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Innovation and Small Enterprises in the Third World

Innovation and Small Enterprises in the Third World

New Horizons in the Economics of Innovation series

Edited by Meine Pieter van Dijk and Henry Sandee

Innovation is crucial for small enterprises to become and remain competitive in the global economy. In this book, the authors have combined theoretical insights with comprehensive case studies on innovation among small-scale enterprises in developing countries, paying particular attention to technological change in clusters of small firms.

Chapter 11: Linkages Between Small and Large Firms in the Kenyan Food Processing Sector

Dorothy McCormick and Rosemary Atieno

Subjects: development studies, development economics, economics and finance, development economics


Chapter 11 15/3/02 8:49 am Page 1 11. Linkages between small and large firms in the Kenyan food processing sector Dorothy McCormick and Rosemary Atieno 1 Firms link to achieve ends that would be difficult or impossible to attain alone. Large manufacturers develop networks of small suppliers to provide them with a wide variety of needed inputs. Service providers, such as tour operators, assemble lists of foreign and domestic contacts to expand their markets and enhance their service. Small traders co-operate with larger ones to ensure that they have access to the goods their customers want. Firms of all types contract out specialized activities ranging from security services to technology-intensive manufacturing of component parts. They form associations to address common concerns and tap their informal networks when faced with particular challenges. This chapter examines these and other types of interfirm linkages, focusing in particular on those between large and small firms within the food processing sector in Kenya. We will first discuss the theory relating interfirm linkages to firm performance. Kenya’s food processing subsector is then described, as well as the research methodology. Subsequently a profile of the industry’s linkages is given and firm linkages are related to performance. INTERFIRM LINKAGES AND FIRM PERFORMANCE Linkages between firms are not new to economic analysis. The industrial organization paradigm recognizes that buyers and sellers may co-operate in matters ranging from pricing to research and development (Scherer, 1980). Institutional approaches emphasize both the nature and the potential costs of the interactions between...

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