Risk and firm growth: the dilemma of Nairobi's small - scale manufacturers
Abstract
In Nairobi, where the economic and social consequences of business
failure are high, entrepreneurs' risk-management strategies work separately
and together to discourage firm growth. Many manage risk through
flexibility. By working in rent-free quarters, using family labour and
little capital, they minimise fixed costs and increase opportunities for
additional income. Business owners also avoid risk by manufacturing
standard products for a known market. Successful entrepreneurs diversify
their income and assets rather than expanding one enterprise. Finally, most
prefer to preserve land and other assets unencumbered by debt. These
rational responses to a risky business environment inhibit formation of a
dynamic manufacturing sector. Policymakers, NGOs, and the private sector
can help by creating broad policies and targeting specific programmes to
remove or reduce risk.