Survival, Contracts, and Networks
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he r ot
n ia oc ss te ra
ex p
or
or pe tit m co
tio
A EP
k or s’
on
ne tw
lin
r fa i de tra
pa ird th
e
40 35 30 25 20 15 10 5 0 rty
percent of survey respondents
Figure 3.1 Source of Client Contact, 2009
type of contact source Source: World Bank survey of African exporters, conducted in 2009. Note: EPA = Economic Partnership Agreement.
catch-all category—but also trade fairs (17 percent) and online research (16 percent). Thus, direct informational spillovers do not appear as a driving force of the synergy identified. Cadot et al.’s (2011) preferred hypothesis is, instead, the presence of indirect spillovers operating via the banking system. Consider the following scenario. A Senegalese firm is approached by a U.S. buyer to provide a small trial order of t-shirts. Upon successful delivery and sale, the buyer is satisfied and again contacts the Senegalese firm for a larger order. Now the Senegalese firm has to ramp up capacity and, for that, it needs support from financial institutions. In Sub-Saharan Africa, financial institutions may not take letters of credit from the buyer at face value, because they are aware of the risk of all sorts of glitches—quality or others—that may appear down the line. In fact, anecdotal experience suggests that the bank’s response will typically be “no” irrespective of the proofs of profitability that the exporter shows, and the trade relationship with the U.S. buyer will end before it had a chance to bear fruit. However, if several Senegalese firms already sell t-shirts on the U.S. market, the same financial institutions may be more easily convinced about the chances of success of this venture and better evaluate the potential risks involved in this transaction.