Enterprising Ethnic Minorities

PSD Blog reports on enterprising ethnic minorities within African private sectors quoting Vijaya Ramachandran who has found that:

• The great anomaly is that in most cases African governments have, however inadvertently, created conditions under which ethnic minorities do better than African groups, who would otherwise appear to be in a favored position.

• It seems that network benefits from within ethnic communities substitute for a lot of the dysfunctional elements of regulation or poor government services, and other obstacles such as limited access to external finance, poor avenues for dispute resolution, etc.

• There is probably some degree of correlation with levels of corruption in general and the relative prominence of ethnic minorities in business, although I don't recall this being empirically demonstrated. This is not to say that they are more corrupt, but that in poor governance environments "outsiders" actually end up being able to deal more effectively in business over the long term. This may be partly because patronage networks change over time, or that ethnic minorities and foreign companies are not perceived as political threats, so their emergence as economic powers is less contentious.

• Ethnic minority-owned companies have tended to start larger, and grow faster, partly because they may possess some of the general characteristics associated with higher growth to a greater degree than other companies.