Small towns in the rural areas of the global south have captured increasing attention in the recent rural development literature, given the role they play in creating business development and employment creation. As the rural population increase amid a declining share of farm sector employment, small towns invite migrants from rural areas to expand on non/farm activities as an income diversification option besides agriculture. Emerging Urban Centres (EUCs) represent a fast-growing section of a small town that experiences a rapid increase in population and economic development as most small towns comprise other mostly rural areas with extensive farmland and dispersed population. Business development in the rural areas is constrained mainly by the uncertain environment created by lack of capital with small formal financial sector, information, and skilled personnel. A vast literature has documented social networks to be stronger around small towns and play a significant role in influencing market information, labour, and capital, access. However, empirical evidence documenting how social networks have influenced business development, investment, and employment around small towns amid limited resources has lacked empirical attention in the global south‟s rural development literature. Therefore, this study examines the role social networks play in influencing business developments, investment, and employment creation within Ilula and Madizini EUCs. The study focuses on answering the following research questions: (i) what kinds of businesses operate in EUCs, and their characteristic features in terms of flows of goods and services? (ii) how are EUC business networks structured, and what are the trading constraints and opportunities? Similarly, the study aims to test the following hypotheses: (i) the size and influence of social networks and the individual, business and farm characteristics of EUC business owners do not significantly influence business development (ii) strong (family and friendship) and weak (acquaintance) social network ties and business owner related socioeconomic and business-specific characteristics of EUC businesses do not significantly influence business investment decisions in EUCs; and (iii) the size and influence of social networks and the individual, business and farm characteristics of EUC business owners do not significantly influence business employment creation within the EUCs.
This study took its point of departure from Social Network Theory, which argues that economic actors‟ actions are embedded within their social relations and that their positions within the web of social interactions determine their opportunities and constraints. Examining business development from a social network perspective enables researchers to understand the evolution of different businesses in small towns over time and space. Empirically, the study focuses on Ilula and Madizini EUCs, which are in the rural areas of the Iringa and Morogoro regions in Tanzania. The study was based on quantitative and qualitative data collected using survey questionnaires and interview guides from a random sample of 459 and 296 businesses in the EUCs in Ilula and Madizini. Data processing and descriptive and multivariate analyses were done using Microsoft Excel, SPSS, and STATA software. Organisation and analysis of social network data use using Gephi software, while content analysis was used to analyse qualitative information using NVIVO software.
The study results depicted EUCs in Ilula and Madizini as key market centres for dominant agricultural produce, mainly tomato and paddy/rice from the surrounding near and distant villages. A large proportion of which was traded to regional and international markets, these centres were also market nodes for industrial goods from other urban areas to surrounding rural areas. About 60 percent of all businesses belong to the trading category (mostly unspecialised). The majority of these businesses are involved in crop-trading and wholesale/retail. Services based businesses and manufacturing and transportation were seen to develop alongside and mainly linked to major crop value-chain businesses. Opportunities created through the development of crops and other business linkages have attracted many migrants from the surrounding rural areas and other parts of the country. Migrants own about 75 percent of the businesses surveyed.
The product and information exchange structure in Ilula and Madizini business networks was centralised to few businesses within the trading category, mainly tomato and paddy/rice traders and wholesale/retail. However, most businesses were not networked in the general EUC business network, mainly due to a lack of network relations with businesses within the value chain of dominant crops (tomatoes and paddy). Especially in respect of the Madizini business network, where paddy/rice integrated fewer businesses in its value chain than tomatoes in Ilula EUC. Similar businesses also acted as brokers of products and information both horizontally across businesses within the EUC and vertically across businesses outside the EUCs, which guaranteed access to a higher quality of products and information. EUC business development was enhanced by increasing the size and influence of social network, which positively impacted business stock and sales turnovers because extensive social networks were also linked with highly influential businesses, which widened the base for access to products, capital, and markets.
Business investment decisions in the EUCs and the types of businesses were influenced by business owners‟ strong social networks (of ties of family, relatives, and friendship networks) and weak ties of business acquaintances/colleagues. These networks were particularly influential in investing in food crop trading, transportation and wholesale and retail businesses. Most of which were closely linked to the tomato and paddy value chains. However, strong ties relevance in investment decisions decreased as an individual‟s human and financial capital improved. Lack of formal institutional arrangements was identified to constrain networking and inform business investment decisions.
In employment creation, most businesses in Ilula (66 percent) and Madizini (62 percent) were run by owners without employing any extra labour. However, they created more employment opportunities indirectly through the services they demanded, like storage, transportation, security, renting shop space and cullies (loading and unloading). Indirect employment was created mostly around businesses with stronger/high network linkages with businesses within major crop value-chains. These were like tomato and paddy trading, manufacturing and processing, wholesale-/retail and construction.
Strong and weak social networks played a significant role in businesses employees‟ recruitment and for workers in obtaining employment opportunities in Ilula and Madizini EUCs. The likelihood of employment creation increased when social networks‟ size and influence increased among Madizini and Ilula businesses. However, the increasing influence of social networks among Madizini businesses reduced the prospects of creating employment opportunities. The result is connected to the earlier observation that many businesses were not networked in the general EUC business value chain. Also further exacerbated by a lack of business-crop effects where the paddy/rice and sugarcane value chains as key crops in Madizini seemed to involve fewer chain actors, who were also poorly integrated into other business categories.
Thus, EUCs were revealed to focal centres of business investment in the rural global south as they facilitate rural-urban linkages through the trade of goods and services to and from rural and urban areas. Social networks were further revealed to play a significant role in influencing business development, informing investment decisions, recruiting labour, and creating employment opportunities. This is because access to market information, labour, capital relied mainly on social networks. The likelihood of developing a business and creating more employment was also determined by increasing the scope (size and influence) of one‟s social network, which also directly linked to dominant crop value chains. Therefore, small towns in the rural areas of the global south create an avenue of business development, investment, and employment amid the large informal sector and inadequate institutional arrangements. However, this is realised through robust social networks and linkages with dominant crop value chains where strategic opportunities for rural business development are created.