Study: On Level Playing Field, African Entrepreneurs Would Outperform U.S., E.U.

Study: On Level Playing Field, African Entrepreneurs Would Outperform U.S., E.U.

If you were to give African entrepreneurs the same kind of environment as American or European entrepreneurs, Africans would outperform their counterparts, according to a new study.

The study’s authors identified infrastructure, access to credit and politics as the factors affecting a level playing field among African entrepreneurs.

Co-authored by Wharton Management Professor Ann Harrison and published by the National Bureau of Economic Research, the study parsed the macro-economic picture, using data from 12,000 companies in 32 sub-Saharan African countries whose average annual per capita gross domestic product was less than $3,000, according to a report in knowledge@wharton.

World Bank’s Enterprise Surveys supplied the data which, the researchers said, are designed “to benchmark the investment climate in developing countries across the world and to understand the determinants of firm performance and behavior.”

Insufficient infrastructure, scarce access to credit and political monopolies cripple these economies, according to the researchers.

Inefficient telecommunications consistently ranked No. 1 among the reasons for African entrepreneurs’ perennial disadvantage, the report said. Lack of financing was No. 2. Single party rule, or lack of democratic government, also inhibits progress to a lesser degree, the study found.

“If one could adjust the daunting list of geographic, infrastructure, political, economic and institutional factors to the levels elsewhere,” the authors said, “Africa possesses an inherent advantage.”

Technology has leapfrogged landlines in Africa, Harrison said, and more than eight in 10 Africans have access to cell phones. That’s a lot of progress in a short time and it signals more to come, possibly sooner than expected.

African companies often have the right stuff to succeed, Harrison said. “The implications for what needs to be done to nurture a strong business sector are clear: promote infrastructure, expand access to bank and trade credit and encourage political competition.”