Abstract
The persistent gap between policy formulation and implementation has been identified as a critical constraint on enterprise development and economic growth in Kenya. Despite numerous policy initiatives, systemic governance challenges continue to undermine the business environment, affecting competitiveness and investment. This analysis critically evaluates the evolution of enterprise policy and governance frameworks, aiming to diagnose specific institutional failures and propose a coherent model for enhancing policy efficacy and accountability within the business ecosystem. The study employs a longitudinal policy analysis, combining documentary analysis of key policy texts, legislative frameworks, and official reports with a structured review of independent evaluations and stakeholder assessments. This diagnostic approach assesses coherence, implementation fidelity, and outcomes. A central finding is the recurrent theme of policy dilution during implementation, where an estimated 60% of analysed policies exhibited significant deviation from their original design intent due to fragmented institutional mandates. This has perpetuated a high-compliance-cost environment for small and medium-sized enterprises. The diagnostic reveals that structural governance weaknesses, rather than a lack of policy intent, are the primary impediment to a transformative business environment. Effective enterprise development requires fundamentally re-engineered implementation mechanisms. Establish an independent, statutory Policy Implementation Oversight Unit; mandate integrated regulatory impact assessments for all new business legislation; and adopt a unified digital platform for all national and county-level business licensing and compliance. policy implementation, governance diagnostics, enterprise development, regulatory coherence, institutional analysis This paper provides a novel diagnostic framework that disaggregates policy failure into discrete institutional and procedural components, offering a replicable model for systemic governance analysis in emerging economies.