Minority entrepreneurs and private sector growth in Sub-Saharan Africa

Abstract

This study focuses on the role of entrepreneurs in the private sector in sub-Saharan Africa. Using data from the Regional Program on Enterprise Development (RPED) and controlling for various factors, our analysis compares growth rates of indigenously owned African firms with firms owned by entrepreneurs of Asian or European descent, in Kenya, Zambia, Zimbabwe, and Tanzania. The author find that after controlling for firm size and age, various entrepreneurial characteristics, and sector and country differences, minority (or non-indigenous) entrepreneur firms start out larger and grow significantly faster than indigenously-owned African firms. Our results are consistent with theories that argue that informational and financial networks created by minority entrepreneurs provide access to credit, information, and technology for members of these networks. The author also find that within indigenously-owned African firms, entrepreneurs with secondary and university education realize a higher rate of growth; access to education presumably enables indigenous African entrepreneurs to develop managerial skills that serve as a substitute for the informational and financial networks created by minority entrepreneurs.