Networks and Manufacturing Firms in Africa: Results from a Randomized Field Experiment

We run a novel field experiment to link managers of African manufacturing firms. The experiment resembles the many forms of interaction that business and community organizations offer to their members. The design features exogenous link formation, exogenous seeding of information, and exogenous assignment to treatment and placebo. We study the impact of the experiment on firm business practices outside of the lab. We find that the experiment successfully created new variation in social networks. We find significant diffusion of business practices in terms of VAT registration and having a bank current account. This diffusion is a combination of diffusion of innovation and simple imitation. At the time of our experiment, all three studied countries were undergoing large changes in their VAT legislation. JEL codes: D22, L26, O33. *Data collection and experimental implementation were funded by the World Bank; we thank Hinh Dinh for his constant support and encouragement. We thank Sourovi De, Simon Franklin, Anja Grujovic and Jono Lain for excellent research assistance on this project. We have appreciated the generous assistance of partner organisations throughout the research process: Economic Development Initiatives in Dar es Salaam, the Ethiopian Development Research Institute in Addis Ababa and RuralNet Associates in Zambia. We thank seminar audiences at CERGE-EI, CORE (Université Catholique de Louvain), the Ethiopian Development Research Institute, the Georgetown Public Policy Institute, Monash University, the 2012 NEUDC Conference (Dartmouth College), the 2013 Annual Conference of the Royal Economic Society, the University of Gothenburg, the University of Kiel, the University of Oxford, and the University of Sydney. Freeman Spogli Institute for International Studies, Stanford University; [email protected]. Centre for the Study of African Economies (‘CSAE’) and Department of Economics, University of Oxford; [email protected]. 1 Networks and manufacturing firms in Africa