The role of social networks in business development, investment and employment creation in Tanzania’s Emerging Urban Centres
Loading...
Date
2022
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
Sokoine University of Agriculture
Abstract
This study examines the role of social networks in influencing business developments,
investment, and employment creation in Ilula and Madizini EUCs. The study focuses on
answering the following research questions: i) What are the kinds of businesses that
operate in Ilula and Madizini EUCs? ii) What are the characteristic features of EUC
businesses in terms of flows of goods and services in and outside Ilula and Madizini
EUCs? iii) How are business networks in Ilula and Madizini EUCs structured? iv) What
are available trading opportunities and potentials given business embeddedness and
brokerage positions in Ilula and Madizini business network? Similarly, the study aims to
test the following hypotheses: i) The size and influence of social networks of EUC
business owners do not affect business performance. ii) Strong and weak social network
ties of EUC businesses do not influence business investment choices in EUCs. iii) The
size and influence of social networks of EUC business owners do not influence EUC
business employment creation.
This study took its point of departure from Social Network Theory, which argues that
economic actors’ actions are embedded within their social relations and that their
positions within the web of social interactions determine their opportunities and
constraints. It examines business development from a social network perspective, which
enables researchers to understand the evolution of different businesses in small towns
over time and space. Empirically, the study focuses on Ilula and Madizini EUCs, which
are in the rural areas of the Iringa and Morogoro regions in Tanzania. The study was
based on quantitative data collected using survey questionnaire from a random sample of
459 and 296 businesses in the EUCs in Ilula and Madizini, respectively. Qualitative data
were collected using interview guides from 38 key informants and six focus group
discussions. Data processing and descriptive and multivariate analyses were done using Microsoft Excel, SPSS, and STATA software. Organisation and analysis of social
network data was done using Gephi software, while content analysis was empployed to
analyse qualitative information using NVIVO software.
The findings of this study showed that Ilula and Madizini EUCs are key market centres
for dominant agricultural produce, mainly tomato and paddy/rice from the surrounding
near and distant villages. A large proportion of the agricultural produce was traded to
regional and international markets, which are also market nodes for industrial goods from
other urban areas to surrounding rural areas. About 60 % of all businesses belong to the
trading category (mostly unspecialised). Many of these businesses are involved in crop-
trading and wholesale/retail. Service based businesses, manufacturing and transportation
were seen to develop alongside major crop value-chain businesses. Opportunities created
through the development of crops and other business linkages have attracted many
migrants from the surrounding rural areas and other parts of the country. Migrants own
about 75 % of the surveyed businesses. The product and information exchange structure
in Ilula and Madizini business networks was centralised to few businesses within the
trading category, mainly tomato and paddy/rice traders and wholesale/retail. Majority of
businesses were not networked in the general EUC business network, mainly due to a lack
of network relations with businesses within the value chain of dominant crops (tomatoes
and paddy). Similar businesses also acted as brokers of products and information, both
horizontally across businesses within the EUC and vertically across businesses outside the
EUCs. This guaranteed networked businesses access to better and quality products and
information. Business development in the EUCs was enhanced by increasing the size and
influence of social network, which positively impacted business stock and sales turnovers
because extensive social networks were also linked with highly influential businesses.
Business investment decisions in the EUCs and the types of businesses were influenced
by business owners’ strong ties of family, relatives, and friendship networks and weak ties of business acquaintances/colleagues. These networks were particularly influential in food
crop trading, transportation, and wholesale and retail business investment, most of which
were directly linked to the tomato and paddy value chains. However, the relevance of
strong ties in influencing investment decisions decreased as business owner human and
financial capital improved. Lack of formal institutional arrangements was identified to
constrain networking and inform business investment decisions.
In terms of employment creation, most businesses in Ilula (66 %) and Madizini (62 %)
were run by owners without employing any extra labour. However, they created more
employment opportunities indirectly through the services they demanded, like storage,
transportation, security, renting shop space and cullies (loading and unloading). Indirect
employment was created mostly around businesses with stronger/high network linkages.
Large proportion of this employment was created by businesses operating in close
connection with major tomato and paddy crop value-chains, such as trading,
manufacturing, wholesale/retail and construction. Strong and weak social networks played
a significant role in businesses recruitment in Ilula and Madizini EUCs. The likelihood of
employment creation increased when social networks’ size and influence increased among
Madizini and Ilula businesses. However, the increasing influence of social networks
among Madizini businesses reduced the prospects of creating employment opportunities.
The result is connected to the earlier observation that many businesses were not
networked in the general EUC business value chain, which is exacerbated by a lack of
business-crop effect where paddy/rice and sugarcane value chains as key crops in
Madizini were narrow and poorly integrated into EUC web of doing business.
Thus, from the two cases, EUCs were revealed to be focal centres of business investment
in Tanzania as they facilitate rural-urban linkages through trade of goods and services to
and from rural and urban areas. Social networks were further revealed to play a significant
role in influencing business development, informing investment decisions, recruiting labour, and creating employment opportunities. This is because access to market
information, labour, and capital relied mainly on social networks. The likelihood of
developing a business and creating more employment was also determined by increasing
the scope (size and influence) of one’s social network, mainly around dominant crop
value chains. Therefore, as informal sector is still dorminant in rural areas, social
networks are instrumental in realising rural development as they enable business
development by assuring access to capital, market information, goods, and labour.
Given the role of EUCs in supporting business development, it calls for government and
private sector action in prioritising EUCs as trade and value addition centres that will
benefit majority rural populations. Moreover, dedicated public and private sector support
on the development of crop value chains around EUCs is called for to support subsequent
business and rural development, investment, and creation of employment potentials for
growing rural population.
Description
Thesis
Keywords
Social networks, Business development, Investment-employment creation, Tanzania’s Emerging Urban Centres