprising spirit (Vzquez et al., 2006, 2009a). At the same
time, it has been observed that, when comparing students in their first and last academic year at
the university, the former show higher expectations of entrepreneurship education than their
future graduated pairs, thus concluding a poor effect of the transit through university on the
entrepreneurial vocations of students (Vzquez et al., 2009a, 2009b).

This lack of entrepreneurship education in Spanish universities is due to many factors affecting
most institutions of higher education in European countries, particularly the shortage of human
and financial resources, the rigid organizational structure of higher education institutions, the
poor multidisciplinary tradition in the organization of academic programs, and the low
motivation and training of professors in entrepreneurship issues (Enterprise Directorate General,
2008a, 2008b). As a consequence of these factors, entrepreneurship education is very difficult,
and a deep restructuring, both in the own internal structure of institutions and in the mindsets of
the university fellowship, is needed in order to make the change possible.

Thereby, most public universities have developed and implemented specific extracurricular
actions to give support to potential entrepreneurial initiatives emerged from the heart of the
universitys own fellowship, in the form of an increasing number of University-Enterprise
foundations, business chairs, spin-off programs or specific institutional programs and centers on
entrepreneurship (Directorate General of Small and Medium Enterprise Policy (DGPYME,
2006); National Agency for Quality Assessment and Accreditation (ANECA, 2007).

13
Justification of greater entrepreneurship education in universities is inherent in the potential
outcomes derived from it in students. Hence, it should be a priority concern to develop practical
models which help to identify the curricular mechanisms and institutional supports needed to
articulate a new strategy in the university aimed to facilitate the emergence of entrepreneurial
interest and initiatives among students. On these lines, cognitive models of entrepreneurial
intentions is derived from the Model of the Entrepreneurial Event (Shapero and Sokol, 2003).

In simple terms, these models take it that business start-up derives from the formation of an
entrepreneurial intention, which in turn is a direct consequence of individual attitudes towards
the perceived desirability and feasibility of that behaviour which convey the potential effects of
other endogenous or exogenous variables such as education. While it is true that some successes
have been achieved by this line of research when explaining the effect of entrepreneurship
education on undergraduates entrepreneurial prospects (Lin and Rodrguez, 2005; Soutaris et
al., 2007; Corduras et al., 2008; Toledano and Urbano, 2008; Vzquez et al., 2009a, 2009b),
several limitations have been recently noted with regard to its vague specification of the
psychological constructs and educational variables used as predictors of entrepreneurial intents,
together with other criticisms doubting the validity of the approach in predicting the
entrepreneurial behaviour of university students over the long term (Robinson et al., 2003;
Chandler and Lyon, 2003; Hemmasi and Hoelscher, 2005; Linn and Chen, 2009).

Desire for New Venture Creation

Entrepreneurship and new venture creation play vital role creating employment opportunities all
over the world. It is Important for young graduates to possess the leadership style that is pre-
requisite to become entrepreneurs. Entrepreneurship has emerged over the last couple of decades
as possibly the strongest economic force that world has ever witnessed. Commonly verbalizing
that entrepreneurship denotes the new enterprise formation (Gartner, 2003). Timmons (2004)
established a fascinating model of entrepreneurial course, which embraces that novel business
formation, is an extremely vibrant sense of balance procedure. It has been years long debate that
leaders are born or can be created through education and training. Like it was also in the heated
debate that entrepreneurs are born or can be made through education till the planned theory of
behaviour was enacted (Ajzen, 2003).

There are two schools of thoughts that prevail in the context of entrepreneurship; the nascent
entrepreneurship which believes in psychological behaviour (nascent entrepreneurship talks
about the locus of control, propensity to risk, need to achieve) and planned behaviour
entrepreneurship, (PBT talks about learning, intention, and behaviour) which believes in learning
and grooming (Henry et al., 2003; Nabi et al., 2006; Stam et al., 2008). The term nascent
entrepreneurs cover individuals who have merely shown interest in starting a firm but may not
have yet reached a relatively advanced stage at which concrete actions are being undertaken to
effect the reasonably imminent possible birth of a new firm, and such studies also use a range of
means to identify what they term nascent entrepreneurs (Gartner et al., 2004).

There is significant difference among researchers as to the nature and scope, while studying
cultural dissimilarities as an important variable for cross-national comparative outcomes
(Harrison & McKinnon, 2003). There are some differences between Western and Asian cultures.
The foremost is individualism and collectivism dimension (Gudykunst (2004). A track for action,

14
a cause of inspiration, and a locus in decision-making process (Stewart, 2005). Asians, on the
other hand, are We-orientated people. They acquire their personality from their position they
embrace in the group. That means Asians feel, in a way overwhelmed with their position in a
group, and do not tend to hold a strong individual identity. Aljunied (2005) stated that human
beings have basic responsibility towards each other. Able-bodied men are expected to take care
of women and children. The family bond is described as the strongest of human ties.

Prior research has shown that new venture creation is a planned and consequently, intentional
behaviour (Shapero & Sokol, 2003; Bird, 2003; Autio et al., 2003; Tkachev & Kolvereid, 2004).
The intention conception presumed that new business formation is a deliberate and designed
behaviour (Krueger & Carsrud, 2003). The theory of designed behaviour (Ajzen, 2003),
exploited in entrepreneurship ever since the 1990s, has facilitated a new approach to the
intention conception. Several studies have shown the importance and effectiveness of university
education in anticipating and clarifying individual behaviours connected to the creation of a
company (Kolvereid, 2003; Krueger, 2003). Education and training in entrepreneurship have an
instant influence on the approach of students and their behavioural intention (Kolvereid & Moen,
2004), which indicates that there should be a considerable disparity among students who have
pursued an entrepreneurship course and those who did not.

Innovativeness
Innovativeness is concerned with supporting and encouraging new ideas, experimentation and
creativity likely to result in new products, services or processes (Miller and Friesen, 2003). The
indicators used to assess innovativeness comprises the level of involvement in R&D, and the
extent of innovation and qualifications of the workforce. The rising demand of entrepreneurship
learning both at undergraduate and graduate echelons reveals the requirement for graduates to
depart colleges prepared with the understanding and expertise essential to carry on in modern
days competitive setting. After gaining the required entrepreneurial skills and abilities
graduating students attitude change and are more attracted towards entrepreneurship.

It was observed that higher degree knowledge of diverse entrepreneurial characteristics had
unquestionably added extra practical insights regarding entrepreneurial action among young
graduates and thus in some way persuading intentions (Ajzen, 2003). The importance of know-
how and learning has broadly drawn attention, specifically to the enhanced information the
education is providing (Cooper, 2005). The judgment to turn out to be an entrepreneur might be
conceivably well thought-out as intentional and careful mind set and this judgment is influenced
by education (Krueger et al., 2000).

In particular increasing attention has been paid to entrepreneurial orientation seen as process
reflected in recurring organisational behaviour (Covin and Slevin 2003) rather than the actions of
individuals possessing certain attributes or characteristics. Behaviour important in both policy
and organisational theory contexts includes willingness to take risk, innovativeness,
technological leadership and a proactive stance toward competition (Khandwalla, 2004; Covin
and Slevin, 2004; Lumpkins and Dess, 2006; DTI, 2001).

15
Various researchers have ventured into the field of entrepreneurial intentions among academics
providing an assessment of expected dynamics in emergence of firms with high growth potential
given the research and technological environment that incubates gestation of such start-ups.

Some scholars primarily focus on the effect of personality characteristics on decision making
process (Bonnett and Furnham, 2001; Brockhaus, 2002; Johnson, 2004). Although the results
vary across the studies, they often indicate a link between entrepreneurial intention and some
personality factors, such as self-confidence, risk-taking ability, need to achievement, and locus of
control. However, a person is surrounded by an extended range of cultural, social, economic,
political, demographical, and technological factors. Therefore, personality traits cannot be
isolated from these contextual factors. According to Hisrich (2003), people can be pushed or
pulled by the situational factors, which are related with their personal backgrounds and present
lives.

The cultural and institutional frameworks also affect entrepreneurship (Wennekers and Thurik,
2002).The study of Autio et al. (2000) on robustness of entrepreneurial intention in various
cultural contexts revealed that encouragement from the university environment affects the
entrepreneurial conviction of students. In another point of view, Backes-Gellner, and Werner
(2007) demonstrate that a college degree reduces start-up problems with labor and financing and
is crucial - especially for young entrepreneurs. Therefore, universities are viewed as engines of
economic growth and development, and not merely institutions of higher education (Chrisman et
al., 2005).

People in varying environments have a large range of expectations, demands, and outlooks for
diverse and complex values in many areas. Cultural values seem to be a significant issue in
todays world. According to Hayton et al. (2002) and Hechavarria and Reynolds (2009), cultural
values reflect the degree to which a society considers entrepreneurial behaviors such as risk-
taking to be desirable and promoting innovation and creativity. Some societies are more
supportive of entrepreneurial activities than others (Carsurd et al. 2006). This statement was
supported by Pruett et al. (2009) when they explored motivations and barriers to entrepreneurial
characteristics among university students in different cultural contexts. Their results suggest that
the degree of entrepreneurial intention is related to national culture.

According to Garavan and OCinneide (2004), the different stories of successful entrepreneurs
stimulate the debate on the famous paradigm of the entrepreneurs are made or born. Obviously,
it is difficult to ignore the possible impacts of genetics or personality traits.
According to this model, the first approach to entrepreneurial education is to view it as a sub-set
of general management education. As a reaction to this approach, the second view differentiates
entrepreneurial education from the managements of large-scale organizations. The last stage
provides a basis for the notion of the reintegration of management education and
entrepreneurship education (Harrison and Leitch, 2004). Recently, the nature of discussion on
entrepreneurial education shifts towards learning for entrepreneurship, not about it (Cooper et al.,
2004).

There is an increasing interest to entrepreneurship education in Turkey as well. However, as it is

indicated by Gurol and Atsan (2006), it is far from being a national policy matter. The review of

16
curricula of Turkish business schools in 2006 demonstrated that 15 of 53 state universities have
elective entrepreneurship course, while 7 of 23 private universities offer entrepreneurship
provision and only one of them offers a major in entrepreneurship (Gurol and Atsan, 2006). It is
clear that the existing level of entrepreneurship education in Turkey is quite insufficient to foster
entrepreneurship. In fact, entrepreneurship is one of the main strategies of industrial policy in
Turkey towards the full membership to European Union (EU). However, the lack of a
comprehensive policy framework for entrepreneurial education is a significant impediment to
achieve a rapid progress.

Understanding perceptions of students at higher education level is a necessary step in this

process as evidenced in yet another study by Ahmed, Nawaz, Ahmad, Shaukat, Usman, Wasim-
ul-Rehman and Ahmed (2010) in investigating the impact of personal traits, demographic
characteristics and entrepreneurship education on entrepreneurial intentions of
university students of Pakistan.

Personality, work experience and educational attainment results provide strong empirical support
for entrepreneurial career intentions. Overall, the findings of this study contribute to the on-going
research on minority entrepreneurship in general and Hispanic entrepreneurship in particular by
identifying important social predictors of entrepreneurial intentions, (Abebe, 2012).

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