Women-Owned SMEs in Emerging Markets

The Missing Link in Global Supply Chains

Shabnam Shalizi

• Publisher: Routledge
• Year: 2021
• Topic: Economics
• eBook ISBN:
  9781000470208
• Subtopic: Women in Business
• Index: Economics

This book investigates women as business owners in emerging markets, documenting the structural difficulties they face as a result of their seeking access to global supply chains, and demonstrating the ways in which they are rewriting norms and challenging market assumptions.

Although women own an estimated one-third of all small and medium-sized enterprises (SMEs) in emerging markets, they are deeply underrepresented in global supply chains. In what the author refers to as the Women in Trade Deficit, women-owned enterprises earn less than 1% of all money spent on vendors by large corporations and governments worldwide. Drawing on an in-depth empirical investigation of a range of SMEs in Bangladesh, Nigeria, and Sri Lanka, this book investigates how women enter the supply chains of major global firms and multinational corporations and the challenges they face in doing so. Overall, the book argues that these business owners are rewriting norms and rearranging markets through networked enterprises to advance what the author calls prosocial industrialism.

Whilst many studies focus on women at the micro-enterprise or laborer level, this book makes an important contribution to our understanding of their role at the helm of SMEs that trade internationally. As such, it will be of interest to researchers across business studies, economics, sociology, and development studies, and to donor agencies, policymakers, and the global private sector.

1 Introduction

DOI: 10.4324/9781003120971-1

Behind every product or service are people. They produce, process, move, and bring products to market that consumers use in their daily lives. Buying decisions do not begin with the consumer—they end there. Decisions about who works in these complex supply chains start with companies. Millions of suppliers at various levels of production contribute to the business of finished goods and services. Buyers at major global firms and multinational corporations determine which farmer, factory owner, or engineer will produce value in which countries. They make important decisions in the conduct of trade. Their decisions affect the lives of artisans, small vendors, and entrepreneurs at all levels worldwide. Given the extreme impacts we have already seen on environment and society, particularly in emerging markets, firms have not made wise decisions. Trade has the potential to be inclusive, and I argue it must be. To achieve this, we must learn from the people who are excluded.

This book exposes mechanisms that weaken and empower the full potential of people who can, or already do, participate in international trade. And this is not just any people. The population under study is both invisible and visible. They are capable, yet they are not equally able, to access and enter the supply chains of major global firms and multinational corporations. They earn less than 1% of all global spend on vendors by large corporations and governments worldwide (UN Women 2020; Vazquez and Frankel 2017), yet own an estimated 32–38% (8–10 million) of formal small and medium-sized enterprises (SMEs) in emerging markets.¹ They are the women owners of SMEs. These entrepreneurs are established, accomplished, and resolute. However, for a variety of reasons learned from the fieldwork for this book, they are only marginally represented in global markets. I refer to the fact that women-owned businesses earn less than 1% of all global procurement spend as the “Women in Trade Deficit.”

Despite their invisibility, major global firms have started to publicly acknowledge wanting to bring these SMEs into their supply chains. Recent “supplier diversity” initiatives have been developed. In 2016,² Accenture, Citi, Ernst and Young, Johnson and Johnson, IBM, Intel, Pfizer, Procter and Gamble, UPS, and Walmart pledged a combined $1 billion to buy from women-owned SMEs—especially those in emerging markets—for their supply chains. Women-owned SMEs create products and services that are of value to major global firms. Some are very straightforward and utilitarian, while others are innovative and groundbreaking. From custodial, floral, and prepared foods to the manufacturing of carpets, toiletries, corporate gift items, and hardware that companies require, women-owned SMEs cover a lot of ground. Upcycling, ridesharing, e-commerce, and construction companies also count women technological (tech) innovators among their founders and owners. However, global firms have been unable to meet their goals of working with these SMEs. For example, in 2017, the American multinational corporation Walmart announced that it did not meet a 2011 commitment to double the sourcing of its products and services from women-owned businesses in overseas markets by 2016.³ Failures like this one perpetuate the “Women in Trade Deficit,” even as they hint at deeper structural issues.

Women entrepreneurs have had to contend with “Jane Crow,” which Murray (1970) described as the full spectrum of “assumptions, attitudes, stereotypes, customs, and arrangements which have robbed women of a positive self-concept and prevented them from participating fully in society as equals with men” (Wayne 2011, 583). Even as women SME owners struggled against the Jane Crow regime, it provoked them to act. Their entrepreneurial motivation was rooted in their autonomy. Although most emerging markets cannot be classified as post-liberation feminist states, these SME owners see themselves as already liberated. They feel that they are fighting a battle for their fellow countrywomen by redistributing resources through their businesses. Fatima Mernissi (1975) contended in that, “Liberation is a costly affair for any society, and women’s liberation is primarily a question of the allocation of resources” (165). Where possible, the SME owner actively recruited women as her employees, giving them a platform to decisively allocate resources. That is, she gave those employees the right to their own economic self-determination. The women SME owners studied in this research have even done the work of both government and the private sector. They ensured their workers were safe, paid well, received benefits, and prioritized their social welfare and natural environment.

Despite these positive developments, women who own SMEs are still unable to access and enter the supply chains of major global firms and multinational corporations. Increasing trade liberalization and rising inequality has forced women entrepreneurs in emerging markets, such as Fatima introduced in the Preface, to find innovative ways to overcome exclusionary systems and chart their own pathways to economic independence and international visibility. Increased internet access at improved speeds and expanded smart phone ownership across these markets has swung commercial doors open for women entrepreneurs. Women-owned SMEs have adopted “a suite of digital platforms¹ for their businesses, including social media, social messaging, e-commerce, delivery apps, and digital payments.”⁴ Their strategic use of the internet and social networks has amplified their commercial performance and capabilities to trade globally. They not only understand how to use the internet, but also how to optimize their use of it for commercial purposes. However, evidence of their work and impact is insufficiently documented.

One reason we know little about what makes some women-owned SMEs successful and others fail in global markets is a lack of research. There are valuable data sets about the entrepreneurial performance of women in local and domestic markets, though this data skews in favor of micro-enterprises. Several studies cover their financial exclusion, and the credit gaps these entrepreneurs face in their home countries. Data about women-owned SMEs in emerging markets that have been transacting across borders, or that seek to do so, are limited. Also, information about the interactions between women-owned SMEs in emerging markets and the institutional actors that seek to diversify their supply chains by sourcing from women is scarce. The available research largely focuses on women farmer cooperatives and other export associations linked to agricultural value chains—when in reality, outside of traditional commodity exports, women-owned SMEs vary widely in the industries they cover.

The Organisation [sic] for Economic Co-operation and Development (OECD) concluded that better qualitative information—in addition to better statistics—was required to profile women entrepreneurs.⁵ This book answers their call with updated and rich qualitative data. But before diving into women-owned SMEs, I discuss how neoliberalism, offshoring, and a rising middle class have shifted economic and entrepreneurial dynamics in emerging markets.

Asymmetric globalization and trade in the postmodern age

It would be disastrous if the current globalization were to be a one-way process, with universal transmitters on one side and receivers on the other, with the norm set against the exceptions; with on the one hand those who think they have nothing to learn from the rest of the world, and on the other those who believe that the rest of the world will never listen to them.

Amin Maalouf, 1949–present

The global concentration of power, wealth, and knowledge has led to a disputed international development dichotomy that classifies countries as “developed” or “developing.” Over the last ten years, newer terms have offered a different portrayal of the development and growth rates in countries, such as “emerging markets” or “frontier markets.” This book is based on original data collected from three countries commonly classified as “developing.” However, I posit that all countries are developing, and none are in the so-called “third world.” Instead, complex economic networks connect all components and dimensions of “one world” (Wallerstein 1974). Segmenting the world into “developed/developing” using a yardstick maintained by former colonizing and imperial nations has sustained lower levels of accountability for the damaging effects of Western production on the Global South. Segmentation has also resulted in less public awareness of the progress these countries are making. Keeping with predominant references, the geographical scope of this study is thus within emerging market countries in the Global South, with open markets and economic reforms to match.

Countries on the semi-periphery or periphery (Wallerstein 1974) of the historically concentrated cores of economic power have suffered from highly politicized development and trade schemes (Collier 2007; Moyo 2009; Sachs 2005; Stiglitz 2012) powered by the asymmetric currents of economic globalization. Capitalism continues to dominate the prevailing economic system, steadily impacting how actors produce and trade in a technology-forward global market. Many aspects of its functionality have persisted, while a number have changed. I begin with what has remained the same. Some of the most damaging impacts of globalization have been on international trade. Development continues to be an obstacle for poor nations, because wealthier nations whose private institutions depend heavily on low-cost materials and labor have exploited citizens and natural resources. For this reason, job creation within these countries should not be conflated with empowerment. Mass offshoring has lowered standards for the social protection of people as the Global South has competed for multinational and other corporate contracts.

With the rise in automation, offshoring no longer promises job creation as it once did across emerging markets. A reduction in the costs of offshoring includes “an increase in the demand for developing country labor as a result of an increasing range of tasks offshored, but a decline in labor demand due to a lower labor requirement per unit task” (Bandyopadhyay et al. 2019). Social protection covers all the factors that affect individual well-being. Jobs and strong labor markets are one key aspect; other aspects include accessible health and a clean environment—all of which can reduce human exposure to risks. Apart from unpredictable job creation, offshoring has produced unprecedented levels of waste and pollution, particularly in low- and lower-middle-income countries. The environmental tradeoff for jobs and foreign investment has been deliberate on the part of the public and private sectors in emerging markets because,

as its primary goal, the South pursuing economic development is willing to bear the costs of environmental degradation … [and] the environmental protection measures undertaken generally fall short of the levels needed to restore the environmental quality acceptable by WHO standards.

(Choi and Yu 2018)

The contemporary offshoring model has become a double-edged sword—unsustainable job creation and largely irreversible damage to the environment.

Governmental concessions and tax breaks for multinational firms have further deprived citizens of social services and protections to advance their individual and professional development. Capitalism has proven highly resilient, despite having failed billions globally. While the destabilizing forces of globalization have been unevenly distributed across society (Bauman 1998; Stiglitz 2002), technology has become a driver of what Zygmunt Bauman (1998; 2000) calls liquid modernity—the continuous evolution of relationships, identities, and economics in contemporary society. Thus, what has changed about the functionality of capitalism is that the Global South is a continuously evolving range of countries that span Latin America, Africa, and Asia. They are not primitive, nor are they without knowledge. They are seizing technology and disrupting markets. They are increasingly modern, adaptive, responsive, and resilient.

Emerging markets have absorbed new economic activities from entrepreneurs who are redefining the characteristics of local markets. Their commercial activities are frequently in protest to otherwise limited job opportunities and the exploitative practices employed by major global firms in their home countries. Technology is behind this phenomenon. Handheld devices, computers, and social networks have challenged the meaning of “capital” in capitalism because they have become gateways to self-employment and the world of e-commerce. The current growth across emerging markets suggests a technology-forward response and resistance to the adverse effects of globalization. The need for productivity begets competition. Entrepreneurs seeking to enter global supply chains from their unique positions in rapidly evolving markets are seizing these opportunities.

Leapfrogging, a growing middle class, and the rise of intangible capital

In a world where capitalism is evolving, emerging markets are an opportunity. Nine out of every ten new skyscrapers in 2016 were built in emerging markets.⁶ Economists and industrialists alike have stated that the new economic power core is in Asia. The proliferation of technology—both in terms of product diversification and penetration—has opened access to the global network economy beyond historically dominant groups (Castells 1996; 2010). In 2016, emerging market countries filed more patents than developed markets for the first time in history.⁷ Structural transformations saw countries in the Global South reallocate resources from some industries into investments in infrastructure. Driven by these economic and technological changes, most emerging market nations do not look as they did ten years ago.

In 2017, $35 trillion was spent by the middle class. This figure is expected to rise to $64 trillion by 2030—one-third of the global economy.⁸ Across emerging markets in Asia, Africa, and Latin America, 1.7 million workers were added to the workforce every month, and trade increased between emerging markets—from 25% in 1995 to 40% in 2018. This led to new ratings issued by major credit agencies, including S&P and Moody’s. Spending on consumer durables (e.g., cars and appliances) also increased, and tourism expanded—135 million Chinese traveled abroad in 2017. A growing middle class also reflects newer, competitive capacities in emerging markets. Business with North American and European firms is a knowledge-generating process. The reverse is also true—innovation spurred by entrepreneurs across a number of emerging markets has benefited Western markets.

Many emerging markets have gained from Western economies by “leapfrogging” past specific stages in development processes, saving these countries time and money. One of the most familiar examples of leapfrogging is the land line telephone. A 2015 Pew study in Africa found that 97% of respondents did not have a land line, yet over two-thirds had cell phones. These nations had bypassed land line telephones altogether.⁹ This figure is higher today, particularly because many entrepreneurs own more than one phone. There is decisive value in distinguishing ce...

Table of contents

• Cover
• Half-Title
• Series
• Title
• Copyright
• Dedication
• Contents
• List of figures
• List of tables
• Acknowledgments
• Abbreviations
• Foreword
• Preface
• 1 Introduction
• 2 Finding the missing link in global supply chains
• 3 Women-owned SMEs in emerging markets
• 4 Institutional arrangements: Understanding, reacting, and adapting
• 5 International standards and procurement in practice
• 6 Circumventing boundaries digitally and the role of trust
• 7 Unpacking the Women in Trade Deficit
• 8 Conclusion
• References
• Appendices
• Appendix A: Women SME owner profiles
• Appendix B: 45 Key findings (Obstacles and Opportunities)
• Index