Institute for Development Studies, University of Nairobi

This paper outlines a proposed study of the so-called "missing-middle" in Kenya's industrial structure. It has been argued that there is a relative under-development of enterprises of a middle-scale in Kenya. This under-development, it is argued here, is of significance for Kenya's overall industrial development. In this study, the aim is to examine in detail the possible causes of the missing middle in the manufacturing sector. Any such study also needs to account for the form of the middle found in Kenya. In particular this entails explaining the relative and conspicuous success achieved by entrepreneurs of Asian ethnic origin in developing middle-scale enterprise. It is argued that existing approaches to the question of the middle, especially those based within the framework of neo-classical economics, have paid insufficient attention to the micro-analytics of enterprise operation and socio-cultural factors. Working within a broad background of the new institutional economics, a framework has been developed for examining and interpreting exchange processes which it is argued are at the core of enterprise development. A detailed argument is constructed within this framework seeking to explain the various phenomena of the middle observed in Kenya. The essence of this argument is that the general exchange environment faced by would-be middle-scale entrepreneurs in Kenya is very difficult. However it is suggested that entrepreneurs of Asian origin have been able to exploit elements of their socio-cultural structure in order to effectively find solutions to problems created by this environment. A number of case-studies are now proposed to both test and develop the specific hypotheses advanced.