Small Businesses Performance in West African Border Regions: Do Social Networks Pay Off?

Abstract

This paper studies the link between economic performance and social networks in West Africa. Using data collected about 358 small-scale traders in five border markets between Niger, Nigeria and Benin, we test whether the well-connected actors are the most successful in terms of monthly profit. The results show that the overall economic performance of traders is greatly affected by the size and the nature of their network. Being in active relationship with one additional prominent figure increases profits by 50%. While social ties with local religious leaders have a negative effect on the business profit, relationship with civil servants, politicians, and, security officers, is translated into economic performance. Unlike social network, formal education is not rewarded among small traders. The paper also shows significant differences between countries and regions. Social connections developed with state representatives have a much greater effect on economic performances in Niger and Benin than in Nigeria, where average profit is much higher. Profit is higher where the Nigerian part of the cross-border region has experienced a boom in import and export activities.