Business Group Competitive Advantage & Export Performance:The Case of Africa’s Minority Entrepreneur

Abstract

To facilitate interfirm trust and exchange, business groups typically organize along an axis of solidarity such as kinship, religion, or political identity. In this paper, we consider whether business group solidarity based upon the minority identity of affiliate owners can be a basis for business group competitive advantage. Based upon World Bank enterprise surveys in 24 sub-Saharan African countries of over 8000 firms, we identify uncharacteristic affiliate performance effects upon the self-identified ethnicity of firm owners. We find affiliates owned by Indian, Middle-Eastern, and European entrepreneurs do not show the expected superior export performance compared with indigenous African owned firms. A finding suggests that long-established and exclusionary ethnic groups may either become less exclusive, consistent with the mixed embeddedness thesis. In contrast, our findings show that Chinese owners of group-affiliated firms significantly outperform both independent firms and other business group affiliates with non-Chinese owners. We contribute to understanding the origins of business group heterogeneity and the evolving basis of entrepreneurs’ competitive advantage.