Organisational Factors and Uptake of Venture Capital by Small and Medium Enterprises: A Case of Selected Venture Capital Beneficiaries of Kenya Commercial Bank
Abstract
Capital venture is a means through which corporations contribute in the success of external innovations to help them gain insight into non-core markets and access to capabilities. Most businesses tend to look internally for primary funding before considering finances from banks and cooperative societies. Venture capitalists are important source of fund that can invest in any form of business, regardless of size, depending on their assessment and postulation of the success of the business. The main objective of this research study was to establish the influence of organisational factors and uptake of venture capital by small and medium enterprises: a case of selected venture capital beneficiaries of Kenya Commercial Bank. In particular this study sought to find out the role of organisational innovativeness, ownership structure, capital gearing and entrepreneurial competencies of owner/manager on uptake of venture capital by SMEs in Kenya. The researcher aimed to identify significant facts around SME organisational factors that entrepreneurs can rely upon to enhance their lucrativeness for uptake of venture capital, that can support policy makers in reviewing effectiveness of existing policies in a bid to propel uptake of venture capital in Kenya and the region and that can provide important literature to be referenced by scholars and other researchers studying the same or related issue in order to identify gaps for further studies. The study was informed by resource view-based, institution and pecking order theory. The study employed a descriptive research design with a target population of 300 SMEs who had benefited from venture capital in Kenya through KCB Lions Den and KCB 2Jiajiri. The sample size for the study was 90 respondents, randomly selected and gathered primary data by use of questionnaires in a Likert scale. Data gathered from correctly filled questionnaires was coded, tabulated and analysed using Statistical Package for Social Sciences (SPSS) Version 24. The study adopted descriptive and inferential statistics to capture the characteristics of variables under study and analyse the relationship between dependent and independent variables. The researcher conducted this study within the set ethical standards. The study established that organisational innovativeness had a positive and significant effect on uptake of venture capital with B=0.586, t=5.228 and R2 of 0.259. Ownership structure had a positive and significant effect on uptake of venture capital (B=0.685, t=5.747) and R2 of 0.297. Capital gearing also had a positive and significant effect on uptake of venture capital with B=0.687, t=6.235 and R2 of 0.333. The study further established that entrepreneurial competencies had B=0.713, t=6.778 and R2 of 0.371, which is a positive correlation and denotes the most significant influence on uptake of venture capital compared to other variables under this study. Therefore, the study concludes that organisation innovativeness influence uptake of venture capital by SMEs to a great extent and is a fundamental pillar to growth and entry to new market place. Ownership structure determine uptake of venture capital by SMEs to a great extent and primary driving factor for investor and creditors decision. Capital gearing influences the uptake of venture capital by SMEs to a great extent. Entrepreneurial competencies of owner/manager influence and determine uptake of venture capital by SMEs to the greatest extent compared to other variables in this study. The study recommends that given the importance of entrepreneurial competencies in relation to uptake of venture capital, instructors should develop competency-based training and education programmes targeting to enhance entrepreneurial skills of owner/managers. SMEs should invest in research to create innovative products and least cost processes. Businesses with high capital gearing ratio should target to attract debt that is relative to their equity, thereby balancing their financial risk. Finally, the owners/managers should strive to take up more venture capital since the venture capitalists do not only assist in provision of funds but can also contribute to the internal operations of the businesses, especially policy formulation.
Key Words: Capital gearing, Venture capital, Ownership structure, Entrepreneurial competencies, uptake
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