1

An overview of African entrepreneurship and small business research.

Abstract:

Given the potential importance of self-employment for African economic development, the present
paper provides an overview of the current state of entrepreneurship research in Africa. This is based on
the compilation of a bibliography of African entrepreneurship research. To our best knowledge, this is
the first time that such a bibliography has been attempted for Africa. We analyze the frequency and
topics of research outputs since 1963 and provide an overview of the main themes and topics in African
entrepreneurship research. It is shown that in Africa, the government impacts on entrepreneurship both
directly (through for instance taxation, education and training policies as well as privatization) and
indirectly through, for example, contributing to an uncertain policy environment, damaging social capital
and creating institutional features that keep African firms small. The smallness of African firms, and the
role of social network capital in overcoming the negative features limiting African firm growth and
survival, are important topics for future research on African entrepreneurship.

Etant donne l'importance potentielle du travail a son compte pour le developpement economique de
l'Afrique, le present article offre, sur la base d'une compilation bibliographique, une vue synoptique de
la recherche sur l'entrepreneuriat en Afrique. Autant que nous le sachions, il s'agit la de la premiere
tentative de ce genre. Nous analysons la frequence et les sujets de la recherche produite depuis 1963, et
passons en revue les themes principaux de la recherche africaine en entrepreneuriat. Il ressort qu'en
Afrique le gouvernement a sur l'entrepreneuriat un impact a la fois direct (a travers par exemple la
taxation, l'education, les politiques de formation et la privatisation) et indirect (de par sa contribution a
un environnement politique incertain, qui fait tort au capital social et cree des traits institutionnels
s'opposant a la croissance des entreprises africaines). La petitesse des compagnies africaines, ainsi que
le role du reseau social pour surmonter les traits negatifs qui limitent la croissance et la survie de ces
compagnies, constituent des sujets de recherche importants pour l'avenir.

Article Type:

Bibliography

Subject:
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Small business (Bibliography)

Small business (Social aspects)

Authors:

Naude, W.A.

Havenga, J.J.D.

Pub Date:

01/01/2005

Publication:

Name: Journal of Small Business and Entrepreneurship

Publisher: Canadian Council for Small Business and Entrepreneurship Audience: Academic
Format: Magazine/Journal Subject: Business, general
Copyright: COPYRIGHT 2005 Canadian Council for Small Business and Entrepreneurship ISSN: 0827-6331

Issue:

Date: Wntr, 2005 Source Volume: 18 Source Issue: 1

Topic:

Event Code: 290 Public affairs Computer Subject: Small business; SOHO

Product:

Product Code: 9970000 Small Business

Accession Number:

204932002

Full Text:

Introduction

Africa is the poorest region in the world and the only major developing region with a negative growth in
income per capita over the past two decades (Sachs et al., 2004: 117). Can entrepreneurship make a
difference to economic growth and development in Africa? Answering this question would require
rigorous research into African entrepreneurship. However, compared to research on entrepreneurship
elsewhere in the world, and the extensive scientific debate on entrepreneurship in Europe and the
United States, entrepreneurship research in Africa is relatively lacking. This lack is reflected in the fact
 3

that a number of recent in-depth scientific reports on the causes and remedies of Africa's slow economic
growth performance fails to discuss entrepreneurship at all (Sachs et al., 2004; Fafchamps et al., 2001;
Collier and Gunning, 1999a, 1999b).

In contrast to the relative lack of scientific debate on African entrepreneurship, policy makers in Africa,
and some donor countries, are claiming that entrepreneurship can make important contributions to
economic growth and development. For example a recent report by the South African Department of
Trade and Industry states, "the government is now turning its attention to looking at entrepreneurship
development and the promotion of self-employment as strategies that can help to overcome the
unemployment problem and propel the economy to higher rates of growth. (DTI, 2000: 4).

If policy makers are to be successful in this, more research on African entrepreneurship will have to be
carried out and disseminated. Where and how should this research be focused? To provide some initial
answers to this question, it is the purpose of the present study to give an overview of the current state
of entrepreneurship research in Africa based on the compilation of a comprehensive bibliography of
African entrepreneurship research. This is the first time that such a bibliography has been attempted for
Africa. We took our example from two international bibliographies of entrepreneurship and SMEs. (1)
Both were published in the United States and are particularly comprehensive in the coverage of
literature worldwide, but not with regard to Africa. The present study is aimed at rectifying this
omission. Through the compilation of such a bibliography, one can provide an indication of the quantity
of scientific research on African entrepreneurship, the topics within entrepreneurship this research
addresses, and the countries in Africa where the scientific debate on entrepreneurship is most intense.
From this overview, we will also be able to glimpse some of the current directions that African
entrepreneurship research is taking.

The paper is structured as follows: in the next section (section 2) we briefly discuss the concept of
entrepreneurship for purposes of this study and to illuminate the African context. Section 3 discusses
the methodology this paper follows in identifying and categorizing African entrepreneurship research
between 1963 and 2001. Section 4 summarizes the main findings with respect to the topics, frequency
and country studied in African entrepreneurship research over the period. In section 5 we identify seven
questions (or directions) in African entrepreneurship research that seems topical. Section 6 concludes
this paper.
 4

The Concept of Entepreneurship

There is no commonly accepted definition of entrepreneurship and the concept defies easy
measurement. It is a multidimensional concept and the definition used will depend on the focus of the
research taken (Verheul et al., 2001: 4). Most often, especially in Africa, the term or concept is equated
with self-employment. The term self-employment refers to people who provide employment for
themselves as business owners rather than seeking a paid job. In Africa, a large part of the self-
employed is in the informal sector, as we will show below, a correspondingly large part of
entrepreneurship research in Africa draws on studies on informal enterprises. Defining entrepreneurship
as self-employment is consistent with the Global Entrepreneurship Monitor (GEM) project's definition of
entrepreneurship as "Any attempt at new business or new venture creation, such as self-employment, a
new business organization, or the expansion of an existing business, by an individual, teams of
individuals, or established businesses. (Reynolds, Hay and Camp, 1999).

The entrepreneurship literature indicates a difference between entrepreneurship and small business
promotion. Indeed, from the definition above, it is clear that entrepreneurship is a much broader
concept than small business. However, small businesses are often seen as the 'seedbeds. of
entrepreneurship or one of the key "vehicles. of entrepreneurship (Acs, 1992: 38). As such,
entrepreneurship and small business research are often intertwined. In Africa, the relationship between
entrepreneurship and small business research is even closer. This is because small businesses (SMEs)
predominate in Africa to a larger extent than elsewhere. The size distribution of firms in Africa is heavily
skewed, with a much higher proportion of very small firms than can be found elsewhere (Bigsten et al.,
2001; Tybout, 2000). (2)

In the directions taken by entrepreneurship research in Africa (section 5 below) we note that the
relationship between a firms size and the manner in which it constrains entrepreneurship provide the
basis for this paper's research.

Methodology

The study area included all the countries of Africa and, to a certain extent, other parts of the world
where academic and scientific publications appeared with regard to Africa. Sources ranged from
scientific indexes, book bibliographies, theses and dissertations, academic and professional journals,
conference papers, popular journals, and internet sources. It was not the intention to compile a listing of
 5

any type of publicized information on entrepreneurship and SMEs, but to concentrate on those that
have scientific and academic value.

In total, just over 500 scientific publications on African entrepreneurship spanning the years 1963 to
2001 were identified (Table 1).

Each entry in the bibliography was classified according to author, year, country, and subject. Altogether,
15 subjects or topics were used to classify output. These 15 are:

1. Definitions, Concepts and Methodology

2. The Role of Entrepreneurship in Africa

3. Characteristics of African Entrepreneurship

4. Determinants, Constraints and Opportunities

5. Government, Support and Policy

6. Women Entrepreneurship

7. Informal Sector

8. Agriculture and Rural Development

9. Technology and Innovation

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10. Culture, Networks and Clusters

11. Management, Education and Skills

12. Legislation, Institutions and Regulations

13. Financial factors, Credit and Information

14. History

15. General

In the next section we summarize the main features of African entrepreneurship research as reflected in
the bibliography. Frequency and Topics of Research on African Entrepreneurship (1963.2001)

Frequency

There has been a significant growth of entrepreneurship research in Africa since 1980. Between 1963
and 1978 only 54 publications, or an average of 3.38 per year were produced. This may be attributed to
the fact that African countries were still unaware that entrepreneurship and SMEs could play a major
part in the economic development and growth of developing countries. However, in the past two
decades the world became more aware of SMEs contribution to the economies of countries and the way
in which this contribution can enhance the development and growth of third world countries. This
resulted in a dramatic increase in research output in this field. Welsch (1992: 1) states that even in the
US academia began to take notice of this self-employment phenomenon only in the late 1970s and early
1980s.

Since 1980 however, more than 466 or 89.6% of the total number of publications identified in our
bibliography were produced. The growth in African entrepreneurship publications is depicted in Figure
1. As Figure 1 and Table 1 indicate, since the late 1980s there was a significant increase in
 7

entrepreneurship research in Africa. This corresponds with the implementation of structural adjustment
programs (SAPs) in many African countries.

The data in Table 1 was broken down into the subject countries. This is contained in Table 2 below.

Distribution of Research Output

It can be seen from Table 2 that 61.2% of all African entrepreneurship research concerns South African
entrepreneurship and small business. About 12% is general, followed by research on Zimbabwe (5.0%),
Nigeria (3.8%) and Kenya (3.72%). Table 2 also shows that 70% of all research was published between
1990 and 2001.

Publications per Topic

Using the 15 topics described in section 3, the publications on African entrepreneurship identified were
sorted per topic and per period. This gives an indication of the topical areas in African entrepreneurship
research since the 1960s. From Table 3 can be seen that by far the largest number of entrepreneurship
research in Africa deals with education, management, and skills issues (14.2%) and determinants,
constraints and opportunities of entrepreneurship (14.0%). Studies on the role or contribution of
entrepreneurship are also frequent (10.38%). The least frequent research topic is on the role of finance,
credit and information.

It can be seen from the table that, initially, African entrepreneurship research was very general (1960s).
During the 1970s the focus was placed on the history of African entrepreneurship and the role of culture
and networks. During the 1980s the focus shifted to the informal sector, the characteristics of African
entrepreneurs and education and training.

Table 3 shows that during the 1990s education and training remained the dominant research theme in
African entrepreneurship, followed by characteristics of African entrepreneurs. Noticeable during the
1990s was the interest in the role that entrepreneurship could play as well as the emergence of research
on women's entrepreneurship. These trends in research reflects the greater acceptance of free and
liberalized markets in Africa after the Cold War ended in 1989 and the greater recognition of the rights
of women in the 1990s.
 8

Themes in African Entrepreneurship Research

The issues addressed in African entrepreneurship, as detailed above, can broadly be summarized as
issues dealing with the determinants of African entrepreneurship (including its obstacles) and the effects
of government on small business and entrepreneurial support measures for entrepreneurship, such as
education and training.

What are the main findings and gaps for future research that may come from this? We put forth a
number of directions, without necessarily being exhaustive, that current entrepreneurship research in
Africa is taking. Entrepreneurship and Economic Growth?

There is relatively little research (as compared to elsewhere) on the effect of entrepreneurship on
economic growth and development and vice versa. For instance, recently the issue of whether
entrepreneurship leads to lower unemployment or vice versa, resulted in an intense scientific debate in
Europe and the US (Audretsch et al., 2001). It seems to be accepted, especially in government circles,
that entrepreneurship development will have beneficial effects for Africa. However, the current findings
from Africa are much more sober on these prospects. Bewayo (1995), from a study of Ugandan
entrepreneurs, concludes that African entrepreneurs tend to emphasise "economic survival," "making a
living," and "providing for family. as reasons for going into business. Also, high-economic growth may
discourage entrepreneurship by leading to higher wages and therefore raising the opportunity costs of
self-employment. Verheul et al. (2001: 12) remark that 'several arguments have been brought forward
supporting a negative impact of economic growth on the level of self-employment..

In Africa high unemployment might be associated with a low degree of entrepreneurial activities, and
low economic growth might be the cause of low entrepreneurship development (Audretsch, 1998). High
economic growth, on the other hand, may discourage entrepreneurship if it is accompanied by rising
wages. One explanation that would need further research is whether this direction of causality is true
for Africa, and whether the levels and quality of human capital in Africa impacts on the direction of
causality.

The survivalist nature of entrepreneurship in Africa is emphasised by Kesper (2000: 1) as a weakness of

entrepreneurship with the implication that SMEs might not be leading economic growth growth but
following it. She states:
 9

Thus, the implication is that a broad approach to provide support to entrepreneurs only really helps
survivalist firms and thus acts as some break on poverty. If job creation and some of the other goals are
to be realistic, then fine-tuning, targeting, and picking winners may be a better way to implement
entrepreneurial support programs. For these to be successful would, however, require of government to
build and maintain better data on SMEs. Such data in Africa is extremely poor. There is also a lack of
information on employment, sales, sector, etc. of SMEs. In particular, future research should result in
more longitudinal survey data on SMEs to be able to also scientifically gauge the impact of support
measures on entrepreneurs and their firms.

Small Businesses as Vehicles for Entrepreneurship

There is a need in Africa for more research on the relation between entrepreneurship and firm size. We
have already commented on the fact that the size distribution of firms in Africa is heavily skewed
towards small firms. Moreover, existing research finds that while entrepreneurship support programmes
may lead to a rapid rise in the number of businesses, the average size of businesses tends to be constant
(Fafchamps, 1994). A study covering Kenya, Swaziland, Zimbabwe, Botswana, and Malawi found that
only 0.9% of the surveyed firms grew to 10 employees or more over a five-year period (Liedholm et al.,
1994). Most start-ups stagnated at start-up size (1 to 4 persons). It could be interesting, given the
possible need for larger firms in Africa, to determine which characteristics of entrepreneurs are
positively associated with firm size.

There are, of course, many large firms in Africa. Most of these are multinational enterprises (MNEs).
Indeed, as Coughlin (1998) remarks, "Africans own very few medium or large-sized manufacturing firms..
Gilroy et al. (2002) point out that there is a lack of sufficient research on the role and impact of MNEs in
Africa. Better research on the dynamics of MNEs in Africa may throw more light on the determinants of
small firm size in Africa as well as local indigenous industrialization, and the functioning of networks, and
the success or failure of industrial clusters.

Naude and Krugell (2002) identify a number of factors in the structural and institutional landscape in
Africa that may limit firm size. These are shortcomings in Africa's legal and financial systems, human
capital endowment, market size, and social fragmentation.
 10

There is evidence that the macro-economic policy framework in Africa, specifically tax policy, may
influence firm size. Specifically, biases in tax policy may favour the creation of smaller firms as a way of
avoiding taxes and regulations. Gauthier and Gersovitz (1997) find evidence in Cameroon that small
firms prefer to remain small and informal in order to avoid taxes while large firms were influential
enough to obtain special treatment. It was the mid-sized firms that bore the highest tax burden with the
result that the distribution of firm size in Africa is characterised by a "missing middle."

Finally, it noted that large firms require more managerial than technical capacities to oversee and
coordinate the business. This creates a more urgent need for formal education and training of
entrepreneurs in Africa. Formal education increases the learning capabilities of individual, thereby
raising entrepreneurial efficiency and resulting in more successful firm growth (Goedhuys and
Sleuwaegen, 2000: 141). It has been found that there is a clear correlation between entrepreneurial
education and firm size in Africa: a much higher percentage of entrepreneurs managing medium and
large firms have university degrees than those managing very small firms. The provision of appropriate
training for entrepreneurs in Africa is also an avenue for future research as far as it related to the ability
of African entrepreneurs to learn how to export. The importance of entrepreneurship for exports, and
the possible importance of exporting for entrepreneurship development, is explored below.

Entrepreneurs, International Trade and Globalisation

A third critical area for entrepreneurship research in Africa is the relationship between African
entrepreneurship, international trade, and globalisation. According to Soderbom and Teal (2001: 20),
"The poor performance of manufacturing in most African countries is arguably due to its inability to
export its products.. Africa's (in particular sub-Saharan Africa's) share of world trade fell dramatically
over the past 40 years. The region's share of world exports declined from 3.1% in 1955 to 1.2% in 1990.
There was also major erosion of the region's ability to compete in international markets, and Africa lost
ground in key commodity exports (Ng and Yeats, 1998). (3)

Exporting, are seen as one of the few possible strategies for economic growth open to Africa (Fafchamps
et al., 2001). Enlargement of the effective market size through exports generates a number of
technological benefits (Krueger, 1981). Indivisibilities in production are overcome and firms can use the
minimum efficient plant size, utilise all of their capacity, and exploit economies of scale (Balassa, 1978;
Feder, 1982; Jung & Marshall, 1985; Moschos, 1989). In addition, trade introduces international
competition (Chow, 1987). There is competitive pressure to reduce X-inefficiency, (Jung and Marshall,
1985), and it necessitates technological improvements (Ram, 1985; Moschos, 1989) and more efficient
management (Feder, 1982). Thus, exports tend to increase total factor productivity (Balassa, 1978).
 11

These benefits also spill over to non-exported products that can then be produced more efficiently
(Tyler, 1981). All of the latter could suggest that more manufacturing exports from Africa could boost
entrepreneurship development in a Schumpeterian sense. However, low entrepreneurship development
could also impact, through lower firm efficiency, on lower exports from Africa. The question is: will
greater exports facilitate the development of entrepreneurs or will better entrepreneurs result in higher
levels and growth rates of exports? Or is there two-way causality?

Bigsten et al. (1999) use the RPED firm-level panel data for Cameroon, Ghana, Kenya, and Zimbabwe to
estimate the effect of exporting on efficiency. Measures of firm-level efficiency using stochastic
production frontier models are constructed for the period between 1992 and 1995. The results of both
random effects and time-variant productivity models reveal that exporters are more efficient than
nonexporters. Furthermore, exporters increased their efficiency during the period more rapidly than
non-exporters, and new entrants to exporting had the largest subsequent efficiency gains. The effect of
exporting on efficiency appears to be larger in this African sample than in comparable studies of other
regions that are consistent with the smaller size of domestic markets.

A concern expressed by Naude et al. (2002) is that large firms do most currently exporting from Africa.
Small manufacturing firms in Africa often cannot bear the high, fixed cost involved in exporting. (4) Thus,
strategies aimed at increasing African exports should focus on providing additional support to
entrepreneurs in small firms and focus on mechanisms to reduce the high fixed costs in exporting. There
are various ways in which industrial clusters and networks can provide economies of scale and scope to
allow firms to lower fixed costs in exporting. The question of African enterprise clusters is addressed
below.

Trade restrictions are a major reason why African entrepreneurs have difficulty learning how to export.
Teal (1999) finds that African trade barriers are far more restrictive than that of any other region. The
divergence in the case of non-tariff protection is even sharper. This limits the size of the internal market
and prevents firms from reaping economies of scale or learning how to export (see Naude et al., 2000;
Fafchamps et al., 2001). Although increasing competition in international markets may lead to many
small firms closing down, this trade liberalization may be good for entrepreneurship development.

Entrepreneurial Networks and Clusters

A fourth area of research that needs to be explored is on entrepreneurial networks and clusters. (5)
Networks and clusters provide information, assistance, and examples and they stimulate innovation and
 12

transfer technology and skills (Brautigam, 1998: 3). In this way, networks can help new entrepreneurs to
enter into self-employment since they reduce search costs while also lowering the risks of embarking on
a new venture. There are two interrelated strands in African entrepreneurship literature. The first strand
relates to industrial clusters and attempts to ask what contribution industrial clusters can play in Africa
and why there is a lack of significant industrial clusters in Africa. The second strand relates to
entrepreneurial networks and the role of social capital in strengthening them.

Clusters have been identified as important for African entrepreneurs. Further research into clusters can
be justified with reference to learning by small firms and because small firms succeed in exporting to the
degree of larger firms when they make use of networking and externalities in industrial districts
(Schmitz, 1995). For instance, Schmitz (1999: 465) writes that, "case studies have emerged from various
parts of the world showing that clusters of small enterprises have broken into international markets..
According to Oostendorp (2001: 1), "if size is not helping African firms to become successful exporters,
other factors need to compensate for this, such as higher levels of firms efficiency, lower transport
costs, or higher product quality.. Clustering and network effects may provide this compensation as such
clustering enables SMEs to obtain efficiency gains through collective efficiency as a result of local
external economies and joint action.

In this respect it is important to ask why there is a lack of significant industrial clusters in Africa. Two
related reasons have been noted in the research literature, namely low levels of efficiency of small firms
and a low incidence of subcontracting between large and small firms (McCormick, 1999). As Berry(2000:
12) recognizes, "contractors are not willing to invest their time or efforts with sub-contractors which are
not close to being efficient producers. And a cluster must have a high level of collective efficiency if it is
to compete in world markets." This may also explain the success of East Asia and Latin America (as well
as of some European countries) in achieving rapid growth of exports from small firms, specifically, that
the efficiency of the small firms allowed for successful establishment of clusters and sub-contracting
(Berry, 2000: 12).

Further reasons may require more in depth research into the role of local governments and
industrialisation in Africa. For instance, research in Europe (Italy) has pointed to the important role that
local municipalities played in stimulating the development of industrial clusters and networks. Such
research on the municipal-entrepreneurial interface in Africa is lacking. Furthermore, the little existing
research on industrial clusters and networks in Africa seems to suggest that many of the small industrial
clusters found in Africa appear to have developed out of market towns rather than out of vertical
sectoral disaggregation. According to Pedersen (1997: 14), "They are often characterized by very limited
vertical specialization and diversification and may develop into clusters of petty commodity producers
rather than full-blown industrial clusters. This may be one reason for the limited success of many African
enterprise clusters."
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As stated, the second strand of research on networks in Africa focuses on entrepreneurial networks and
social capital. Whilst related to work on industrial clusters, this strand of research attempts to identify
the different types of networks used by African entrepreneurs and the functions of the different types of
networks. Barr (2002) discusses "innovation networks. and 'solidarity networks. in Africa, drawing on
research from Ghana. Innovation networks fulfill the function of improving firm performance by
allowing information about the world to flow between members whilst solidarity networks are designed
to reduce uncertainty. Barr (2002) finds that the latter type of network dominates in Africa due to the
fact that the uncertainty faced by African entrepreneurs is paramount: "Much of the uncertainty facing
enterprises in sub-Saharan Africa is due to a lack of contract discipline leading in turn to delayed
supplies, unreliable quality and late payments and repayments by customers. (Barr, 2002: 94).

Given the importance of solidarity networks in lowering uncertainty, factors negatively impacting on
these networks will lower the survival rate and success rate of firms. Thus lower entrepreneurial
efficiency in Africa may be partly due to lower levels of social capital (6) or lack of social cohesion.
Africa's ethnolinguistic fragmentation has been identified as a factor that might undermine networks.
Africa's median level of ethnolinguistic fragmentation is 0.73 versus 0.21 in non-African countries (Block,
2001: 457). Easterly and Levine (1997) find that this ethnolinguistic fragmentation undermines growth in
Africa. Not only may lack of social cohesion undermine the efficiency of entrepreneurs in Africa, but it
may also be a cause of the skewed distribution of firm size in Africa in that the coordination problems in
an ethnolinguistically fragmented society may be prohibitive for the establishment and management of
large firms. The importance of social capital in strengthening entrepreneurial networks is thus an
important direction of research in Africa (Barr, 2002; Fafchamps, 1992; Brautigam, 1997).

African research has made important strides in understanding the role of 'special. groups of
entrepreneurs, most notably women entrepreneurs and ethnic minorities. The African literature on
minority entrepreneurship suggests that contractual mechanisms generated within ethnic groups are
crucial to providing access to inputs, credit, technology, and finance. This in turn leads to greater
profitability and growth of firms within the network. Empirical evidence from the World Bank's Regional
Programme on Enterprise Development (RPED) indicates that minority entrepreneur firms do enjoy a
higher rate of firm growth. This finding is consistent with the marginalisation theory of
entrepreneurship, wherein a person's marginal social position acts as a driving force in their becoming
self-employed.

Financial Constraints and Entrepreneurial Success

 14

One of the significant findings from the research literature on the constraints on African entrepreneurs
relates to the difficulty these entrepreneurs face when attempting to access finance and credit. These
findings are substantiated by many surveys that find that personal savings, and not bank loans, are the
main source of start-up funding amongst entrepreneurs in African countries (Grenier, McKay and
Morrissey, 1998; Parker et al., 1995). Another important finding is that women entrepreneurs have
more difficulty than male entrepreneurs to obtain credit.

The lack of external sources have been explained with reference to financial underdevelopment, the
small firm size prevalent, and lack of collateral offered by entrepreneurs.

Africa has less financial depth than other developing countries due to financial repression and a lack of
openness. Collier and Gunning (1999a, 1999b) provide a number of explanations as to why the financial
sector has remained underdeveloped. For instance it faces high natural costs because there is little
collateral, limited financial information, and high risks intrinsic to shock prone economies.

There are also policy-generated costs that constrain financial development, such as implicit taxation
through financial (interest rate) repression, taxation through unremunerated reserve requirements, and
a poor legal system for loan recovery. The nature of the banks also plays a role. Public sector banks have
often been diverted to other objectives such as channeling off-budget funds for government
expenditure. The remaining private banks are oligopolistic in nature and concentrate on risk minimising.

As a result of the above factors, informal credit and insurance schemes predominate in Africa. Although
these are also subject to limited financial information and a lack of collateral problems, Fafchamps
(1992) argues that networks may support such arrangements. It has already been pointed out in section
5.4 that this is one reason why firms in Africa owned by ethnic minorities tend to grow faster and be
larger. This underlines the importance of research into informal credit schemes and entrepreneurial
networks in Africa.

The Economic Geography of Entrepreneurship

According to Sachs (2001), geographical factors may be important to understand the difficulties faced by
entrepreneurs in Africa. Gallup, Sachs and Mellinger (1998: 9) identify a number of geographic features
of Africa that hinder entrepreneurs. They show that Africa has a very high concentration of land in the
tropics, (7) a population heavily concentrated in the interior, (8) more than a quarter of the population
 15

in landlocked countries, (9) is far from the closest core markets in Europe, and has low population
densities in the coastal and interior regions. These factors raise both domestic and international
transport costs. Naude (2001) discusses the adverse impact of high shipping costs on South African
exports.

The impact of high transport costs may be more significant in Africa because of the lack of clusters and
large firms in Africa. As a result of high transport costs, small firms are required to hold large
inventories, the cost of which can be prohibitive for small firms (Rodriguez-Clare, 1996). (10)
Furthermore, many complementary inputs into manufacturing require a close proximity to the supplier,
specifically such services such as banking, auditing, consulting, wholesale services and machine repair.
Due to Africa's geography, these services are often wholly absent.

Audretsch (1998) points out that geography also matters for innovative activity and the international
comparative advantage of regions because the kind of knowledge-intensive inputs required for high-
skilled modern manufacturing necessitate a significant amount of tacit, as opposed to codified,
knowledge. As he states (1998: 21), "the marginal cost of transmitting knowledge, especially tacit
knowledge, rises with distance.. This need for technological expertise in a globally competitive economy
significantly raises the entry costs for small firms into exporting, especially when compared to the
probability of 0.5 that the firm might fail within 3 years.

Diamond (1998: 398) argues that as far as geography is concerned, it is especially climate and the
environment for food production that limit the development of entrepreneurship. The latter, according
to him, gave rise in Europe to guns and other technology, widespread literacy, and the political
organization necessary to sustain entrepreneurial innovation and development. In sub-Saharan Africa,
however, "Food production was delayed by Africa's paucity of domesticable native animal and plant
species, its much smaller area suitable for indigenous food production, and its north-south axis, which
retarded the spread of food production and inventions."

Acemoglu et al. (2001a, 2001b) argue against the dominating influence of geography, claiming that
differences in poverty are due to differences in the institutions of society. This is in following a line of
scientists that focus attention on the fact that societies or regions that provides incentives and
opportunities for entrepreneurial development will be richer than those that fail to do so.

Acemoglu et al. (2001b: 4) find that:

 16

It was easier for European colonial powers to settle and transfer their institutions in poorer, less sparsely
populated areas, such as Australia, New Zealand, and North America than in more prosperous and
populated areas such as tropical Africa. The subsequent reversal of fortune that these areas experienced
is consistent with the institutions hypothesis, but not the geography hypothesis, since the underlying
geography and climate remain unchanged. Naude (2004) finds empirical evidence supporting Acemoglu
et al.'s (2001a) thesis and also finds that geography has a determining effect on institutions in Africa.

Apart from high population densities and relatively prosperous communities in places in Africa that
prevented large-scale settlement by European settlers, Acemoglu et al. (2001a) suggest that African
institutions are also worse due to high settler mortality in the era of colonialization (due to malaria and
yellow fever). This prevented the transplant of colonial institutions that could have been beneficial for
entrepreneurial development. Thus Acemoglu et al. contend:

They subsequently find a strong and significant negative association between per capita income growth
and better rates of settler mortality. Lal (1998) attempts to identify aspects of the colonial institutions
that were important from an economic welfare point of view. In other words, why were the European
institutions that were transplanted to the colonies of Australia, North America, and New Zealand good
for poverty eradication? The view of Lal (1998) is that the West's culture of individualism and norms that
approve of individual material advancement encourage institutions of private property. During the
subsequent scientifically and technologically driven Industrial Revolution, "the age of industry created a
considerable advantage for societies with institutions of private property. (Acemoglu et al., 2001b: 37).
Today, intellectual property rights, protection of innovations through patent rights, and institutions such
as subsidies and learning organizations are acknowledged in the endogenous growth literature as
essential for economic growth and development (Temple, 1999).

The Role of African Entrepreneurs in Technological Catching-Up

African entrepreneurs need to enter the production and exports of high-technological manufactured
goods. One noted constraint faced by many exporters of manufactured goods from Africa is the
technological obsoleteness of African goods, which renders these goods non-competitive. Indeed one of
the strong arguments for trade liberalisation in African countries is that greater openness will allow
African entrepreneurs to more rapidly assimilate new technologies.
 17

In theory, the fact that Africa has many small businesses could be a positive factor in technological
catching-up. It has been claimed that small firms can better adopt new technologies and that as a result
of new technologies, the importance of scale economies has been reduced, implying that in many
sectors small firms do not face a disadvantage anymore (Verheul et al., 2001: 12). Thus, adaptation of
new technologies could be vital for African entrepreneurs.

The literature from Africa suggests that the transfer of technology is not straightforward, even in the
presence of a liberal trade regime. Africa's geography, lack of clusters, and high transport costs may limit
the transfer of much needed technologies. The so-called "technological capability approach. (Nelson and
Winter, 1982) implies that technology cannot simply be transferred to an African economy or African
entrepreneur like a product. The reason is due to the difference between capacity and capability: the
former may exist but the latter may not and would require a close proximity to be transferred and
adopted. Much new technology involves tacit knowledge and a learning process. Distance and high
transport costs thus make lack of a close proximity a significant obstacle to entrepreneurship in Africa.

Furthermore, the influences of domestic policay may hinder the transfer of technology to
entrepreneurs. This is due to policy influences that contribute to an institutional landscape in Africa that
is not conducive to learning by entrepreneurs (Wolf, 2001). Uncertainty has been identified as a cause
for this. Lall (2000: 5) points out that "if the learning period, costs, uncertainties and leakages are very
high, co-ordination with other firms in the supply chain exceptionally difficult, or information, labor and
capital markets particularly unresponsive, "difficult. knowledge may not be absorbed.. Research should
determine to what extent this applies to Africa and how a more conducive learning environment for
technological innovation and adaptation can be established.

Summary and Conclusion

In Africa, the term or concept of entrepreneurship is often equated to self-employment. The term self-
employment refers to people who provide employment for themselves as business owners rather than
seeking a paid job. In Africa, a large part of the self-employed is in the informal sector. Given the
potential importance of self-employment for African economic development, it was the purpose of the
present study to give an overview of the current state of entrepreneurship research in Africa based on
the compilation of a bibliography of African entrepreneurship research. To our best knowledge this is
the first time that such a bibliography has been attempted for Africa.
 18

The study area included all the countries of Africa and, to a certain extent, other parts of the world
where academic and scientific publications appeared with regard to Africa. In total, just over 520
scientific publications on African entrepreneurship spanning the years 1963 to 2001 were identified.
There has been a significant growth of entrepreneurship research in Africa since 1980. Between 1963
and 1979 only 54 publications, or an average of 3.38 per year, were produced. Since 1980 however,
more than 466or 89.61% of the total number of publications identified in our bibliography were
produced.

About 61.2% of all African entrepreneurship research concerns South African entrepreneurship and
small business. About 12% is general, followed by research on Zimbabwe (5.0%), Nigeria (3.84%) and
Kenya (3.65%).

By far the largest amount of entrepreneurship research in Africa deals with education, management and
skills issues (14.2%) and determinants, constraints, and opportunities of entrepreneurship (14%). Studies
on the role or contribution of entrepreneurship are also frequent (10.38%). The most infrequently
researched topic is the role of finance, credit, and information.

Initially, African entrepreneurship research was very general (1960s). During the 1970s the focus was
placed on the history of African entrepreneurship and the role of culture and networks. During the
1980s the focus shifted to the informal sector, the characteristics of African entrepreneurs, and
education and training. During the 1990s education and training remained the dominant research theme
in African entrepreneurship, followed by characteristics of African entrepreneurs. Noticeable during the
1990s was the interest in the role that entrepreneurship could play as was the emergence of research
on women entrepreneurship. These trends in research reflect the greater acceptance of free and
liberalized markets in Africa after the Cold War ended in 1989 and the greater recognition of the rights
of women in the 1990s.

The themes that research on African entrepreneurship is taking are recognising that government policy
measures in Africa have a significant impact on the level and success of entrepreneurship. In this
respect, the research on African entrepreneurship is consistent with that from other regions (Storey,
1994; 2003). In Africa, government impact on entrepreneurship both directly (through, for instance,
taxation, education and training policies, and privatization) and indirectly (through, for example,
contributing to an uncertain policy environment, damaging social capital, and creating institutional
features that keep African firms small). We have argued that the smallness of African firms and the role
of social network capital in overcoming the negative features limiting African firm growth and survival,
are important topics for future research on African entrepreneurship.
 19

Finally, African entrepreneurship research can benefit from additional research to understand the
behaviour of different types of entrepreneurs in Africa (nascent, novice, portfolio, habitual, and serial
entrepreneurs in Africa) as Delmar and Davidsson (2000) note; to determine the characteristics of
entrepreneurial cognition in Africa (Baron, 1998); and to investigate opportunity recognition and
information acquisition strategies in Africa (Gaglio, 1997).

Acknowledgements

We are grateful to Werner Havenga for his research assistance and to two anonymous referees for their
comments and suggestions.

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 27

J.J.D. Havenga, School for Entrepreneurship, Marketing and Tourism, Faculty of Economic and
Management Sciences, North West University (Potchefstroom Campus), South Africa

(1.) See Meyer and Brigham (2000) and Welsch (1992).

(2.) Even the large firms in Africa are not very large by world standards, and SMEs tend to be very small.
For example, almost 98% of all firms surveyed in 1997 in six African countries (Botswana, Kenya,
Lesotho, Malawi, Swaziland, and Zimbabwe) had less than 10 workers (Mead and Liedholm, 1998: 63). In
a survey of 143 manufacturing firms in Ghana between 1992 and 1994, Soderbom and Teal (2001) find
that 81% of firms are SMEs and 53% employ less than 30 workers. Even in South Africa, with the largest
business sector on the continent, SMEs dominate. It is estimated that in South Africa there are about
800,000 SMEs (Naude and Krugell, 2002) which is about 95% of the total number of firms (formal and
informal).

(3.) Rodrik (1998) emphasises that one should keep in mind that there were a variety of performances
within the region.

(4.) Even in the US there have been increasing concerns as to the ability of small firms to export. Ali and
Swierz (1991: 77) find that "the small business exporting environment is more complex than previously
thought and that future efforts to understand it will require, at minimum, a fuller examination of the
interrelationships among size, export experience, and managerial attitudes."

(5.) Clusters are geographically agglomerated industries. For example, they are charactized by a high
density of business activity, resulting in ideas and both cooperation and competition between
businesses (Verheul et al., 2001: 13).

(6.) Bourdieu (1985: 248) defines social capital as "the aggregate of the actual or potential resources
which are linked to possession of a durable network of more or less institutionalised relationships of
mutual acquaintance or recognition."

(7.) In all parts of the world, economic development in tropical zones lags far behind that in temperate
zones. The underlying reason is a backlog in productivity growth. Differences in productivity growth and
innovation between temperate and tropical zones reflect the interplay of a number of factors. First,
 28

many kinds of agricultural and construction technologies do not transfer well between ecological zones.
Second, temperate zones have long had much higher rates of endogenous technological change than
have the tropics. Third, the tropics pose inherent difficulties in agriculture and public health. Fourth, the
tropics are disadvantaged because they are far from the large mid-latitude markets.

(8.) They find that only 19% of sub-Saharan Africa's population live within 100km of the coast.

(9.) The costs of international transport for landlocked developing countries are on average 50% higher
than for coastal economies (Radelet and Sachs, 1998).

(10). North (1958: 537) remarks, "Revolutionary developments in transport have been an essential
feature of the rapid growth of the western world of the past two centuries. Reduction in the cost of
carriage has enabled specialization and division of labour on a national and international basis to replace
the relatively self-sufficient economies that predominated in the western world two centuries ago."

Research on South African SMEs reveals, however, a mismatch between

the reality and the model of the SME sector used by South African

policy makers: The South African SME sector is far from homogenous

and would require a fine-tuned set of interventions rather that the

generic assistance currently provided. Only the few, more dynamic

SMEs show a potential to contribute to rapid employment creation,

whilst survivalist activities constitute the vast majority of South

African SMEs.

Historical and econometric evidence suggests that European

colonialism caused not only a major change in the organization of

these societies, but also an institutional reversal--European

colonialism led to the development of relatively better

 29

institutions in previously poor areas, while introducing extractive

institutions or maintaining existing bad institutions in previously

prosperous places.

Europeans adopted very different colonialization strategies, with

different associated institutions. In one extreme, as in the case

of the United States, Australia and New Zealand, they went and

settled in the colonies and set up institutions that enforced the

rule of law and encouraged investment. In the other extreme, as in

the Congo or Gold Coast, they set up extractive states with the

intention of transferring resources rapidly to the metropole. (p.

1395)

Table 1. Output of entrepreneurship/SME publications in Africa

in five-year intervals

Period Number Percentage

1963-68 8 1.53

1969-73 20 3.85

1974-78 26 5.00

1979-83 43 8.26

1984-88 46 8.85
 30

1989-93 141 27.11

1994-98 179 34.42

1999-2001 57 10.96

Total 520 100.00

Table 2. Distribution of research output per country

Total number

Country 1963-2001 1960-69 1970-79

Africa (general) 62 3 7

Algeria 1 - -

Angola 1 - -

Botswana 13 - 1

Cameroon 4 - -

Central Africa 1 - -

Egypt 1 - -

Ethiopia 2 - -

Ghana 16 1 6

Ivory Coast 3 - -

Kenya 19 - 2

Liberia 1 - -

Libya 1 - -

Malawi 3 - 1

Mozambique 1 - -
 31

Namibia 1 - -

Nigeria 20 2 4

Sierra Leone 2 - -

South Africa 318 3 25

Sudan 2 - 1

Swaziland 2 - 1

Tanzania 3 - -

Uganda 2 - 1

West Africa 2 - 1

Zaire 5 - -

Zambia 8 - 2

Zimbabwe 26 - -

Total 520 9 52

Country 1980-89 1990-2001 Percentage

Africa (general) 7 45 11.92

Algeria 1 - 0.19

Angola 1 - 0.19

Botswana 2 10 2.50

Cameroon 1 3 0.76

Central Africa - 1 0.19

Egypt - 1 0.19

Ethiopia 1 1 0.38

Ghana 4 5 3.07
 32

Ivory Coast - 3 0.57

Kenya 7 10 3.65

Liberia 1 - 0.19

Libya 1 - 0.19

Malawi - 2 0.57

Mozambique - 1 0.19

Namibia 1 - 0.19

Nigeria 8 6 3.84

Sierra Leone 1 1 0.38

South Africa 49 241 61.15

Sudan - 1 0.83

Swaziland - 1 0.83

Tanzania 1 2 0.57

Uganda - 1 0.83

West Africa - 1 0.83

Zaire 1 4 0.96

Zambia 2 4 1.53

Zimbabwe 5 21 5.0

Total 94 365 100.00

Table 3. Publications per topic, 1963-2001

Total

number of 1960-69 1970-79

Category publications publications publications

 33

1 13 1 -

2 54 1 4

3 22 - 3

4 73 - 4

5 33 - 1

6 30 - 2

7 25 1 5

8 19 1 4

9 11 - -

10 49 1 6

11 74 - -

12 16 - 1

13 8 - 1

14 29 - 7

15 64 2 13

520 7 51

1980-89 1990-2001

Category publications publications

1 4 8

2 7 42

3 14 51

4 7 16
 34

5 5 27

6 9 19

7 11 8

8 2 12

9 2 9

10 3 39

11 11 63

12 2 13

13 2 5

14 9 13

15 7 42

95 367

Figure 1. Output of entrepreneurship/SME publications in Africa in

five-year intervals.

Intervals in years

1999-2001 10.96

1994-1998 3.4

1989-1993 27.11

1984-1988 8.85

1979-1983 8.26

1974-1978 5

1969-1973 3.85
 35

1963-1968 1.53

Note: table made from bar graph.