Analysis of Solidarity Mechanisms Affecting the Performance of Ethnic Minority Business Groups in Africa

Abstract

Business groups comprise independently owned firms based on different types of owner solidarity, such as kinship, ethnicity, religion, or political identity. However, research has been slow to account for how the adverse effects of ethnic solidarity influence BG-affiliate firm performance. We investigate the interplay of owner ethnicity and their firms’ innovation and export performance. We find variations in affiliates’ performance based on their self-identified ethnicities by analyzing data from the World Bank’s Enterprise Surveys (WBES) across 20 sub-Saharan African countries. Notably, long-established migrant communities, including Indian, Middle Eastern, and European entrepreneurs, experienced waning performance within the BG structure. In contrast, group-affiliated firms led by Chinese entrepreneurs show significant outperformance compared to their African counterparts and minority group affiliates. This study contributes to a novel understanding of the heterogeneous relationship between ethnic solidarity and BG-affiliated firms’ performance across sub-Saharan Africa.