Research agendas on African enterprise development
Based on Figure 1, we can identify a number of resource gaps in the study of African enterprises. Firstly, considering the ‘contingency’ box, the majority of studies mentioned above examines the external components (institutions, markets, resources, competition), while fewer address the internal ones, such as entrepreneurship, size, skills and relational capabilities. We argue that future research needs to develop a better understanding of the internal resource configurations and the capability mixes that create African enterprise development.
The second box, the ‘strategic action’ aspects of the model, also seems to be conceptually under-developed and empirically under-researched in an African context. Future research needs to understand why firms operating within similar contingencies adopt widely different strategies and perform in different ways. Indeed, excluding strategic action as a mediator between contingencies and performance would overlook the key role of agency in African enterprise development and in particular the role played by decision makers/entrepreneurs/managers.
Finally, the review of the literature on performance of African enterprises suggested that more work is needed to understand the performance aspect. In particular, we argued that it is essential to make a distinction between survival, growth and profitability when assessing performance. Are ‘survival without growth’ or ‘growth without profitability’ sufficient indicators of performance? Research on performance would furthermore need to deal with the thorny issue of the sources of performance, for instance; is survival, growth and profitability based on political and kinship based strategies reflective of African enterprise development?
Emphasizing relationship between contingencies and strategy.
Thus, there are lacunas in relation to each of the dimensions of Figure 1. However, more importantly, we need to understand the relationships and interactions between the three dimensions. The contingencies, strategies and performances of African enterprises can interact in any number of ways. In what follows, we will emphasize two interconnections between contingencies and strategies that in particular need to be addressed in future research on African enterprise development. The first concerns the heterogeneity of African enterprises. The second concerns the heterogeneity of African countries.
Accounting for the heterogeneity of African enterprises
There is no such thing as “an African firm” and recent debates have started to acknowledge the huge heterogeneity of African business and how this impacts firm strategy, conduct and performance. For one, comparisons between countries highlight national variations, for instance in terms of importance of external relationships, government regulations and financial support (see e.g. Hung, Benzing and McGee, 2007). Within the SSA countries, there are also variations between indigenous and non-indigenous entrepreneurs and firms (see e.g. Ramachandran & Shah, 1999) or between firms with different ethnic orientation, for instance between Kenyan African, Kenyan Asian and Kenyan British firms (Jackson, Amaeshi and Yavuz, 2008). Beyond cultural heterogeneity, it is possible (and necessary) to segment according to firm types (incumbents, entrepreneurial firms, etc). Even further segmentation is possible (based on age, location, sector, export orientation, etc.). Thus, conceptualizing the heterogeneity of African firms is a complex task. However, untangling the heterogeneity in choices and outcomes across firms within SSA countries is a vital part of making sense of the factors that shape firm behaviour.
Empirical data on performance drivers of African firms are scarce and do not adequately address or explain the dynamic relation between the contingencies, the strategies and the performance of the firms. Despite the recent media enthusiasm over African firm success, researchers are only beginning to understand the determinants of firm success in low-income countries. New lenses are needed to understand and explain the rising African “lions”, which despite often challenging environments succeed in growing their businesses. While studies suggest that Africa possesses a substantial reservoir of capacity endowments and best practices and that the solutions to African growth issues often are home-grown (Dia, 1996), exactly how this plays out is not thoroughly researched. Therefore, the focus needs to shift from solely analysing the multiple macro and micro- level barriers to examining firm strategy and capabilities in much more detail. More concretely, we proposed an analytical framework which directs attention toward three key dimensions: 1. The interplay between internal and external contingency factors; 2. The interaction of external and internal contingencies and firm strategy (balancing, network and internationalization strategies); and 3. The determinants of firm performance (e.g. measured through survival, growth and profitability). The interplay between these dimensions is a central element of the framework. A contingency approach to understanding African enterprise growth will, inter alia, take into account the heterogeneity of African firms as well as the heterogeneity of the business environments in which they are operating.
The framework has several advantages: first, it emphasizes the mediating role of strategy between contingencies and performance. Second, it emphasizes a dynamic perspective on firm behaviour and the resulting performance. Finally, the framework acknowledges that there is no one best way to strategize, but that strategy must be formulated through a fit between external and internal contingencies. As an example, we have shown how understanding firm and country heterogeneities have important implications for firm strategies. The tide is starting to turn and a new and diverse generation of African firms is emerging, gaining grounds in local and global markets. It is high time that research gears up to enhance our understanding of this phenomenon, for instance by developing better conceptualizations of firm level factors behind African enterprise growth and/or by massively upgrading the effort to provide empirical data on African enterprises.