Impact of the business environment on output and productivity in Africa

Bah, El-hadj M.; Fang, Lei

doi:10.1016/j.jdeveco.2015.01.001

Cited by 98 publications

(64 citation statements)

References 59 publications

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“…However, as it is widely documented, the business environment in most African countries is not conducive to SMEs' success and has a negative impact on their output and productivity (Bah & Fang, 2015). Therefore, we argue that the impact of productivity on export engagement is moderated by the quality of the business environments supporting or hindering exporting firms, such as the presence of institutional voids.…”

Section: Introductionmentioning

confidence: 77%

Testing the self-selection theory in high corruption environments: evidence from African SMEs

Gomes

Vendrell‐Herrero

Mellahi

et al. 2018

IMR

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This article is c Emerald Group Publishing and permission has been granted for this version to appear here (http://dro.dur.ac.uk/23861/). Emerald does not grant permission for this article to be further copied/distributed or hosted elsewhere without the express permission from Emerald Group Publishing Limited.Additional information: Use policyThe full-text may be used and/or reproduced, and given to third parties in any format or medium, without prior permission or charge, for personal research or study, educational, or not-for-prot purposes provided that:• a full bibliographic reference is made to the original source • a link is made to the metadata record in DRO • the full-text is not changed in any way The full-text must not be sold in any format or medium without the formal permission of the copyright holders.Please consult the full DRO policy for further details. Purpose: Whilst substantial evidence from low corruption, developed market environments supports the view that more productive firms are more likely to export, there has been little research into analysing the link between productivity and exports in high corruption, developing market environments. The purpose of this paper is twofold. First, to test the premise of selfselection theory whether the association between productivity and export is maintained in high corruption environments, and second to identify other variables explaining export activity in high corruption contexts, including cluster networks and firms' competences.Design/methodology/approach: The authors draw on the World Bank Enterprise survey to undertake a cross-section analysis including 1,233 SMEs located in nine African countries. The advantage of this database is that it contains information about the level of perceived corruption at firm-level. Logistic regressions are performed for the full sample and for subsamples of firms in high and low corruption environments.Findings: The findings demonstrate that the self-selection theory only applies to low corruption environments, whereas in high corruption environments, alternative factors such as cluster networks and outward looking competences, exert a stronger influence on the exporting activity of African SMEs. Research implications/limitations:This research contributes to theory as it provides evidence that contradicts the validity of self-selection theory in high corruption environments. Our findings would benefit from further longitudinal investigation. Practical implications:African SMEs need to consider cluster networks and outward looking competences as important strategic factors that might enhance their international competitiveness.Originality/value: Our criticism of the self-selection theory is distinctive in the literature and has important implications for future research. We show that the contextualisation of existing 2 theories matters and this opens a research avenue for further more sensitive contextualisation of existing theories in developing economies.

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Section: Introductionmentioning

confidence: 77%

Testing the self-selection theory in high corruption environments: evidence from African SMEs

Gomes

Vendrell‐Herrero

Mellahi

et al. 2018

IMR

View full text Add to dashboard Cite

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“…The model builds on Brixiová (2013) and Brixiová and Égert (2012). Similarly to Bah and Fang (2015) it emphasizes the business environment. The paper is related to the literature on education and entrepreneurship, recently applied to Malawi by Kolstad and Wiig (2015).…”

Section: Introductionmentioning

confidence: 99%

Entrepreneurship, institutions and skills in low-income countries

Brixiová

Égert

2017

Economic Modelling

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Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. AbstrAct This paper develops a model of costly firm creation in an economy with weak institutions, costly business environment as well as skill gaps where one of the equilibrium outcomes is a low-productivity trap. The paper tests the implications of the model using a cross-sectional dataset including about 100 countries. Both theoretical and empirical results suggest that to move the economy into a productive equilibrium, complementarity matters: reforms to improve the business environment tend to be more effective in creating productive firms when accompanied by narrowing skill gaps. Similarly, more conducive business regulations amplify the positive impact on firm creation of better education and reduced skill mismatches. To escape a low-productivity trap, policymakers should thus create a pro-business framework and a well-functioning education system. JEL Classification: L26, J24, J48, O17

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“…Ramachandran et al (2009) provided ample evidence that the SSA economy is subject to a burdensome regulation that considerably impedes the cost of doing business. The quantitative impact of this business environment has been found by Bah and Fang (2015) as being responsible for almost half of the SSA relative labor productivity gap which suggests that the creation of an attractive business environment offers the potential to unleash significant productivity gains for the SSA economy. Assuming hypothetically that distortions is the story, it is important to understand whether their impact is broad-based affecting the whole economy or idiosyncratic, sector-specific.…”

Section: Aggregate Analysis 321 Gdp Per Capita and Its Componentsmentioning

confidence: 99%

The Lion on the Move Towards the World Frontier: Catching Up or Remaining Stuck?

Harchaoui¹,

Üngör

2017

Journal of African Economies

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The remarkable growth spurt reported by the Sub-Saharan African (SSA) economy since the mid-1990s offers the opportunity to revisit the narrative of its economic development experience. We investigate whether the SSA economy has initiated a gradual process of convergence which reverses the long-term fall so far behind the U.S. frontier. Our framework begins with a top-down approach that performs a nested development accounting exercise. This aggregate analysis complements a bottom-up approach that tracks the sectoral origins of the SSA aggregate relative labor productivity performance. The application of this framework to a representative sample of the SSA economy over the 1970-2010 period suggests the following set of results. After one-quarter of a century of falling behind the U.S. level of real income per capita, the SSA economy observed a swift turnaround towards the end of the 1990s, yet without showing any sign of catch-up. Second, parallel to favorable demographic developments, SSA reports a startling relative labor productivity gap which accounts for much of its relative income per capita gap. Third, the use of the concept of cognitive skills reveals that human capital considerations have worsened off over time, making total factor productivity no longer the biggest part of the story underlying relative labor productivity differences. Fourth, the sectoral evidence points to the coexistence of headwinds (negative within-and reallocation-effects) and tailwinds (between-effects) which tend to cancel out each other, thus preventing SSA aggregate economic performance to get anywhere closer to the world frontier even during the growth spurt period.JEL classification: N10, O47, O55, O57.

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Impact of the business environment on output and productivity in Africa

Cited by 98 publications

References 59 publications

Testing the self-selection theory in high corruption environments: evidence from African SMEs

Testing the self-selection theory in high corruption environments: evidence from African SMEs

Entrepreneurship, institutions and skills in low-income countries

The Lion on the Move Towards the World Frontier: Catching Up or Remaining Stuck?

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