Mobile Phones and E-commerce among Micro and Small Enterprises in the Informal Sector: An Empirical Investigation of Entrepreneurship in Nairobi

O. LK. "Mobile Phones and E-commerce among Micro and Small Enterprises in the Informal Sector: An Empirical Investigation of Entrepreneurship in Nairobi." Shaker Verlag – Germany. 2013;1(1).


Lack of employment has pushed many people into self employment in the informal sector in Nairobi and Kenya at large. Micro and small enterprises (MSEs) are recognized by the government for their contribution to the GDP. Information and Communication Technologies (ICTs) are assisting the operators of MSEs in this sector to become more entrepreneurial. The ICT that is widely used in the sector is the mobile phone. Studies done on the usage of ICTs among MSEs have mostly concentrated on the roles of computers and internet usage, and given contradicting results on the benefits of using these technologies in e-commerce. Evidence on the role of mobile phones among MSEs in Kenya is lacking, especially, the evidence on factors facilitating and preventing their adoption, and the effects of the adoption on the performance of an MSE.

This thesis analyzed the determinants of mobile phone possession, the extent of its usage in e-commerce, and the impact of mobile phone usage on the performance of an MSE. The hypotheses that were tested and strongly rejected were: a) e-readiness factors that is, characteristics of the owner, the attributes of the firm and the environment under which the firm operates, have no effect on the adoption of mobile phones and their usage in e-commerce; and b) the adoption of mobile phones and their use to transact business has no effect on the performance of an MSE. Data for the study was collected from the 8 divisions of Nairobi Province. Three models were estimated using these data, namely, the logit model, the probit model and the LPM (linear probability model).

The main findings of the thesis are as follows: a) the majority of MSEs in Nairobi’s informal sector are poor although a few of them had sales running into millions of Kenya shillings; b) the sector is dominated by literate people, the majority of whom were male operators; c) many of the operators had mobile phones, and they used them for business transactions; d) each MSE paid a daily fee of 20 Kenya shillings to the City Council officers; e) the key readiness factor influencing the possession of the phone is electricity; f) education has a strong influence on the usage of the phone for e-commerce; and g) mobile phone possession and usage for e-commerce are highly associated with sales turnover and with employment creation within the informal sector.

It is recommended that MSEs be categorized by the value of items sold and not the number of employees. A clear distinction should be made between MSEs in the informal sector and those in the formal sector. Further, a conducive, operating environment which accommodates electricity needs to be provided. Computer training and innovations associated with the usage of mobile phones should be encouraged and facilitated among MSEs to enhance their performance. Research on business start-ups and innovations due to mobile phone usage should be carried out. Finally, research on specific transactions of mobile phone usage in e-commerce needs to be conducted.

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