AEGIS ECAS 2007 - View abstract

Panel	12. African entrepreneurs and/in emerging markets: towards a situational understanding of entrepreneurial behaviour?
Paper ID	482
Author(s)	Nystrand, Malin
Paper	View paper (PDF)
Abstract	A well-known feature of the business environment in Africa is the businesspersons’ need to straddle both social and economic roles. Several empirical studies (including field work in Uganda initiating this study) indicate that African business practice is intertwined with various types of social obligations with economic consequences. Many African entrepreneurs use the working capital of their enterprise for social rather than business ends (for example: assistance to relatives and others within a larger social network with regard to transport, health costs, school fees, weddings, funerals, etc), and many employ kins and other socially relevant individuals even if they lack relevant competence. A well-known conceptualisation of these types of action and transaction is Hydén’s (1983) ‘economy of affection’. Although contested as a theory, the concept of ‘economy of affection’ is still a useful definition of the informal institution at play. The problem of social versus economic roles of economic actors can be viewed both from an actor-based and from a structurally based perspective, and is addressed in various theoretical traditions, such as New Institutional Economics (North, Shirley, Bates), Economic Sociology (Granovetter, Swedberg, Smelser), Economic Anthropology (Polanyi, Sahlins), and Development Studies (Hydén, Friedman). Much of existing research on these issues presumes that the informal institutions have to change to fit the formal institutions of the market and the state, and/or that individuals have to choose between the ‘traditional’ (economy of affection) and the ‘modern’ (market) system. This presumption can be questioned, on both theoretical and empirical grounds. From a theoretical perspective, many NIE scholars, sociologists and anthropologists assert that informal institutions precede and give legitimacy (or otherwise) to formal institutions. From an empirical perspective, it is a fact that social considerations continue to play a role in determining business practice in Africa and that African entrepreneurs do not uniformly follow market norms. Taking actual business practice and Ugandan businesspersons’ own rationale for such practice at face value, this research aims at understanding the dynamics of the interaction between market norms and ‘economy of affection’ norms at actor level in order to develop a better understanding of African business practice. More specifically, the extent to which Ugandan businesspersons choose between the logic of the market and the logic of the ‘economy of affection’ or manage to combine and balance them is mapped out and analysed, as well as the rationale behind this behaviour. Initial empirical findings suggest that that the extent to which Ugandan businesspersons relate to market norms and/or ‘economy of affection’ norms varies with business size, gender of businessperson and various other factors. Explanations to socially motivated economic transactions range from moral (altruism) or social (group norms) to economic (insurance through investment in social networks). Furthermore, a historic perspective has been pointed out: the businessperson is likely to have been assisted him/herself, hence feel obliged to assist as part of ‘generalised reciprocity’.

Doing Business in Uganda: The Impact of Informal Institutions on Business Practice