Industrial structure and microenterprises in Africa

  • M. Fafchamps (1994). Journal of Developing Areas, 1-30
  • Abstract: Drawing insights from the theory of industrial organizations, this paper lays down some theoretical underpinnings for a consistent approach to African MEs (Microenterprises). Three questions are the focus of this paper: How do African MEs survive? Can their behavior be characterized as perfect competition among atomistic firms? What can be done regarding MEs and industrial structure in Africa? These issues are put in perspective by discussing the role of MEs in the economic development process. The second section presents a survey of theories that attempt to explain firm-size heterogeneity in developed countries. It is argued that African MEs survive or thrive either by finding locations or market niches in which they do not have to face competition from larger firms; by taking advantage of better worker supervision, entrepreneurial motivation, and access to small venture capital; or by avoiding or being dispensed of certain laws and regulations. The third section discusses business practices, contract enforcement, and informal associations among MEs. The four section concludes with a discussion of policy implications and avenues for further research. Alternative ways of capturing returns to size without losing cost advantages granted by small size are explored in some detail. -from Author
  • Theme: Growth and performance
  • Keywords: developing region, development process, firm size, industrial structure, informal sector, microenterprise, microenterprise role, theoretical approach, Africa, Africa, (sub-Sahara)
  • Reference type: Journal Article
  • Geographic location: Africa, Global South
  • Quality:
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