University Study Shows How the Slave Trade Has Lingering Effects on African Businesses

A new study, by researchers at Washington University in St. Louis and the University of Utah, finds that the effects of the African slave trade persist today among businesses in Africa.

The study found that businesses in countries that were active in the slave trade are more often tightly controlled by individuals or families — often because they have limited access to equity funding and shared ownership. Meanwhile, businesses in African countries less affected by the slave trade have more diversified ownership structures.

The researchers’ model suggests that 67 percent of firms in countries with above-median slave exports would have sole proprietorship. In contrast, countries below the median for slave exports have 46 percent sole ownership. While closely held ownership isn’t necessarily bad, the research suggests that some African firms may miss 21st-century growth opportunities due to the inability to raise capital through shared ownership.

This study suggests that African nations historically affected by the slave trade tend to have weak institutions that are unable to enforce the existence of contracts. They also have weaker and more concentrated social networks and trust.

“The slave trade appears to predict ownership structure in ways that nothing else can explain,” said Lamar Pierce, professor of organization and strategy at Olin School and co-author of the new study. Although ownership concentration can be very useful, not having the option to diversify ownership is bad.”

The full study, “Historical Origins of Firm Ownership Structure: The Persistent Effects of the African Slave Trade,” will be published in the Academy of Management Journal. It is available here.

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