Understanding Internationalisation of Informal African Firms Through A Network Perspective

Metal workshops in Suame Manufactoring Cluster, Kumasi, Ghana. (Photo: (c) Boafo, Owusu, Guiderdoni-Jourdain)

The work of Christopher Boafo, Richard Afriyie Owusu and Karine Guiderdoni-Jourdain offers an understanding of the internationalization of informal smaller firms in two major enterprise clusters in a sub-Saharan African economy through a network perspective. Here Boafo reflects on their paper in International Small Business Journal: Research Entrepreneurship, “Understanding internationalisation of informal African firms through a network perspective.”

As a lead author, my interest in researching informal entrepreneurship is motivated by our informal family business, which had linkages with formal firms and was an integral part of production and marketing chains. This is one case example of the many successful cluster-based informal manufacturing enterprises in a developing economy that I had lived with during my early life.

Estimates suggest that eight out of 10 enterprises (i.e., own-account workers and small economic units) are informal (International Labour Organisation [ILO], 2018). In sub-Saharan Africa, over 79 percent of enterprises are informal and the sector contributes around 36.2 percent of the Gross Domestic Product (ILO, 2018). At the same time, informal cross-border trade accounts for a significant proportion of intra-African trade, representing 80 percent and 42 percent of total trade between some countries in Eastern and Western Africa (Afreximbank, 2020). Yet informal entrepreneurship remains underreported in firm internationalisation; defined as the extension of a firm’s activities beyond the borders of the domestic marketplace. In this research, we argued that economic blocs with higher shares of the informal sector create a wider societal legitimacy for informal firms to internationalize to regional markets and beyond.

Carpentry workshops in Sokoban Wood Village, Kumasi, Ghana

This article has explored two research questions: First, how and why do informal firms internationalise to foreign markets instead of remaining local? Second, how do the social and business networks of informal firms influence their modes of internationalisation? Our findings show that half of the studied 14 informal smaller firms transacted business in five to seven foreign markets, and more than half sold abroad within three years of inception. The study illustrates the different network ties that influence passive and active internationalisation strategies with evidence that these informal firms developed buyer networks through customer referrals and foreign customer walk-ins. Overall, we provide a comprehensive understanding of the triggers that initiate international business activities by informal firms. The findings emphasise that informal firms have high levels of entrepreneurial acumen and ambition, and early internationalisation is not limited to formal firms, but also includes informal firms.

We have offered insightful suggestions for future research. First, we call for future studies to explore customer satisfaction by obtaining performance data from foreign buyers, based on the findings that internationalising informal firms largely developed buyer networks. In this context, we suggest using Ubuntu, a social relationship theory of business conduct in Africa. Second, we recommend that researchers conducting field research on firms in the informal sector cooperate with the trade or sector associations that represent informal firms. Through this approach, we gained the trust of the associations’ leaders, and through them, we could establish relationships with their membership.

In conclusion, our study opens the research arena for international entrepreneurship researchers, given the importance of legitimate and opportunity-driven informal entrepreneurship for economic development in developing economies.

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Christopher Boafo, Richard Afriyie Owusu, Karine Guiderdoni Jourdain

Christopher Boafo (pictured) is a PhD candidate at the International SEPT Competence Centre, African Centre for Career Enhancement and Skills Support at Leipzig University. He is an experienced business analyst with a demonstrated history of working in international business and development industry (in Africa and Europe). Richard Afriyie Owusu teaches business-to-business and international marketing courses at bachelor's and master's levels at the School of Business and Economics, Linnaeus University, in Vaxjo, Sweden. Karine Guiderdoni-Jourdain is in a PhD position, in management science at the Institute of Labour Economics and Industrial Sociology, Aix Marseille University.

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