Clustering as an organizational response to capital market i

Absence of a well-developed capital market has been listed as a key obstacle to industrialization in developing countries in the development literature. In this paper, we show that industrial clusters, through specialization and division of labor, can ease the financial constraints of microenterpris...

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Bibliographic Details
Main Author: Ali, Merima
Format: Article
Language:English
Published: 2014
Subjects:
Ethiopia
Africa
Clustering
Entry Barrier
Finance
Microenterprises
LEADER 01558nab a22001937a 4500
008 160615b2014 xxu||||| |||| 00| 0 eng d
100 |a Ali, Merima 
245 |a Clustering as an organizational response to capital market i  |c evidence from microenterprises in Ethiopia / Ali, Merima. 
260 |c 2014 
300 |a 697 - 709 
520 |a Absence of a well-developed capital market has been listed as a key obstacle to industrialization in developing countries in the development literature. In this paper, we show that industrial clusters, through specialization and division of labor, can ease the financial constraints of microenterprises even in the absence of a well-functioning capital market. By using data from more than 17,000 microenterprises in four sectors and four regions of Ethiopia, we find that clustering lowers capital entry barrier by reducing the initial investment required to start a business. This effect is found to be significantly larger for microenterprises investing in districts with high capital market inefficiency, indicating the importance of clustering as an organizational response to a credit constrained environment. The findings highlight the importance of cluster-based industrial activities as an alternative method of propagating industrialization when local conditions do not allow easy access to credit. 
650 |a Ethiopia 
650 |a Africa 
650 |a Clustering 
650 |a Entry Barrier 
650 |a Finance 
650 |a Microenterprises 
773 |a Small Business Economics  |d October 
999 |c 41870  |d 41870 

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