SUSTAINABILITY OF ANTI-POVERTY MEASURES: THE HIDDEN USE OF KINSHIP NETWORKS ESMERALDA GASSIE Graduate Centre of Business/ Centre for European Studies, University of Limerick, Republic of Ireland [email protected]Paper prepared for presentation at the World Bank International Conference on Poverty and Social Inclusion in the Western Balkans WBalkans 2010 Brussels, Belgium, December 14-15, 2010 Copyright 2010 by author(s). All rights reserved. Readers may make verbatim copies of this document for non-commercial purposes by any means, provided that this copyright notice appears on all such copies.
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SUSTAINABILITY OF ANTI-POVERTY MEASURES: THE HIDDEN USE OF KINSHIP
NETWORKS
ESMERALDA GASSIE
Graduate Centre of Business/ Centre for European Studies, University of Limerick, Republic of Ireland
Growth factors include the advanced age of the owner/manager, having numerous employees including
kindred, belonging to a community where associations are present and operating in an urban area. The
highest positive predictor is kin-employees, while kin ownership is negative, as foreseen by literature on
capital control. Sales growth is hindered for female or younger entrepreneurs. Business owners/ managers
who share firm’s control with their kin and/ or obtained a bank loan, while living in rural areas see the
sales level decrease. The firm activity does not benefit from being agricultural, industrial or in services. In
addition, time in operation does not have a positive impact on sales growth. The high intercept indicates
that the initial sales level is not negative. Masakure (2008) did not conclude on the type of influence of
social capital but belonging to a community where associations, including professional ones, exist
increases sales by 90.2 percent. Firm longevity decreases sales by 38.2 percent evidencing the higher
growth of younger firms. The positive influence of the operating in an urban area and hiring additional
employees confirms Masakure et al. results (Masakure, Cranfield, and Henson 2009) while the negative
impact of being a female entrepreneur on sales growth was also observed occurring in Ghana (Masakure
2008). An additional kin employee in Albania increases sales by 122 percent while non-kin employees by
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only 63 percent. The conclusion cannot be that kin members have a positive impact as the presence of an
additional kin-member in the firm’s capital decreases sales by 102.8 percent.
The hypothesis to be tested is: the kinship network does influence firm growth, i.e. a5 is significantly
different from 0. In the case of the estimated equation, a5 represents the coefficient of KNEMPL (a5.1)
and KNO (a5.2), i.e. kin employees and kin owner(s): H0 : a5.1 = a5.2=0 ; H1: a5.1 = a5.2 ≠ 0
A univariate ANOVA is performed on both variables. The null hypothesis is rejected at 95 percent
significance level for both variables2. So both ownership and employment related kinship variables do
influence sales.
POTENTIAL IMPLICATIONS FOR ANTI-POVERTY MEASURES: A NEEDED CHANGE IN
PERCEPTIONS
Anti poverty measures intend to include in virtuous growth circles populations that are excluded from
growth spill-over. Fostering economic activity through the use of the kinship network primarily affects
the poor while they experience difficulties in accessing the market. Measures that legitimize economic
activities while recognizing the benefits of the kinship network are sustainable through time and across
countries. Theoretical models do not yet allow for such encompassing perspectives. Since the beginning
of the 20th century, Weber (Weber and Parsons 1965) opposed the kinship network influence on
economic activities, as a proxy for primitive forms of exchange, and market institutions. The family or the
kinship network has been considered as negative for economic growth in that it has prevented the
development of proper market institutions by its reluctance to innovate (Azariadis and Stachurski 2005),
or by nepotism (Grassby 2001; Siu-lun 1985), generally described as a lack of transparency in economic
transactions. Consequently, when the influence of social groups, like the kinship network or family, is
historically analyzed in development economics, it supposedly reflects a low level of development of the
geographical area studied.
2 These results are valid within the context of the numerous statistical assumptions underlying the Expectation Maximisation missing values method and the ordinary least squared regression model in SPSS.
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Institutionalists affirm that increased wealth brings in issues of ownership and competitiveness, leading to
negative consequences of kin involvement in business. Family business scholars indeed show that
successful family businesses still persist nowadays. Economics focuses on issues of efficiency and
growth, thus concluding in a similar way to institutionalists. Finally, social network analysis temper both
aspects of the issue by considering only the frequency of the links amongst actors and not their finality.
So far, the analytical frameworks that have been developed are rather historically contextualised. They
consider the unit of analysis adapted to the study of the socio-economic transformation as experienced by
western countries (household/ nuclear family/ individual). Or else they do not consider social groups as
important determinants of economic decision processes. Colli and Rose (2008) emit the hypothesis that
family firms emerge in times of uncertainty. From an empirical perspective, historically and culturally
based institutions, such as the kinship network, coexist with market based ones. A similar observation
was made by Ruggles (1987) on 19th century England and America rejecting the institutionalist
perspective on economic transition. It would not be a surprise that, as Sunderland (2007) comments on
social relations during the industrial revolution, there is a biologically based trust in kin.
Firms considered within their cultural and social embedding, are an interesting bridge towards
overcoming the consequences of the current economic crisis. Be it because of their locality or their
flexibility, small firms are the perfect antidote to economic mayhem. The objective in anti-poverty policy
making should therefore privilege a bottom up approach. A further and appropriate survey of culturally
based economic behaviour would indicate structural patterns. The kinship network can be collateralized
when material collaterals are difficult to find, such as for Chinese small businesses (Chua, Kellermanns,
Chrisman, and Wu 2007). The kinship network can be mobilized in rural areas and they have already
proven to be effective for increasing employment (Yusheng Peng 2004). When combining family and
transnational business networks the effect on firm growth can be very valuable (Yeung 2000).
Katzner (2008) states decision making represents a set of ‘mental acts […] relying heavily on the symbols
and their interpretation’ (Katzner 2008: p. 5). Different cultures mould economic agents’ choice making
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and preference expressions in different ways. In ‘quasi’ capitalist economies, such as the Japanese one,
agents do not base their decisions on cost/benefit analysis only, but also on loyalty to ‘the family,
company or society’ (Katzner 2008: p. 85). Katzner shows that efficiency at all costs is not a prerogative.
The rationale, in the western sense would be for Japanese operators, to choose the second optimal
decision, in order to respect to other criteria required by the cultural context, such as for example
employees’ respect for their superiors. Therefore the policies and analytical frameworks cannot be the
same for different culturally based economies.
CONCLUSION
Alternative ways of fighting poverty and social exclusion need using local leveraging channels. For
countries where social structure is dense, i.e. resorting frequently to non-market or social structures,
discarding different types of economic practices other than market ones will have shortcomings.
Concessions to the bottom-up methods of implementing market organized practices can lead to beneficial
effects over time for the population targeted and for funding institutions and will be valid independently
of public governance. On one hand corruption in program administration and implementation is avoided
as the projects are managed at the usual micro-level. On the other hand, the change of perception in the
legislation of bank systems, aid institutions, fiscal authorities or investment regulations can generate
global spill-over effects and facilitate the insertion of economic activities using social networks.
The use of social networks and more specifically the kinship network needs proper identification and
transparent evidencing of the spill-over mechanisms between the social and economic spheres of activity
in particular contexts. This paper showed the existence of the kinship network influence for business
activities in Albania and explored paths of application to anti-poverty measures in Western Balkan
countries. The latter cannot occur without the adoption of encompassing models. This paper evidenced
that including anthropological considerations in firm growth models allowed obtaining interesting but
limited results. The limitations are due to the lack of interest for socio-economic data collection and
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analysis in developed and developing countries. A change of methodological frameworks in socio-
economic policy making and data collection institutions has to occur in order to identify, analyze and
utilize empirical growth factors. Encompassing social and economic factors can lead to enriched results in
policy making (Gassie 2008; Gassie and Hu 2009).
The issue of involving the kinship network into business growth goes beyond the Balkan region. Similar
phenomena have been observed in many other countries with positive effects on growth of firms. The use
of the kinship network involves the exploration of particular channels it takes in various countries and
regions. The survival of successful family firms (Anderson, Jack, and Dodd 2005; Anderson and Reeb
2003; Bruland and O'Brien 1998; Colli 2003; Grassby 2001; Hamilton 2006; Hoffman, Hoelscher, and
Sorenson 2006; Yanagisako 2002) or the recent findings on the issue of homophily proving that social
capital is indeed built based on familiar networks (McPherson, Smith-Lovin, and Cook 2001; Mouw,
Cook, and Massey 2006) do make of the kinship network a concept whose applicability is to be studied at
a global and structural level.
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