What Constitutes Successful African Enterprises? A Survey of Performance Variations in 210 African Food Processors

Michael W. Hansen, Esther K. Ishengoma, Radha Upadhyaya

Research output: Contribution to journalJournal articleResearchpeer-review

Abstract

Purpose: To understand African small and medium-sized enterprise (SME) performance and its antecedents is essential, both from a strategic management and an industrial development perspective. While a substantial literature on African SMEs has emerged in recent years, studies of their performance specifically are few and inconclusive. The purpose of this paper is to address this lacuna in the literature by examining variations in performance of 210 East African SMEs.
Design/methodology/approach: The paper employs OLS and logistic regression and Classify k-means test to analyze performance variations in a unique data set of 210 food processing enterprises in Tanzania, Kenya and Zambia.
Findings: Three generic types of African SMEs are identified based on performance: laggards, followers and gazelles. The gazelles are typically medium-sized, skill-intensive companies selling relatively differentiated products in niche markets. The laggards are typically small, capital-intensive companies involved in grain milling that adopt a cost differentiation strategy. A key driver of variation in performance is found to be the quality of the external business environment (in particular the quality of intermediary markets), and also capability factors such as the strength of management. Strategy factors such as differentiation and political strategies explain performance variations.
Practical implications: Among the policy implications are that African industrial policy should focus on improving the functioning of intermediary markets, e.g. by reducing the transaction costs of inter-firm collaboration. Moreover, rather than focusing industrial policy on SMEs per se, policymakers should focus on those types of enterprises that are capable of generating high performance, e.g. skill-intensive enterprises with strong managerial capabilities, engaged in differentiation strategies.
Originality/value: The paper integrates the extant literature on African SME performance, develops an analytical framework for studying it and presents novel empirical insights based on one of the most detailed surveys of SME performance in the continent to date. The findings have important and tangible implications for literature, as well as for industria
Original languageEnglish
JournalInternational Journal of Emerging Markets
Volume13
Issue number6
Pages (from-to)1835-1854
Number of pages20
ISSN1746-8809
DOIs
Publication statusPublished - 2018

Keywords

  • Food processing industry
  • African enterprise strategy
  • Determinants of SME performance
  • Industrial development policy

Cite this

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abstract = "Purpose: To understand African small and medium-sized enterprise (SME) performance and its antecedents is essential, both from a strategic management and an industrial development perspective. While a substantial literature on African SMEs has emerged in recent years, studies of their performance specifically are few and inconclusive. The purpose of this paper is to address this lacuna in the literature by examining variations in performance of 210 East African SMEs.Design/methodology/approach: The paper employs OLS and logistic regression and Classify k-means test to analyze performance variations in a unique data set of 210 food processing enterprises in Tanzania, Kenya and Zambia.Findings: Three generic types of African SMEs are identified based on performance: laggards, followers and gazelles. The gazelles are typically medium-sized, skill-intensive companies selling relatively differentiated products in niche markets. The laggards are typically small, capital-intensive companies involved in grain milling that adopt a cost differentiation strategy. A key driver of variation in performance is found to be the quality of the external business environment (in particular the quality of intermediary markets), and also capability factors such as the strength of management. Strategy factors such as differentiation and political strategies explain performance variations.Practical implications: Among the policy implications are that African industrial policy should focus on improving the functioning of intermediary markets, e.g. by reducing the transaction costs of inter-firm collaboration. Moreover, rather than focusing industrial policy on SMEs per se, policymakers should focus on those types of enterprises that are capable of generating high performance, e.g. skill-intensive enterprises with strong managerial capabilities, engaged in differentiation strategies.Originality/value: The paper integrates the extant literature on African SME performance, develops an analytical framework for studying it and presents novel empirical insights based on one of the most detailed surveys of SME performance in the continent to date. The findings have important and tangible implications for literature, as well as for industria",
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What Constitutes Successful African Enterprises? A Survey of Performance Variations in 210 African Food Processors. / Hansen, Michael W.; Ishengoma, Esther K.; Upadhyaya, Radha.

In: International Journal of Emerging Markets, Vol. 13, No. 6, 2018, p. 1835-1854.

Research output: Contribution to journalJournal articleResearchpeer-review

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