african women and economy

Feature

Cluster initiative management: A potential for African women entrepreneurs in the informal sector

Obianuju E Okeke-Uzodike Durban University of Technology, South Africa

Mogie Subban University of KwaZulu-Natal, South Africa

Abstract

The paper examines the role cluster initiative management can play for women entrepreneurs in

small medium enterprises in the South African informal sector economy as forms of employment.

It looks inter-relationally into aspects that heighten awareness and significance of entrepreneurial

development of women. The concept of cluster initiative management at local, national, regional

and global levels in relation to rural women in the informal economy is of note. The paper

contextualizes the cluster notion as an important approach especially for small and medium-

sized enterprises to survive and compete successfully in changing business environments while

identifying key issues for due consideration. The notion of clustering has evolved over time and

four domains of women’s economic empowerment are put forward. Methodology in the paper

follows an exploratory study premised on reviewing existing literature through dimensions of

cluster initiative management and its relevance in women entrepreneurial development. Findings

of the study provide insights and recommendations into the provision of a favourable environ-

ment for cluster initiatives to flourish and draws attention of key policy-makers in decision-

making that supports sustainability of women entrepreneurs towards self-employment in informal

sectors of the economy.

Keywords

cluster initiative management, rural women and informal economy, small medium enterprises,

women entrepreneurs

Corresponding author:

Obianuju E Okeke-Uzodike, Durban University of

Technology, Riverside Campus, Pietermaritzburg,

KwaZulu-Natal 3201, South Africa.

Email: [email protected]

Local Economy

2019, Vol. 34(5) 421–438

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DOI: 10.1177/0269094219864082

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Introduction

The informal sector and the role that women entrepreneurs play in it have become significant aspects of the global economy. This resonates with the view put forward by Williams and Gurtoo (2011: 351) that requires increased attention. With globalization, economic and business activities have remained one of the major trends driving world economies. Within the ambient of this study on women entre- preneurship in the rural context, the buying, selling and distributing patterns of firms around the world with the aim of creating competitive advantage and increasing market share (Hollensen, 2013; Zohari, 2008) are creating huge challenges for local economies. With globalization, the business environment becomes rigid and more competitive for local businesses to ‘thrive and survive’. Competing tendencies of entrepreneurial survival and localization of industries have seen a growing interest of researchers, scholars, professionals and policy-makers on business clustering to stimulate local economies. Accordingly, Chen (2007) in Aikaeli and Mkenda (2014: 52) holds the view that when women are excluded from job opportunities, they have little choice and take up of informal jobs. This gives effect to the informal econ- omy remaining as a useful concept to policy-makers and researchers, especially in terms of finding ways to assist women entrepreneurs. Increasingly, development in the economic and business spheres has inclined the development of cluster initia- tive management (CIM) in relation to women entrepreneurs, particularly rural women. The paper links women entrepre- neurship in the informal economy through small medium enterprises (SMEs) and examines these aspects in relation to local development.

The prospect of African women entre- preneurs according to the UNDP (1995)

in Ozigbo and Ezeaku (2009: 49) ostensibly ties entrepreneurship and socioeconomic development together, and is reflective that entrepreneurs are a means for socio- economic development. The authors hold the view that promoting women’s entrepre- neurship could be an avenue for mecha- nisms that could afford greater protection and security for their families and commu- nities through SMEs and the informal econ- omy (Ozigbo and Ezeaku, 2009: 49–50).

Focusing on the research methodology, the paper is a theoretical study based on secondary literature on CIM as a pertinent focus area given that women entrepreneurs face several challenges, particularly rural women. The purpose of the paper is to pro- vide a synopsis of the current state of women entrepreneurs in the informal econ- omy. More especially, to highlight through a bibliometric study, research perspectives into the repositioning of initiatives of women entrepreneurs and SMEs in the informal sector.

The next part of the paper is structured as follows after the ‘Introduction’ section: first, the authors provided a justification and pertinent research objectives for the study, followed by the conceptualization and theorizing of women’s economic empowerment (WEE) and CIM. The next section deals with the enterprise clustering and the applicability of CIM to the infor- mal sector. Furthermore, a background lit- erature on Africa’s informal economy and women entrepreneurs was presented. Through the perspectives of economic empowerment of women and cluster initia- tives (CIs), the domains of WEE are subse- quently emphasized. A discussion on managing clusters among women entrepre- neurs in the informal sector is next and fur- ther linked to CIM vis-à-vis empowering women to strategically lead and improve rural economies. The next and final section concludes with some implications for the future of CIM.

422 Local Economy 34(5)

Justification for the study and

research objectives

The view of Blaauw (2017: 357) that the informal economy is here to stay and is unable to provide meaningful alternatives, thus heeding interventions and assistance which is fundamental to the justification for this study. The vulnerabilities faced par- ticularly by rural women in entrepreneurial activities are real and warrant examination. Identifying gaps in the research is crucial to addressing informal employment both in the South African and global sectors.

In this context, an excerpt from Phumzile Mlambo-Ngcuka, UN Women Executive Director and UN Assistant-Secretary- General, at the Second National Encounter of Women Legislators on 4 December 2014 at Mexico, thus read: ‘We cannot afford to lose the potential of another generation of women’ (SEEP, 2015).

Given the above statement, there is a growing need for an inclusive market sys- tems development promoting WEE and advancing social equity. According to the World Economic Forum (2017: 33), bar- riers to female economic participation across industries are linked to the scarcity of cross-industry collaboration and shared learning opportunities. Such barriers exclude women from any form of involve- ment in market systems (SEEP, 2015).

Accordingly, the authors’ intention to examine CIM among African women entre- preneurs in the informal sector originated from the fact that the sector makes up a significant portion of economies in develop- ing countries and is growing at high rates. However, adequate attention has not been given to its sustainability and development. It is also worth noting that the share of informal activities in Africa remains among the largest in the world, averaging 40% in the region’s low-income countries and 35% for its middle-income countries but witnessing a gradual global decline

(IMF, 2017; Medina et al., 2017). The infor-

mal sector absorbs a large number of

employment and marginalized segments of

society such as women (Kyaruzi and

Radovic-Markovic, 2009). With women

occupying a larger share of the labour

force and economic activities in the infor-

mal sector in Africa, strategies are needed

to foster women survival and economic

development within the sector.

Consequently, addressing constraints

facing the informal sector is necessary and

relevant to policies, strategies and initiatives

for women economic development. In addi-

tion, literature has documented increased

failure rates for SMEs at early stages in

developing regions such as Africa,

Caribbean and Latin America countries

(GEM, 2018). Women are seen as contributing to the

family responsibilities such as providing

food supplies, taking care of bills and

paying children’s school fees, calling for

greater attention to further women’s eco-

nomic development in this era of dynamic

global environment. The main objective of

this paper is to shed light on the discussion

and attention of entrepreneurial activities of

women in the informal sector, understand

the role CIM can play in the survival of

women-owned businesses and the broader

aspect of the economic and social develop-

ment of women in developing countries.

Conceptualizing and theorizing

WEE and CIM

In conceptualizing cluster formation and

management, it has been proven successful

in large and formal businesses in developed

nations, could impact positively on SME

activities in the informal sector in develop-

ing countries, and particularly for women in

the informal sector. Empirical studies have

shown research in cluster formation or

CIs in the formal economy. As a result,

Okeke-Uzodike and Subban 423

the relevance of this study relates to the pre- sumably neglected women in the informal sector and how CIM can move the sector forward. Women economic development has continued to dominate discourses in ensuring an engendered society. Potentials of women entrepreneurs and contributions to the development of many countries are being recognized within the global commu- nity (Ibeh, 2007; Radovi�c-Markovi�c, n.d.). Considering practical and theoretical con- cepts of the informal sector, growth of women’s labour force participation is on the increase. Changing traditional African family structures and the role of women in the households is significant.

Different schools of thought including Zimmerman (1990) noted that empower- ment differs across levels of analysis, per- spectives and concepts, such as individuals, organizations and communi- ties. Page and Czuba (1999) supported this assertion by indicating components in defining empowerment as multidimensional and a social process. From the multidimen- sional aspect, empowerment occurs within sociological, psychological and economic dimensions (Page and Czuba, 1999). As a social process, it reflects in relationships with others as a continuous process. While Bayissa et al. (2018) acknowledged the com- plexity and multidimensional nature of empowerment vis-à-vis women empower- ment, Hennink et al. (2012) noted that it occurs through six mechanisms, five domains and is measured along these levels.

Rappaport (1981, 1984) defined empow- erment as a construct linking individual strengths and competencies, helping sys- tems and proactive behaviour to social policy and social change. The theory links individual well-being with the larger social and political environment. Empowerment is accepted as referring to the ability of people to understand and control personal, social, economic and political forces in improving life situations (Israel et al., 1994),

or expansion of assets and capabilities of poor people to participate in, negotiate with, influence, control and hold institu- tions accountable that affect their lives (Narayan, 2002: 14). The common theme emanating from these definitions is of indi- viduals gaining mastery or control over their environment (Boley and McGehee, 2014: 86; Rappaport, 1984: 122). Empowerment is viewed as a construct that links individual strengths as noted by Rappaport (1981, 1984). This enables indi- viduals and communities to take power in gaining greater control, efficacy and social justice in changing their lives and environ- ment (Israel et al., 1994). The notion of empowerment enables individuals to gain control over decisions and factors that shape their lives, build capacities, increase resources and gain access to networks (UNSDN, 2012). Rahman and Reza (2016: 49) summarized that empowerment is a transition from a passive situation to an active situation of control.

Similarly, from an economic perspective, Golla et al. (2011) defined economic empowerment as the ability to make and act upon economic decisions resulting in sustained living standards and potential for advancing economically. Literally, eco- nomic empowerment entails the capacity of women and men to participate in, contrib- ute and benefit from growth processes in ways that recognize the value of their con- tributions, respect their dignity and distri- bution of the benefits of growth (Eyben et al., 2008).

Drawing from this background, this paper is underpinned by theories of empow- erment and cluster formation. Empowerment within the ambit of this paper addresses the economic prerequisites for women advancement, while clustering explains the use of networks in empowering women in entrepreneurship. The World Bank (2012) refers to women’s economic development/empowerment as: ‘. . . the

424 Local Economy 34(5)

accumulation of endowments (education,

health, and physical assets); use of endow-

ments to take up economic opportunities

and generate income; and application to

take actions, or agency, affecting individual

and household well-being’ (4).

Overview of enterprise clustering

in the informal sector

It can be said that clustering is viewed as a

means of boosting the competitiveness and

prosperity of firms in related industries,

products and services and a way through

which all participants in the modern

global economy can compete, co-operate

and flourish. The concept of business clus-

tering has been proven successful from the

conglomeration of geographically posi-

tioned large firms in related industries

strategically dominating market share of

certain products and services globally.

Evidence has been found in developed

nations and among larger firms in the

formal sectors. Smaller firms known as SMEs are faced

with the challenges of finding new ways to

achieve competitiveness and strategic busi-

ness positioning. A potential interest has

grown in the need for localization and

development of clusters of SME firms.

Increasing research and studies have

shown successful clustering of SME firms

mostly in the formal business sector. The

concept of clustering is examined among

women entrepreneurs/SMEs in the informal

sector of a developing country economy.

According to La Porta and Shleifer (2008:

275), the informal economy of numerous

developing countries accounts for a signifi-

cant and growing portion of the economic

activity. In sub-Saharan Africa, the infor-

mal economy represents 80% of the total

labour force and contributes approximately

55% of sub-Saharan Africa’s GDP

(UNECA, 2015: 2). Literature pertaining

to the informal sector in South Africa, according to Chandra (2002) (in Arosanyin et al., 2009: 66), highlights that small businesses experience crime, lack of access to credit, infrastructure challenges, together with the need for training. These are considered some of the most common constraints experienced in the informal eco- nomic sector. Similarly, studies have shown the high involvement of women in the infor- mal economy contributing significantly in various ways to the immediate household structures, society and the nation at large. Empirical research initiatives have docu- mented various challenges facing women- owned SMEs in the informal sector in developing countries leading to high failure rates. This paper, therefore, examines how CIM could effectively reposition women entrepreneurs strategically in this era of business competitiveness.

Applicability of CIM to the informal sector

It is a considered view that rural contexts are evolving with literature on women entrepreneurs in the informal sector. This is largely due to a lack of research in indig- enous knowledge systems and emphasis on contextual African methodologies (submits Gelb, 2001 in Ozigbo et al., 2009: 53–54).

It is argued that many women as small scale entrepreneurs do not possess good negotiation skills to attain better deals in business opportunities, suggests Kibanja and Munene (2009) (in Nandonde and Liana, 2013: 32). These authors hold raise the question in order to build women’s capacity and improve their entrepreneurial skills. In this regard, Lewinian’s (1939) theory (in Nandonde and Liana, 2013: 33) suggests that social behaviour is the prod- uct of individual’s interaction with situa- tions. Women entrepreneurs in Africa are victims of social exclusion in accessing edu- cation, land and finance. Haan (2006) (in Nandonde and Liana, 2013: 36) submits

Okeke-Uzodike and Subban 425

that the informal sector is an option for

rural women. However, soft skills shortage

is a problem for employment in agribusi-

ness and entrepreneurial activities. Concerted efforts are required to support

female entrepreneurs in making better eco-

nomic choices to be able to transform their

potential endeavours for tangible economic

gains, maintains the OECD (1997) (in

Kagbu, 2018: 45). Entrepreneurship there-

fore represents an appropriate opportunity

for women all over the world, as entrepre-

neurship responds flexibly to entry, change

and innovation. This potential has not yet

been realized optimally in most developing

countries as a large number of women work

in informal sectors but their contributions

are subject to constraints and abilities to

upgrade production continuously. These

include poor access to market information,

technology and finance, support services,

policy and regulatory environments

(UNIDO, 2001 in Kagbu, 2018: 45).

Background on Africa’s informal

economy and women

entrepreneurs

The informal sector represents a key part of

most national economies and accounts for a

significant proportion of employment

(ADB, 2013; World Trade Organisation,

2016). The provision of flexible employment

for women who want to work within prox-

imity to their homes is welcomed by (Alatas

and Newhouse, 2010). The challenge

remains with low wage workers who need

to survive economic downturns, suggests

(Loayza and Rigolini, 2011), and the ability

to support their middle-income households

(Van Klinken, 2009, 2014). For developing

countries, the informal sector occupies a

major role in production and income gen-

eration (Hussmanns and Mehran, 2003: 1).

This is why the International Labour

Organization (ILO) (1993) defines the infor- mal sector as a concept of a labour force.

From the perspective of a developing world, such as Africa, concept of the labour force originated from the fact that the informal sector accounts for a signifi- cant portion of employment and means of livelihood for millions of people. Many people, especially the vulnerable popula- tion, such as the poorest, women and youth find their daily means of survival pre- dominantly through the informal sector. The informal economy occupies a manda- tory role in sustaining the daily lives of African people and poverty alleviation. The size of the informal sector in Africa is large averaging 60% of total non- agricultural employment in which at least 9 in 10 rural and urban workers have informal jobs (ADB, 2013; IMF, 2017). The informal economy represents approximately 80% of the total labour force, between 30 and 90% of total non-agricultural employment, con- tributes between 25 and 65% of GDP and 50% of gross value-added in sub-Saharan Africa (ILO, 2013: 3; IMF, 2017: 49; UNECA, 2015: 2). The informal economy in Africa remains among the largest in the world because labour absorption can be traced to the fact that the sector is charac- terized by a multiplicity of micro, small and medium-sized businesses often referred to as informal sector enterprises.

The 15th International Conference of Labour Statisticians defines informal sector enterprises as unincorporated enter- prises, producing goods or services for sale or barter, with an employment size below a certain threshold according to national circumstances (ILO, 2000). The latter is covered within a broader concept of entre- preneurship – ‘a process through which entrepreneurs create and grow businesses, is concerned with the exploitation of prof- itable opportunities using innovative ideas, includes technological change and generates economic growth’ (Shane et al., 2012: 3;

426 Local Economy 34(5)

Shane and Venkataraman, 2000: 218). Local customers generate a significant pro- portion of the economic productivity and to a large extent contributing to the conti- nent’s GDP.

Entrepreneurial activities in the informal sector occur outside state regulatory sys- tems and have become defining business trends globally. Women dominate informal sectors with entrepreneurial activities because of flexibility to enter and generally operate outside government oversight (Kitching and Woldie, 2004; USAID, 2013: 1). In addition, more women are found in the informal sector because it is a source of income that helps to address the needs of women, with a vast majority of these women conducting their businesses from homes or on the streets (Chen, 2001: 4; Ramani et al., 2013: 4). Additionally, women tend to be over-represented in low- income jobs while men over-populate the upper segment jobs (Chen, 2001). On aver- age, due to discriminating social norms and harmful cultural practices, women achieve 87% of the men’s level of human develop- ment in Africa (AEO, 2017: 110). As a result, gender gaps persist in Africa regard- ing access to economic assets, workplace participation, entrepreneurship opportuni- ties, and benefits from natural resources and the environment (AEO, 2017: 110). It can be deduced from the afore-going dis- cussion that women mostly engage in the informal sector because it is the best or the only way they could earn a living due to lack of employment opportunities and experience including skills with high illiter- acy rates (Njenga and Ng’ambi, 2014: 40).

Entrepreneurship is viewed as the focus on change in women’s lives, which translates to empowerment in economic, political, education and training and decision-making power. Small economic entities such as SMEs are open and vulner- able to intense competition. Chen (2001: 8) added that street traders often experience

rigid competition from big economic play-

ers. Women entrepreneurs face substantial

competition not only from the big market

players but also from their male counter-

parts. Survival and sustainable business

competition in changing economic environ-

ments for SMEs requires collaboration or

clustering. Clusters affect competition

through increase in company productivity,

while stimulating the formation of new

businesses (Porter, 1998). Scheer and Von

Zallinger (2015: 1) added that clustering

provides advantages for SMEs to use new

technologies, joint purchasing strategies

from production to marketing, better utili-

zation, improved competence, quality and

skills. CIM may not be present in most

businesses or industries, and is a key ele-

ment for global changes in the business

environment. Research has shown that dif-

ferences in the business skills and practices

of women entrepreneurs indicate that not

all women entrepreneurs can expand,

move within or rise between sectors

(Spring, 2009: 24), therefore CIM could

serve as an empowerment tool for women

entrepreneurs in the informal economic

sector.

Perspectives on economic

empowerment of women and CIs

An excerpt from the International Center

for Research on Women in defining WEE

states that ‘a woman is economically

empowered when she has both the ability

to succeed and advance economically, and

the power to make and act on economic

decisions’ (Golla et al., 2011: 4). Wu

(2013: 6) noted that Golla et al.’s definition

of WEE is built on four domains as per

Figure 1 and further explained in Table 1. The authors acknowledge the essence of

the components of the WEE Framework,

but expand mainly on the networks aspect

of domain three (3), which is linked to the

Okeke-Uzodike and Subban 427

framework of CIM. The authors proposed

a more strategic and inclusive approach

that is designed to draw from the potential

and capabilities of women entrepreneurs, as advocated by Roberts (2008: 22).

According to Output 5 of Outcome 7 of

the South African Government’s outcomes,

the approach was aimed at, among other

targets, to have achieved at least 30% of smallholder farmers organized as

co-operatives in 2014 in an attempt to

afford dominance and priority regarding

entrepreneurship, as reflected in Sinyolo and Mudhara (2018: 79).

Economic change and globalization have

generated substantial research interest in

entrepreneurship and WEE. Relevant to

Africa, researchers’ interests on women entrepreneurs established awareness from

significant events such as the Africa-Asia

Women’s Economic Empowerment

Conference in Beijing (1995) and the ‘First

Global Women Entrepreneurs Fair’ in Ghana (1996). In addition, the Structural

Adjustment Programmes in numerous

African countries contributed to various

interests in WEE. These events, until recent times, highlighted the need for

Figure 1. WEE framework. Source: Wu (2013: 7).

Table 1. Four domains of women’s economic empowerment.

Agency Focus on capabilities, knowledge and adopting new strategies and

technologies to enhance productivity and income

Institutional environment, norms,

recognition and status

System of values, norms, institutions and policies shaping

economic and social environments

Social relations,

accountability networks,

influence

Power relations and networks helping women to aspire to new

heights and realize their potential

Economic advancement Income, assets and tenacity to persevere and return on labour

Source: Wu (2013: 7).

428 Local Economy 34(5)

continued discourse on WEE. As a result of globalization, business environments are becoming increasingly rigid and competi- tive, posing challenges of survival for women-owned enterprises through small and medium-sized organizations found in informal sectors of the economy. This forces cluster building and integration among businesses to gain competi- tive advantage.

The notion of clustering has evolved over time and is well documented in Coral (2009), Das (1998) and Ketels (2017). Evolution of clusters was influ- enced by changes in the competitive envi- ronment, technology, market demands and business strategies. The philosophy behind clustering originates from the work of Alfred Marshall who illustrated how small firms in the industrial heart- lands of the UK and Europe had acquired critical external economies of scale and scope by locating within geographically defined areas (Marshall, 1920). From a scholarly point of view, Porter (1998: 78) defined clusters as the geographic concen- tration of interconnected companies and institutions in a particular field. In a sim- ilar and more recent view, UNIDO (2013) defined clusters as ‘geographical concentrations of inter- connected enterprises and associated insti- tutions that face common challenges and opportunities’ (9). Emerging from both definitions are two fundamental high- lights, which are geographical proximity and share of common features. Consequently, clusters encompass an array of linked industries and other enti- ties essential to competition within the countries as well as across the national borders (Porter, 1998). Porter (1998) is of the view that geographical proximity/co- location in a cluster setting provides an alternative way of organizing value chains among small businesses considering factors such as nearness to raw materials

and skilled labour among others. The scholar explained that clustering and co- location of firms presents critical masses needed for competitive success while absence of co-location substantially limits global competitiveness and growth of such small firms (Porter, 1998). As a result, the co-location theory addresses the need for businesses to be geographically situated for economic advantages, which attends to the need for CI and its manage- ment (CIM).

According to Ketels and Memedovic (2008: 384), CIs can be defined as a ‘collab- orative actions by groups of companies, research and educational institutions, gov- ernment agencies and others to improve the competitiveness of a specific cluster.’ These scholars expounded that achieving such competitiveness requires raising awareness of companies within a cluster and creating more effective platforms for interaction or providing a platform for an improved dia- logue between the private and the public sectors when making decisions about how to improve cluster-specific business envi- ronments. In this context, CIs are about upgrading competitiveness to increase busi- ness growth and employment by supporting a group of companies in product develop- ment, entering new markets/new business areas and engaging with technologies. CIM could be viewed as a catalyst, a con- nector and a convener across the cluster’s diverse stakeholders. In essence, enterprises within clusters tend to enjoy mutual benefits such as the dynamic composition of actors creating enhanced learning, networking and ultimately innovation. In achieving the latter, the CIM framework emphasizes the need for a viable cluster innovative idea, organized body and human resource while the management aspect entails five fields of actions mentioned as Information and Communication, training and qualification, co-operation, marketing and public relations/internationalization (Cluster

Okeke-Uzodike and Subban 429

Management Guide, 2006: 10). When these

are present, it can be asserted that CIs can

contribute to the development of the whole

cluster through their identification of role-

players’ needs and the provision of services

striving to fulfil those needs (Moss, 2009). The phenomenon of clustering and its

advantages have been well established in

both developed and developing countries.

Research into clustering of SMEs in devel-

oping countries has shown marked poten-

tial in fostering improved trust and

co-ordination among the SMEs, enhanc-

ing the competitiveness of export-

oriented enterprises, creating employment

within the local economic regions and

enhancing living standards of households

(Giuliani et al., 2005; McCormick, 1999;

Morrison et al., 2013; Tewari, 1999). In

addition, industry clusters provide SMEs

with passive benefits that accrue as a result

of the SMEs’ co-location with other firms

and institutions in a geographically con-

fined space (Lund-Thomsen and Nadvi,

2010). Evidence exists that established

regional economies develop through clus-

tering, cluster-enabled places and small

firms, to connect to the global economy,

foster interaction, and collaboration

among firms and create opportunities for

related and sustainable diversification,

with new clusters emerging from existing

ones (Bell and Tracey, 2010; Eisingerich

et al., 2010; Ffowcs-Williams, 2014: 10). CIs are becoming increasingly prevalent

among socioeconomic structures and can be

viewed as an element for economic develop-

ment in the 21st century. The approach

facilitates addressing weaknesses such as

unemployment and labour retention in a

struggling region. In this respect, the effect

of entrepreneurship is greater when entre-

preneurs act in clusters instead of alone

(Delgado et al., 2010), and this could facil-

itate empowering women entrepreneurs in

the informal sector.

Managing clusters among women

entrepreneurs in the informal sector

According to Williams and Gurtoo (2011: 354), informal entrepreneurs are seen as those taking logical decisions to rise above circumstances. Recently, debate and dis- courses on survival of businesses, economic and industrial development have been focused mostly on the formation of net- works referred to as clusters. Knop (2015) holds that clusters are a group of entities (enterprises, scientific units, public adminis- tration, local authorities, etc.) consciously operating in a specific eco-system focused on a specific territory and within a defined specialization. These entities share a common vision on various economic initia- tives, co-ordinated by a firm or an integra- tor that is equipped with specified competences. Bylok et al. (2016) found that the strength of clusters rests on five pillars which include geographical location, industry similarity, ties and interactions, co-operation and competition, and creation and knowledge management.

The concept of a cluster constitutes inno- vative thinking and describes processes whereby geographically located producers, buyers and suppliers implement and improve mutual collaboration. The role of business clusters as a measure of control to survive in a competitive business environ- ment is acknowledged and dominated aca- demic/professional theorizing in this context. According to Szabo and Durkop (2015: 31), companies that are part of a cluster enjoy benefits of obtaining efficient and specialized information, and are more productive in sourcing inputs.

The formation of firms in developing countries such as Africa is a complex pro- cess due to rapid changes in technology and the global business environment (BusinessReport, 2015; Naudé and Krugell, 2002). This is because Africa is

430 Local Economy 34(5)

susceptible to weak political institutions, fragile business environments, unstable eco- nomic growth and social problems such as poverty, unemployment and inequality (Ncube and Jones, 2013: 2). SMEs are bur- dened with ineffective policy designs, market failures, weak structures, lack of capabilities, and entry barriers to global markets and value chains. The small size of SMEs makes it difficult for them to gain economies of scale and to take advan- tage of market opportunities that require the delivery of large stock volumes of stan- dardized products or compliance with inter- national standards (UNIDO, 2013: 12). In addition, the SMEs are confronted with marketing-related challenges such as poor location, insufficient marketing, inability to conduct marketing research, incorrect interpretation of the market and human resource factors (Brink and Cant, 2003).

SMEs dominate large economic activi- ties, remain a major source of employment creation, contributing to economic growth and good mechanism for poverty allevia- tion most especially in developing nations (Aga et al., 2015; Bauchet and Morduch, 2013). In this context, SMEs have a key function in the development of a country’s economy and considered a fundamental part of the economic fabric in developing countries because of its ability for further growth, innovation and prosperity (Fiseha and Oyelana, 2015). There are sizable SMEs across Africa within the informal sector that are mostly dominated by women involved in business activities such as selling goods and offering services.

Irrespective of the above contributions, literature has documented various chal- lenges facing women entrepreneurs ranging from access to finance, lack of managerial skills, to lack of institutional/network sup- port, social norms/beliefs and entrepreneur- ial opportunities inter alia (Engagement Bureau, 2018; Entrepreneur: India, 2017; TechinAfrica, 2018). SMEs tend to struggle

to survive and maximize opportunities. This paper considered cluster formation as a strategy to improve women empowerment subordinate to global economic develop- ment. SMEs found in the informal sectors are mostly family-owned firms with individ- ualized aims. The key role in the develop- ment of clusters for such businesses lies in managing the entity. The nature of such clusters requires a management approach taking into consideration specific decisions in addressing associated social and econom- ic challenges (Knop, 2015; Lindqvist et al., 2008).

The paper proposes a call for a re- orientation and understanding of the rele- vance of the potential for African women entrepreneurs in the informal sector, corrob- orating with Nelson (2007: 91). In address- ing these gaps, Provan and Kenis (2008) suggested three models for clusters mainly found within SMEs, which includes a self- managing-participatory model, leader of network taking key decisions on behalf of the cluster and task of administrative staff to stimulate participants towards action.

The three suggested models by Provan and Kenis (2008) could work well for SMEs in the formal sector. On the other hand, SMEs in the informal sector can ben- efit from the self-managing participatory model. The model allows for the growth potential of SMEs within the cluster. The growth path of enterprise clusters is deter- mined by five factors, namely the size of the market and nature of the products, the stock of economies of scale and scope, upgrading rate, the nature of the supporting institutions and the roles they play, and the forms of collective success/efficiency (Foghani et al., 2017; Uzor, 2017). Similarly, cluster members participate in the process of decision-making and have shared strategic interests needed to achieve the economies of scale and scope. The stock of economies of scale allows SMEs to take advantage of market opportunities that

Okeke-Uzodike and Subban 431

require large production quantities, homog- enous standards and regular supply; joint bulk purchases, finance, consulting services, advertising; and purchase/use of equipment (UNIDO, 2001: 7). Economies of scale improves SME dynamics by allowing them to penetrate the larger market, which increases production, returns and innova- tions (Harvie, 2015; Schmitz, 1995). Such collective effort with institutional supports such as government/NGO enhances the effi- ciency and unleashes the entrepreneur’s growth potential (UNIDO, 2013: 12). Upgrading addresses the nature of SMEs’ internal processes that encourages learning and the path chosen to ensure competencies are acquired for competitive advantage (Kaplinsky and Readman, 2001). Alibhai et al. (2017) explained that public policies address market failures limiting supply of finance, information problems, infrastruc- ture challenges and non-competitive market structures facing SMEs. The latter found that cluster development initiatives provide resources to enable SMEs to oper- ate profitably to allocate resources and sup- port to the SMEs. Such government support may include informational support and education by means of guides, semi- nars, and conferences and grants support- ing mapping of potential clusters and the implementation of selected projects (Andersson et al., 2004; Solvell et al., 2003).

It is proposed that there is a need for greater educational empowerment of women entrepreneurs through functional education, which is the view of Dauda (2017: 75). In this context, women SMEs in the informal sector are mostly character- ized by smaller market size and could ben- efit from networks and companies locally, nationally, regionally and globally. With the entrepreneurship and clustering con- cept, women can gain more power and con- trol over their own lives, as well as in their socio-cultural and political spheres (EU, 2016: 10). Women’s economic participation

and empowerment are paramount in strengthening women’s position in the soci- ety. The concept of economic empower- ment is a substantial base for gender equality and women’s rights, providing opportunities for women to access financial services, employment, property, productive assets and skills development. Market information can be viewed as a prerequisite for achieving the Sustainable Development Goals (Eyben et al., 2008; Golla et al., 2011). What is needed to assist women in CIM, is support from government through credit policies and strategies, management assistance and technical training strategies in fulfilling sustainable development tar- gets, suggests Arosanyin et al. (2009: 68).

CIM vis-à-vis empowerment of women in rural economies

This section deals with the significance of CIM in empowering women and improving rural economies. The informal sector can be regarded as an integral part of generating employment for rural women. Hitherto, there are many studies that are done in Africa regarding liberating women from various barriers and backgrounds. The building of business negotiation entrepre- neurial skills, however, is a very important aspect in the success of empowering women in the informal trade, in particular, agri- business skills (Nandonde and Liana, 2013: 28).

Ozigbo et al. (2009: 54) highlights that support for women entrepreneurs to improve rural economies and contribute to CIM includes encouraging and assisting in business support initiatives, providing financial assistance, educational literacy programmes and monitoring support pro- vided through networking structures.

Entrepreneurship is not an individualis- tic approach but a collective one with many actors including entrepreneurs (Ozigbo et al., 2009: 60). In context of the paper,

432 Local Economy 34(5)

the findings in literature through this paper

reveal that there is a need to rejuvenate gov-

ernment activities towards creating an

enabling social and physical infrastructure

environment to catapult entrepreneurial

development (with special focus for

women) in the rural areas. Extension agen-

cies should develop training to address

these characteristics in women in order to

ensure entrepreneurial success in CIM. This

can be achieved better by encouraging the

formation (and the management) of

co-operative along business lines and assist-

ing in building the business acumen

of women in this important sector

(Kagbu, 2018: 52–53).

Conclusion and future

implications of CIM

Amidst the emergence of global trends,

competition is considered a prerequisite

condition for maintaining organizational

performance, income and employment.

Consequently, a growing number of emerg-

ing economies and individual businesses are

striving to sustain and keep pace with the

continuously increasingly complex network

of social, political and economic entities.

This perspective includes due consideration

be given to women entrepreneurs in the

rural economy who face adversaries in

managing local enterprises and households.

The paper notes challenges that rural

women face amidst cumulative effects of

competing in business environments and

calls for greater efforts to raise profiles of

rural women in the informal economy. This

evolution sees the development of business-

related networks commonly referred to as

clusters to enhance women entrepreneur-

ship access to progressive economic

opportunities propelling them to become

self-sustainable. The concept of business

clusters as a specific form of economic orga-

nization has been at the centre of the

interest of experts from various scientific

disciplines, practitioners and policy-

makers due to its undisputed ability to sup-

port competitiveness and development of

concerned subjects at the micro level, as

well as at the macro level. Traditionally,

conceptualization of clustering mainly con-

sidered its applications in the context of the

manufacturing industry, but, currently clus-

tering has spread across industries, educa-

tional institutions and professionals. The authors hold the view that CIs have

taken the centre stage in policy-making

across the industries, regions and nations,

occupying a fundamental role in rejuvenat-

ing weak clusters for rural women entrepre-

neurs and promoting the emergence of new

science-based industries. Informal sectors

have grown considerably in recent years as

a means of survival and sustainability.

Content and objectives of CIs vary substan-

tially from information gathering and dis-

semination, cluster analyses, networking,

lobbying, export promotion, regional

attractiveness and branding to innovation

and cluster growth. CIM has increasingly

been identified as a key approach, especially

for SMEs and women in the rural economy

to survive, and compete successfully in the

business environment.

Declaration of Conflicting Interests

The author(s) declared no potential conflicts of

interest with respect to the research, authorship,

and/or publication of this article.

Funding

The author(s) received no financial support for

the research, authorship, and/or publication of

this article.

ORCID iD

Obianuju E Okeke-Uzodike https://orcid.org/

0000-0002-9301-7172

Okeke-Uzodike and Subban 433

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