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Perspective: Economic and Business Research in Africa
John Kuada
The Role of Africa-focused Journals
The design and implementation of pro-growth and anti-poverty policies and strategies remain a major challenge in all Sub-Saharan African countries. The prevailing view among development experts is that there is no reliable alternative to economic growth, if Africa is to rise out of poverty. Economic growth reduces the levels of real unemployment and strengthens individuals capacity to care for themselves and their siblings. It also generates revenues necessary for anti-poverty policies. But while the engine of growth may be in the private sector, policy interventions are required to create the environment in which firms can operate and build their competitive advantages.
It is in this context that knowledge creation and dissemination through research and publications become important. The better informed African politicians, policy makers and business leaders are about the of forces that drive Africas competitive disadvantages on the global economic scene, the more capable they are in crafting solutions that are robust enough to give their countries a lift out of poverty. Research publications channel new knowledge to scholars and practitioners. That is, by sharing their knowledge and engaging in joint research, African researchers and their non-African colleagues are most likely to produce the kind of knowledge that can guide policy makers and possibly shape Africas economic future.
During the last two decades, many African scholars have made significant contributions to filling the knowledge gap. Research institutions have also been established in a number of African countries to provide the requisite infrastructural framework for research into economic and management practices. Institutions such as CODESRIA, (the Council for the Development of Social Science Research in Africa) and AERC, (the African Economic Research Consortium), have provided a platform for the dissemination of social science knowledge produced by Africans on Africa both within the continent and beyond. The existence of these and similar research institutions has strengthened the exchange of ideas among Africans and non-African researchers by ensuring that the work of African researchers is available within Africa and elsewhere in the world.
These are laudable developments that must be encouraged and supported. It is in this regard that academic journals that focus exclusively on African economic and business issues are highly important. The present journal, the African Journal of Economic and Business Research (AJEBR) draws its legitimacy from this realisation. It provides an avenue for disseminating empirical research results, as well as theoretical viewpoints and methodologies that are considered useful for research in key areas of economics and business in Africa. Through this medium researchers can build directly on the latest knowledge from their colleagues within and outside Africa.
Living up to this ambition, the present volume of the journal takes up issues relating to personnel management, export sector development, the role of micro-traders in economic development as well as cultural impact on African management. Since the journal seeks to publish papers covering a broad range of economic issues, we hope that it will appeal to a wide spectrum of researchers and practitioners concerned with African economic development.
Looking Ahead
A quick overview of existing literature in the field suggests that several issues cry for immediate research attention. Issues concerning private sector development, relationships between the private sector and government institutions, internationalisation of African firms, regional economic integration and cross-border inter-firm linkages, foreign investments and resource inflows, as well as social and cultural implications of business development are among the issues that have attracted some research attention but still leave many gaps unfilled.
Economic Liberalisation and Private Sector Development Policies
The adoption of policies that open up African economies to the rest of the world and allow them to participate fully in the WTO framework has been one of the priority policy issues in recent years. It has been argued that liberalisation (or economic openness as some choose to call it) would stimulate SSA economies, improve resource utilisation and help the nations adopt pro-poor policies.
Economic history tells us, however, that liberalisation amounts to a radical shift in SSA economic policies and must therefore be thought through very carefully. For barely three to four decades ago African politicians demonstrated a glaring suspicion of private enterprises and therefore considered the state to be the best creator and custodian of the wealth of their nations. Foreign companies were kept away through the erection of tariff walls and combinations of non-tariff barriers.
But barricading local companies behind fortified trade barriers tends to undermine innovation and dynamism within local industries, and is therefore counter-productive. This theoretical argument has been reluctantly accepted by a number of SSA governments during the past two decades. The younger generation of African policy makers are now trained to believe in the notion that freeing markets and rolling back the state results in energized productive forces. This understanding is, however, reflected a lot more in the political rhetoric in Africa but less so in specific government economic actions. Research is required to understand the reasons underlying the reluctance of African policy makers to fully embrace private sector development and economic liberalisation.
Private-Public Partnerships
Building a positive investment climate for private enterprise development requires forging strong government-business ties. Businesses must understand the needs of government and accept their responsibilities in building viable societies while bureaucratic structures and mechanisms must be business-friendly. Some efforts are underway in several SSA countries to build such mechanisms. But after decades of government suspicion of private capital and policies to restrain their operations in these economies, partnership initiatives have been greeted with suspicion and reservations by some private investors. African bureaucracy is itself quite uncomfortable with the new political changes since the dominant mindset has hitherto been anti-business. Research is required in this area as well to gain insight into the elements of mistrust between the bureaucracy and the private business community and to design instruments that can contain these elements in specific countries and contexts.
Internationalisation and Economic Growth in Africa
Internationalisation has also appeared on the research agenda. Development Economists have argued that internationalisation of African firms is a pre-requisite for rapid rate of economic growth of SSA countries. The main reason is that internal demand in individual African countries (and the continent as a whole) is too weak and volatile to sustain growth. The fact that Africa represents a tiny fraction of world trade and that its exports are, in many cases, below their level of three decades ago means that the potential for expansion is enormous. Internationalisation has other potential benefits. For example, by competing on international markets, African firms are compelled to remain up-to-date in production, sourcing, and marketing techniques. This stimulates innovation and enhances the overall competitiveness of firms.
The above viewpoints have powerful theoretical, strategic and policy implications. To start with, African firms must pursue upstream and downstream internationalisation strategies concurrently (Kuada and Srensen 1999, 2000). Upstream internationalisation is required for input flows and acquisition of other essential resources (including technology, finance and knowledge). In addition, downstream internationalisation is required from the onset of the operations of most manufacturing firms to enable them meet the minimum volume of output required for optimal usage of their technologies.
Despite these theoretical arguments, empirical studies of internationalisation of African firms are very few and substantial knowledge gaps remain to be filled in this area.
Weak Regional Interconnectedness
One aspect of the internationalisation process is regional economic cooperation and integration. Numerous attempts at regional economic integration have failed in Africa because intra-African trade has been relatively small. Simply put, Africans do not sell to each other. The reasons include the fragmentation of the continent into many small countries, political sensitivities and border disputes. This situation has to change if Africa is to achieve sustainable economic growth. The question is repeatedly asked about why African countries exhibit a high propensity to seal off borders with their immediate neighbours while they continue to trade with the West. Research is required to empirically establish the gains of intra-African trade in regional markets and to encourage more serious political actions to smoothen commercial linkages that can encourage cross-border trade and industrial cluster formation.
FDI and Capital Flows into Africa
One of the benefits of outward-oriented economic policies is foreign resource flows to specific African countries from private foreign investors. SSA countries are therefore advised to formulate policies that encourage linkages between their firms and foreign firms and to stimulate net flow of foreign investments as a deliberate economic growth strategy.
Many countries have responded positively to this advice and have designed incentive packages aimed at attracting foreign investors. Empirical evidence has, however, shown that although international investment flows to developing countries as a whole have been on the increase, African countries share of this inflow has remained relatively small. For example, while FDIs in European and Central Asian countries increased by 5,200% between 1980 and 1998 SSA countries registered a modest increase of 59% (Asiedu 2002). Asiedus study further showed that while infrastructure development and return on investment tend to have strong influence on investment flows to non-SSA countries, the impact on SSA countries is rather insignificant. Furthermore, the impact of openness on investment inflows to SSA countries is also modest. She therefore argued that there is an adverse regional effect on investors perception of the attractiveness of SSA countries as investment targets. That is, being an African country is itself enough to be excluded from foreign investors radar. What are the reasons for this tendency and how should policy makers respond This is a question requiring research attention.
Socio-cultural Embeddedness of Business Activities
Lastly, most theoretical formulations in Economics and Business tend to overlook or underplay the role of institutional forces that define and govern economic exchange. Recent studies in Economic Sociology (Granovetter 1985, Whitley 1994) suggest that the social and cultural context in which firms operate can harbour forces of innovation, collective efficiency, network resources, social capital and human drive that combine to shape firm-level economic action. Conversely, the socio-cultural context can also be a source of constraining forces in the form of collective inefficiencies and disadvantages as well as inclinations to mediocre performance of firms and institutions. Business studies in Africa have hitherto not benefited substantially from this emerging theoretical perspective.
The above list is not exhaustive but provides an indication of the variety of research issues that AJEBR would be grateful to publish in the coming years.
We wish all our contributors and readers a productive and rewarding 2006.
For enquiries about contributing to the journal, please contact:
John Kuada,
Editor
African Journal of Business and Economic Research (AJBER)
Email: kuada@business.aau.dk
Or write to:
John Kuada (Associate Professor)
International Management,
Dept of Business Studies
Aalborg University, Denmark
Fibigerstraede 2,
9220 Aalborg Oest
Denmark
References
Asiedu, Elizabeth (2002) On the Determinants of Foreign Direct Investment to Developing Countries: Is Africa Different World Development, Vol.30, No.1, pp.107-119.
Granovetter, Mark (1985) Economic Action and Social Structure: The Problem of Embeddedness American Journal of Sociology 91, 3: 481-510.
Kuada, John and Srensen, Olav Jull (1999) Upstream and Downstream Processes of Internationalisation: Some Ghanaian Evidence Journal of Euromarketing Vol 7 No. 4 pp:7-41
Kuada, John and Olav Jull Srensen (2000) Internationalization of Companies from Developing Countries, Binghamton, N.Y: The Haworth Press, Inc.
Whitley R., ed. (1994) European Business Systems: Firms and Markets in their National Contexts, London: Sage Publications