The cousin marriage tradition, colonial shocks, and the performance of informal firms in sub-Saharan Africa

Research Summary: The paper explores how the deep historical roots of informal institutions influence current informal businesses. It proposes that both pre‐colonial institutions—the tradition of cousin marriage—and the subsequent shocks of colonization still impact the performance of informal firms. We theorize on how the effects of historical family systems are moderated by the traumatic and spatially heterogeneous shocks of colonialism, in particular the cultural values of the colonizers (individualism) and their religious (missionary) activities. Our hypotheses are tested by regression analysis based on surveys of informal businesses in multiple regions of eight African countries. We find that the cousin marriage tradition is negatively associated with the performance of current informal businesses though this relationship is attenuated in places where colonizers were more individualistic. Managerial Summary: This paper explores how the pre‐colonial family institutions—the tradition of cousin marriage—and the subsequent shocks of colonization jointly impact the performance of contemporary informal firms in sub‐Saharan Africa. We propose that the historical tradition of cousin marriage has persistent and negative effects on the revenue and labor productivity of contemporary informal businesses. This is because informal entrepreneurs in ethnic areas with the cousin marriage tradition may prioritize social obligations over economic incentives. However, these relationships are attenuated in ethnic areas colonized by European countries with more individualistic cultural values. Our findings highlight the importance for business owners and managers to understand the deep historical roots of the social norms of the communities and groups with which they interact.