Intergenerational transmission of entrepreneurship: An East African perspective of SME owner’s choice of joining the family business or independent own founding

Abstract

Drawing from the lens of entrepreneurship as a contextually driven phenomenon, this study examined the effects of parental business exposure (PBE) on the entrepreneurial mode of entry (EME) of the next-generation family members and the role of exposure to self-employed grandparents and motivation to venture on the relationship between PBE and EME. A survey administered to a sample of 440 SME owners in Kenya who had one or both entrepreneurial parents indicated that PBE significantly and positively influences joining the family business and significantly and negatively impacts the independent own founding EME. Both exposures to self-employed grandparents and necessity entrepreneurship motivation improve the positive relationship between PBE and joining the family business EME. By investigating the role of these two factors in the intergenerational transmission of entrepreneurial behaviour that are of keen interest in a developing country context like Kenya, this study provides practical guidance to family businesses in these contexts on the importance of extended households and a post-entry phase training of the next-generation family business entrepreneurs in shaping the next-generation leaders of family businesses.

Keywords:

• Family business
• entrepreneurial mode of entry
• entrepreneurial behaviour
• intergenerational transmission
• necessity entrepreneurship
• opportunity entrepreneurship
• developing economies
• Kenya

Public Interest Statement

Fifty years post-independence, most family businesses in Kenya are experiencing challenges of intergenerational succession. In most cases, the next-generation family members are unwilling to take over the family business; where they do, the family business performance deteriorates. Indeed the media is rife with many examples of family businesses which have collapsed after the next-generation assumption of control. This study examined the factors that affect the entrepreneurial entry choice of the next-generation family member, either joining the family business or independently beginning their own business. The study explicitly underlines the role of family embeddedness factors, such as exposure to enterprising grandparents, in shaping the decision to join the family business. The study also finds that the next generation joins the family business out of necessity instead of opportunity identification. Thus cautioning family businesses on the need to train the next generation before they assume control.

1. Introduction

The role of entrepreneurship in developing economies cannot be overstated. Entrepreneurial uptake is a vehicle for addressing financial security and hence improving individuals’ lives through the creation of new jobs, innovation and wealth creation (Bruton et al., 2013; Sutter et al., 2019). The transformative and emancipatory nature of entrepreneuring has more recently been acknowledged by scholars pointing to its eudaimonic benefits, especially in impoverished contexts (Boudreaux et al., 2021; Gish et al., 2022; Kimmitt et al., 2020; Ryff, 2019). These studies argue that entrepreneuring is a vehicle for a ‘virtuous life purpose of human flourishment and self-realization in human development (Ryff, 2019) as well as an individual’s psychological wellbeing (Wiklund et al., 2019). Such objectives have been argued to matter even more than the financial security objective of entrepreneuring among individuals in impoverished contexts (Kimmitt et al., 2020). For example, in Rwanda, entrepreneuring has been illustrated as a vehicle that may lead to prosperity and peace in conflict-entrenched zones (Tobias et al., 2013). The study by Kimmitt et al. (2020) among small holder farming households in rural Kenya also illustrates that family inward entrepreneuring – denoting a self-sufficient entrepreneuring underpinned by a strong family unit that is able to counteract constraints in the environment such as lack of access to agricultural inputs and markets – is primarily driven by the motive of enhancing the family physical health and is complimented by improvements in family relationships and financial situations.

As a result of the crucial role of entrepreneurship, scholars have been keen to understand the genesis of entrepreneurial behaviour among individuals. One stream of literature examines the “intergenerational transmission of entrepreneurial behaviour (Hopp et al., 2019; Laspita et al., 2012; Sørensen, 2007). Through this lens, a majority of scholars have reported an association between entrepreneurial parents and their offspring’s propensity towards entrepreneurial behaviour (Hopp et al., 2019). The argument is that by growing up in a family business, the offspring is exposed to various learning experiences such as vicarious learning (observational learning) and learning by doing as part of family chores, and this exposes them to entrepreneurship which in turn leads to an inclination towards an entrepreneurial career. Furthermore, entrepreneurial parental role models transfer explicit knowledge about entrepreneurship to their offspring in form of “know-how” and “know-who” and this influences offspring propensity towards entrepreneurial behavior (Abbasianchavari & Moritz, 2021). However, not all scholars agree that all forms of entrepreneurial behavior are beneficial to a country. For example, Stam and Van Stel (2011) use the global entrepreneurship monitor data to illustrate that entrepreneurial activity in low-income countries does not affect economic growth unlike in transition and high-income countries. The peculiarities of the business environment in developing countries, particularly those in Sub-Saharan Africa (SSA), has resulted to scholarly interest into how entrepreneurial activities can lead to the development of these economies (Mustafa & Hughes, 2018). This discourse has led to the categorization of entrepreneurial types in these economies as legal/illegal, formal/informal, and necessity/opportunity entrepreneurship (Desai, 2011). Scholars have illustrated that majority of entrepreneurial behaviour in these contexts is comprised of informal family businesses (Dana, 2018; Khavul et al., 2009) established out of a need for survival rather than to exploit a perceived untapped opportunity – a necessity-driven motivation- and hence incapable of transforming and having a significant impact on these economies (Ratten & Jones, 2018).

Despite a general consensus that family businesses are a rich source of supply of entrepreneurs in an economy (Hopp et al., 2019; Laspita et al., 2012; Zapkau et al., 2017), current studies examining the supply of entrepreneurs from family businesses in developing economies of Africa remain limited. The peculiarities of these contexts underpinned by a rich cultural diversity (Khavul et al., 2009) and a problematic institutional environment (Murithi et al., 2019) may present as both an asset and a liability in availing entrepreneurial opportunities and also setting boundaries for the realization of those opportunities for the next-generation family members (Welter, 2011). The current study sought to respond to this gap by examining two underexplored interaction effects of parental business exposure and entrepreneurial mode of entry association that may be of significance to a developing country in SSA with similarities to Kenya: grandparents’ entrepreneurial status effects and entrepreneurial motivation in the form of the necessity/opportunity dichotomy.

The role played by grandparents – “parents” own parents” has received little attention in the discourse on intergenerational transmission of entrepreneurial behaviour (Laspita et al., 2012). Their role may be of keen interest in family businesses in developing and emerging contexts where extended households and kinship ties are still a common practice (Khavul et al., 2009; Verver & Koning, 2018) and business families embedded in social relationships internally with the family and externally with the surrounding community tap into these connections to navigate the challenging business environment (Ansari et al., 2012; Murithi et al., 2019). A focus on the role played by grandparents in shaping the entrepreneurial occupational choice of their grandchildren also sheds light on the crucial role of grandparents’ entrepreneurial status as catalysts of the PBE effects on not only the conception of entrepreneurship as a career choice, but also on the decision to remain in the family business or to establish an independent business, i.e., the mode of entrepreneurial entry. The study further adds to the scarce discourse on the crucial role played by grandparents’ entrepreneurial status (Laspita et al., 2012) in the socialization and education of their children as they discern their occupational choice.

By exploring the role of necessity/opportunity entrepreneurial-type dichotomy in distinguishing the choice of mode of entrepreneurial entry (i.e., to join in the family business or independently found a new venture) by the next-generation family members, the study responds to calls in the literature to integrate family business studies with entrepreneurial theory (Porfírio et al., 2020). According to entrepreneurial theory, opportunity entrepreneurial uptake is motivated by a perceived business opportunity in the market, while the motivation for necessity entrepreneurial uptake is the lack of or limited alternative employment opportunities (Hilson et al., 2018; J. H. Block et al., 2015; Reynolds et al., 2005). Like in entrepreneurship, the next-generation family business members’ choice of entrepreneurial entry may be approached in two ways; they may, on the one hand, opt for a choice that is readily available when the alternatives are few and less attractive or when it is a natural course of events for the business to stay in the family (Porfírio et al., 2020), i.e., the necessity entrepreneurial uptake. This uptake may also be out of the obligation and the pressure from the expectations of perpetuating the family business and tradition. On the other hand, they may opt for an independent business motivated by a need to exploit an untapped business opportunity. This proactive approach may result from a need to be independent and proactively establish new businesses (Porfírio et al., 2020). Our study reveals that the choice of entrepreneurial entry into the family business is viewed as a source of income for sustenance by the next-generation family members in developing contexts. These findings thus contribute to the discourse on family businesses as a seedbed for nurturing the entrepreneurial mindset and, in particular the contribution of small family businesses in shaping and growing the entrepreneurial propensity and behaviours of the next-generation family members (Muigai et al., 2021; Ramírez-Pasillas et al., 2021). These findings also illustrate the need for training interventions for the next-generation members so that they can improve the quality of their entrepreneurial activities. The results also contribute to the current discourse on contextualizing entrepreneurship (Korsgaard et al., 2022; Shepherd et al., 2021) by showing spatial contextual factors that shape the entrepreneurial behaviour of the next-generational family members in East Africa.

2. Literature review

2.1. Contextualizing entrepreneurial behaviour in developing countries in Africa

Entrepreneurship scholars have acknowledged entrepreneurial behaviour as a contextually driven phenomenon of a society (Baker & Welter, 2020; Welter, 2011; Steyaert & Kat, (2004). In management research, context underpins situations, circumstances or conditions external to the particular phenomenon that may constrain or enable it (Cappelli, 1991; Mowday & Sutton, 1993). The context lens in entrepreneurship research has, for example, led to the view that entrepreneurial behaviour in societies with alternative developmental paths may be triggered differently such that, through its processes and practices, entrepreneurship behaviour is likely to materialize differently in societies marred with high poverty levels and hence high levels of uncertainty, high population growth, high levels of unemployment, gender inequality and high levels of government corruption in comparison to contexts with institutional certainty (Pasillas et al., 2017; Shepherd et al., 2019). Thus, entrepreneurial contexts can be both an asset and a liability through availing of entrepreneurial opportunities and setting boundaries for realizing those opportunities (Welter, 2011).

Sub-Saharan African (SSA) context is home to some of the fastest growing economies in the African continent, with an average growth rate of 4.2% (excluding South Africa), with economies in East Africa recording the highest growth rate of an average of 6.3% (Igwe et al., 2018). This regional growth and market expansion have availed entrepreneurial opportunities to individuals and firms (Anderson, 2011), but their realization has not been easy. The developing economies suffer from more inefficient and ineffective markets than developed markets (Behrman, 1999), whose foundation has been coined as “institutional voids”, defined as “absences or shortcomings that help markets operate effectively” (Khanna & Palepu, 2005).” In the context of SSA, these institutional voids are underpinned by poor governance structures marred with high corruption and political instability, an inefficient legal system, power shortages and bureaucratic government regulations (Igwe et al., 2018; Murithi et al., 2019). The informal sector is also dominated by illegal businesses that evade tax, a reflection of the excessive tax system that negatively impacts the performance of small businesses (Khavul et al., 2009; Ratten & Jones, 2018). Furthermore, Baker and Welter (2020) argue that the social institutions that define the local norms and traditions, which, for instance, determine gender roles within families, help explain the low uptake of female entrepreneurship. Welsh et al. (2021) underscore this further by illustrating that social institutional element (family moral support) significantly impacts the performance of female headed businesses in the Arab based developing countries in SSA.

When actors are embedded in weak or absent formal institutions, they are likely to construct substitutes for these formal institutional supports (Peng et al., 2008). Heeks et al. (2021) Illustrate how firms in developing countries navigate through these inefficiencies through digitization and, in some cases, automation to reduce the time and financial cost of transactions. In the same vein, Lashitew et al. (2022) inductively illustrate how these institutional voids can be mitigated through stakeholder collaboration including those not directly involved in the business activities based on a case study of the Kenyan mobile money system—M-Pesa. Indeed, the institutional voids in Kenya motivate commercial entrepreneurs to develop hybrid goals that incorporate social value creation alongside commercial goals (Sydow et al., 2022). Other scholars have also suggested that suppler development in dairy farming business in Kenya may be helpful in navigating these institutional voids (Brix-Asala & Seuring, 2020). Murithi et al. (2019) argue that business families in Sub-Saharan Africa are best positioned to navigate these institutional contexts by exploiting the social relationships they are embedded in. The context that individuals are embedded into shapes their forma mentis, affecting their overall ways of thinking, taking decisions, evaluating opportunities, and behaving. This study explores the mode of entrepreneurial entry of the next-generation family members in Kenya, a country in East Africa. The study focuses on the role of grandparents’ entrepreneurial status and necessity/opportunity-driven motivation in the relationship between parental business exposure and entrepreneurial choice of joining the family business or independently owning the business. The following section examines the role of family business exposure on entrepreneurial behaviour.

2.2. Family business exposure

There is a consensus among scholars that business families are drivers of entrepreneurial activity (Bloemen-Bekx et al., 2019; T. M. Zellweger et al., 2012) and entrepreneurial parents tend to have entrepreneurial offspring (Carr & Sequeira, 2007; Chlosta et al., 2012; Habbershon & Williams, 1999; Hoffmann et al., 2015; Jaskiewicz et al., 2015, 2015; Kim et al., 2006; Mungai & Velamuri, 2011; Nordqvist & Zellweger, 2010; Pittino et al., 2018; Schindehutte et al., 2003; T. Zellweger et al., 2011). This is because the behaviours, expressions and identities of others play a key role in an individual’s choice of a particular behaviour (Akerlof & Kranton, 2000). These influences are also reflected in the selection of an individual’s career (Krumboltz et al., 1976). For example, Chlosta et al. (2012) examined the effect of entrepreneurial parental role models on self-employment decisions, and the results indicated that having an enterprising parental role model increases the likelihood of self-employment. An inductive study done by Tarling et al. (2016) on the effects of early exposure to family businesses in Australia and the United Kingdom also revealed the important values instilled by exposure to a family business, such as accountability, hard work and personal responsibility that held a key role in informing the choice of entrepreneurship as a career option as well as the exploitation of a business opportunity. Pittino et al. (2018) on the other hand inductively examined the entrepreneurial entry paths (either succession or independent own founding) of 169 cases of entrepreneurs in the small and medium enterprise sector who had a prior family business exposure (FBE) in Italy. These authors found out that among other things, the profile of successors into the family business differed in terms of their risk propensity, and attributed those with a high risk propensity to a gambler succession profile while those with low risk propensity were attributed to a conservative succession profile. On their part Soleimanof et al. (2021) reported that when the next generation family members perceive their entrepreneurial parents as being passionate they are likely to form a favourable attitude towards entrepreneurship.

The transition entrepreneurial behaviour has also started to interest scholars of family business owing to the low succession rates in family businesses (De Massis et al., 2008). For example, a study by T. Zellweger et al. (2011) in 8 countries (Austria, Finland, Germany, Hungary, New Zealand, Norway and Switzerland) and 87 Universities reported that innovation and independence motives significantly influenced an intention to start an independent business rather than succession intent among students with prior family business exposure (hence forth FBE). Similarly, a survey done by Sieger et al. (2016) in 50 countries across 1000 Universities revealed that over 80% of all the students surveyed intended to become entrepreneurs upon completion of their studies and 33.6% of these students had a prior FBE. The authors further reported that, of the over 32,000 sampled students with FBE, 38.2% intended to explore own founding mode of entry five years after completion of their studies, while only 2.4% had an intention of succession entry mode. A majority of these studies have, however, focussed on populations of students and therefore examined the likely entrepreneurial intention of the next-generation family members. However, scholars have reported that while most students exhibit a high level of entrepreneurial intention, few actually begin businesses, and therefore, the start-up rate among graduates is low (Galloway & Brown, 2002). This has led researchers to question the extent to which entrepreneurial motivations at the intention stage of the entrepreneurial process translate into actual behaviour (Pittaway & Cope, 2007). Arguments exist that entrepreneurial intention is not a full reflection of real action with attempts to search for factors that shorten the intention—action gap (Adam & Fayolle, 2016; Kolvereid, 2016). Family business scholars have particularly called for an examination of the entrepreneurial behaviour of individuals with prior FBE. This study overcomes this limitation by drawing a sample from a population of practising entrepreneurs and hypothesizes that:

H1: Parental entrepreneurial status positively influences joining the family business mode of entrepreneurial entry

H2: Parental Entrepreneurial status negatively influences independent own founding mode of entry

As can be inferred from the studies above, a great deal of research on the role of family business exposure and family role modelling in informing an entrepreneurial career has focused on the role of entrepreneurial parents. The role of grandparents, however, has remained underexplored despite their significant role in the development and behaviour of their grandchildren (Chan & Boliver, 2013; Dunifon, 2013; Tyszkowa, 2017). For example, a national survey in the United Kingdom that targeted 1,478 adolescents reported that there is a considerable amount of informal care that grandparents give to their adolescents (Tan et al., 2010). This study concluded that grandparents fill in the parenting gap of hardworking parents, and hence there is a greater need to recognize their role as family supporters. This is particularly important in developing and emerging contexts where extended households are still a common practice and grandparents play a significant role in the upbringing of their children (Xu & Chi, 2018). They are viewed as a source of wisdom and credible information to their grandchildren when making crucial decisions especially in adolescence years (Griggs et al., 2010). Furthermore, they influence the economic status of their children through knowledge transfer, values and family ethos gained through their lifelong experiences (Portes et al., 2009). The effects of grandparents on their grandchildren have also been shown to persist after the grandchildren have become adults by influencing the grandchildren’s occupational position. A study done by M. Zhang and Li (2019) found out that the effects of grandparents on their grandchildren’s occupational aspirations persist from adolescence to adulthood even after controlling for parents socio-economic—cultural resources. The impact of self-employed grandparents on the choice of entrepreneurship is however underexplored (Laspita et al., 2012). We suggest that there is an important and significant reinforcement role played by self-employed grandparents in shaping the mode of entrepreneurial entry of the next-generation family members with self-employed parents. We therefore hypothesize that (Figure 1):

Figure 1. Hypothesized relationships

H3: The positive relationship between parental entrepreneurial status and the offspring choice of joining the family business mode of entrepreneurial entry is stronger for offspring with self-employed grandparents

2.3. Motivation to venture

Entrepreneurship theory categorizes types of entrepreneurship through motivation to venture under the dichotomy of necessity-driven versus opportunity-driven entrepreneurship (J. H. Block et al., 2015; Jafari-Sadeghi, 2020; Reynolds et al., 2005). Scholars have largely used the push and pull framework to categorize this dichotomy whereby necessity entrepreneurial uptake occurs when an individual is pushed into entrepreneurship due to a lack of a job or an unsatisfactory source of employment, while opportunity entrepreneurs begin their businesses by being pulled by a perceived business opportunity (Reynolds et al., 2005; Uhlaner & Thurik, 2010). Recent conceptual models have recommended a needs-based view of the necessity/opportunity dichotomy in entrepreneurship that results in entrepreneurial motivations that lie on a continuum (Dencker et al., 2021) such that, through the lens of Maslow’s hierarchy of needs (Arlow, 1955), necessity entrepreneurs correspond to the first two needs of the hierarchy (i.e. basic and safety needs) while opportunity entrepreneurs correspond to the other higher level needs in Maslow’s hierarchy. The author further argues that necessity entrepreneurship occurs as a response of the absence of supportive institutional levers in an economy and may manifest itself in various varieties corresponding to the needs in the Maslow hierarchy. A clear distinction thus does exist between necessity motivated entrepreneurs and opportunity motivated entrepreneurs. Scholars have for example examined individual circumstances and background as likely determinants of motives of necessity versus opportunity entrepreneurs (Nasiri & Hamelin, 2018). A need for independence informs the pursuit of opportunity-based entrepreneurship (Aparicio et al., 2016). Opportunity entrepreneurs are also characterized by higher levels of human capital as they tend to be more educated than necessity entrepreneurs (J. Block & Sandner, 2009). On the other hand, necessity-driven entrepreneurial uptake occurs due to factors such as involuntary job loss and scarcity of white-collar jobs (Reynolds, 2005), a prevalent phenomenon in developing contexts (Mota et al., 2019).

Both necessity and opportunity entrepreneurship explains the behaviour of total entrepreneur activity in a country (Martínez-Rodriguez et al., 2020) and are copresent in all economies (J. H. Block & Wagner, 2010; Nikolova, 2019), but necessity entrepreneurial uptake is more prevalent in developing economies (Wierenga, 2020). The quality of entrepreneurial ventures that result from these two motives differ. Opportunity entrepreneurial uptake provides more job opportunities in developing and emerging economies (Edoho, 2016). It is also attributed to more exports and the creation of new industries or market niches (Reynolds et al., 2005). This entrepreneurial uptake correlates highly with technology-based, high-growth firms (Reynolds et al., 2005). On their part, necessity entrepreneurs begin their businesses due to a lack of alternative employment options for a source of income (Peña et al., 2016). The main drive of this type of business uptake is pure economic motivation (Van der Zwan & Hessels, 2013). They may also be motivated by occupational safety concerns (Tyszka et al., 2011) or their own professional or personal dissatisfaction (Noorderhaven et al., 2004), such as the absence of prospects in their professional life (Orhan & Scott, 2001). In SSA, scholars indicate that necessity entrepreneurial uptake results in few employment opportunities in most cases, not more than five employees (Khavul et al., 2009).

Studies on the social antecedents of opportunity and/or necessity entrepreneurship are few, and even so, the findings are mixed and are dependent on the context of the study. For example, a comparative study of China and India reported a positive and significant effect of “knowing an entrepreneur” on both necessity and opportunity entrepreneurial uptake in China. At the same time, in the case of India, a higher social capital influenced opportunity and not the necessity entrepreneurship (Sahasranamam & Sud, 2016). Wagner (2005), on his part, observed that family role models facilitate opportunity entrepreneurial uptake more than necessity entrepreneurial uptake. Orhan and Scott (2001) argue that a need for a flexible job due to family responsibilities may push women towards entrepreneurship (necessity entrepreneurial uptake). Scholars also agree that necessity entrepreneurship is motivated by a need to increase the income/earnings (Dawson & Henley, 2012; J. H. Block & Wagner, 2010), particularly in developing countries in SSA where the choice between employment and entrepreneurship is curtailed by few and less remunerative employment opportunities that drive this “necessity driven survival” entrepreneurial uptake (Ratten & Jones, 2018; Williams & Gurtoo, 2012). Evidence also suggests that in developing countries, individuals, in addition to holding low-income part-time jobs, become necessity entrepreneurs in order to supplement their income (Gautam & Andersen, 2016; Mahama & Maharjan, 2017). Through the same lenses, growing up in a family business exposes the next-generation to the vision, intention and behaviour of the family business (Porfírio et al., 2020), which entails not only provision of the next-generation employment opportunities but also the safeguarding of the socio-emotional wealth (Gomez-Mejia et al., 2011). Indeed the next-generation family members may feel the obligation and the pressure from the expectations of perpetuating the family business and tradition—a necessity entrepreneurship categorization (Bhola et al., 2006) and hence may opt to join the family business as opposed to founding an independent business. The need to provide employment for the next generation may be more vivid in developing contexts with high levels of unemployment. Joining the family business may be viewed by next-generation as a better alternative due to, on one hand, few options of formal and better remunerative employment and on the other hand, the challenges of independent founding due to a lack of an enabling environment for cushioning the liability of newness of start-ups (Yang & Aldrich, 2017). In this case the choice of joining the family business may be viewed as source of providing a source of income for survival. It may also be viewed as availing a better and higher remunerative opportunity because the next-generation family member can leverage on existing networks and reputation of the established family business to navigate these hostile environments. We therefore hypothesize that:

H4: The positive relationship between parental entrepreneurial status and joining the family business mode is stronger for necessity entrepreneurs.

3. Methodology

3.1. Sample and data

Difficulties in obtaining a dataset of the next-generation family business owners has resulted in scarce literature on this important group of entrepreneurship (Prügl & Spitzley, 2021). To overcome this challenge, we first randomly selected 850 registered businesses from the statistical business register that is updated and maintained by the Kenya National Bureau of Statistics (KNBS). This sample was drawn from the Nairobi Metropolitan Service (NMS), which constitutes four counties; Nairobi, Kajiado, Kiambu, and Machakos, with a cumulative population of approximately 445,500 registered micro, small, and medium enterprises. Proportional distribution of the study area was done. We first stratified the frame according to the size based on the number of employees, where a micro business was the category having 4–9 employees, while a small enterprise had 10–49 employees (see Table 1 on sectoral distribution).

Table 1. Distribution of the sample

S/No.	Sector Groupings	Micro (4–9 employees)	Small (10–49 employees)	Grand Total
1	Agriculture	2	1	3
2	Food Processing	4	3	7
3	Wearing apparel	1	1	2
4	Industry except food processing and wearing apparel	18	28	46
5	Construction+Real estate	96	34	130
6	Wholesale and retail trade, repair of motor vehicles and motorcycles	163	88	251
7	Transport and storage	10	13	23
8	Accommodation	1	8	9
9	Food and beverage service activities	8	16	24
10	ICT, Finance, Professional + Administration	151	84	235
11	Education, Health + Other Services	59	61	120
	Grand Total	513	337	850

Ten trained field enumerators were commissioned to conduct the survey during the period of October 2020 and December 2020. This period included a pilot study conducted among fifty entrepreneurs across the four counties. Due to the COVID-19 pandemic, a low response rate was anticipated, and hence a personal interview was deemed a better alternative as it has a higher response rate (Mathers et al., 1998). A phone call to schedule the interview was made to each of the 850 business owners, and upon acceptance, the enumerator visited the entrepreneurs and administered the oral interview. The experience and the training of the enumerators facilitated this process and 738 respondents participated in the survey despite the challenges and restrictions necessitated by the COVID-19 measures in the country. Next, we purposefully selected 440 respondents as they grew up in a family where either the father or the mother had or is still running a business.

Table 2 presents descriptive statistics for the dependent and independent variables. A proportion of 26% became entrepreneurs by joining their parents’ business while 71% became entrepreneurs by founding a new venture. A total of 3% indicated that they became entrepreneurs through other means. Scholars such as Bhat and Daulerio (2014) have illustrated that entrepreneurial entry path can occur through franchising and therefore the 3% could be indicative of such a mode of entry. Additionally, 24% reported that their mother currently owned or had previously owned a business while 52% affirmed that their father currently owned or had previously owned a business. Further, 40% indicated that their grandparents currently owned or had previously owned a business. Moreover, the average age was 46 years with a standard deviation of 7 years. The minimum age reported was 29 years and the maximum was 72 years.

Table 2. Descriptive statistics

Variable Name	Description of Variable	N	Mean	Standard Deviation	Minimum	Maximum
ModeEntINH	I became an Entrepreneur by Inheritance of my parents’ business,yes = 1	440	0.26		0	1
ModeEntNEW	I became an Entrepreneur by Founding a New Venture, yes = 1	440	0.71		0	1
MothrExp	Mother currently owns or has ever owned a business, yes = 1	440	0.24		0	1
FathrExp	Father currently owns or has ever owned a business, yes = 1	440	0.52		0	1
GrandPdExp	Grandparents currently own or have ever owned a business, yes = 1	440	0.40		0	1
RelatExp	Relatives own or have ever owned a business, yes = 1	440	0.71		0	1
lnAge	Age in years	440	46.09	7.29	29	72
Gender	Male, yes = 1	440	0.84		0	1
YearExep	Operating their main business for more than 3 years, yes = 1	440	0.86		0	1
MaritalST	Married, yes = 1	440	0.93		0	1
PrevEmpl	Employed before starting your business, yes = 1	440	0.68
MotivStartINC	Started their main business to earn a higher income, yes = 1	440	0.33
MotivStartOPP	Started their main business to fill an open opportunity in the market, yes = 1	440	0.45
Education	Attained university degree prior to starting own firm, yes = 1	440	0.21

This table presents descriptive statistics. The sample includes 440 next generation family-owned firms in Kenya.

The findings revealed that 93% were married and 84% of the respondents were male. We attribute the big gender disparity to the fact that most women-owned businesses in developing countries are informal un-registered businesses (De Vita et al., 2014). Further, 86% had operated their main business for more than 3 years while 68% were employed before starting their business. Regarding motivation for starting their businesses, 33% were motivated by the need to earn an income for sustenance – a necessity entrepreneurial motivation while 45% were driven by the need to fill an open market opportunity- an opportunity entrepreneurial motivation. In total, 12% indicated that a combination of both opportunity and necessity drive informed their motivation to venture. Some scholars have argued for the possibility of belonging to both dynamics (J. Block & Koellinger, 2009). Finally, 21% of the respondents had attained a university degree prior to starting own firm.

3.2. Measures

3.2.1. Dependent variable

Our dependent variable is “entrepreneurial mode of entry” takes dummy variables for each category between joining in the parent’s business and independent own founding. It therefore takes a value of 1 if the answer to the question “I became an entrepreneur by joining my parent’s business is yes, 0 otherwise and a value of 1 if the answer to the question “I became an entrepreneur by founding an independent business from my parents” is yes, 0 otherwise. According to previous studies conceptualization, these are the approximations of entrepreneurial mode of entry (Bastié et al., 2013; Parker & Van Praag, 2012).

3.2.2. Independent variables

3.2.2.1. Parental entrepreneurial status

In line with previous studies’ conceptualisation (Chlosta et al., 2012), we used a binary variable to indicate whether the SME owners were exposed to parental self-employment. Paternal self-employment status was coded as 1 if the father of the respondent was self-employed or had been self-employed, 0 otherwise. Similarly, maternal self-employment status was coded as 1 if the mother of the respondent had ever been self-employed and 0 otherwise.

3.2.2.2. Grandparents entrepreneurial status

In line with previous conceptualization (Laspita et al., 2012), grandparents’ entrepreneurial status was taken to mean the entrepreneurial status of parents own parents. It was a dummy variable that took the value of 1 if the answer to the question “does your grandparent own or has ever owned a business” is yes, 0 otherwise.

3.2.2.3. Motivation to venture

Motivation to venture was a dichotomous variable that captured entrepreneurial entry through the pull and push factors, i.e., necessity and opportunity entrepreneurship. The respondents were required to tick the statement that best described their motivation to venture, contrasting two main motives that described each category. For each category, it took a dummy variable of 1 if the answer to the question “I started/joined the business in order to earn some income for sustenance a proxy for necessity entrepreneurship, is Yes and 0 otherwise. This was taken as an approximation of necessity entrepreneurship to denote the motivation to entrepreneurship to earn better remuneration given the available choices within the context of the study. Scholars agree that necessity entrepreneurship is motivated by income (Dawson & Henley, 2012; J. H. Block & Wagner, 2010). Similarly, a dummy variable that took the value of 1 if the answer to the question “I started my main business to fill an open opportunity in the market” is yes and 0 otherwise.

3.2.3. Control variables

We included a total of six control variables that potentially influence our results. First we included gender as a dummy variable that indicated whether the entrepreneur is male (1) or female (0). The propensity towards entrepreneurship has consistently been found to be gender dependent (Henry et al., 2016; Sullivan & Meek, 2012; Wang & Wong, 2004). Furthermore, studies on entrepreneurial motivation have reported that the push and pull motivation to venture is influenced by gender such that the propensity for necessity entrepreneurship is higher in women than in men as they look for a flexible employment alternative to accommodate family life (Orhan & Scott, 2001). Secondly, we included the entrepreneurs’ age as studies indicate that the opportunity to engage in self-employment increases with age (Lee & Vouchilas, 2016); age has also been found to bias entrepreneurial type with propensity for opportunity versus necessity shown to rise with age (T. Zhang & Acs, 2018). Prior knowledge has also been found to be critical in opportunity realization and exploitation (Marvel et al., 2016). The level of education in particular has been shown to bias the mode of entrepreneurial entry (Parker & Van Praag, 2012). We therefore included a dummy variable to capture the highest education attainment that took the value of 1 if the answer to the question “what is your highest level of education?” is university education and 0 otherwise. In the same vein, we included the duration of time that the respondent has run their business as a dummy variable that takes the value of 1 if the entrepreneur has run their business for more than 3 years and 0 otherwise. Previous studies have reported that entrepreneurial parents increase the odds of running a business for more than three years (Bhola et al., 2006) and therefore improves the survivability of the business. We further examined the marital status of the respondents by asking whether he or she lived with a partner or not. Marital status was coded as dummy variable with the value of 1 if married and 0 otherwise. Previous studies have reported that most individuals who opt for self-employment are either married or engaged in a partnership (Woronkowicz & Noonan, 2019). Finally, we controlled for previous employment by including a dummy variable that took the value of 1 if the answer to the question ‘were you employed prior to starting your business” is yes and 0 otherwise. Scholarly work has reported that entrepreneurs are organizational products as the organization that an individual is exposed to offers grounds for acquisition of critical psychological and social resources needed to create new organizations (Audia & Rider, 2014).

3.3. Model specification

The study tested the following probit Model in the regression analysis.

Pr(Mode of Entry_i = 1) = α₀ + α₁ [Parental Business Exposure] + α₂[Age] + α₃ [Gender] + α₄ [Operating Business more than 3 years] + α₅ [Marital Status] +α₆ [Previous employment] +α₇ [Motivated to earn higher income] + α₈ [Motivated to fill open opportunity] + α₉ [Education] + e

Or

Pr (Mode of Entry_i = 1|X_i) = F(x′_i β), where i = 1,2

1 – Joining the family business

2 – Founding new venture

Φ represented the distribution function of the standard normal random variable. Parental Business Exposure may be influenced by owner attributes such as the age, gender, level of education, operating business for more than 3 years, marital status, previous employment, motivation to earn higher income and motivation to fill an open opportunity. Therefore, to avoid endogenous problems due to biased outcomes and inconsistent estimates that may arise with a regression model that compares entrepreneurial mode of entry and the aforementioned owners’ attributes, a probit model with continuous endogenous regressors was used.

4. Results and discussion

4.1. Preliminary analysis

Table 3 and 4 presents the pairwise correlation between the dependent and independent variables. Joining the family business mode of entrepreneurial entry proxied by ModeEntINH is positively and significantly correlated with maternal self-employment status (MothrExp), paternal self-employment status (FathrExp), grandparents’ entrepreneurial status, age, gender, number of years of experience, marital status, previous employment, necessity entrepreneurship, opportunity entrepreneurship and education. However, founding a new venture independent of the parents’ business mode of entry proxied by ModeEntNEW is negatively and significantly correlated with the key explanatory variables mentioned above.

Table 3. Pairwise Correlations

	1	2	3	4	5	6	7	8	9	10	11	12	13	14
1. ModeEntINH	1
2.ModeEntNEW	−0.94***	1
3. MothrExp	0.36***	−0.36***	1
4. FathrExp	0.49***	−0.47***	0.38***	1
5. GrandPdExp	0.51***	−0.49***	0.30***	0.58***	1
6. RelatExp	0.34***	−0.32***	0.31***	0.57***	0.48***	1
7. lnAge	0.04	−0.02	0.02	0.002	0.07	0.04	1
8. Gender	0.15***	−0.12***	0.07	0.18***	0.11**	0.17***	0.17***	1
9. YearExep	0.18***	−0.16***	0.10**	0.15***	0.08*	0.19***	0.17***	0.06	1
10. MaritalST	0.09*	−0.08*	0.07	0.08*	0.16***	−0.01	0.18***	0.21***	0.09**	1
11. PrevEmpl	−0.42***	0.43***	−0.19***	−0.30***	−0.33***	−0.14***	0.08*	−0.08	−0.08	−0.08*	1
12. MotivStartINC	−0.03	0.02	−0.02	−0.04	0.08*	−0.004	0.07	0.05	−0.20***	0.06	0.06	1
13. MotivStartOPP	−0.13***	0.12***	−0.01	−0.03	−0.11**	−0.03	0.06	−0.09*	0.12***	−0.06	0.10**	−0.64***	1
14. Education	0.30***	−0.27***	0.25***	0.36***	0.36***	0.30***	0.03	0.12***	0.07	0.04	−0.12***	0.03	−0.02	1

This table presents pairwise correlations among dependent and independent variables. The sample includes 440 next generation family-owned firms in Kenya. *, ** and *** denote significance at the 10%, 5% and 1% levels respectively

Table 4. Probit models

	Model 1: ModeEntINH		Model 2: ModeEntNEW
	Column 1	Column 2	Column 3	Column 4
	Coefficient	Marginal Effects	Coefficient	Marginal Effects
MothrExp	0.53*** (0.181)	0.13*** (0.051)	−0.54*** (0.177)	−0.19*** (0.060)
FathrExp	0.76*** (0.242)	0.15*** (0.049)	−0.63*** (0.219)	−0.17*** (0.059)
GrandPdExp	0.73*** (0.203)	0.16*** (0.052)	−0.71*** (0.193)	−0.21*** (0.059)
RelatExp	0.43 (0.326)	0.08 (0.052)	−0.09 (0.257)	−0.02 (0.070)
lnAge	0.47 (0.538)	0.10 (0.111)	−0.22 (0.501)	−0.06 (0.141)
Gender	0.24 (0.289)	0.04 (0.049)	−0.03 (0.246)	−0.01 (0.068)
YearExep	1.24*** (0.390)	0.15*** (0.028)	−0.75*** (0.301)	−0.16*** (0.046)
MaritalST	−0.05 (0.398)	−0.01 (0.086)	0.03 (0.348)	0.01 (0.100)
PrevEmpl	−0.81*** (0.180)	−0.19*** (0.051)	0.82*** (0.166)	0.25*** (0.055)
MotivStartINC	−0.39* (0.233)	−0.07* (0.043)	0.31 (0.218)	0.08 (0.056)
MotivStartOPP	−0.66*** (0.220)	−0.13*** (0.044)	0.49*** (0.203)	0.13*** (0.055)
Education	0.41** (0.191)	0.10** (0.051)	−0.24 (0.186)	−0.07 (0.058)
Intercept	−4.40** (2.049)		2.31 (1.871)
No. of Observations	440		440
LR χ^2(12)	218.76***		194.77***

Robust standard errors in parenthesis accounts for heteroscedasticity. *, ** and *** denote significance at the 10%, 5% and 1% levels respectively.

4.2. Main effect analysis: The effect of Parental entrepreneurial status on entrepreneurial mode of entry

Our hypotheses H1 and H2 posited that parental entrepreneurial status positively influences joining the family business mode of entrepreneurial entry and negatively influences independent own founding mode of entry of the next-generation family members. From model 1, the marginal effects for the MothrExp, FathrExp, proxies for parental business exposure are positive and significant in column 2 while negative and significant in column 4. Having a mother and/or a father who owns or has owned a business increases the probability of joining the family business entrepreneurial mode of entry by next generation by 13.0 and 15.0 percentage points respectively. On the other hand, it decreases the probability of founding new venture entrepreneurial mode of entry by next generation by 19.0 and 17.0 percentage points respectively. The results support the prediction of our hypothesis (H1).

4.3. The interaction effects of grandparents’ entrepreneurial status

Our hypothesis (H3) suggested that the positive relationship between parental entrepreneurial status and the offspring’s choice of family business mode of entrepreneurial entry is stronger for the offspring with self-employed grandparents. From model 1 column 2, the marginal effects for the GrandPdExp, a proxy for grandparents’ entrepreneurial status are positive and significant. Having grandparents who own or who have owned a business increases the probability of joining the family business entrepreneurial mode of entry by next generation by 16.0 percentage points which is bigger than mother and father owning business. The results support the prediction of our hypothesis (H3).

4.4. The interaction effect of motivation to venture

Our hypothesis (H4) posits that the positive relationship between parental entrepreneurial status and joining the family business mode of entrepreneurial entry is stronger when the motivation to venture is out of necessity than when it is out of opportunity. From model 1 column 2, the marginal effects for the MotivStartOPP, a dummy for opportunity motivated entrepreneurship against necessity are negative and significant. Therefore, being motivated to fill an open opportunity in the market decreases the probability of joining the family business entrepreneurial mode of entry by next generation by 13.0 percentage points, while being driven by necessity entrepreneurial uptake increases probability of inheritance entrepreneurial mode of entry by next generation by 13.0 percentage points. The results validate the prediction of our hypothesis (H2).

5. Discussion

Entrepreneurship scholars have called for an examination of the effects of prior entrepreneurial exposure in the entrepreneurial process beyond the entrepreneurial intention stage in order to further illuminate the effects of this phenomenon in the entrepreneurial process (Zapkau et al., 2017). This study attempts to contribute to this call through three main avenues. First, we examine the effects of parental entrepreneurial exposure on the mode of entrepreneurial entry of the next-generation family members—a choice between joining the family business or independent own founding among small and medium business owners. Second, the study examines the interaction effects of grandparents’ entrepreneurial status and motivation to venture on this association. Third, the study draws from a sample of next-generation family business members in a developing country context—Kenya.

Our study reveals that parental entrepreneurial exposure positively influences joining in the family business and negatively influences independent own founding mode of entrepreneurial entry. Akin to the study done by Laspita et al. (2012), the positive association between PBE and joining the family business EME is improved by the interaction of grandparents entrepreneurial status. Further, the motivation to venture also has a significant interaction effect on the association of PBE and EME such that, contrary to the finding of Bhola et al. (2006) who found that opportunity driven motivation influences joining in the family business, our study shows that it is the necessity driven motivation that influences joining in the family business. The possible explanation for the contrary findings are the fact that in developing contexts, the established family business may offer a better remunerative source of income in comparison to the available white-collar jobs and independent start-ups. Labour market studies in developing contexts reveal that, these environments not only have a high unemployment rate but also underemployment is prevalent (Fields, 2011). Our study makes several contributions to literature and practice.

First, in line with previous studies that have reinforced the role played by parental—founders as facilitators of the entrepreneurial process of the next-generation members (Garcia et al., 2019), our study reveals that PBE influences the propensity towards joining the family business mode of entrepreneurial entry. We argue that in developing contexts, this exposure may legitimize the family business as a better remunerative alternative than own founding mode of entry because of the perceived challenges of establishing an independent business in these contexts. The heavy bureaucratic government procedures of establishing a new business as well as other institutional constraints such as heavy taxation, corruption in public service and lengthy government requirements all raise the transactional cost of businesses (Liedong et al., 2020) and hence limit the anticipated earnings from the start-up. Scholars have reported that developing contexts are characterized by a lack of “market supporting formal infrastructures”, and family ties compensate for the lack of these facilitating institutions (Ge et al., 2019). The next-generation family members may therefore perceive the family businesses as a better remunerative business than starting their own independent business. Our study further argues that entrepreneur grandparents play a reinforcing role in facilitating this process in these contexts. It thus adds credence to the qualitative study done by Khavul et al. (2009) that illustrated that East-African family business owners are characterized by strong family ties that constitute extended families unlike family businesses in North America and Europe. The findings also compliment the work of T. M. Zellweger et al. (2012), that argued that in societies with loose family ties and high regard for autonomy, the next-generation family business members are less likely to choose a succession mode of entry. The findings thus corroborate scholarly work on the kinship approach in entrepreneurship that illuminates the role of the extended family in not only facilitating the entrepreneurial process of the next generation but also in providing the rationale for start-ups (Verver & Koning, 2018).

Second, our study corroborates the findings of T. M. Zellweger et al. (2012), who reported that in developing economies, “necessity succession” may be more prevalent than in developing countries. This is the choice of joining the family business as opposed to independent founding due to a lack of a better alternative source of employment. Our study reveals that the next-generation small business owners in Kenya choose joining the family business motivated by a need for a higher income a necessary entrepreneurial uptake. These findings are of particular importance to family businesses in developing economies. While these businesses do act as easier seedbeds for the development and uptake of entrepreneurship for the next-generation family members, there is a need for greater support for these potential entrepreneurs as they grow up, which may be through training and mentoring in order to build their knowledge and skills that may improve the quality of their entrepreneurial activities. Indeed, as Kandade et al. (2021) illustrate in their interpretation of narratives of 24 next-generation leaders of family businesses in India, the quality of family relationships that entails early affiliation with the business, mutual obligation and mentoring, holds the key to transforming family successors to successful business leaders. Next-generation post-entry could also be accompanied by clear hands-on training guidelines that entail a developmental path underpinned by innovation and learning, for example, through corporate venturing efforts (Au et al., 2013; Muigai et al., 2021).

6. Conclusion

Given the critical importance of entrepreneurial uptake to developing countries of SSA, examining the factors that facilitate its emergence and survival remains an important policy consideration. The Global Entrepreneurship Monitor (2015) suggests that the formal employment sector in Africa cannot contain its growing population, and entrepreneurship remains a crucial tool for developing these economies. Our findings provide examples of the individuals’ entrepreneurial entry decisions in SSA, which may bring policy makers closer to the nature of this process for potential entrepreneurs. The context of SSA presents institutional constraints and enablers to entrepreneurial entry (family businesses). There is also the response of potential entrepreneurs (next-generation) from these enablers and constraints – to either join the family business or independently start their businesses. Policymakers must be aware of these responses in order to constantly ensure that the institutional constraints are addressed to support innovative entrepreneurial entry in developing countries of SSA.

7. Limitations and avenues for future research

Our study has several limitations that may be avenues for future research. First, our results apply primarily to a developing country context similar to Kenya. According to the World Bank, Kenya is ranked as a lower middle-income country with a high unemployment rate estimated at 10.4% (World Bank, 2020). Scholars have thus called for a distinction of various emerging economies as they are different based on their size, economic path and history and therefore may produce different research results (Cao & Shi, 2021). This study did not examine the effects of parental entrepreneurial status on the mode of entrepreneurial entry from a middle income emerging economy such as India and China and hence this would be an interesting avenue for future research to see comparatively how the results would differ. Second, we used the push and pull framework to examine the necessity/opportunity dichotomy and its effects on the mode of entrepreneurial entry. Future research could use a needs-based approach to map out the necessity/opportunity motivation in a continuum (Coffman & Sunny, 2020; Dencker et al., 2021). Such results may yield interesting insights for family businesses. Future research could also examine other dichotomies that are prevalent in developing contexts, as the necessity/opportunity dichotomy could be restrictive. Formal/informal dichotomy, for example, could yield interesting findings (Autio & Fu, 2015; Desai, 2011).

Disclosure statement

No potential conflict of interest was reported by the authors.

Additional information

Notes on contributors

Sarah W Muigai

Sarah Muigai, faculty member, Strathmore Business School, Nairobi Kenya

Edward Mungai

Edward Mungai, Senior Lecturer, Strathmore Business School, Nairobi Kenya

Ramakrishna Velamuri

Ramakrishna Velamuri, Senior Lecturer and Dean, Mahindra School of Management Mahindra University Hyderabad, India