In Africa, social capital (SC) is an important resource for the informal economy. It substitutes the limited formal business support systems as factor inputs for enterprise development. This article investigates the effect of Burt’s structural holes theory of social capital in the context of the Ethiopian informal economy. Data were collected from street entrepreneurs in Addis Ababa using multiple name generators constructed on the basis of entrepreneurs’ frequent interaction with people related to resources needed for entrepreneurial activities. Social network analyses and statistical procedures of instrumental variables estimation were used to analyse the data. By controlling the potential endogeneity problem between structural holes and enterprise outcomes, the findings of the study show that entrepreneurs’ dense network structure, which lacks structural holes, has a significant negative effect on entrepreneurial outcome. Accordingly, policies that aim at supporting informal entrepreneurs need to consider the benefits of social contacts while taking into account the downside of being excessively embedded in dense networks.
Ethiopia is urbanizing rapidly and migration is the major factor in the urbanization process. Migration is selective and rural youth are more likely to migrate to cities than others. However, the capacity of cities to accommodate migrants by providing formal employment is limited. Consequently, migrants remain without access to employment opportunities. The majority are pushed into self-employment in the informal sector. Despite such challenges, harnessing the benefits of the youth bulge and promoting inclusive development through entrepreneurship programs has become a priority area since 1990s. Although progresses have been made, entrepreneurship programs are unable to reach the unemployed youth and those engaged in informal sector. The objective of this paper is to explore barriers that hinder the youth to join entrepreneurship programs. The study followed qualitative approach. Data were collected through key informant interviews and focus group discussions from four cities-Addis Ababa, Adama, Bahir Dar and Hawassa. The findings show that politicization of entrepreneurship; lack of understanding the needs of the youth, weak institutional systems, low levels of service capacity and inefficiency and lack of entrepreneurship education and youth negligence hinder the success of entrepreneurship programs thereby attaining inclusive development. Entrepreneurship programs thus need to follow flexible and participatory approach. Programs need to be selective in the type of entrepreneurial initiatives and supports that can address the needs and priorities of the youth. Providing youth with entrepreneurial education has a positive effect on their decision to be engaged in entrepreneurial activities. The government needs to minimize its political intervention in entrepreneurship programs.
It is widely recognized that social capital constitutes an important form of social regulation in informal sector and it is the major component of the asset portfolios of the urban poor. Nevertheless, the potential contribution of social capital in the informal sector remains under-investigated in African cities. Applying the network approach, this study examined the economic returns of social capital to microenterprises in the informal sector. To do so, the personal networks of street vendors in Addis Ababa were examined. Multi-stage sampling procedures involving purposive and systematic random-walk techniques were applied to draw samples. Data were collected through position generator surveys. The data were analyzed using OLS and Instrumental Variable Estimators. By controlling the potential endogeneity, the estimation results revealed that network resources are positive and significant predictors of enterprise profit. But their benefit is less for married vendors than unmarried ones. The human capital measures such as education, vocational training, and business experience are not significant predictors of enterprise profit.
scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.