Returns to Social Network Capital Among Traders

Abstract

Using data on agricultural traders in Madagascar, this paper shows that social network capital has a large effect on firm productivity. Better connected traders have significantly larger sales and value added than less connected traders after controlling for physical and human inputs as well as for entrepreneur characteristics. The analysis indicates that three dimensions of social network capital should be distinguished: relationships with other traders, which among other things help firms economize on transactions costs; relationships with potential lenders; and family relationships, which reduce efficiency, possibly because of the blurring of firm boundaries.We find no evidence that social capital favors collusion.

Persistence of full- and part-time farming in Southern China

“…Self-employment like agricultural production or non-agricultural self-employment could additionally benefit from the establishment of occupation-related social networks. As illustrated by Fafchamps and Minten (2002) in the case of agricultural traders, larger social networks affect sales and value added significantly. Usually, the opportunity costs of taking up a new job off the farm compared to continuing the current full-time farming activity will increase over time because farm profits benefit from extending networks and accumulating human capital.…”

Institutional obstacles to African economic development: State, ethnicity, and custom

“…In other words, business networks with strong returns essentially result from interaction among simple business acquaintances, and commercial relationships are nurtured through business meetings and socialization outside of work. Ethnic concentration "seems to result from nothing else than historical accident and socialization patterns that are reinforced by the practice of business itself" (Fafchamps 2004, 308;Fafchamps and Minten 2002). Such a conclusion also follows from the examples cited by Moore (1997) where it appears that successful African businessmen have used personal connections developed at an earlier stage of their professional…”

Innovation Performance and Embeddedness in Networks: Evidence from the Ethiopian Footwear Cluster

“…This is consistent with our observation in the descriptive part that firms' cooperation is mainly based on long-term business interaction but not on any kind of family relations or on being born in the same locality. The non-significance of family network implies that, unlike business interactions, family relations might carry less information (Fafchamps and Minten, 2002) or even redundant.…”