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Paper short abstract:

This paper investigates performance differences of domestic and Indian migrant enterprises in Kampala. It tests whether Indian firms benefit from stronger social ties and better access to capital and how relevant this is for explaining differences in profitability and investment activities of MSEs.

Paper long abstract:

n many countries in sub-Saharan Africa, foreign ethnic minorities play a dominant role in private sector and economic development. To date the economic literature on migration and foreign ethnic minorities has primarily focused on the impact of emigration on business development in the emigrant's country of origin. However, the question of how enterprise activities of foreign ethnic minorities affect the economic development in the host country remains largely unaddressed.

We use own firm survey data to investigate differences in terms of firm size, productivity levels, capital accumulation, profitability and employment generation amongst domestic and Indian migrant enterprises. The survey was conducted in 2012 in Kampala, Uganda and includes 466 micro and small enterprises (MSE) of which about 8% are run by entrepreneurs of Indian descent.

Our analysis will help to identify similarities and differences regarding economic constraints and opportunities across these groups. In particular, we will take a deeper look into the role social networks play in explaining firm performance. Results from recent studies suggest that the strength of social networks can be crucial in explaining firm performance differences between various ethnic or social groups. We therefore examine whether foreign ethnic minority firms benefit from stronger social ties and thus better access to capital and how relevant this is for differences in the profitability and investment activities among micro and small enterprises in Uganda.