The Social Networks of Entrepreneurs in the Informal Sector: Does the ‘Strength of Ties’ Augment Microenterprise Performance in Ethiopia?

Abstract

The objective of this study was to examine the effect of strength of ties on the performance of micro-enterprises in Addis Ababa. The study employed a cross-sectional approach and multistage sampling procedures involving purposive and systematic random-walk techniques to draw samples. Network data were collected through Name Generator and Interpreter surveys. The data were analysed using social network analysis and statistical procedures. By controlling the potential endogeneity problem between strength of ties and enterprise performance, the results revealed that the strength of ties have significant negative effect on microenterprise performance. Strong ties constrain entrepreneurial agency and economic performance but appear to favour the trust and resources required to develop and maintain microenterprises.