International entrepreneurship in Sub-Saharan Africa: interfirm coordination and local economy dynamics in the informal economy

Abstract

PurposeThe International Labor Organization (2020) estimates that eight out of ten enterprises (i.e. own-account workers and small economic units) are informal worldwide. However, less is known about the internationalization of informal enterprises. Here, it is argued that economic blocs, such as sub-Saharan Africa, with a greater proportion of informal enterprises, may provide broader societal legitimacy for them to operate internationally. Thus, informal firms would need to collaborate with other firms to overcome their resource constraints. Geographic colocation is one way to facilitate positive interfirm interactions that promote networking and subsequently cooperation. The purpose of this paper is, thus, to addresses two questions. Firstly, how and to what extent does interfirm marketing cooperation in geographic colocation influence the internationalization of micro and small informal manufacturing enterprises? Secondly, how do the perceived benefits of local external economies moderate this relationship?Design/methodology/approachThe study draws evidence from 125 randomly selected informal enterprises located in two major clusters in Ghana, using a mixed-method approach.FindingsThe partial least square - structural equation modeling (PLS-SEM) analysis applied revealed two central points. Firstly, sharing marketing costs allows informal firms to upgrade their phases of export development directly. Secondly, the linkage of increasing sales activities and local external economies encourages the progress of the phases of export development and the scope of internationalization. Results confirm that the cluster benefits of interfirm cooperation and local external economies on the informal firm internationalization process complement each other in addition to their linear relationship.Originality/valueThe study contributes to understanding the nexus of the informal sector, geographic colocation and the entrepreneurial internationalization literature. The results should motivate researchers and policymakers to approach informal firm internationalization through collaborative business activities.

Business environment and adoption of AI: Navigation for internationalization by new ventures in emerging markets

“…Furthermore, the study sheds light on the concept of institutional voids as an opportunity for AI-entrepreneurship (Chalmers et al, 2021). The study emphasizes transportation as a formal sector of the economy, a fact that might not have received extensive attention in previous internationalization studies which, as often, focused on the informal economy in Africa (Boafo et al, 2023;Zahoor et al, 2023).…”

“…They highlighted the potential for internationalization among these informal firms, contingent upon intermittent institutional support provided to enterprise clusters. Additionally, Boafo et al (2023) extended their exploration by delving into interfirm coordination and local economic dynamics within the informal economy. Drawing evidence from 125 randomly selected informal enterprises, their research provided insights into the prospects of geographic colocation and the entrepreneurial internationalization process.…”

“…However, the overwhelming emphasis on the informal market has cast a shadow over the potential of businesses operating within the formal economy. While informal firms undeniably constitute a substantial majority, accounting for approximately 80% of businesses in sub-Saharan Africa (Boafo et al, 2023), it is imperative to redirect attention to the formal economy and explore its prospects for internationalization. This shift in focus becomes particularly crucial considering the increasing reliance on technology by tech startups and businesses in the formal sector, presenting a burgeoning potential for these enterprises to wield influence in shaping trade dynamics.…”

“…Notably, the majority of studies in this realm have predominantly centred on developed countries, leaving a critical void in our understanding of the unique challenges faced by emerging economies in implementing AI practices (Kamoche & Wood, 2023) and the call for exploring more of Africa‐to‐Africa Internationalization (Owusu‐Yirenkyi et al, 2023). Moreover, in the African context, while an increasing body of research has been focusing on digital technologies within the informal market (Boafo et al, 2022; Boafo et al, 2023; Dana & Ratten, 2017), there is a notable scarcity of comprehensive studies addressing the formal sectors (Mogaji & Nguyen, 2022).…”

“…As a continent, Africa is witnessing a surge in technological innovation, with a growing number of tech startups spearheading transformative solutions to address local challenges (Abdulquadri et al, 2021; Balakrishnan et al, 2021). While the informal market in the continent remains robust (Boafo et al, 2022; Boafo et al, 2023; Dana & Ratten, 2017), formal sectors are increasingly being shaped by the endeavors of these tech startups (Mogaji & Nguyen, 2022). It is within this dichotomy that the present study positions itself, seeking to explore how new ventures, driven by technological innovation, navigate the intricate environmental challenges posed by the integration of AI for international expansion.…”