What we learned about firms

The annual conference organized by the Centre for the Study of African Economies (CSAE) at the University of Oxford is one of the largest academic development economics conferences focusing on sub-Saharan Africa, this year with almost 300 different presentations and more than 400 participants.

It should not be a surprise that many presentations on firms and private sector development were featured at this conference, including several contributions by World Bank staff (including myself).

This blog post aims to give a sense of some of the papers presented on private sector development in Africa. While it is impossible to give a full overview of all papers presented, here are some highlights of papers related to firms: 

• Growing evidence on the importance of managerial practices for African firms. Daniela Scur (MIT Sloan) confirmed that the positive relationship between management practices and innovation also holds in sub-Saharan Africa, using World Management Survey data for medium-sized and large firms, while Tsegay Tekleselassie (with Girum Abebe; both from EDRI in Ethiopia) showed that a one standard deviation improvement in business practices leads to a 12-25% rise in productivity for smaller firms in Ethiopia.
• Innovative firms create jobs and necessity might be the mother of invention. Elvis Avenyo (University of Johannesburg; with Maty Konte and Pierre Mohnen) used data from the World Bank Enterprise Survey and the Innovation Follow-up to show that African firms who engage in product innovation create more jobs, although many are temporary, while Amin Karimu (University of Ghana Business School; with Justice Tei Mensah and Joshua Abor) argues – using similar data - that firms facing more electricity outages are more innovative.
• Comparing firm-level data across countries and years remains a challenge. Bruce McDougall (with Andrew Kerr; UCT DataFirst) discussed the difficulties of comparing firm censes across countries and time. Censuses take very different approaches on how to include informal and small firms (e.g., in Rwanda informal firms are only included if they have a fixed location, while in Ghana informal firms need to have a sign outside to be included).
• Capital grants increase productivity, by allowing firms to buy more technologically advanced assets. Laurin Janes (DFID; with Michael Koelle and Simon Quinn) revisited earlier capital grants RCTs conducted in Sri Lanka and Ghana to show that these capital grants did not just increase revenue and profits, but also total factor productivity (TFP) by 9% to 18%. Firms used the capital grants to buy more technologically advanced assets, which subsequently increased these firms’ productivity.
• More evidence on mindset-oriented trainings and their mixed impact on firm performance. Sreelakshmi Papineni (World Bank Gender Innovation Lab) replicated an earlier successful intervention of soft skills and business practices training in Togo with women entrepreneurs in Ethiopia, and only finds a positive effect in one of the three trainings offered. Trainings delivered by instructors experienced in running their own business were more successful.
• Men reduce contributions to household public goods if their partner has an individual business opportunity. The paper I presented (joint work with Marine Gassier and Francisco Campos) compares direct and indirect support by men to their partner’s business in a lab experiment in Ghana with women entrepreneurs and their partners, and finds that when women have an individual business opportunity, men contribute less to household public goods.
• Providing microfinance for startups does not reduce the “home bias” of female entrepreneurs. Mahreen Mahmud (University of Oxford; with Farah Said, Giovanna d’Adda and Azam Chaudhry) showed that giving a startup loan to aspiring female entrepreneurs in Pakistan makes them more likely to start a business, but does not influence their “home bias”: women still prefer to set up their business within the household.
• The workplace environment matters for workers’ productivity. Factories are often noisy places; Josh Dean (from the briq Institute in Bonn) shows that this harms productivity. In an RCT in Kenya, a doubling of volume (a ten decibel increase) lowers productivity by five percent.

An overview of the program including submitted papers can be found here, and more summaries of papers are found on David Evans’ blog with one-sentence summaries (at CGD) and on Twitter through hashtag #OxCSAE2019. Videos from the plenary sessions – which included sessions on artificial intelligence, automation and Africa’s economic prospects – can be found here.