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Part B
Gender Entrepreneurship and Youth Unemployment in Africa
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Chapter 5
Female Entrepreneurship in Africa: Relationships between SWT and P-A Theory, Behavioural Economics Insights
John Struthers and Dina Modestus Nziku
Abstract
Within developing countries, particularly in Africa, there is an emerging literature which highlights the unique obstacles faced by women entrepreneurs who start and develop their own businesses (De Vita, Mari, & Poggesi, 2014; Jamali, 2009; Minniti & Naude, 2010; Naude & Havenga, 2005; Nziku & Struthers, 2018). A key objective of this chapter is to critically appraise some of the conceptual approaches adopted in this literature. In so doing, the authors revisit a seminal paper first developed by Granovetter (1973) which suggested that female entrepreneurs, instead of being disadvantaged by the so-called âweak tiesâ that bind their business networks, actually enjoy compensating benefits which Granovetter referred to as the strength of weak ties (SWT). Building on the conceptual work of Nziku and Struthers (2018) which developed an innovative taxonomy for analysing the SWT concept within a Principal-Agent (P-A) paradigm, the chapter will set out new insights which challenge some of the assumptions of the extant entrepreneurship literature. In particular, that women are inherently more risk averse in their business decision making than men. The theoretical context for this will be derived from a behavioural economics methodology first developed by Kahneman and Tversky (1979). They introduced the concept of loss aversion as a more realistic approach to attitudes towards risk on the part of entrepreneurs than risk aversion. The chapter contends that the loss aversion perspective may be more appropriate to the decision-making frame adopted by female entrepreneurs, especially in the context of Africa as well as in other developing regions of the world. The chapter will therefore suggest that such an approach can yield fresh insights on the topic of female entrepreneurship which the extant literature heretofore has not addressed, though this will have to be subsequently tested empirically.
Keywords: Female entrepreneurship; SWT; P-A paradigm; behavioural economics; loss-aversion; Africa
Introduction
Within developing countries, particularly in Africa, there is an emerging literature which highlights the unique obstacles faced by women entrepreneurs who start and develop their own businesses (De Vita, Mari, & Poggesi, 2014; Jamali, 2009; Minniti & Naude, 2010; Naude & Havenga, 2005; Nziku & Struthers, 2018). The role of social networks in facilitating womenâs entrepreneurial activities has gained attention in the literature as well as being recognised as a vehicle for creating potential sources of social capital (Agholor, Smith, Oyelana, & Ibrahim, 2015; Birley, 1985; Brixiova & Kangoye, 2016). A key objective of this chapter is to critically review some of the assumptions adopted in this literature. One such assumption is that women are restricted in their entrepreneurial endeavours by many obstacles and challenges. It is also assumed that women entrepreneurs display higher levels of risk aversion in a business context than men. In this chapter, we challenge this assumption by developing an empirical methodology derived from behavioural economics which replaces the assumption of risk aversion by the assumption of loss aversion.
In doing so, we also revisit a seminal paper first developed by Granovetter (1973). In the context of that paper, Nziku and Struthers (2018) have suggested that women entrepreneurs, instead of being disadvantaged by the so-called âweak tiesâ that bind their business networks, actually enjoy compensating benefits that Granovetter referred to as the strength of weak ties (SWT). This chapter extends the conceptual concepts in our earlier paper and asks the following questions: Are womenâs business networks, especially in an African context, inherently disadvantaged by the type of âweakâ ties that characterise such networks (e.g. to the extent that they may be based on looser professional contacts than their male counterparts)? What obstacles or barriers can these âweakâ ties cause that may inhibit womenâs entrepreneurship? For example, they may include limited access to finance from within the formal banking sector which can create an over-reliance on informal or bespoke sources of finance (such as microfinance). Does such a reliance on âweakâ ties limit the types of businesses carried out by women in such societies? For example, those that are heavily reliant on the services sector of the economy; or those that are heavily dominated by the supply of female specific products and services (e.g. cosmetics and hairdressing).
The chapter tries to answer these questions by challenging an assumption that permeates much of the extant literature on womenâs entrepreneurship, especially in Africa, which assumes that women are inherently more risk averse than men within their business ventures. The theoretical context for this is a behavioural economics methodology first developed by Kahneman and Tversky (1979). This suggested that the concept of loss aversion rather than risk aversion is a more realistic approach to attitudes towards risk on the part of entrepreneurs.
Background and Context
This chapter builds upon the conceptual work of Nziku and Struthers (2018) which developed an innovative taxonomy for analysing the SWT concept, first developed by Granovetter (1973, 1983) within a Principal-Agent (P-A) paradigm (Jensen & Meckling, 1976). In developing countries, particularly in Africa, there is an emerging literature which highlights the unique obstacles faced by women entrepreneurs who start and develop their own businesses (De Vita et al., 2014; Jamali, 2009; Minniti & Naude, 2010; Naude & Havenga, 2005). The role of social networks in facilitating women entrepreneurial activities has also gained attention in this literature (Agholor et al., 2015; Birley, 1985; Brixiova & Kangoye, 2016). The gender aspect is a central component in our exploration of the SWT concept and the P-A paradigm due to its relevance in explaining the contribution of entrepreneurial activities of women and their network utilisation (Marlow & Martinez Dy, 2018; Nziku & Struthers, 2018; Rouse, Treanor, & Fleck, 2013; Williams & Patterson, 2018). In this chapter, the authors highlight ways in which their taxonomy can be operationalised empirically by incorporating some key concepts from behavioural economics.
The economic development of an efficient private sector in Sub-Saharan Africa (SSA) is of critical importance in delivering sustainable economic growth as well as for raising the living standards of people in the region. Entrepreneurship is a major driver of the economy in developed and developing countries alike (Nziku, 2016; Ramadani, 2013). The World Bankâs 2012 World Development Report on Gender Equality and Development suggested that SSA had approximately 61% of women participating in the labour force compared with 26% in the Middle East and North Africa, and 64% in East Asia and the Pacific (World Bank, 2012). A subsequent World Bank publication in 2019 also suggested that 63% of women in Africa in the non-agricultural labour force worked in the informal sector compared to around 30% worldwide (World Bank, 2019). Moreover, the literature suggests that within African countries there are more females than males who become involved in entrepreneurial activities (Global Entrepreneurship Monitor, 2019; Nziku, 2016). Yet, there is a variety of unfavourable factors within local regulatory, normative, and cognitive systems which place additional burdens on women entrepreneurs in their attempts to start-up and expand their businesses (Amine & Staub, 2009; BrixiovĂĄ & Kangoye, 2016; Halkias, Nwajiuba, Harkiolakis, & Carcatsanis, 2011; Naude & Havenga, 2005; Nziku, 2013, 2016).
The annual Global Entrepreneurship Monitor (GEM, 2017) has highlighted the challenges facing women entrepreneurs in Africa. Although at the societal level private sector entrepreneurship in SSA exceeds that in developed countries, the main challenge lies in raising the level, range, and depth of women entrepreneurship. There is also a perceived need to conduct more empirical studies on women entrepreneurship within Africa as existing studies tend to cover a small number of countries on the continent (GEM, 2017). Richardson, Howarth, and Finnegan (2004) suggest that unless data on the level of ent...
