Helping Small Firms in Africa Grow & Create Jobs
Professor Vittorio Bassi
In their recent publication, Achieving Scale Collectively, published in the journal Econometrica, Vittorio and co-authors study the organization of production in informal clusters of small firms in Uganda, and how this helps them overcome barriers to technology adoption.
A key policy concern is that the small size of many firms in developing countries may prevent them from adopting technology, and, as a result, leave them stuck in poverty traps. In this new paper, they challenge this view. They show that small firms in urban Uganda engage in active rental markets for large machines between small firms, and that this allows them to access modern machines that have too large a capacity for any single firm.
To show this, together with the local NGO BRAC Uganda, they conducted a representative survey of about a thousand firms to collect information on the production process for products in sectors that employ a large share of workers in manufacturing. Vittorio and coauthors have presented the results of this project to the Ministry and Trade and Ministry of Finance of Uganda, who are interested in creating workshops for shared machine rentals as well as industrial parks to foster cooperation among small informal firms. A summary of this article is available here, and a video can be found here.
