Exploring a new methodological frontier of strength of weak ties (SWT) in a principal-agent (P-A) paradigm: case of female entrepreneurship in Africa

Research output: Contribution to conferencePaper

Abstract

Purpose 
This paper builds upon the conceptual work of Nziku and Struthers, (2018) which developed an innovative taxonomy for analysing the Strength of Weak Ties (SWT) concept, first developed by Granovetter, (1973) within a Principal-Agent(P-A) paradigm (Jensen and Meckling,1976). Within developing countries, particularly Africa, there is an emerging literature which highlights the unique obstacles faced by women entrepreneurs who start and develop their own businesses; Nziku and Struthers, 2018; De Vita, Mari and Poggesi (2014); Minniti and Naude, (2010); Jamali, (2009);& Naude and Havenga, (2005). The role of social networks in facilitating female entrepreneurial activities Brixiova and Kangoye, (2016); Agholor, Smith, Oyelana and Ibrahim, (2015);&Birley, (1985)has gained attentionin the literature as well as creating potential sources of social capital.The gender lens is an important aspect in this exploration of the SWT concept and the P-A paradigm (Williams, Nicola and Patterson, (2018); Rouse, Treanor, and Fleck, 2013; & Marlow, Martinez Dy, 2018)due to its validity in explaining the contribution of entrepreneurial activities of women and network utilisation. This will be highlighted in this study using an empirical assessment and analysis of the designed taxonomy.
The aim of the paper is to empirically test a taxonomy of SWT towards mitigating potential P-A conflicts. The taxonomy highlights the mechanisms through which African women can overcome some of the obstacles they face when setting up and developing their entrepreneurial ventures Nziku and Struthers, (2018). Using empirical data, the authors will provide an elaboration of the taxonomy in the context of female entrepreneurs across diverse economic sectors in Africa. Key objectives will be: firstly to explore how a P-A paradigm can elucidate the SWT using indicators from the paradigm; secondly to examine the challenges faced by female entrepreneurs in Africa; and thirdly to design a new methodological framework for integrating the SWT concept with the P-A paradigm.

Design/methodology/approach 
The philosophical underpinning for this study is positivistic and derived from a behavioural/experimental economics perspective. Using a deductive approach 6 key P-A indicators developed in the Nziku and Struthers study (2018) namely: attitude towards risk; behaviour-based versus target based contracts; asymmetric information; risk-sharing; transaction costs; verification and monitoring costs are analysed. A case study using an experimental design strategy with a quantitative approach (based on questionnaire),which has antecedents in the behavioural/experimental economics literature, especially theseminal works by Kahnemann and Tversky, (1979) and Smith, (1998) in relation to SWT theory by Granovetter (1973) is adopted.
A key specific issue is to challenge the accepted wisdom based on an ‘expected utility’ approach which as at its core an implicit assumption that: a) agents are risk-averse and; b)female(entrepreneurs) are likely to be more risk averse than male (entrepreneurs) Niederle and Vesterlund (2007). Much of the extant literature has taken this as a sine qua non. To this end, empirical constructs such as theneed to replace the assumption of risk aversion with that of loss aversion, which assumes more realistically an asymmetric information approach to the issue of how agents (especially female entrepreneurs) approach the ‘more versus less risk’ scenario in their business decisions. In this context too, the role of ‘prospect theory’ and ‘framing’, again derived from the work of Kahnemann and Tversky, (1979)is central for setting out the questions in the study.

Contribution 
The main contribution of the paper is to apply this innovative methodology to highlight new insights on the SWT concept for mitigating P-A trade-offs within the context of female entrepreneurs in developing countries, Africa specifically. From such an approach it is expected that new theoretical perspectives might emerge, eg: that female entrepreneurs in such contexts may have different approaches to ‘income smoothing’ trade-offs within their decision making compared with their male counterparts.
Another aspect, which can also be traced to an extant economics literature, is the ‘willingness to pay’ principle. Essentially this principle asks what individual agents(or groups) might be willing to pay to avoid a certain risky outcome, eg: business failure or loss of trust among their networks/groups or ties. Therefore, this paper makes a significant contribution to the literature from an empirical perspective in testing the conceptual taxonomy of the P-A paradigm in the context of SWT among female entrepreneurs in some African countries. Embedding the SWT concept within a P-A framework enhances a clearer understanding of African women entrepreneurs’ attitudes and their responses towards risk and uncertainty. This will also enable better understanding of the role of networks and the incentives attached to business initiatives operated by women in Africa.

Policy Implications 
Possible policy implications include: whether respondents would be willing to take out ‘insurance’ to obviate some of the risks that they may face in their day to day businesses. Or, on the question of obtaining access to finance to set up and/or expand their businesses: are females more likely to engage in group borrowing rather than individual borrowing which characterise many developing countries and in which females feature significantly. This aspect, and others, can be expected to influence public policies to encourage female entrepreneurs, which may include public-private partnerships (PPPs).

Practical Implications 
This study will have implications for practice in the context of lessons that may be learned and the transferring of good practice to countries and contexts different from the selected countries in the study. Due consideration will have to be made for varied cultures, contexts and history.

Originality/Value of a paper 
The originality of this study lies in the development of an innovative taxonomy, which highlights the role of ‘SWT’ social networks towards mitigating26the P-A problem among African women entrepreneurs. The paper makes a significant contribution to the theoretical and methodology frontier in literature.
Original languageEnglish
Pages24-26
Number of pages3
Publication statusPublished - 29 Aug 2019
Event Centre for African Research on Enterprise and Economic Development 4th Annual Conference - Universitt of the West of Scotland, Paisley, United Kingdom
Duration: 29 Aug 201930 Aug 2019

Conference

Conference Centre for African Research on Enterprise and Economic Development 4th Annual Conference
Abbreviated titleCAREED 2019
CountryUnited Kingdom
CityPaisley
Period29/08/1930/08/19

Keywords

  • Female entrepreneurship
  • SWT
  • P-A paradigm
  • behavioural/experimental design
  • Africa

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    Nziku, D. M., & Struthers, J. J. (2019). Exploring a new methodological frontier of strength of weak ties (SWT) in a principal-agent (P-A) paradigm: case of female entrepreneurship in Africa. 24-26. Paper presented at Centre for African Research on Enterprise and Economic Development 4th Annual Conference, Paisley, United Kingdom.