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Socio-Economic Review Advance Access published online on October 20, 2005
Socio-Economic Review, doi:10.1093/SER/mwj034
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© The Author 2005. Published by Oxford University Press and the Society for the Advancement of Socio-Economics. All rights reserved. For Permissions, please email: journals.permissions@oxfordjournals.org

Article

The Institutional Basis of Economic Failure: Anatomy of the Segmented Business System*

Geoffrey Wood 1* and Jedrzej George Frynas 2

1 School of Management, University of Sheffield, Firth Court, Western Bank, Sheffield, S10 2TN, UK
2 Middlesex University Business School, The Burroughs, London NW4 4BT, UK

* To whom correspondence should be addressed.
Geoffrey Wood, E-mail: g.t.wood{at}sheffield.ac.uk


  Abstract

There has been a glaring lack of research on institutional configurations, which impede rather than promote economic success. Building on Richard Whitley's business systems theory and based on the experience of East Africa, this paper attempts to fill a gap in the literature by identifying a distinct variety of capitalism, the segmented business system. Segmented business systems are characterized by rigid internal divisions between different areas of economic activity. The relative impermeability of barriers between the latter partially accounts for their weak track record; this is mitigated--but, in some cases, exacerbated--through the operation of informal networks of support. Whilst segmented business systems would seem to be characterized by consistent institutional failure, specific aspects thereof have proved highly functional to elite interests. However, given their vulnerability to external and internal pressures, segmented business systems are likely to remain locked in a cycle of generally poor and uneven economic performance in the absence of radical reforms.

Keywords: business systems; varieties of capitalism; institutions; African economies.
*We are very grateful to Richard Whitley and two anonymous reviewers for helpful comments on an earlier draft. All remaining errors are ours.
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