PROPOSITIONS, HYPOTHESES, AND CONCLUSIONS

To function effectively in a global economy, the entrepreneurs of Southeast Asia and Subsaharan Africa will not be able to avoid the kinds of evolution that modern businesses around the world experience. They will move toward public listing of their stocks, greater specialization and capital mobility, modern management techniques. Entrepreneurs in Southeast Asia got an early start in part due to the strength of the Chinese clan and dialect networks. But some evidence suggests that entrepreneurs move away from reliance on these networks as other institutions develop to take their place: formal banking systems, trade fairs and trade promotion efforts, etc. Furthermore, as Ruth McVey points out, "The need to act in an increasingly internationalized business world imposes forms and behavior which erode Chinese exclusivity."

Already this is happening, particularly in Southeast Asia. By the mid-19th century, for example, the guild-like dialect organizations that organized commerce among the Chinese were being replaced by more "modern" forms "such as business partnerships, alliances and trade associations." Sieh suggests that the new economic groups in Malaysia are different from older groups. They are more diversified, rely more on professional management, tend to grow more through acquisition than through greenfield investment, make more use of external finance: stock issues, bank borrowing, and are less risk-averse. There also appears to be some movement away from patronage relations. McVey notes that "as members of the Malay elite became more involved and confident in business activity they began to ponder the wisdom of relying on a heavy bureaucratic hand." Mackie also notes that the Chinese in Indonesia are making less use of political connections as their businesses become competitive internationally.

This kind of evolution is assisted by the establishment of institutions such as stock markets, a more efficient means of raising capital through reputation without relying on networks. Indeed, this process has probably gone furthest in Malaysia, where the Kuala Lumpur Stock Exchange was established in 1973. The stock market "made it much easier for larger Chinese companies to advance beyond the single-family firm toward more complex patterns of interlocking share ownership and control, bringing very large sums of capital within the grasp of a single group through takeovers, capital issues, and share swaps." Conversely, although Thailand has had a stock exchange since 1975, it did not apparently played a significant role in capital mobilization until the late 1980s. Indonesia was later in establishing a stock exchange, but its market too only began to take off in the late 1980s. It would be useful to know just what attributes a stock exchange needs to enable local entrepreneurs to avail themselves of its opportunities. This would be useful for African countries, many of whom have recently established stock exchanges.

Governments in Southeast Asia also made good use of import substitution policies to push their traders into manufacturing. Increasing import duties on consumer goods like textiles and simple electronics has long been a stimulus to move accumulated capital into production. Since traders have the contacts with foreign distributors and networks of information that can make this process easier, they are the logical group to push. African countries had a later start at ISI than Southeast Asia, and they had probably not made full use of this role of ISI in getting local production of consumer goods started before they were swept into the river of liberalization in structural adjustment programs in the 1980s. For example, the Nnewi traders in Nigeria were stimulated to shift to manufacturing only by new restrictions imposed in the early 1980s on the goods they were importing.

Further research is needed on local entrepreneurship in both areas, particularly in Subsaharan Africa. We don't know much about the positive role of foreign investment and linkages there, since most of the research on foreign investment in Africa has been conducted from a critical viewpoint. More studies like David Himbara's of the Kenyan Indian capitalists would also be very useful for a better understanding of the opportunities available to Subsaharan countries to make better use of the entreprenuerial resources available in their non-African populations. Mauritius may provide guidance here. It is also likely that firms embedded in business networks that span national borders will have different attitudes toward liberalization: they are likely to be more "outward oriented" than those with only local networks, and this eventually will help promote trade.

By: Deborah Bräutigam Local Entrepreneurship in Southeast Asia and Subsaharan Africa: Networks and Linkages to the Global Economy School of International Service American University Washington, DC To learn more about this author, visit United Nations University's Website.

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