The Principal-Agent Problem in Development Assistance and Its Negative Impact on Local Entrepreneurship in Africa: Time For New Approaches

African Technology Development Forum Journal, Vol. 3, No. 2, pp. 27-33, 2006

7 Pages Posted: 25 Oct 2009

See all articles by Philipp Aerni

Philipp Aerni

Center for Corporate Responsibility and Sustainability (CCRS) at the University of Zurich

Date Written: June 1, 2006

Abstract

The following article describes the principal-agent problem in international development assistance. It shows how this problem leads to a top-down approach in development projects which may discourage local entrepreneurship and ultimately undermine sustainable poverty alleviation strategies. The author argues that African countries suffer most from this problem because of their high level of aid dependence. A change in the rules of the game of project-oriented development assistance could help tackling the issue by setting the incentives right. Entrepreneurship and technology may then become tools of social, economic and political empowerment and facilitate more endogenous development that is driven by successful local initiatives rather than foreign aid programs.

Keywords: Principal-Agent Problem, Development Assistance, Entrepreneurship, Empowerment

Suggested Citation

Aerni, Philipp, The Principal-Agent Problem in Development Assistance and Its Negative Impact on Local Entrepreneurship in Africa: Time For New Approaches (June 1, 2006). African Technology Development Forum Journal, Vol. 3, No. 2, pp. 27-33, 2006, Available at SSRN: https://ssrn.com/abstract=1493752

Philipp Aerni (Contact Author)

Center for Corporate Responsibility and Sustainability (CCRS) at the University of Zurich ( email )

Zähringerstrasse 24
Zurich, CH-8001
Switzerland
044 634 40 60 (Phone)

HOME PAGE: http://www.ccrs.uzh.ch/en/organization/people/pa.html

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