Entrepreneurial capacity and state incapacity: Family firms in Bangladesh / Farzana Nahid

Farzana , Nahid (2017) Entrepreneurial capacity and state incapacity: Family firms in Bangladesh / Farzana Nahid. PhD thesis, University of Malaya.

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Abstract

This study examines family businesses with strong entrepreneurial capacity, operating in a developing economy governed by what can be characterized as a state with little capacity to nurture vibrant domestic firms. The empirical focus of this study is that of entrepreneurial family firms in Bangladesh and their rise as major corporate enterprises in spite of the state’s incapacity to help foster the development of domestic firms. These family firms emerged in Bangladesh, a weak state marked by persistent political turmoil, a deeply fractured bureaucracy stemming from the country’s double partition history, an inefficient and inexperienced political and judicial institutions, and a governance system heavily plagued by corruption and rent-seeking. Moreover, since independence, different regimes have initiated various policies through which the agrarian-dominated economy gradually turned into a manufacturing-dominated economy where family firms were the main engines of economic growth. These family firms have identified opportunities to survive and grow, have been innovative and adaptive, have taken risks and have nurtured successors with entrepreneurial skills. As policy initiatives were not adequate to nurture their growth, family firms maintained convenient, yet sometimes illegitimate, relationships with the government, a nexus that helped them secure access to various government concessions and the means to shape policies in their favour. This study uses concepts from two bodies of literature as family business and the developmental state. These two bodies of literature have not been used together while analysing the development of family firms under a weak state. Given this situation, the study deals with two key questions. First, how did family firms emerge as conglomerates while being confronted with state incapacity? Second, what do the histories of these large family businesses indicate about their entrepreneurial capacity and/or their forms of state-business nexuses? This study adopts a business history approach in order to trace the evolution of seven large family firms in Bangladesh. They are: A.K. Khan, BEXIMCO, Square, Anwar, Akij, Rahimafrooz and PRAN-RFL. The seven case studies highlight three vital issues: firstly, the state has been incapable of adopting viable and well-planned strategies to nurture domestic enterprises. Secondly, the form of entrepreneurship and state-nexuses that these large firms adopted helped them sustain themselves even under a weak state and in a situation of economic bottlenecks and political crises. Thirdly, this study confirms that no single factors from within entrepreneurship and state nexuses could assist the family firms to survive and grow within a weak state, rather the firms needed a combination of both, which heavily influenced business strategies. This is how the ideas from scholarly work about the developmental state, and from schools of thought about entrepreneurship together have contributed to a better understanding of how large family firms survive and grow in a weak state like Bangladesh. Although these two factors mutually nurtured their business growth, however, the weak state allowed the firms to remain domestic market focused, export few products to lower and lower middle income countries, avoid public listing and professionalization of the organizational structure.

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