Mobile phones, institutional quality and entrepreneurship in Sub-Saharan Africa

Abstract

This study investigates whether mobile phone penetration modulates the effect of different indicators of governance on some indicators of the ease of doing business in Sub-Saharan Africa with data from the period 2000–2012 by employing the Generalised Method of Moments. Three broad concepts of governance are explored: (i) political (comprising voice & accountability and political stability/no violence), (ii) economic (involving government effectiveness and regulation quality) and (iii) institutional (including corruption-control and rule of law). Ten dimensions of entrepreneurship are considered. Two main findings are established with respect to the net effects of the interaction between mobile phones and governance dynamics. They are (1) reduced cost of business start-up procedure, the time to build a warehouse and the time to resolve an insolvency and (2) increased time to enforce a contract, to register a property and to prepare and pay taxes. Implications for theory and policy are discussed. Some of the engaged policy implications include the following. (i) Measures on how to leverage on the potential of mobile phone penetration for entrepreneurship opportunities by addressing challenge of access to and affordability of mobile phones on the one hand and on the other hand, improving on the role of the mobile phone as a participative interface between emerging entrepreneurs and governance. (ii) The relevance of the mobile phone in mitigating information asymmetry between entrepreneurs and government institutions, notably by: reducing government inefficiency (which potentially represents an additional cost to doing business) and decreasing informational rents, bureaucracy and transaction costs.