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

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 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 Principal-Agent paradigm. The aim is to develop a taxonomy (or scorecard) for mitigating the challenges faced by women entrepreneurs in Africa from a Principal-Agent perspective. Six Principal-Agent parameters are analysed namely: attitudes towards risk; behaviour-based versus 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 ‘strength of weak ties’ networks may impact in mitigating the problems arising from the Principal-Agent paradigm. Some implications for women entrepreneurs in Africa are highlighted
Research Implications: The current conceptual study suggests that the ‘strength of weak ties’ concept can be used by African women entrepreneurs to mitigate Principal-Agent problems. The authors argue that the original Principal-Agent taxonomy developed in the paper fills a conceptual research gap in the existing literature. Embedding the SWT concept within a Principal-Agent framework will facilitate further research not only to understand African women entrepreneurs’ attitudes (and responses) towards risk and uncertainty. 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 Strength of Weak Ties (SWT) social networks towards mitigating the Principal-Agent problem among African women entrepreneurs. The paper makes a significant contribution to the literature from a conceptual perspective.