African Enterprise Clusters and Industrialization: Theory and Reality
Introduction
African development is closely tied to small-scale industry. For more than two decades, observers have recognized that small, so-called `informal' activities generate employment for the growing number of men and women who can no longer find work in agriculture, government service, or large-scale industry. Although many of the jobs provided by small firms are low-paying, they enable families to survive, educate their children, and in some cases, move out of poverty.
Small enterprise development has also been linked to the industrialization process itself, though here the negative side of the relationship has been stressed at least as often as the positive. Much of the available literature emphasizes obstacles and constraints to enterprise growth. Since the list of these is long—low levels of product and process technology, small product markets, lack of access to capital, lack of physical infrastructure—and the institutional framework for addressing them is weak, industrialization can seem like a distant, even unattainable, dream.
There is, however, a recent international literature which suggests that operating in clusters may help small enterprises to overcome these growth constraints. This literature offers three specific ways in which clustering enables firms to overcome obstacles to growth. First, clustering gives rise to collective efficiency which enhances firms' competitive advantage; second, clustering facilitates growth in small steps; and third, clustering makes it easier to respond to opportunities and crises. Much of this literature deals with advanced countries and, more recently, also with Latin America and Asia. There is very little material on Africa. This paper draws together some of that material and explores whether the benefits that clusters have provided elsewhere are also found in Africa.
The material gives some indication that clustering does indeed help the process of industrialization, but it also shows that the economic and social environment affects the impact of clustering. The six cases in this study suggest that the small size of product markets, the oversupply of labor, and the institutional weaknesses that characterize so many African economies are the main limiting factors. The cases also show that African clusters, far from being homogeneous, vary in both internal structure and level of industrialization. Some are laying the groundwork for industrialization by improving producers' access to markets and offering an environment in which joint action can begin. Others are industrializing, in the sense that they have begun the process of specialization and differentiation that leads to greater efficiency and ultimately to industrialization. Still others have diversified their size structure and interfirm linkages in such a way that they have been able to tap wider national and global markets.
The paper is presented in five section. Following this introduction, section 2 discusses the relevance of the collective efficiency model for incipient industrialization. Section 3describes the six clusters. Section 4offers a detailed analysis of the clusters, using the framework of collective efficiency. Section 5assesses the usefulness of the theoretical model and concludes with practical implications for African governments, donors, and the business community.
Section snippets
Enterprise clusters and incipient industrialization
Industrialization is both the process of building up a country's capacity to convert raw materials into new products, and the system that enables production to take place. The process of industrialization implies increasing efficiency in the use of both labor and capital. Clustering is believed to help enterprises grow and contribute to industrialization more broadly.
Six african enterprise clusters
The literature on small-scale industry in Africa is full of examples of small enterprises that neither grow nor develop technologically. Does this also apply to cases where enterprises have clustered? Has clustering helped them to overcome the commonly found growth constraints? This section draws together some of the scarce material that exists on African enterprise clusters. After a brief explanation of the choice of clusters, we examine their economic environments, describe their
African clusters and industrialization: the reality
The evidence suggests that clusters can and do further industrialization, but they do so in different ways. Categorizing the clusters into groups helps to make clear their contribution to the industrialization process. Three categories have been identified: clusters laying the groundwork for industrialization, those in the early stages of industrialization, and those that are fully part of the industrial sector in their respective countries (McCormick, 1998a). The following section looks
Collective efficiency and beyond
The collective efficiency framework has proved to be a useful tool for analyzing the performance of these six African enterprise clusters and explaining their ability to contribute to the industrialization process, but like any model, it cannot explain all of the variations among real-world clusters.
Clusters are contributing to industrialization in Africa. Grouping the six case study clusters has revealed important differences among them and has shown that each group has its own part to play in
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