Female entrepreneurship in Africa: Strength of weak ties in mitigating principal-agent problems

Abstract

Purpose

The purpose of this paper is to develop a conceptual framework which combines the strength of weak ties (SWT) concept with an innovative taxonomy for mitigating principal-agent (P-A) conflicts. The taxonomy highlights the mechanisms through which African women can overcome the obstacles faced when setting up businesses.

Design/methodology/approach

The paper discusses the role of “weak ties” networks in entrepreneurial activities and integrates the concept with the key parameters of the P-A paradigm. The aim is to develop a taxonomy (or scorecard) for mitigating the challenges faced by women entrepreneurs in Africa from a P-A perspective. Six P-A parameters are analysed, namely, attitudes towards risk; behaviour-based vs targets-based contracts; asymmetric information; risk-sharing; transaction costs; and verification and monitoring costs.

Findings

With the aid of the taxonomy developed in the paper, the authors analyse the channels through which “SWT” networks may impact in mitigating the problems arising from the P-A paradigm. Some implications for women entrepreneurs in Africa are highlighted.

Research limitations/implications

The current conceptual study suggests that the “SWT” concept can be used by African women entrepreneurs to mitigate P-A problems. The authors argue that the original P-A taxonomy developed in the paper fills a conceptual research gap in the existing literature. Embedding the SWT concept within a P-A framework will facilitate further research not only to understand African women entrepreneurs’ attitudes (and responses) towards risk and uncertainty, but this will also facilitate greater understanding of the importance women attach to the role of incentives within their businesses.

Practical implications

The taxonomy presents new insights for understanding the most serious constraints that hinder women entrepreneurs in Africa. The taxonomy will be the basis for a follow-up empirical paper on selected African countries.

Originality/value

The originality of this study lies in the development of an innovative taxonomy which highlights the role of “SWT” social networks towards mitigating the P-A problem among African women entrepreneurs. The paper makes a significant contribution to the literature from a conceptual perspective.

Citation

Nziku, D.M. and Struthers, J.J. (2018), "Female entrepreneurship in Africa: Strength of weak ties in mitigating principal-agent problems", Journal of Small Business and Enterprise Development, Vol. 25 No. 3, pp. 349-367. https://doi.org/10.1108/JSBED-03-2017-0115