Testing the self-selection theory in high corruption environments: evidence from African SMEs

Abstract

Purpose Whilst substantial evidence from low-corruption, developed market environments supports the view that more productive firms are more likely to export, there has been little research into analysing the link between productivity and exports in high corruption, developing market environments. The purpose of this paper is twofold. First, to test the premise of self-selection theory whether the association between productivity and export is maintained in high-corruption environments, and second to identify other variables explaining export activity in high-corruption contexts, including cluster networks and firms’ competences. Design/methodology/approach The authors draw on the World Bank Enterprise survey to undertake a cross-section analysis including 1,233 small- and medium-sized enterprises (SMEs) located in nine African countries. The advantage of this database is that it contains information about the level of perceived corruption at firm level. Logistic regressions are performed for the full sample and for subsamples of firms in high- and low-corruption environments. Findings The findings demonstrate that the self-selection theory only applies to low-corruption environments, whereas in high-corruption environments, alternative factors such as cluster networks and outward-looking competences (OLC) exert a stronger influence on the exporting activity of African SMEs. Research limitations/implications This research contributes to the theory as it provides evidence that contradicts the validity of self-selection theory in high-corruption environments. The findings would benefit from further longitudinal investigation. Practical implications African SMEs need to consider cluster networks and OLC as important strategic factors that might enhance their international competitiveness. Originality/value The criticism of the self-selection theory is distinctive in the literature and has important implications for future research. The authors show that the contextualisation of existing theories matters and this opens a research avenue for further more sensitive contextualisation of existing theories in developing economies.