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    ______________________________________________________________________________Copyright 2004. La Chaire de management stratgique international Walter-J.Somers, HEC Montral. Tous droitsrservs pour tous pays. Toute traduction et toute reproduction sous quelque forme que ce soit est interdite. Les textespublis dans la srie Les Cahiers de la Chaire de management stratgique international W-J.- Somers nengagent que laresponsabilit de leurs auteurs. Distribu par la Chaire management stratgique international Walter-J.-Somers, HECMontral, 3000 chemin de la Cte-Sainte-Catherine, Montral, Qubec, H3T 2A7.

    Environment, Strategy, andLeadership Patterns as Determinantof Firm Performance: A Study ofCameroonian FirmsBy : Taeb Hafsi and Bernard Gauthier,

    Professeurs titulaires HEC MontralSeptember 2003Cahier de recherche : N 25-01

    ISSN: 1711-6309

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    ABSTRACT

    In this article, we use a unique set of microeconomic data on a relatively large sample ofCameroonian firms, gathered during the 1992-1995 period, to describe the nature of these firmsinstitutional and competitive environment, their strategic responses, and the characteristics of theirtop managers. Then we study the relationships that exist between performance of these firms, andthree sets of variables describing environment, strategy and leadership characteristics. We showthat there are clear firm behaviors that can be described by configurations of these variables, andsuch configurations generally explain performance. Important implications for both research andpractice are suggested.

    RSUM

    Dans cet article, nous utilisons un ensemble de donnes unique sur un grand chantillon defirmes camerounaises, assembl pendant la priode 1992-1995, pour dcrire la nature desenvironnements concurrentiel et institutionnel de ces firmes, leurs rponses stratgiques et lescaractristiques de leurs dirigeants. Nous tudions ensuite la relation qui existe entre laperformance des firmes et trois ensemble de variables dcrivant leurs environnements, leursstratgies et les caractristiques de leurs dirigeants. Nous montrons quil est possible de rvler descomportements reconnaissables partir de configurations des variables utilises. Et cescomportements expliquent la performance des firmes. Des consquences importantes en matire derecherche et de pratique de la gestion sont suggres.

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    Table of Contents

    ABSTRACT..................................................................................................................................................................... 1RSUM ........................................................................................................................................................................ 1

    INTRODUCTION............................................................................................................................................................. 2

    II. A THEORETICAL FRAMEWORK....................................................................................................................... 3

    ENVIRONMENT.............................................................................................................................................................. 4STRATEGY..................................................................................................................................................................... 5LEADERSHIP.................................................................................................................................................................. 7

    III. DATA AND METHODS ................................................................................................................................... 9

    1. THESAMPLE ......................................................................................................................................................... 9

    2. THEVARIABLES ................................................................................................................................................ 10ii. Strategy variables.............................................................................................................................................. 11iii. Entrepreneurial characteristics variables............... ........... .......... ........... .......... ........... .......... ........... .......... ..... 11Performance variables........................................................................................................................................... 11

    3. EMPIRICAL ANALYSES ........................................................................................................................................ 12

    IV. FACTOR ANALYSES: RESULTS AND CONCEPTUALIZATION................................................................... 14

    1. ENVIRONMENT FACTORS ................................................................................................................................... 142. STRATEGY FACTORS .......................................................................................................................................... 153. ENTREPRENEURIAL CHARACTERISTICS FACTORS ............................................................................................... 15

    V. REGRESSION ANALYSES: RESULTS AND CONCEPTUALIZATION..... ........... .......... ........... .......... .......... 17

    VI. DISCUSSION AND IMPLICATIONS FOR RESEARCH AND PRACTICE................................................ 20

    BIBLIOGRAPHY........................................................................................................................................................... 23

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    INTRODUCTION

    The three dimensions of environment, strategy and leadership are the basis of the dominantstrategic management framework (Schendel and Hofer, 1978). Based on Andrews (1987)sformalization of the concept of corporate strategy, the idea of strategic management emphasizesthe process by which the interaction and fit between environment, the organizations resourcesand choices, and the nature of leadership, in particular top managements values, lead to higherperformance. These dimensions may be seen as antecedents of performance. In the case ofdeveloping countries, can we expect the same relation ? In their study of management theoryand practice in developing countries, Kiggundu, Jorgensen and Hafsi (1983) suggested thatthose theories in which the organisation can behave as a closed system should apply to

    developing countries. Where the organisation cannot behave as a closed system, they found thatthere were significant differences with what happens in developed countries. As each ofstrategy, leadership and environment cannot be considered strictly internal to the firm, weshould expect differences.

    In developed countries, much research has been devoted to the bilateral relationshipsbetween performance and each of these strategy, leadership and environmental factors. Despitethorny methodological issues, related to our ability to build appropriate constructs and measurethem properly (Prescott & Vankatraman, 1990), the contingency theory, in particular, which positscongruence between environment and structure as a determinant of performance has been tested ina variety of situations and circumstances. The congruence of strategy, structure and environment

    has also received wide support in numerous circonstances (Rumelt, 1991; Prescott & Vankatraman,1990; Vankatraman and Grant, 1986; among many). Finally Porters early work (1980) haspopularized a number of strategies, which are supposed to lead to performance, while Miller (1996)and Hrebeniak and Joyce (1985) have suggested the conditions of environmental determinism andof strategic choice in which these strategies provide the best performance. Linking leadership toperformance has been more difficult to operationalize. Hambrick and Masons work (1984) hasprovided an important lead with the idea of relating demographic characteristics to performance,and has been joined by numerous followers (Geletkanycz & Hambrick, 1997; Finkelstein, Sydneyand Hambrick, D. C, 1995; Westphal & Zajac, 1995; Daily and Dalton, 1992; Reuber and Fisher,1992). Other significant work has found a fit between strategic choices and leadership profiles(Golden and Zajac, 2001; Michel and Hambrick, 1992; Zajac and Shortell, 1989; Fredrickson,

    J.W., D.C. Hambrick, S. Baumrin, 1988).

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    Although the importance of each of these factors on firm performance is widely recognized,rarely have all of environment, strategy and leadership characteristics been related, in a largesample test, to performance, though it has been discussed in case research (Andrews, 1987;Schendel and Hofer, 1978). Even more rarely has such a research been performed in a developingcountry setting (Hafsi and Farashahi, 2002; Hoskisson & Wright, 2000; Teoh, 1997; Kiggundu,Jorgensen and Hafsi, 1983). It is to fill such a gap that this research has been conducted and itsresults proposed here.

    In this article, we use a unique set of microeconomic data on a relatively large sample ofCameroonian firms, gathered during the 1992-1995 period1, to describe the nature of these firmsinstitutional and competitive environment, their strategic responses, and the characteristics of theirtop managers. Then we study the relationships that exist between performance of these firms, andthree sets of variables describing environment, strategy and leadership characteristics. We showthat there are clear firm behaviors that can be described by configurations of these variables, andsuch configurations explain their performance.

    In the first section of the article, a theoretical review is proposed to highlight the strategicmanagement conceptual framework to which we intend to contribute and the specific contributionsof our research. Then, in the second section the nature of the context within which Camerounianfirms evolve, the generic strategies that they have developed to respond to such a context, and thedemographic profiles of the managers who were responsible for their conduct, are then described.Finally, in the third section these dimensions of Context, Strategy and Managerial characteristicsare used to explain Cameroonian firms performance.

    II. A THEORETICAL FRAMEWORK

    In this section, the relationships among environment, strategy and leadership, and the linksof these factors to performance are investigated by reviewing the strategic management literature.We first review what has been reported in the literature about the importance of environment,resources, and leadership as predictors of performance, and attempt throughout to assess themeaning of these findings for firms in developing countries, in particular in Cameroon. Weconclude that although environmental, strategic and leadership factors may be seen as antecedentsof firms performance in developing countries, institutional instability in these countries mayreduce the influence of traditional industry factors, and make entrepreneurial creation , and socio-

    political skills more significant in generating competitive advantage and economic performance.

    1 , The 1992-95 period is a period of significant change in Cameroon, as important structural adjustment programswere being implemented.

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    EnvironmentThe influence of environment on a firms strategic behavior and structural arrangements is

    well documented in the strategic management literature (Prescott & Vankatraman, 1990; Butlerand Carney, 1986; Miller, 1982; Chandler, 1962). The fit between environment, strategy andstructure has been often shown to be a predictor of performance (Rumelt, 1991; Khota and Orne,1989; Balkin and Gomez-Mejia, 1987). Miller (1981) and Mintzberg (1978) have suggested thatthese dimensions come in configurations, which are themselves related to performance. Theevidence confirming both contingency theory and configurational theory propositions is nowoverwhelming, even if there are still many methodological issues that cast a shadow on theprecision of the findings (Miller, 1996; Shaker and Covin, 1993; Prescott & Vankatraman, 1990).There is however relatively little research done on the topic about firms in developing countries(Hafsi & Farashahi, 2002; Goldsmith, 1996). For example, Uskiden & Pasadeos (1995) havecompared ASQ and OS from 1990 to 1992, and found mostly Western-centric research. Of the 53

    articles published by ASQ, 48 were from and about the USA, and the other five about Europe. Yet,very early Negandhi (1971) and others (see Kiggundu, Jorgensen and Hafsi, 1983, for a synthesis)have shown that developing countries general environment is so overwhelming that one may befaced with patterns that are at odds with western-based theories.

    Most of the environment influences are generally seen as task related and competitionborne (Porter, 1980). Competition dynamics are often presented as based on factor marketimperfections, and their differentiated exploitation by individual firms (Barney, 1990). It is forexample widely accepted that high barriers to entry, a small number of competitors, a lowelasticity of demand, a low cross-elasticity with substitutes, low relative power of suppliers and

    buyers, and product differentiation, all contribute to firm performance differences. Factor market

    imperfections are also generated by institutional factors (Oliver, 1997). Regulations, norms,cognitive-cultural factors all contribute to bending traditional economic rationality into normativerationality (DiMaggio and Powell, 1983). This is even more present in developing countries. Thegeneral environment is more fluid, and in particular socio-political factors dominate traditional taskenvironment factors (Scott, 2001; Martinez-Vasquez & McNab, 2000; Peng & Heath, 1996).

    The situation in developing countries such as Cameroon is also unsual (Hadjimanolis &Dickson, 2000; Kiggundu, Jorgensen, and Hafsi, 1983). In particular, industry dynamics is oftenhighly politicized and competition may be severely constrained (Brautigam, 1997). In addition, thepublic sector may be dominant, and private sector initiative may not be easy to predict. Whetherthere are barriers to entry or to exit is the object of specific bargaining among key actors. The very

    nature of what may constitute differenciation is subtle and hidden to the unfamiliar observer. Forexample, differentiation may be related to access to public markets, or public favors, for political

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    reasons. In general, the situation is highly fluid and unstructured, so that there is a need for a more"developmental perspective " (Allen, 1988).

    StrategyThese environmental influences are often seen as deterministic (Hrebeniak and Joyce,

    1986). Yet strategic choice is possible and has a bearing on a firm performance (Oliver, 1997;Porter, 1994). A resource perspective (Wernerfelt, 1984) suggests that resource selection anddeployment may result in sustainable firm performance variations where factor marketimperfections in the form of barriers to resource acquisition, imitation, or substitution are generated(Shoemaker and Amit, 1994; Barney, 1986; Penrose, 1959). In developing countries these barriersare also socio-political, with government playing a central role, and government access being a

    key meta-resource.

    The chamberlinian-penrosian (CP) theory (Barney, 1986; Penrose, 1959; Chamberlin, 1933;Robinson, 1933) emphasizes the unique assets and resources of the firm and their impact on the

    firm's strategy and returns. This perspective is interesting, particularly because it has been revivedrecently with the popularity of the resource-based view of the firm (Wernerfelt, 1984, 1995). Thisperspective is consistent with the traditional strategic management model (Ansoff, 1965; orLearned, Christensen, Andrews and Guth, 1965). More specifically, the CP, resource-basedperspective, suggests that certain ... resource and asset differences may allow some firms toimplement strategies that alter an industry's structure in ways that uniquely benefit these firms. Forthis reason, firm heterogeneity can represent an important source of competitive advantage forfirms" (Barney, 1986, p.793).

    Sustainable competitive advantage is the outcome of discretionary rational managerialchoices, selective resource accumulation and deployment, strategic industry factors, and factormarket imperfections. Whether resources are scarce, unique, inimitable, durable, idiosyncratic,

    nontradeable, intangible, and nonsubstitutable makes the difference in terms of sustainableadvantage and firm enduring performance. In developing countries, factor market imperfections,that are related to the nature of the general environment, abound, and provide ample space forstrategic choices (Gauthier, 1996). The competitive advantage of a firm may come more often fromits socio-political stakeholders relations skills than from other more traditional resources.

    However, in developing countries, national resource and structural problems come also tobear on the behavior of firms (Mathews, 2000; Gauthier, 1995). In particular, it has frequently beenshown that infrastructural factors may be an impediment to competitiveness of firms (Gauthier,1995; Ibghy & Hafsi, 1992). Basic utilities or transportation means may be critical for thedevelopment of firms, forcing some of them to commit important resources to be able to maintainan acceptable technical-economic performance (See Ouedraogo, 2003). Infrastructural factors arefrequently combined to regulatory factors to make the difference between success and failure.Also, institutional instability may lead to added uncertainty. For example, regulation may be hastilyimprovised to affect fondamentally the structure of industry, dramatically modifying barriers to

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    entry and competition. As a result, firm success in many developing countries could be morerelated to the ability to affect regulation or to benefit from it, thus to socially and politically-relatedfactors, than to technical-economic and competitive factors (Scott, 2001; Neelankavil, Mathur &

    Zhang, 2000; Tsang, 1998; Stiglitz, 1998).Evolutionary theories, most notably those of the Austrian school (Jacobson, 1992; Kirzner,

    1981) suggest that profit is not the result of monopoly power but rather the result of entrepreneurialdiscovery and innovation. According to these theories, the goal of strategy formulation is not tolimit competitive forces, but rather to discover new ways to generate returns. These ideas areparticularly relevant to developing countries situation, because of firm age, size and lack ofresources. We could therefore propose that entrepreneurs in Cameroon as in many developingcountries still attempt to avoid competition through discovery (Glueck, Kaufman and Walleck,1980) which may explain the amazing growth of the informal sector in these countries (Gauthier,1996; Arellano, 1994; De Soto, 1990).

    Alertness to opportunities is the distinctive competence of entrepreneurs, whether inCameroon or elsewhere. One would expect however the opportunities to emerge as much from theneeds of consumers, as from government regulations (Arellano, 1994; Brautigam, 1997). Themarket is described as rarely in equilibrium (Schumpeter, 1950; Mises, 1949), and this isexacerbated because "an enormous amount of ignorance stands in the way of completecoordination of the actions and decisions of the many market participants" (Jacobson, 1992;Kirzner, 1979). The field in Cameroon could be expected to generate innumerable opportunities forprofitable exchanges that go unnoticed, except by a few. Entrepreneurial profit is thus expected tobe related to access to superior information, especially from government sources.

    Also, in many developing countries, invisible assets have frequently been mentioned byresearchers (Woodworth, 2000; Goldsmith, 1992), as the name of the game, even though the termhas to be understood in a wider sense, and in particular includes a large array of intangible sourcesof competitive advantage, some politically-related (e.g., support of powerful individuals), othersethnically-related (access to the resources and support of a powerful group), still others market-related (e.g., access to information about government coming decisions). The same could apply toCameroon.

    In recent years, most developing countries have gone through a massive institutionalchange process, whereby traditional values have been peeled off the make up of firms andindividuals, because they have been seen as inimical to economic growth. As new institutions taketime to develop, a situation of institutional void may be experienced in some cases, which affectsthe normal functioning of these countries. The ability to deal with economic and social interactionsand to resolve conflict peacefully has also been severely weakened in the process. This weakinstitutional structure of many developing countries is an increasingly dominant factor, in the

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    determination of firmss performance (Stiglitz, 1998). Economic and Institutional theorists havesuggested that the key to understanding the lack of economic development is the gouvernability of the country (Hafsi and Faucher, 1996), which may be conceived to be theresult of a fit between purpose, institutional arrangements and leadership characteristics.Governability alone does not ensure success. Firms have also to be then competitive in theirmarkets, competitiveness being again the result of a combination of strategy, structuralarrangements and leadership characteristics. Applying this to the context of Cameroon, one wouldexpect governability issues to be dominant competitive factors (Wallis & Dollery, 2001; Klingner,1996). Thus the traditional teachings related to the effects of industry structure would probably nothold. Rather infrastructural, regulatory, and socio-political conditions would be at least asimportant as competition in determining firms performance.

    LEADERSHIP

    Furthermore, managerial in particular top management team characteristics have also beenshown to be predictors of organizational behavior and performance (Knight et al, 1999; Boeker,1997; Hambrick and Mason, 1984). The argument is that top management background, inparticular values and experiences are associated to firmss strategies and performance (Pegels,Song and Yang, 2002). The relationship between firm performance and leadership characteristicshas been widely studied (Hafsi and Fabi, 1996). Such factors as ge, experience, education andeven social origin, and psychological characteristics are related to performance. Hambrick,Geletkanycz and Frederickson (1993) have also shown that demographic and psychologicalcharacteristics are themselves related2. We would expect these authors propositions to apply to thesituation of Cameroon. In particular, age of managers may be positively related to sales growth,but negatively related to profit. Their education and experiences may be related to profit and

    stability. Finally Social and ethnic origins may be related to profit and growth performance.

    In a recent study, it has been shown that in Cameroon, age, education, social origin,property status, experience, and family background combine into four patterns of managerialprofile that are consistently related to strategic behavior (Hafsi, Mbassgu & Gauthier, 1997). Ingeneral, it may be said that in fluid environments, top managers have more profound influences asthey affect values and beliefs and institutionalization of corporate behavior (Selznick, 1957).

    In summarizing this discussion, the performance of firms in developing countries can beconceived to be determined by environmental, strategic and entrepreneurial characteristics. Theenvironment institutional instability may reduce the influence of traditional industry structuralfactors, and make entrepreneurial creation more effective. Socio-political skills may be seen as a

    2 . For example, commitment to the status quo, a psychological orientation, has been shown to be associated with (1)tenure in the industry, (2) present performance, and (3) the belief that successor will have the same characteristics.

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    critical resource, probably a kind of meta-resource that makes other resource acquisition anddeployment choices more relevant and more effective as a source of competitive advantage.Finally, top managers characteristics mediate between the peculiar environmental conditions of

    business and strategic choices. We would expect these three important factors to coalesce in alimited number of configurations. Tentatively, based on these conclusions, we can construct themodel described in Figure 1 below to explain the performance of firms in Cameroon. This figureshows that basic environmental factors (in particular infrastructure, regulation and governmentintervention), and leadership characteristics determine competitive dynamics, and firm strategies(in particular resource acquisition and deployment choices), which lead to performance. Therelationship is moderated by the firms resources and capabilities, in particular available socio-political skills.

    Figure 1: A model to explain firm performance in Cameroon

    Performance

    Competitive

    dynamics

    Infrastructure

    Leadershipcharacteristics

    Socio-politicalskills

    Firm strategies

    Regulation

    Governmentintervention

    Firm resourcesand capabilities

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    In this research, we use this model as a guide to check the relationships between firmperformance patterns and the three of environment, strategy and leadership patterns. In the nextsection, the data and methods used are described in more details.

    III. DATA AND METHODS

    1. THE SAMPLE

    The data used in this study were collected within the framework of The Regional Programof Enterprise Development (RPED), an important research project coordinated by the World Bank.Surveys were conducted in seven African countries undergoing adjustment programs. TheCameroon study was realized by the authors in collaboration with researchers and associates atEcole Suprieure des Sciences Economiques et Commerciales (ESSEC) of Douala. The survey wasperformed in June and July of 1993 and 1994 among manufacturing enterprises in Cameroon.

    A stratified sample of 202 firms, in the two main industrial regions of Douala and Yaound3and in four industrial sectors, wood and furniture, textile and clothing, metal and small machinery,and food and beverages, was studied. These geographical regions and industrial sectors account forthe vast majority of manufacturing activities in Cameroon.

    As shown in Table 1, 34 firms in the sample were classified as micro enterprises (1 to 4employees), 81 were small (5 to 29 employees), 54 were medium-sized (30 to 99 employees), and33 were large (100 employees or more). Forty firms in the sample could be categorized asinformal. These are defined as being either not legally registered, or registered as a personalenterprise, and satisfying one of the two following criteria: (1) they do not keep annual accounts or(2) they have an apprenticeship scheme4. Most informal firms were micro in size (0 to 4 full-time

    employees). It is also important to mention the very large average size of firms in the food andbeverage sector, in particular brewing and palm oil transformation. Some 56% (11,524 employees)of all full time workers are found in this sector5.

    3. Of the 202 firms in the sample, 142 were located in Douala, the economic center of the country,57 in the Capital Yaound, and 3 in the provincial cities of Edea (2) and Limbe (1).

    4 . For informal and micro firms, in the absence of an official census of enterprises in Cameroon, private sources wereused, and were complemented through field identification, with the help of local associations and cooperatives. 40such firms were included. The quality of the sample of informal and micro firms is hard to assess, and should beconsidered indicative if not necessarily representative of the population of these firms.5 .For the formal firm sample, all the 1500 business enterprises of the Rpertoire dentreprises camerounaisesofESSEC5 were examined in search of firms belonging to the four sectors and to the main cities, selected for study. only162 were identified. Therefore the sample of formal firms may be considered to be, if not the total population, highlyrepresentative of what it may be.

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    Two limits should be mentioned. First, the probability for a firm to be included in thesample is related to its size and visibility. Larger firms may therefore be overrepresented. Second,

    the Structural adjustment program (SAP) in Cameroon may have led to a high level of firm exitand creation, while our sample captures only those firms still active in the market, thus overstatingfirm dynamism. Table 1 presents the distribution of the 202 firms by size and sector and othersample characteristics.

    -----------------------------Table 1 about here-----------------------------

    Detailed information was collected on sales, employment, wages, finance and strategy. Thesurvey also provided information on firms constraints and effects of government policy. The

    questionnaire6 was divided into eleven sections of which: firm creation, general characteristics ofthe firm, competition, technology, labor market, financial markets, infrastructure, regulation,general firm support.

    The questionnaire was administered by a group of professors and research associates, underthe supervision of a principal researcher (one of the co-authors here). Each questionnaire wascompleted by the researcher in one or more interviews with the top officer (generally the Generalmanager) or the owner-entrepreneur of the firm, both of which appeared to be eager to collaborateto the research7. In addition to the questionnaire a mini case, based on interviews with key officers,was written on 50 of the participating firms.

    2. THE VARIABLES

    To investigate the relationships between performance and environmental, strategic andleadership factors, described in the model, and to search for patterns, we rely on three sets ofexplanatory variables as summarized in Table 2. These variables are:

    i. Environmental variables. These variables describe first the competitive dynamics of theindustries or, more realistically, of the country as a whole (number of competitors, size of maincompetitors, entry and exit of competitors, the effect of such movements). They also represent themacro and regulatory environment (taxation levels, interest rates, credit accessibility, credit cost,

    6 . Since the questionnaire is too long to be included in this paper, it is available upon request from the authors.7. Training sessions were conducted with each team of interviewers prior to the 6 week survey, in order toreconcile the potentially different interpretations of the questions and to reduce interviewer bias.

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    price of imported raw material, local demand variation and relative cost of labour), and finally theinfrastructural situation (electricity service level, telecommunication service level, road facilitylevel, security level, overall infrastructure situation, firmss infrastructure expenditures).

    -----------------------------Table 2 about here-----------------------------

    ii. Strategy variables.These variables have been chosen to show the pattern of resource deployment

    (Prescott & Vankatraman, 1990). Taking into account the quality of the responses obtained,fourteen have been selected among twenty five functionaly related variables. They include sevenmarketing variables, of which advertising and promotion expenses, and six other variablesdescribing the distribution and sales channels (direct sales to foreigners, sales throughprivateagencies to foreigners, direct sales to local private users, sales to local private intermediaries :

    retailers and wholesalers, sales to local public retailers and wholesalers). They include also fouroperation variables (mode of operation, movement of personnel, size of employment, degree ofspecialization) and three variables highlighting financial and technology policies (borrowing inlocal currency, foreign borrowing, royalty expenses). These variables are similar to those used inresearch published in the Strategic management journal, from its creation to 1996 as shown inAppendix 1.

    iii. Entrepreneurial characteristics variables.The fifteen variables were : Sex, Age, Geographical origin, Fathers employment, Mothers

    employment, Length of education, Major at university (if applicable), Managerial education,

    Experience before start up, Experience as an apprentice, Experience in the economic sector, Other

    firms under control, Vocational training in business administration, in a related technical field, in

    accounting. These variables are similar to those used in previous research (Daily & Dalton, 1992;Reuber & Fischer, 1992; Hambrick & Mason, 1984).

    These three sets of explanatory variables are then used to explain the followingperformance variables:

    Performance variablesThese dependent variables were seen as an indication of the firms capacity to adapt and

    survive (Chakravarthy, 1986, Vankatraman and Ramanujan, 1986). As shown in Table 3, weincluded in the model such variables as Growth in revenue, Profit to sales ratio, Debt to assetsratio, for Financial performance. Growth of personnel, Capacity utilization and Exports, for

    Operational performance, and Investment to sales ratio as an indication of the firms ability tosurvive in the long run.

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    ---------------------------------Table 3 about here---------------------------------

    The choice and classification of some of these variables may be subject to debate. Inparticular distinguishing between strategy and performance variables is a treacherous exercise. Forexample, Growth of personnel or Exports may also be used as strategy variables. They wereincluded as performance variables because, in our research, they were seen by managers as ameasure of their success in the Cameroonian environment. Growth of personnel is generally seenas an organizational effectiveness variable, because of the firms close links with the surroundingcommunity. Similarly, Exports is also seen as an organizational effectiveness variable becauseexports enhance the firms ability to reduce its dependence on local politics8.

    3. EMPIRICAL ANALYSES

    To identity the patterns that characterize Cameroonian firmss behavior and the relationship

    of such a behavior to performance we proceeded in two steps:

    1. We looked for patterns of generic strategies, environment conditions and leadershipcharacteristics that make up or explain the actual behavior using a factor (principalcomponent) analysis.

    2. Then the factors obtained were used as independent variables in a regression analysis to

    explain performance.

    8 . How to define the strategy variables is debatable. One could argue that all strategy variables areperformance variables as well, because strategy is intended to become behavior, and thus performance.What is strategy or performance is simply a matter of focus of attention for managers. For example, marketshare or relative market share, as well as product quality, and the various marketing expenditure (importantcost factors) are in most research used almost indifferently as strategy or as performance variables.Managers on the other hand use any of these as a performance variable to emphasize the point of applicationof the corporate energies. The same ambiguity applies to the variables used here. We have used them as

    performance variables simply because managers in Cameroon appeared, at the time of the field research, tomeasure their performance relative to competition on the basis of these variables.

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    The use of principal component analyses was selected given its usefulness in situationswhere a large number of variables is to be introduced in a model and when these variables arecorrelated (Miller & Friesen, 1984), which is the case here. The principal component analysis isbased on the idea that there may be factors that explain the behavior of all the variables retained. Inother words, the analysis is used to identify a small number of common factors, say q of them, thatlinearly reconstruct the p original variables:

    Yij = Xi1B1j + Xi2B2j + + XiqBqj + Eij

    Where Yij is the value of the ith observation on the jth variable, Xiq is the ith observation onthe qth common factor, Bqj is the set of linear coefficient called the factor loadings, and Eij issimilar to a residual but known as the jth variable's unique factor. Because everything except theleft-hand side variable is to be estimated, the model has an infinite number of solutions. Variousconstraints are introduced along with a definition of "reconstruct" (here minimum residual variancesummed across all equations), to make the model determinate.

    The principal component analysis, together with the special combinations of variables,provides an indication of the basic forces that underly all the variables. This may be interpreted asthe underlying patterns that make up strategy. This R clustering, as opposed to the Q clustering (seeMiller and Friesen, 1984), focuses on variables rather than firms, and is thus intended to identifycommon factors, generic rather than actual behavior or characteristics. The latter would probablybe unique combinations of the generic environments, strategies and leadership characteristicsidentified. Miller and Friesen have argued that given that strategy is situational, these patterns arenot as useful as cluster of firms actual strategic behavior, but we still believe that in anenvironment such as Cameroon, where strategic choice is reduced and environmental determinismhigh (Hrebeniak and Joyce, 1985), that generic behavior is interesting and relevant. From such

    generic behavior, one can come up with hypotheses about firmss actual strategic behavior.

    Finally, the relationship between performance and all of environment, strategy andentrepreneurial characteristics is reconstructed by regressing the performance data available on thefactors identified previously. This is a procedure which is now becoming widely accepted and hasbeen used in many strategic management articles (Kim and Lim, 1988; Vankatraman and Grant,1986; Miller and Friesen, 1984). The factors themselves are the basic representations of theoriginal variables; it is therefore legitimate to replace these variables with the factors identified.

    Such a procedure increases the efficiency and power of the regression procedure, byincreasing the degrees of freedom. More important, since the factors are representative of generic

    patterns, it is the correct procedure for identifying the relationship between (generic) strategy and

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    performance. Each of the performance variables is regressed on the factors, and the results are thencompared and discussed9.

    IV. FACTOR ANALYSES: RESULTS AND CONCEPTUALIZATION

    Tables 4 ABC, 5 and 6 show the results of the principal component analysis. Each group ofvariables led to a set of factors that can be interpreted as follows.

    1. Environment factorsTable 4A shows the infrastructure factors generated by the principal component analysis.

    Factor 1, has been labelled Overall infrastructure constraints, because roads, electricity and aconstruct of overall infrastructure problems load higher. Factor 2, Telecommunication, isprincipally composed of telephone problems and the absence of infrastructure expenditure. Thesefactors show that:

    Proposition 1: In Cameroon, roads, electricity and telecommunications are the criticalinfrastructural constraints for business.

    Competition variables analysis (Table 4B) produces three factors. Factor 1 represents anIncrease of competition trend. Entry of new competitors and its impact on price and market shareload heavily on this factor. Factor 2 represents a Reduction of competition trend because thedeparture of competitors, its impact and the (negative effect of) total number of competitors loadedmost. Finally Factor 3, labelled Size of competitors, is mainly composed of the competitor sizevariable. As a consequence, we can deduce that:

    Proposition 2: In Cameroon, entry and exit of competitors and their size dominate thecompetitive dynamics of business.

    Regulatory and macroeconomic variables produced also three factors (Table 4C). The firsthas been labelled Financial environment, because Credit cost and access load heavily. Factor 2represents the Overall regulatory conditions, as interest rate, lack of demand, corruption, taxes andcost of labour were significant components. Factor 3, Taxation, included Price of imported rawmaterials and taxes. Therefore:

    Proposition 3: In Cameroon, taxation, regulation and credit availability are the mainmacro-economic environmental constraints that come to bear on business firms.

    9 . All these estimations were run using the Stata 4 software.

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    These eight factors generated here are used in the regression analysis of section V.

    ------------------------------------------Tables 4A, 4B and 4C about here------------------------------------------

    2. Strategy factors

    The seven strategy factors generated by the fourteen strategy variables were confirmed by avarimax rotation. All the factors appear to be important in explaining the variables. Each of thefactors, a configuration of variables (Miller and Friesen, 1984), can be construed to be a genericstrategy. The first factor is a combination of relatively (to the average firm) large advertisingexpenses and licencing royalty expenses, a high level of sales to public sector intermediaries(wholesalers and retailers), a very low level of direct sales to private users, a subtantial level ofborrowing in local and foreign currencies, above average levels of imports, employees andoperation shifts, a below average level of specialisation, and a very low level of personnel change.This profile suggests a generic strategy of Focus on public sector intermediate (or industrial)markets. For lack of space we cannot describe all the factors, but similarly we can attribute thefollowing meanings to the other factors generated by the principal component analysis:

    i. Factor 2: Focus on private intermediate (or industrial) markets,ii. Factor 3: Consumer-based entrepreneurial strategy,iii. Factor 4: Production-based focus on consumer markets,iv. Factor 5: Export focus,v. Factor 6: Focus on public sector consumption markets,vi. Factor 7: Production-based supply to the public sector.

    These factors characteristics lead to the following proposition:

    Proposition 4: Cameroonian firm actual strategies are a combination of genericstrategies that emphasize market positioning and production.

    ----------------------------------Table 5 about here----------------------------------

    3. Entrepreneurial characteristics factors

    Entrepreneurial variables generated four factors emphasizing four critical variables: formaltraining, experience, social origin and sex. For example, in the first factor, management andaccounting training dominates. In addition, technical training, apprenticeship load significantly,

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    while age and geographical origin are also significant but with a negative sign. We have thereforedecided that this combination of variables could be construed to mean Formal training, which isthe chosen for the factor. Similarly, the other factors have been labelled as follows:

    i. Factor 2: Experience (ge and informal training), with older and self-educatedmanagers dominating,

    ii. Factor 3: Social (socio-geographic) origin, with urban and higher socio-economic origins dominating,

    iii. Factor 4: Sex, mostly technically educated males dominate.Taking these factors into account, we can propose:

    Proposition 5: The managers that dominate business in Cameroon are mostlyexperienced and formally trained males with urban and higher social-economic backgrounds.

    ------------------------------

    Table 6 about here------------------------------

    Table 7* summarizes the identity of the various factors used in the regressions, and Table 8presents a summary of performance variable statistics.

    ----------------------------------Table 7 and 8 about here----------------------------------

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    V. REGRESSION ANALYSES: RESULTS AND CONCEPTUALIZATION

    In this section, we try to explain performance (growth of sales and labor, and profit/sales ratio)using the factors developed earlier as independent variables. To do so, stepwise regressions witheach of the group of factors have been run on each of the performance variables : Growth of salesrevenue, growth of personnel, profit to sales ratio, capacity utilisation, and also on quasi-performance variables such as investment over sales ratio, debt to assets ratio and exports. Also,four industry dummy variables (public versus private, local versus foreign, size and type ofindustry) have been included to track better the sources of performance. Results are provided inTable 9.

    --------------------------------Table 9 about here--------------------------------

    We observe first that there is a high level of explained variance of sales growth. AdjustedR2 is generally over 30%, and reaches up to 67% for the overall growth of sales, with a largenumber of factors showing significant contributions at the .05 level. Looking in details, theoverall sales growth is explained significantly by such factors as : Formal training of managers,Age and informal training of managers, Overall regulatory conditions, Taxation, Entrepreneurialstrategies in consumer markets and strategies of Supply to Private sector industrial markets and toPublic sector consumer markets, which clearly makes sense in an environment such asCameroons. In addition growth appears to be higher in food products and lower in wood products.Also, medium-sized firms appear to have lower growth, which is confirmed by a look at thedescriptive data gathered10. As an example, from Table 9, and using only the factors that aresignificant, the Growth of sales equation can be written as follows:

    Gsales = 0,15 + 0.06*Ent1 0.10*Ent2 + 0.19*Reg2 0.12*Reg3 + 0.28*Stra2 + 0.37*Stra3 0.09*Stra6 + 0.20*Food 0.15*Wood 0.20*Medium

    The overall Growth of labour is affected by a set of factors similar to that of the overallGrowth of sales. Financial conditions and Sales to the public sector appear to play a moresignificant role than sales to the private sector. The most important difference is that Food andWood product companies grew more and, in decreasing order of importance, micro firm then smalland medium-sized firms grew more their labour than large firms. This may be related to the needfor large firms to adjust to adverse economic conditions by being more cautious about hiring, onthe one hand, and on the other hand the smaller firmss ability to take over the slack left byexpanding their operations.

    10 . Growth of sales in the two periods considered in the data, 92-93 and 93-94, show similar results, but the significantfactors are sometimes slightly different. The differences may be explained by the dramatic 50% devaluation of thecurrency, that took place in 1993, which probably changed the dynamics between the two years under study.

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    There results can be summarized in the following propositions:

    Proposition 6: Growth11 of firms is [positively] associated to ge and training (both

    formal and informal) of managers.Proposition 7: Growth of firms is [negatively] associated to taxation levels and to the

    general regulatory conditions.

    Proposition 8: Strategies emphasizing supplies to industrial markets or to public sectorconsumption, and entrepreneurial strategies focused on consumer markets are associated to [a

    higher] growth of firms.

    Proposition 9: Smaller firms grow faster than larger ones.

    In comparison, Profit/Sales ratio is quite poorly explained. It is possible that profit is not arealistic variable to measure in such settings, given the frequent tendency to evade taxation. So ourprofit data may be severely tainted. Another important problem comes from the limited number ofobservations for which data were available for all sets of variables. Barely above 40 firmspresented all the data required to be included in the sample. The data set for profit was highest forthe profit/sales ratio, with 78 observations. This explains and justifies even more the use of factorsto conduct the regression analyses, increasing thus the degrees of freedom, and the reliability of theresults.

    The so-called quasi-performance variables level of explanation is rather weak. In additionto the small number of usable observations in the data set, it is also possible to argue, as suggestedearlier, that capacity to invest, debt capacity, exports and capacity utilization are not performancevariables, but strategy variables, thus it is simply not appropriate to use them in the regression,because of numerous technical problems, in particular unacceptable collinearity between the

    dependent and the independent variables.More specifically, the profit to sales ratio is affected positively by the increased

    competition, negatively by strategies of supply to private industrial markets, to public sectormarkets and exports. This seems paradoxical but, using our qualitative data, one can suggest thatthese strategies lock the firms in captive markets where the buyers are powerful, and only thepowerful, sometimes foreign, new comers can obtain higher profits. Capacity utilization isexplained by the positive effect of age and socio-geographic origins of the owner-manager, and oftelecommunications, and negatively by a strategy focused on export or public sector industrialmarkets. The regression shows that locally-owned or public sector or wood products firms havesignificantly lower capacity utilization, and that smaller and food and textile firms havesignificantly higher capacity utilization. The capacity to invest is related significantly and

    negatively to the competitive structure, to a strategy of focus on private markets, whether industrial

    11 . as measured by sales volume and number of employees.

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    or consumer, and to a strategy focused on public sector supply markets. This would probablysuggest that the capacity to invest is generally weak. Wood product firms appear to have a poorercapacity to invest than average, while smaller firms (except micro) appear to have a better relativecapacity.

    The debt to assets ratio is related significantly and negatively to the competitive structureand to the export focus strategy. It is also significantly related, negatively to the strategy of focuson exports, and positively to the strategy of supply to the public sector. The regression shows thatlocally-owned firms, public sector firms, food and wood product firms have a significantly higherthan average ratio, which, drawing on our qualitative data ,can be explained by either the politicalpower of the firm, in the two first categories, or by their economic power in the last two. Finallythe export performance appears to be significantly explained by strategic behavior. An export focusstrategy, not surprisingly, affects positively and strongly, the exports, while the strategies focusingon public sector industrial or consumption markets, and on consumer markets affect negatively andstrongly the tendancy to export. It is as if the focus on national markets was, in Cameroon,

    incompatible with exports.All these findings lead to the following general proposition, which confirms our

    expectations at the outset and general findings in the strategic management literature (Schendel &Hofer, 1978; Andrews, 1987)

    Proposition 10:Leadership characteristics, environmental conditions and strategic choicesexplain Cameroonian firm performance.

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    VI. DISCUSSION AND IMPLICATIONS FOR RESEARCH AND PRACTICE

    This research shows a clear relationship between the proposed dimensions of leadership,environment and strategy, and firm performance. This relationship is probably not limited to theCameroonian setting. Similar findings have been reported in other countries. In particular, researchhas abundantly shown the importance of environment on performance (see Hafsi & Farashahi,2002; or Kiggundu et al, 1983 for syntheses). As an example, Tsangs research on 19 Singaporefirms in China concludes that Many of the problems arise because a foreign investor has not fullyprepared to deal with local characteristicsSimilarly, Neelankavil, Mathur & Zhang (2000)survey of Chinese, Indian, Filipino and US Middle-level managers support the notion that culturehas a significant impact on managerial practices Also, on the topic of leadership influences,Msimangira (1994) studied the role of senior and middle-level managers in public manufacturingfirms of Tanzania, to argue that Middle managers do not have as much influence to effect changes

    as do senior managers Fall and Sullivan (1982), in a study of Program success in Senegalconclude further that successful implementation requires that local administrators be involved.Finally, Goldsmith (1996) argued the importance of strategy in performing firms of developingcountries, while Sim & Teoh (1997) studying the relationships between strategy, environment andcontrol in three different settings, find that there are significant relationships between strategytypes (using the Miles and Snow typology) and environmental characteristics and control systemattributes. This encourages us to build on the results of this study to suggest that further researchbe conducted in developing countries at large, on the following set of hypotheses:

    1. In developing economies, leaders demographic characteristics affect performance.Older, more experienced managers of higher socio-economic status and of urban

    background affect positively profit, while younger, less experienced, of lower socio-economic status and of rural background, affect positively growth of revenues.2. In developing economies, entrepreneurial strategies (with higher risk, less government

    involvement, free-market driven) generate more growth and more profit than managerialstrategies (focused on stable markets, with high government involvement, and protectedmarket segments).

    3. In developing economies, opportunities available to large firms are government-controlled, while opportunities for small entrepreneurs are market driven.

    4. In developing economies, industry structure is determined by government intervention,either through regulation or through fiscal and financial measures.

    5. In developing economies, performance is explained more by hidden strategic factors (in

    particular privileged access to government resources and favors, and to critical marketinformation) than by obvious market forces.

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    The last three hypotheses suggest that institutional determinants of organizationalperformance (Scott, 2001), which have been neglected in this work, may be more important thanthe traditional and more easily quantifiable factors. If government is so important, and if hiddenstrategic factors, such as access to government resources and favors, are significant determinants ofperformance, then research more focused on such soft institutions as norms, values, cognitiveorientations, and taking into account harder institutions such as regulations, may be more relevantand more powerful to explain strategic behavior in developing countries (Scott, 2001).

    In this research, we have investigated the effects of three sets of factors, describingleadership characteristics, environmental conditions and strategic choice patterns, on business firmperformance in Cameroon. Using factor analysis we have focused on 19 factors generated by 43independent variables to explain firm performance. These factors explain reasonably well firmsgrowth, as measured by sales volume and number of laborers. Profitability is however poorlyexplained, but as argued earlier there is a suspicion that data concerning profit are tainted by thegeneral lack of transparency in developing countries and the common practice of reporting lower orno profits to avoid taxes (Gauthier & Gersovitz, 1997).

    Each of the set of factors is interesting enough to attract the attention of both researchersand practitioners. Researchers may be tempted by other large sample hypotheses testing designs totest the validity of the general hypotheses offered earlier. First, applicability to situations ofdeveloping countries that are different from those of Cameroon can be investigated. Then, moreinterestingly, comparative studies of firms in a variety of transitional settings could be undertakento test the validity of the proposed hypotheses.

    As the results suggest important institutional undercurrents, It is also necessary to check theinstitutional framework effects (Scott, 2001). For example, it is increasingly argued that theory

    developed in western settings is applicable to developing country situations (Hafsi and Farashahi,2002). Even though powerful institutions come to bear on such a trend, it is useful to designresearch that allows meaningful comparisons. This would not come easy. One step would be to usethe same conceptual framework. Second, it is necessary to reduce confounding factors to aminimum. Therefore, one could sample firms in the same industry and countries with similarcharacteristics of size and economic development.

    In general, research in developing countries suffers from many difficulties. It is hardenough to collect data in settings that do not have the political stability of the western world. Inaddition, the quality of data is often questionable, first because of the inevitable gap that existbetween the language used by researchers and local mores and vernacular. This is compounded

    when the researcher does not speak the local language. Second, business behavior is not alwaysseen as legitimate. Firms are pressured by governments to be socially responsible and politicallypliable, in return for economic rent favors. This leads to dissimulation and a generalized lack of

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    transparency. Third, institutional instability makes for unstable business behavior. What iscollected and observed by researchers is often opportunistic, at best valid here and now, and mayhave no link with any sought after stable pattern of behavior. Creative procedure have yet to be

    invented to provide meaningful research findings in developing countries.

    Nevertheless, practitioners could take notice that leadership, environmental and strategycharacteristics are real determinants of performance. The fit among these factors is a must forbetter performance. In particular older, better trained and more experienced, urban and well to domanagers have better chances of success. This shows also that developing countries are not landsof opportunities where every Horatio Algiers can succeed. Strategic choices that appear to succeedare generally related to good relationship with government, which may accentuate the previousdiscriminatory factors, if government officials are of the same social-economic group as firmmanagers. Young managers of lower social-economic origins may take comfort in the idea thatentrepreneurial activities are still important in transition economies, but may be warned that

    government is a key factor. Entrepreneurs learn soon enough that entrepreneurial activities shouldalso cover government action, thus should generate the relationships that are needed to get accessto critical resources in a less than perfect market. A close attention to the Camerounian case showsalso that there is a lot of efficiency to be gained, especially in capacity utilization. A competitivestructure appears to be effective in improving profitability, but reduces the slack available forfurther development. Finally, small and medium-sized firms, though less profitable, seem to bedoing better at growth (including capacity to invest and to borrow) and at general efficiency (inparticular capacity utilization), than large firms, so it may be that, in transition economies, small isbeautiful.

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    TABLE 1: DISTRIBUTION OF FIRMS BY SIZE AND SECTOR

    Sectors Micro(1-4)

    Small(5-29)

    Medium(30-99)

    Large(100+)

    Total

    Food and Beverages 4 24 16 13 57

    Wood and Furniture 10 17 6 10 43

    Textiles and Clothing 9 18 7 4 38

    Metal and Machinerie 11 22 25 6 64

    Total 34 81 54 33 202

    TABLE 3: DEPENDANT VARIABLES

    Type of Variables Actual Variables in the model

    i. Growth in revenueii. Profit to sales ratio

    a. Financial

    iii. Debt to assets rationiv. Growth of personnelv. Capacity utilization

    b. Operational

    vi. Exportsc. LR performance vii. Investment to sales ratio

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    TABLE 2: INDEPENDANT VARIABLES

    Environmental Vbles Strategy Vbles Entrepreneur Vblesi. number of competitors i. Advertising and

    promotion expensesi. Sex

    ii. size of main competitors ii. Direct sales toforeigners

    ii. Age

    iii. entry and exit ofcompetitors

    iii. Sales through privateagencies to foreigners

    iii. Geographical origin

    iv. taxation levels iv. Direct sales to localprivate users

    iv. Fathers employment

    v. interest rate v. Sales to local private

    intermediaries

    v. Mother's employment

    vi. credit accessibility vi. Sales to local publicintermediaries

    vi. Length of education

    vii. credit cost vii. Mode of operation vii. Major at universityviii. price of imported rawmaterials

    viii. Movement ofpersonnel

    viii. Managerialeducation

    ix. local demand variation ix. Size of employment ix. experience beforestart up

    x. Relative cost of labor x. Degree of specialization x. experience as anapprentice

    xi. Electricity service level xi. Borrowing in local

    currency

    xi. experience in the

    economic sectorxii. Telecommunicationservice lebel

    xii. Foreign borrowing xii. other firms undercontrol

    xiii. Road facility level xiii. Royalty expenses xiii.vocational training inbusiness admin

    xiv. Security level xiv.vocational training ina related tech field

    xv. Overall infrastructuresituation

    xv. vocational training inaccounting

    xvi. Firm's infrastructureexpenditures

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    TABLE 4A: RESULTS OF PRINCIPAL COMPONENT ANALYSIS OFENVIRONMENTAL VARIABLES: INFRASTRUCTURE

    FACTORS

    INITIALVARIABLES

    1INFRA1

    2INFRA2

    E7 0.61 0.07

    E8 0.51 -0.22

    E9 0.34 0.85

    E10 0.66 -0.13

    E11 0.94 0.11

    E12 -0.50 0.50

    EIGENVALUE 2.34 1.05

    % VARIANCE 39.01 17.56

    # Observations = 146Factor1: INFRA1 = Overall infrastructure conditionsFactor2: INFRA2 = Communications problems

    INITIAL ENVIRONMENTAL INFRASTRUCTURE VARIABLESE7 = ElectricityE8 = RoadsE9 = TelephoneE10 = SecurityE11 = Infrastructure constraintsE12 = Infrastructure expenses

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    TABLE 4B: RESULTS OF PRINCIPAL COMPONENT ANALYSIS 0F ENVIRONMENTALVARIABLES: COMPETITION

    FACTORS

    INITIALVARIABLES

    1COMP1

    2COMP2

    3COMP3

    E1 0.37 0.17 -0.70

    E2 0.01 -0.16 0.75

    E3 0.83 -0.34 0.01

    E4 0.80 -0.36 0.16

    E5 0.58 0.61 0.08

    E6 0.20 0.76 0.33

    EIGENVALUE 1.83 1.27 1.21

    % VARIANCE 30.59 21.16 20.14

    # Observations = 158

    Factor1: COMP1 = Increased competitionFactor2: COMP2 = Decreased competitionFactor3: COMP3 = Competitive structure

    INITIAL ENVIRONMENTAL VARIABLES OF COMPETITIONE1 = Number of local competitorsE2 = Competitor size

    E3 = Entry of major new competitorsE4 = Impact of entry of major new competitorsE5 = Departure of major competitorsE6 = Impact of departure of major competitors

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    TABLE 4C: RESULTS OF PRINCIPAL COMPONENT ANALYSIS OFENVIRONMENTAL VARIABLES: REGULATION

    FACTORS

    INITIALVARIABLES

    1REGUL1

    2REGUL2

    3REGUL3

    E13 0.69 0.25 -0.08

    E14 0.76 -0.14 0.23

    E15 -0.61 0.41 -0.06

    E16 0.09 -0.58 0.41

    E17 -0.16 -0.28 -0.63

    E18 0.11 0.51 -0.46

    E19 -0.25 0.39 0.62

    E20 0.40 0.57 0.18

    EIGENVALUE 1.69 1.41 1.21

    % VARIANCE 21.13 17.66 15.14

    # Observations = 158

    Factor1: REGUL1 = Financing conditionsFactor2: REGUL2 = Overall regulatory conditionsFactor3: REGUL3 = taxation

    INITIAL ENVIRONMENTAL VARIABLES OF REGULATIONE13 = Access to credit

    E14 = Cost of creditE15 = Interest rateE16 = Lack of demandE17 = Price of imported raw materialsE18 = CorruptionE19 = TaxesE20 = Cost of labour

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    TABLE 5: RESULTS OF PRINCIPAL COMPONENTS ANALYSIS OF STRATEGICVARIABLES

    FACTORS

    INITIALVARIABLE 1STRA1 2STRA2 3STRA3 4STRA4 5STRA5 6STRA6 7STRA7

    S1 0.14 0.34 0.07 -0.37 -0.43 -0.37 0.24

    S2 0.19 0.32 -0.21 0.04 0.31 0.19 0.66

    S3 0.94 -0.28 -0.05 -0.02 -0.02 -0.02 -0.04

    S4 -0.94 0.26 0.05 0.02 0.02 0.02 0.03

    S5 0.02 0.17 0.19 -0.14 0.75 -0.01 -0.42

    S6 0.07 0.26 0.42 0.04 0.30 -0.38 0.42

    S7 -0.31 -0.73 0.37 0.21 -0.22 -0.09 0.04

    S8 -0.02 -0.01 0.23 -0.71 -0.01 0.57 0.13

    S9 0.06 0.65 -0.68 0.06 -0.16 0.02 -0.16

    S10 0.61 -0.17 -0.04 0.02 0.13 -0.05 0.12

    S11 0.18 0.52 0.19 0.36 0.07 -0.14 -0.06

    S12 -0.17 -0.41 -0.22 0.50 0.11 0.37 0.26

    S13 0.16 0.47 0.46 0.31 -0.31 0.30 -0.04

    S14 0.48 0.46 0.35 0.19 -0.12 0.33 -0.11

    S15 0.94 -0.27 -0.04 -0.003 -0.02 -0.01 -0.05

    EIGENVALU 3.52 2.40 1.35 1.23 1.15 1.02 1.00

    % VARIANCE 0.23 0.16 0.09 0.08 0.08 0.07 0.07

    #Observations = 142

    Factor1: STRA1 = Focus on public sector intermediate (or industrial) marketsFactor2: STRA2 = Focus on private intermediate (or industrial) marketsFactor3: STRA3 = Consumer-based entrepreneurial strategyFactor4: STRA4 = Production-based focus on consumer markets strategyFactor5: STRA5 = Export focus strategyFactor6: STRA6 = Focus on public sector consumption marketsFactor7: STRA7 = Production-based supply to the public sector

    INITIAL STRATEGIC VARIABLESS1 = % Import of raw materialsS2 = Size of employmentS3 = Advertising expensesS4 = Movement of personnelS5 = Direct sales to foreigners

    S6 = Sales made by private agencies to foreignersS7 = Direct sales to private usersS8 = Direct sales to public usersS9 = Sales to private retailers or wholesalersS10 = Sales to public retailers or wholesalersS11 = Mode of operationS12 = Organization structureS13 = Borrowing in local currencyS14 = Foreign borrowingS15 = Royalty expenses

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    TABLE 6: RESULTS OF PRINCIPAL COMPONENT ANALYSIS OFENTREPRENEURIAL VARIABLES

    FACTORS

    INITIALVARIABLES 1ENT1 2ENT2 3ENT3 4ENT4

    C1 0.18 -0.28 -0.09 0.79

    C2 -0.21 0.76 0.09 0.29

    C3 -0.26 0.39 -0.60 0.30

    C4 0.06 0.09 0.62 -0.03

    C5 0.35 0.61 0.44 0.14

    C6 0.77 0.22 -0.32 -0.11

    C7 0.34 -0.39 0.26 0.44

    C8 0.81 0.06 -0.18 -0.14

    EIGENVALUE 1.63 1.40 1.16 1.04

    % VARIANCE 0.20 0.17 0.14 0.13

    #Observations = 121

    Factor1: ENT1 = Formal


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