Establishment processes in a one party economy: the case of Eritrea

Purpose - The purpose of this paper is to address the issues of how business people perceive the business environment, how government policies impact the environment and how the environment impacts the establishment processes and position development of new firms in the Eritrean market. The process is discussed by keeping a strict focus on the main actors and the activities they carried out, as well as how the available resources are utilized and exchanged in the market. Design/methodology/approach - Drawing on the establishment process model developed from the network approach, case studies based on interviews and focus group discussions have been used to shed light on the extent to how government policies and the environment impacts the establishment processes and position development in the Eritrean market. Findings - An important conclusion of this paper is that the main obstacle for business establishment is the hostile attitude of the government to the private sector. Another significant obstacle for building a successful position in the market is the state‐owned command economy network of relationships. An additional crucial hindrance is the non‐existence of a market economy network of relationships that can provide firms in the private sector with the resources they need to perform their operations. Research limitations/implications - All firms in this paper have demonstrated that the main obstacle for establishment is the hostile attitude of the government to the private sector. Another obstacle is the state‐owned command economy network of relationships, which hinders firms from building a successful position in the market. An additional crucial hindrance is the non‐existence of a market economy network of relationships that can provide firms in the private sector with the resources they need to perform their operations. Since the paper is based on case studies and focus group discussions, conducting a similar study on a representative sample of firms selected from a larger population will be very useful. Originality/value - This paper makes a unique contribution by focusing on the establishment process in a market, which is regulated, controlled and owned by the one party government. The other unique contribution is that a firm has to identify the secrets of business success and to follow the same strategy.