Historical Origins of Firm Ownership Structure: The Persistent Effects of the African Slave Trade

Abstract

This paper uses evidence from the historical African slave trade to extend prior theory linking modern firm ownership structure to institutions and social capital. We argue that institutions and social capital are not simply predictors of ownership structure but can also be historically persistent mechanisms through which past traumatic shocks to society shape modern businesses. Using data from over 30,000 firms across 41 sub-Saharan countries, we show that firms in areas that suffered high historical slave extraction are today more likely to have concentrated ownership. High slave export countries have more sole proprietorships and majority ownership, with our model implying a difference of 43 percentage points between the lowest and highest export countries. This difference is particularly pronounced in the manufacturing sector, where high capital needs can necessitate diffuse ownership when credit markets are weak. Finally, we present modest evidence that weakened institutions and social capital are among the mechanisms through which the historical slave trade increases modern ownership concentration. Our paper answers recent calls to bring both Africa and history back into management research through our theoretical extension into distinct and quantifiable historical origins of firm structure.