Ethnic Entrepreneurship: Structure and Process: Volume 4

Ethnic Entrepreneurship: Structure and Process is the fourth volume in the series International Research in the Business Disciplines. As such, it represents a significant transition from the more traditional volumes that preceded it to a more thematic format addressing specific topics currently being debated. Professors Stiles and Galbraith, the editors of the volume, have done an outstanding job of staking out an area of importance and providing a series of articles that are both illuminating and challenging. Over time, I believe that this volume will be viewed as a critical contribution to the overall study of entrepreneurship.

Leading off the book, and the first paper in this section, is, “The Ethnic Ownership Economy” by Ivan Light. This survey paper hardly needs an introduction, because the author is one of the foremost scholars in the field of ethnic economics and entrepreneurship. Ivan Light can be argued to be one of the founders of fields concerned with ethnicity on the strength of his groundbreaking early study Ethnic Enterprise in America (1972). Over the subsequent years he has remained on the cutting edge of research, and the survey paper included here clearly reflects that fact. In this paper, the author reviews and summarizes a significant body of sociological research concerning ethnic economies. He offers three challenges for future research: the first is to examine how the ethnic or immigrant entrepreneurs differ from non-immigrant entrepreneurs, the second is to investigate how immigrants tend to differ in the bundle of resources when compared to their indigenous counterparts, and the third is to study how in multi-ethnic societies non-immigrant entrepreneurs and immigrant/ethnic minority entrepreneurs operate out of social networks with minimal overlap.

The literature of ethnic ownership economies descends from middleman minority theory, a subject it continues to include. However, ethnic economy literature now more broadly addresses the economic independence of immigrants and ethnic minorities in general, not just of middleman minorities (Light & Bonacich, 1991, pp. xii–xiii).¹ This expansion releases the subject from narrow concentration upon historical trading minorities, and opens discussion of the entire range of immigrant and ethnic minority strategies for economic self-help and self-defense. Partial or full economic independence represents a ubiquitous self-defense of immigrants and ethnic minorities who confront exclusion or disadvantage in labor markets. Ethnic economies permit immigrants and ethnic minorities to reduce disadvantage and exclusion, negotiating the terms of their participation in the general labor market from a position of greater strength. Unable to find work in the general labor market, or unwilling to accept the work that the general labor market offers, or just reluctant to mix with foreigners, immigrants and ethnic minorities have the option of employment or self-employment in the ethnic economy of their group. Although ethnic and immigrant groups differ in how well and how much they avail themselves of this defense (Collins, 2003; Light & Gold, 2000, p. 34; Logan & Alba, 1999, p. 179), none lacks an ethnic economy.²

Since Piore’s (1979) seminal work on ethnic economies, there has been significant development in our understanding of the grouping process of immigrants and co-ethnics into economic, social, and political units, and the behavior of immigrant entrepreneurs within these groups. During the past two decades a number of sociologists have contributed several important concepts to the study of ethnic entrepreneurship such as social capital (e.g. Portes, 1998; Portes & Landolt, 1996, 2000), social embeddedness and network ties (e.g. Kloosterman & Rath, 2001; Portes & Sensenbrenner, 1993; Rath, 2002), and fine tuning the definitional distinctions between levels of co-ethnic cohesiveness, such as ethnic neighborhoods, ethnic economies, and ethnic enclaves (e.g. Light & Gold, 2000; Waldinger, 1982; Waldinger et al., 1990). More recently, business theorists have started to examine the problem of ethnic economic activity, incorporating more economic and entrepreneurship strategy concepts such as resource dependency (Greene, 1997), buyer-supplier relationships (Galbraith et al., 2003), access to financing (Smallbone et al., 2002), and differential marketing systems (Iyer & Shapiro, 1999). What appears to be sometimes lacking in modern discussions of ethnic economies and entrepreneurial behavior, however, is an underlying and unifying theoretical paradigm.

Contemporary studies of ethnic entrepreneurs are split into two types of discussions. On one hand they are considered as part of an underserved minority population that needs business assistance to guide venture launch and development. In fact, the term venture would specifically not be used because of the connotation of ethnic entrepreneur as small business owner. On the other hand, some models of entrepreneurial approaches by certain ethnic groups are not only lauded, but adopted for trial by other types of communities, whether those communities be natural or artificially created. The tension between these two approaches may best be attributed to a lack of clarity in two areas. First, to whom does the designation ethnic entrepreneur actually apply? Second, what resources do ethnic entrepreneurs really use in the activities of starting and growing a business.

The central role of networks in advancing organizational and individual goals is well accepted (Adler & Kwon, 2002; Hite & Hesterly, 2001) in the management and sociology literatures. Networks are made up of two distinct types of ties: strong ties and weak ties. Strong ties refer to the network relationships that are close, stable and binding (Ibarra, 1993), as opposed to weak ties, that are more superficial and lacking in emotional investment. Network theory, however, suggests that strong ties may not provide the most beneficial opportunities for an individual/organization (Burt, 1997; Coleman, 1988) and conclude that in order for a business to succeed the entrepreneur must have a network made up of weak ties.

Enclave development is a common theme underlying much of the current thought regarding ethnic entrepreneurism, and particularly entrepreneurial behavior among recent immigrants. Historically, ethnic enclaves are described as having certain necessary characteristics (Portes, 1998; Portes & Bach, 1985; Waldinger et al., 1990), such as co-ethnic spatial concentration or agglomeration, a co-ethnic social and support network, a co-ethnic capital market, an intra-ethnic market trading structure (e.g. Dyer & Ross, 2000), and uniqueness of co-ethnic customer preferences and personalized services (e.g. Peterson & Roquebert, 1993). Current theory suggests that aspiring immigrant entrepreneurs and existing ethnic businesses alike can take advantage of the market and social cohesiveness offered by an established enclave, ultimately reducing the various transactions costs associated with doing intra-enclave business (Knack & Keefer, 1997). As Light (1998) argues, the key connection between social capital and ethnic entrepreneurship is the efficient use of ethnic resources to support the creation and survival of businesses in the community. While some characteristics of ethnic enclaves, such as co-ethnic agglomeration and social networks, have been extensively investigated by sociologists, regional economists, population ecologists, and entrepreneurship researchers, other enclave characteristics, such as the inter and intra-enclave market trading behaviors have been recognized, but less researched (Dyer & Ross, 2000; Galbraith et al., 2003).

Polynesian settlers arrived in Aotearoa (in te reo, or Māori language, “Land of the Long White Cloud”) about the 10th century. Aotearoa was visited briefly by the Dutch navigator Abel Tasman in 1642. However, it was not until 1769 that the British naval captain James Cook and his crew became the first Europeans to explore New Zealand’s coastline thoroughly. The word Māori meant “usual or ordinary” as opposed to the “different” European settlers. Before the arrival of Europeans, Māori, or indigenous Polynesian inhabitants of New Zealand, had no name for themselves as a nation, only a number of tribal names. The original meaning of Pākeha, the settlers, was a person from England. With time, Pākeha became the word to describe fair-skinned people born in New Zealand. We use the word Pākeha here in the sense of the New Zealand census as a European New Zealander.

This chapter explores economic development and entrepreneurship among Aboriginal¹ people in Canada as a particular instance of Indigenous entrepreneurship and development activity worldwide. In turn, Indigenous entrepreneurship, and the economic development that flows from it, can be considered a particular sub-set of ethnic entrepreneurship. What makes Indigenous entrepreneurship a particular and distinct instance of ethic entrepreneurship is the strong tie between the process and place – the historic lands of the particular Indigenous group involved. With Aboriginal populations there is also often a strong component of “nation-building,” or more correctly re-building. This is in contrast with instances of entrepreneurship associated with ethnic groups that have migrated to new places and are pursuing economic opportunities there in ways that distinguish them from the non-ethnic population.

Using Brazilian communities in the Greater Boston area as the focus of the study, this chapter will address the following main questions: Are there differences between Protestant and Catholic churches in terms of their impact on the creation and development of social capital? And, if such differences exist, how do membership and involvement in the churches’ social networks affect ethnic entrepreneurship? Our preliminary conclusions suggest that there are various differences between the two churches in aspects that have the potential to impact social capital, and that the social networks built around and supported by the Brazilian Protestant churches in Massachusetts have been more effective for social capital formation. In consequence, these churches provide a “safer” environment, with higher levels of perceived solidarity and trust, and as such more favorable for ethnic entrepreneurship initiatives and social mobility. In order to lay the theoretical ground for addressing these questions, we will make a brief review of existing research on the association between social capital and ethnic entrepreneurship. We will also discuss the issue of church-membership as a source of social capital creation and growth, and its effects on ethnic business development.¹

Are you at peace with God and your neighbor? This simple question, as it relates to a life of business, may seem curious to most entrepreneurs and probably even irrelevant. However, for the Mennonite entrepreneur this question is very relevant to their faith, to their relationship with their ethnic community, and to their daily lives as business people. This question probes at the hearts of Mennonite entrepreneurs who struggle to reconcile the dilemma of faith, culture, and economic opportunity.

This paper addresses the mutual interdependence of ethnic identity politics and conservative religious affiliation. Called “traditionalism” in this paper, conservative religious affiliation is seen to appeal most to ethnically homogenous communities who have arrived in the United States from Spanish Catholic countries and who draw on the ethnic identity conveyed by traditionalism to deliberately define themselves at a critical distance from the dominant resident culture, called “Anglo-Protestantism” in this paper.

The study of the family firm has gained increased attention in recent years, judging by the number of articles and books published lately as well as the fact that a number of universities in the United States and elsewhere now emphasize a focused study of family business in higher education (Fletcher, 2002; Hoy & Verser, 1994; Litz, 1997). At the same time, the field of entrepreneurship has been enriched by perspectives from sociology and anthropology and has welcomed the study of ethnic business groups, especially in terms of their unique entrepreneurial tendencies as well as their organization and operations within a social order in which they remain a distinct minority (Aldrich & Waldinger, 1990; Light & Gold, 2000).

Developing entrepreneurial talent is important to sustaining a competitive advantage in a global economy catalyzed by innovation. The importance of quality entrepreneurship education and training has gained national attention, with the introduction by the 106th Congress of the Future Entrepreneurs of America Act (H.R., 1331). Congress is also considering providing technical assistance to secondary, post-secondary, vocational, and technical schools to develop and implement curricula designed to promote vocational and technical entrepreneurship (H.R., 2666).

The United States (U.S.) is a truly multi-ethnic society. White Anglo Americans are still the majority group, but the non-white group has recorded a sizable increase. Non-white Americans make up about 26% of the population of the nation as a whole, and this number is projected to reach 31% by the year 2020 (Judy & D’Amico, 1997). The primary source regions of immigrants now include Mexico, Asia, South and Latin America, and other non-European areas. Established U.S. native minority populations historically consisted of African-Americans, native Indians, and second-generation Mexican immigrants (Cox, Lobel & McLeod, 1991).

This chapter is concerned with access to bank finance by ethnic minority businesses (EMBs) in the U.K., focusing particularly on the process of decision-making by bank managers with respect to credit applications by entrepreneurs from ethnic minority groups. The results reported in this chapter are taken from a major U.K. study that included two large scale surveys of EMB owners and a white control group, case studies with ethnic minority entrepreneurs and a programme of interviews with business support agencies. Whilst referring to other evidence, this chapter focuses on the findings from a series of interviews with bank representatives. The U.K. study was funded by the British Bankers’ Association (BBA), the Bank of England and the Small Business Service and supported by the Commission for Racial Equality.

Access to equity capital is critical for business success, especially for young companies which lack the cash flows necessary for debt repayment. The creation and growth of such companies is a means to economic opportunity and wealth for ethnic-minority entrepreneurs. Unfortunately, the traditional venture capital industry is extremely limited in its investments.¹ It also is significantly less likely to invest in businesses owned by ethnic-minority entrepreneurs than those owned by white entrepreneurs (Bates & Bradford, 1992).²