This section provides an understanding of one development theory which explains the institutional basis of economy with precise emphasis to business system theory from scholars such as Richard Whitley, North, Wood and Frynas. It is important to note that government plays an important role in promoting development. The institutions themselves have been variously defined. Nabli and Nugent (1989:1335) offer a useful working definition: an institution is a set of constraints that governs the behavioural relations among individuals and groups. North (1990) puts it even more succinctly: institutions are the rules of game in a society. He further indicates that institutions include any form of constraint that human beings devise to shape human interaction. These include formal rules and informal codes of behaviour, norms that have been consciously created and those that have simply evolved over time (North, 1990).
The importance of institutions to both economic growth and policy performance has become better understood (Hodgson, 2003). There is a considerable body of literature, which suggests that institutional nestedness is the key building block of national economic success (Boyer and Hollingsworth, 1997; Polanyi, 2001). In addition to the above, Chomsky (1996) pointed out that the state plays a major role in shaping the contours of growth; ‘mutual reliance and institutional meshing of private ownership and state activities is fundamental to capitalist societies’ (Bracking, 2003:14).
According to Douglas North (1990:384), institutions play a critical role in the cost of transacting (and also help to determine production costs) their success in reducing total cost has been and continues to be a critical determinant of economic performance. He further declares that an institution represents a contractual relationship. Changes in relative prices lead to recontracting, which in turn leads to institutional change.
Thus, Douglas North (1990) adds that institutions can deteriorate as well as get “better” over time. He was really putting primary emphasis into property rights. Parsons (1958) has argued that the business systems found in many parts of Africa are simply a “failed one”, in other words, not a coherent system at all, in that it fails to meet any functional prerequisites. Parsons was not looking at Africa he only argued about the latter; and Wood and Frynas argued the former. Furthermore, Wood and Frynas (2006:17) illustrate Uganda as another case and show that the institutional weakness of the state manifests itself in many forms: lack of proper physical infrastructure, lack of regulatory frameworks for financial operations and lack of skill development.
In view of the above, Harvey (2002) notes that institutional parameters represent the default boundaries of organizational behaviour, and are therefore guidelines in the promulgation of organizational strategic responses. Whether facilitating or impinging on organizational development, an understanding of institutional features help illuminate the manner in which organizations develop some degree of stability and continuity in highly volatile contexts (ibid). Government is playing an important role in shaping the contours of growth. While, Bracking (2003:14) states that mutual reliance and institutional meshing of private ownership and state activities is fundamental to capitalist societies. MacEwan (1999) indicates that the foundations
of sustainable development lie in basic social infrastructural provision, and supportive regulation.
Whitley (2003) has identified a number of reasons why national institutions are likely to continue dominating the organization of capital and labour markets for some time to come. Amongst other reasons, states are likely to remain the primary units of political competition and modernization, national legal systems continue to standardize the nature of property rights in an economy, national regulations continue to govern industry entry and exit and many other aspects of market competition. Wood and Frynas (2006:26), illustrating the East African experience, have pointed out that poor and volatile economic performance and the close linkages between specific social and political realities, and economic outcomes, underscores the fact that, in the absence of sustained efforts to build on remaining institutional strengths, the negative, yet stubbornly durable, characteristics of segmented business systems are likely to persist. They further indicate that given domestic institutional weakness and a vulnerability to external pressures, segmented business systems remain locked in a cycle of poor performance. The above scholars showed that government is an important player in economic activities. Furthermore, they provided crucial reasons explaining the institutional failure and vulnerability. Most of these reasons contributed to poor performance.
In fact, conservatives blame Africa’s endemic economic crises squarely on individual national governments on the continent. More sophisticated theories of this failure argue that African states have failed to live up to the legitimate expectations and needs of their people (Hyden, 2002:5). However, unlike neo-liberal conceptualizations, these theorists acknowledge that states can make a difference, and that human agency mediated by public institutions can provide the basis of general social progress and development. Theories of the failure of the state focus on the inability of the state to make peasants – and indeed, many of those working in the informal sector – comply with its interests; this is of real significance in Africa, where a very high proportion of employment is in the informal sector. Others argue that deeply embedded patronage networks make progress impossible (Hyden, 2002:5).
Indeed, neo-liberal is one of the theoretical frameworks discussed in this study which tried to remedy the African institutional failure. As Wood and Frynas (2005:5) pointed out, the perspective offered by neo-classical economics supported by Bretton Woods institutions implies that deep government policy reforms at the macro-level including liberalization, privatization of state-owned enterprises and deregulation of markets can redress economic stagnation.
In contrast to the dependency theory which attributed Africa’s lack of development to long-term patterns of international politics, neo-classical economists pointed to short-term policy solutions, which could yield significant results within several years. If properly implemented, low tariffs, free markets and the removal of government constraints on trade would boost economic activity. However, a major weakness of this perspective was the lack of attention to enduring institutional constraints on economic development which could not be overcome in the short term (Wood & Frynas, 2005:5-6). The above scholars highlighted the pertinence of the neo-liberal approach and its impacts.
According to Wood and Frynas (2005:2), national institutions not only affect domestic economic behaviour but also help to understand the impact of home country institutions on international competitiveness of firms and industries. Despite the much discussed onset of globalization, there are still major practical obstacles to a truly global economy and companies are a long way from becoming detached from their home base.
As indicated by Whitley (1999:43), six distinct national archetypical business systems have been identified, based on variations in ownership and non-ownership coordination, and employee relations, primarily drawing on the East Asian, European and North American experiences. All six archetypes (which encompass such diverse countries cases as Scandinavia, the United States, Hong Kong, South Korea, Italy and Japan) can be considered in some manner to be economically successful. However, just as specific institutional configurations may provide the framework for explaining national economic success, they may also do so for failure. This scholar has identified six national archetypical business systems. This study highlighted some of the cases which these countries under investigations could refer to become successful.
Indeed, over 30 years ago, Douglas North (1981) already attempted to explain why ‘inefficient’ institutions could exist and be perpetuated. Wood and Frynas (2005:21) add that the institutional weakness of the state manifests itself in many forms: lack of proper physical infrastructure, lack of regulatory frameworks for financial operations or lack of skills development.
In addition to the above, Wood and Frynas (2005) indicate that the experience of East Africa suggests that in the absence of sustained efforts to build on remaining institutional strengths, the negative - yet stubbornly durable - characteristics of segmented business systems are likely to persist. Specifically local, national and regional institutional characteristics unique to other regions such as the former Union of Social Socialist Republic (USSR) may yet lead to radically different development trajectories. However, there remains an alarming similarity between weak states; a lack of investor capital; low levels of trust; poor training systems; fragmented and personality-based interest associations and macroeconomic failure (Wood & Frynas, 2005:33).
Accordingly, given domestic institutional weakness and a vulnerability to external pressures, segmented business systems remain locked in a cycle of poor performance. At least in the short and medium term, structural adjustment programmes or regime change or greater access to developed country markets are unlikely to break the vicious cycle of those business systems (Wood & Frynas, 2005:33). The existence of successful firms in East Africa suggests that national business systems and segmented business systems in particular are not fully deterministic. Firms can function outside the institutional parameters structuring business systems (Wood & Frynas, 2005:29).
Furthermore, as recent research has suggested, the effect of corruption on economic growth also depends on how it is organized. Unlike East Asia where corruption tends to be more centralized, the fragmented nature of African ruling elites and the lack of stable business government networks have led to an anarchic nature of corruption, preventing businesses from internalizing
costs of corruption such as other transaction costs and preventing them from reducing uncertainty about bribe payments (Stasavage, 1999).
In the age of globalization, external forces can have a major impact on economic actors within national business systems. Indeed, Djelic and Quack (2003a, b) have suggested that ‘dominant foreign players’ may become ‘missionaries’ of institutional change and, beyond simply playing according to their ‘own rules of the game’, may help to institutionalize their rules in new contexts. Wood and Frynas (2005:30) indicate that if the segmented business system is not fully deterministic, then external assistance or inward investment could help to overcome some of the inherent domestic institutional weaknesses. Here it is worth considering the case of Mauritius. Given the above analysis, the question arises as to what extent the Mauritian model can be replicated in segmented business systems generally. The presence of resident Asian business interests (as in the case of East Africa) can be crucial in forming international business networks, which can help firms to thrive despite adverse institutional environments. But there are limits as to how far external linkages can make a difference. Whitley (2003) identified a number of reasons why national institutions are likely to continue dominating the organization of capital and labour markets for some time to come.
Amongst other reasons, states are likely to remain the primary units of political competition and mobilization. National legal systems continue to standardize the nature of property rights in an economy, and national regulations continue to govern industry entry and exit and many other aspects of market competition (Whitley, 2003). Even the most ardent supporters of the global convergence thesis admit that while the onset of global institutional convergence can be detected but it will still take some time until national institutional features will be replaced by global ones (Lane, 2003). The strength of national business systems, while it may be slowly eroding is still pronounced. From this perspective, external linkages have far more potential to transform a small island economy such as Mauritius than many, much larger, national economies on the African mainland (Wood & Frynas, 2005:30).
In the field of industrial relations, states seek to regulate both the conditions under which labour power is sold, and how it is used (Edwards, 2002:162). The former would encompass interventions such as social security, which would guarantee basic living standards, so that the supply of labour power is not totally dependent on the market. According to Wood and Brewster (2007:14), with the exception of a small number of states – mostly in southern Africa – social security provisions on the continent tend to be either negligible or totally absent. This means that individuals are compelled to sell their labour power at any cost – and/or rely on extended, informal family based networks of support. The demands of the latter place great strains on those already in employment, and make having work inherently far more stressful than would otherwise be the case. The second area where the state may regulate the employment relationship is in the deployment of labour power (Edwards, 2002:162). This would include union organizational rights, restrictions on working hours, health and safety legislation, employment protection, including anti-discrimination and anti-harassment measures and formal grievance proceedings. Once again, the general capacity of most governments on the continent
to regulate these areas of the employment relationship remains weak and uneven; as well as also often being entirely absent in relation to informal working (Wood & Brewster, 2007:15).
3.6 Conclusion
This chapter provided a brief historical development and policy background of the textile and clothing industry. It then discusses the impact of the African Growth and Opportunity Act (AGOA) in sub-Saharan African textile and clothing industry. Furthermore, the sustainability and competitiveness of the textile and clothing industry were discussed. The researcher proposed to look at the actual situation of the textile and clothing industry in SSA by describing the situation in Mauritius, South Africa and the DRC. Other sections in this chapter looked at strategies for textile and clothing industry’s competitiveness and the theoretical framework. The next chapter discusses the research design, the different techniques and methodologies used.
CHAPTER FOUR: RESEARCH DESIGN AND METHODOLOGY
This chapter has nine main sections. Section 4.1 is the introduction. Section 4.2 provides the research methodologies and approaches. Section 4.3 discusses the sampling and sampling size. Section 4.4 presents the data procedure and measurement instruments. Section 4.5 provides the response rate of the study. Section 4.6 outlines the nature of data to be collected. Section 4.7 discusses the data analysis techniques used. Section 4.8 presents the ethical consideration. And lastly, section 4.9 is the conclusion.
4.1 Introduction
This chapter describes the various methods used, the various data collection procedures adopted and the way data were analysed and interpreted in this study. It further describes the exploratory research method that was used by the researcher and the theoretical basis for conducting the empirical research. It also describes the construction of the questionnaire; why this research design was used; the targeted population; how the questionnaire was administered as well as the statistical treatment of the data. The aim of this study was to explore what underpins a firm’s survival by discussing the HR practice contribution to the competitiveness and sustainability of the textile and clothing industry in the Southern African Region and the broader lessons learned thereby.
In attempting to explore and understand what enables a firm to survive in the textile and clothing industry in the SAR, an exploratory research was conducted. De Vos, Strydom, Foushe and Delport (2005:106) argue that an exploratory research is conducted to gain insight into a situation, phenomenon, community or individual. Since this study was an exploratory research, both qualitative and quantitative methods were used in order to gain a deeper understanding and as fully as possible answer the questions raised at the beginning of this research in section 1.3. Data were gathered directly from the textile and clothing industry, describing the incidence, frequency and distribution of different factors contributing to the textile and clothing industry’s survival and competitiveness, and studying the interaction of factors.
By contrast, Leedy and Ormrod (2005:2) describe research as a “systematic process of collecting, analysing, and interpreting information (data) in order to increase our understanding of the phenomenon about which we are interested or concerned”. Welman and Kruger (1999:2) add that research is a process whereby scientific methods are used to expand knowledge in a particular field of study. Similarly, Leedy (1997:2) has described research as an attempt that a researcher makes to find systematic ways, with the support of facts that can be demonstrated, to find the answer to a question or a solution to a problem.
But, Bless and Higson-Smith (2004:3) define research as “a systematic investigation of a question, phenomenon, or problem using certain principles”. They further offer the following characteristics of research:
Research is systematic and logical, and observations must therefore be done systematically and follow a logical sequence; in regard to the above principles, the researcher proposes to do fieldwork by making use of observation and in-depth interviews.