Comparative Analysis of Innovation Financing Mechanisms for Tech Startups: Evidence from Ethiopia, Kenya, and Uganda

In developing countries, technology-based startups (TBSs) play a vital role in driving innovation, and they significantly contribute to the generation of jobs and economic development. However, despite their importance, startups have a high failure rate worldwide, and a major contributing factor is a lack of funding. The objective of this study is to compare the existing financing mechanisms in Ethiopia, Uganda, and Kenya and determine the relative position of Ethiopia in the financing landscape. This study was based on resource-based theory and signaling theory. A desk research methodology was employed, and a total of 70 sources were reviewed. The data sources include academic literature, publications from the World Bank, local reports, government policies of the three nations, articles published in reputable journals, and global database indexes. Articles were also selected based on their relevance to the research question and the credibility of the publication. The comparison was carried out based on identifying similarities and differences in economic indicators, the innovation performance of the countries, the innovation eco-system, the types of existing financing mechanisms in each country, and various government policies and initiatives. We also validated our findings by cross-checking information from multiple sources to avoid bias. The results reveal that Ethiopia is lagging behind in most of the parameters set for comparison, while its neighbors, Uganda and Kenya, have a relatively better status in general. Finally, this study has theoretical and practical implications.