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African small and medium enterprises, networks, and manufacturing performance

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  • Biggs, Tyler
  • Shah, Manju Kedia

Abstract

This paper examines the role of private support institutions in determining small and medium enterprise (SME) growth and performance in Sub-Saharan Africa (SSA). It finds that SMEs in SSA get around market failures and lack of formal institutions by creating private governance systems in the form of long-term business relationships and tight, ethnically-based, business networks. There are important links between these informal governance institutions and SME performance. Networks raise the performance of"insiders"and, in the sparse business environments of the SSA region, have attendant negative consequences for market participation of"outsiders,"such as indigenous African SMEs. This is indicated through the determinants of access to supplier credit. Policy interventions will be needed to improve the platform for relation-based governance mechanisms and to address the exclusionary effects of tight networks.

Suggested Citation

  • Biggs, Tyler & Shah, Manju Kedia, 2006. "African small and medium enterprises, networks, and manufacturing performance," Policy Research Working Paper Series 3855, The World Bank.
  • Handle: RePEc:wbk:wbrwps:3855
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    References listed on IDEAS

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    2. Jan Willem Gunning & Paul Collier, 1999. "Explaining African Economic Performance," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 64-111, March.
    3. Marcel Fafchamps, 2004. "Market Institutions in Sub-Saharan Africa: Theory and Evidence," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262062364, January.
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    5. Abigail Barr, 1998. "Enterprise performance and the functional diversity of social capital," CSAE Working Paper Series 1998-01, Centre for the Study of African Economies, University of Oxford.
    6. Fafchamps, Marcel, 2000. "Ethnicity and credit in African manufacturing," Journal of Development Economics, Elsevier, vol. 61(1), pages 205-235, February.
    7. Hall, Bronwyn H, 1987. "The Relationship between Firm Size and Firm Growth in the U.S. Manufacturing Sector," Journal of Industrial Economics, Wiley Blackwell, vol. 35(4), pages 583-606, June.
    8. Barr, Abigail, 2000. "Social Capital and Technical Information Flows in the Ghanaian Manufacturing Sector," Oxford Economic Papers, Oxford University Press, vol. 52(3), pages 539-559, July.
    9. Bernstein, Lisa, 1992. "Opting Out of the Legal System: Extralegal Contractual Relations in the Diamond Industry," The Journal of Legal Studies, University of Chicago Press, vol. 21(1), pages 115-157, January.
    10. Biggs, Tyler & Raturi, Mayank & Srivastava, Pradeep, 2002. "Ethnic networks and access to credit: evidence from the manufacturing sector in Kenya," Journal of Economic Behavior & Organization, Elsevier, vol. 49(4), pages 473-486, December.
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    Citations

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    Cited by:

    1. Gelb, Alan & Ramachandran, Vijaya & Shah, Manju Kedia & Turner, Ginger, 2007. "What matters to African firms ? the relevance of perceptions data," Policy Research Working Paper Series 4446, The World Bank.
    2. Masakure, Oliver & Cranfield, John & Henson, Spencer, 2008. "The Financial Performance of Non-farm Microenterprises in Ghana," World Development, Elsevier, vol. 36(12), pages 2733-2762, December.
    3. Maria Fernanda Tomaselli & Joleen Timko & Robert Kozak, 2013. "Assessing Small and Medium Forest Enterprises' Access to Microfinance: Case Studies from The Gambia," Journal of Development Studies, Taylor & Francis Journals, vol. 49(3), pages 334-347, March.
    4. Martine Spence & Jouhaina Ben Boubaker Gherib & Viviane Ondoua Biwolé, 2011. "Sustainable Entrepreneurship: Is Entrepreneurial will Enough? A North–South Comparison," Journal of Business Ethics, Springer, vol. 99(3), pages 335-367, March.

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    Keywords

    Economic Theory&Research; Banks&Banking Reform; Business in Development; Business Environment; Technology Industry;

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