Into the Unknown: Exploring Entrepreneurship and Firm Performance in the Minibus Taxi Industry

Abstract

This dissertation examines the importance of strategic selection on firm performance in the minibus taxi industry in South Africa. I use a proprietary dataset from a minibus taxi financing company that contains data on loan performance and operational choices. I use this dataset to ask the following questions. The first paper asks under what conditions do firms engage in strategic misconduct. I explore the impact of capital constraints on strategic misconduct. Exploiting a natural experiment in which a financing company changed its interest rates due to nationwide protests, I assess the impact of declining interest rates on over 5000 firms from 2015 to 2020. Using an instrumental variable analysis, I find that firms given lower interest rates decrease strategic misconduct and are more likely to survive. The second paper asks how does the flexibility of private market governance institutions, organizations that structure firms' social and economic boundaries, impact the performance of firms they serve in times of crisis. I exploit the onset and persistence of COVID-19 to assess the impact of the flexibility of associations on the performance of firms within those associations. I find that associations that exhibit flexibility by allowing operators to switch routes moderate the negative impacts of COVID but only for those owners with better assets or more experience. The third paper asks how do external pressures on early strategy selection impact firm performance. I assess the impact of early strategy selection on firm performance through changes in fuel prices. I find that firms that experienced higher than anticipated fuel prices drive more kilometers, take more trips, and work more days. These patterns persist long after the founding of the firm. Firms that experience a high fuel cost shock are also less likely to fall into financial distress, default on their loans, or get into a significant accident. These papers demonstrate that asking core strategy questions in understudied areas with unique data might shed light on long discussed questions with the field of strategic management.