Handbook of Research on Ethnic Minority Entrepreneurship: A Co-evolutionary View on Resource Management

HANDBOOK OF RESEARCH ON ETHNIC MINORITY ENTREPRENEURSHIP

This volume is dedicated to Naomi J. Dana

Handbook of Research on Ethnic Minority Entrepreneurship A Co-evolutionary View on Resource Management

Edited by

Léo-Paul Dana Associate Professor, Department of Management, University of Canterbury, New Zealand, Senior Advisor, World Association for Small and Medium Enterprises and Founding Editor, Journal of International Entrepreneurship and Journal of Enterprising Communities

Edward Elgar Cheltenham, UK • Northampton, MA, USA

© Léo-Paul Dana, 2007 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical or photocopying, recording, or otherwise without the prior permission of the publisher. Published by Edward Elgar Publishing Limited Glensanda House Montpellier Parade Cheltenham Glos GL50 1UA UK Edward Elgar Publishing, Inc. William Pratt House 9 Dewey Court Northampton Massachusetts 01060 USA

A catalogue record for this book is available from the British Library Library of Congress Cataloguing in Publication Data Handbook of research on ethnic minority entrepreneurship: a co-evolutionary view on resource management/edited by Léo-Paul Dana. p. cm. — (Elgar original reference) Includes bibliographical references and index. 1. Minority business enterprises. 2. Entrepreneurship. I. Dana, Léo-Paul. HD2358.H36 2007 338’.04089—dc22 2007017148

ISBN 978 1 84542 733 7 Printed and bound in Great Britain by MPG Books Ltd, Bodmin, Cornwall

Contents ix xii

List of contributors Foreword by Roy Sharp PART I

INTRODUCTORY CHAPTERS

1

Global entrepreneurship and transnationalism Ivan Light

2

Ethnic economies, social capital and the economic theory of clubs Craig S. Galbraith, Carlos L. Rodriguez and Curt H. Stiles

16

3

Ethnic entrepreneurship: a theoretical framework Thierry Volery

30

4

The economics of co-ethnic employment: incentives, welfare effects and policy options Frank A.G. den Butter, Enno Masurel and Robert H.J. Mosch

5

Understanding the diversity of immigrant entrepreneurial strategies Catarina Reis Oliveira

6

Immigrant women in small business: biographies of becoming entrepreneurs Caroline B. Brettell

7

Migrant entrepreneurship from the perspective of cultural diversity Mediha Sahin, Peter Nijkamp and Tüzin Baycan-Levent

PART II 8

9

3

42 61

83 99

ETHNIC MINORITY SELF-EMPLOYMENT IN AMERICA

Ethnic business owners and their advisors: the effects of common ethnicity Linda M. Dyer and Christopher A. Ross

117

Ukrainian farmers in Canada Tom Allen

132

10

Business engagement of Chinese immigrants in Canada Peter S. Li

144

11

Toward a rethinking of race, culture and the African American entrepreneur Nicholas Maurice Young

12

Hispanic entrepreneurship in the United States Frank Hoy v

157 177

vi

Contents

13

Challenges and opportunities for Hispanic entrepreneurs in the United States Juan Holguin, Ernesto Gamboa and Frank Hoy

195

14

Korean immigrants in the United States Pyong Gap Min

212

15

The Iranian ethnic economy in the United States Mohsen Mobasher

228

16

Entrepreneurship among Filipino immigrants J. Mark Muñoz and Ilan Alon

249

17

Minority entrepreneurship in New York Jerome Krase

267

18

Non-economic effects of ethnic entrepreneurship Min Zhou

279

19

The rise and fall of specialized small business investment: taking the taxi to oblivion Milford B. Green and Rod B. McNaughton

289

Does ethnicity matter? A study of the strategic intent of Internet ventures founded by ethnic and ‘non-ethnic’ entrepreneurs Rajeswararao (Raj) Chaganti, Radha Chaganti and Monica Treichel

309

20

PART III

ETHNIC MINORITY SELF-EMPLOYMENT IN EUROPE

21 Ethnic entrepreneurship in European cities: a comparative study of Amsterdam 323 Tüzin Baycan-Levent and Peter Nijkamp 22

Temporal and geographical variations in ethnic minority business: thirty years of research in the United Kingdom Giles A. Barrett and David McEvoy

23

Italians in Britain: ‘Britalian culture entrepreneurs’ revisited Robin Palmer

24

South Asian entrepreneurship in Britain: a critique of the ethnic enclave economy debate Pnina Werbner

25

Access to finance by ethnic minority entrepreneurs in the UK David Smallbone, Monder Ram and David Deakins

26

Ethnic minority business and the employment of illegal immigrants in Birmingham Trevor Jones, Monder Ram and Paul Edwards

27

Immigrant entrepreneurs in Austria Filiz Kurtoglu

337 360

375 390

405 425

Contents

vii

28

Turkish immigrant entrepreneurs in Finland Östen Wahlbeck

433

29

Immigrant entrepreneurs in Germany Maria Kontos

445

30

Migrant entrepreneurship in Germany Maggi W.H. Leung

464

31

Ethnicity, gender and entrepreneurship: Turkish entrepreneurs in Germany Robert Pütz, Verena Schreiber and Isabell Welpe

488

32

Immigrant entrepreneurs in Hamburg Nikolinka Fertala

511

33

Chinese entrepreneurs in Hungary Pál Nyíri

534

34

Roma entrepreneurs in Hungary Ferenc Babusik

555

PART IV 35

36

37

ETHNIC MINORITY SELF-EMPLOYMENT IN ASIA

Ethnic entrepreneurship and the internationalization of Chinese capitalism in Asia Henry Wai-chung Yeung

575

Dalit entrepreneurs on the edges of caste and class: ethnic minority entrepreneurship in India David Blake Willis and J. Rajasekaran

599

Immigrant entrepreneurs and the Israeli welfare state: institutional support and institutional constraints Eran Razin

615

38

Immigrants from the former Soviet Union as ethnic entrepreneurs in Israel Miri Lerner, Susanna Khavul and Robert D. Hisrich

630

39

Small business among Japan’s Buraku people Mitsuru Tanaka

645

40

Korean minority entrepreneurs in Japan David Blake Willis and Soo im Lee

653

41

Clan associations of Singapore and their roles in the small business sector David Leong

669

PART V ETHNIC MINORITY SELF-EMPLOYMENT IN THE SOUTHERN HEMISPHERE 42

Ethnic entrepreneurship in South Africa: an embedded approach to the study among various ethnic groups Bruce Mitchell and Mary Jesselyn Co

681

viii

Contents

43

Entrepreneurship among Ghanaians in South Africa Vivian Besem Ojong

44

Exploring the relationship between culture, communication and entrepreneurship in New Zealand Zhu Yunxia

707

720

45

Immigrant cultural capital in business: the New Zealand experience Noel Watts, Andrew Trlin, Cynthia White and Nicola North

729

46

Enterprising Indian women in New Zealand Edwina Pio

744

47

Lebanese entrepreneurs in New Zealand Michèle E.M. Akoorie

754

PART VI 48

A comparative, exploratory investigation into the perceptions of internationalizing firms in Singapore and the UK Dave Crick and Léo-Paul Dana

PART VII 49

COMPARATIVE STUDY

TOWARDS FUTURE RESEARCH

Towards a synthesis: a model of immigrant and ethnic entrepreneurship Léo-Paul Dana and Michael Morris

Index

783

803

813

Contributors Michèle E.M. Akoorie, The University of Waikato, New Zealand Tom Allen, University of Saskatchewan, Canada Ilan Alon, Rollins College, USA Ferenc Babusik, Delphoi Consulting, Budapest, Hungary Giles A. Barrett, Liverpool John Moores University, UK Tüzin Baycan-Levent, Istanbul Technical University, Turkey Caroline B. Brettell, Southern Methodist University, USA Radha Chaganti, Rider University, USA Rajeswararao (Raj) Chaganti, Temple University, USA Mary Jesselyn Co, University of KwaZulu-Natal, Republic of South Africa Dave Crick, University of Central England, UK Léo-Paul Dana, University of Canterbury, New Zealand David Deakins, Paisley Business School, UK Frank A.G. den Butter, Tinbergen Institute, The Netherlands Linda M. Dyer, Concordia University, Canada Paul Edwards, University of Warwick, UK Nikolinka Fertala, University of Tübingen, Germany Craig S. Galbraith, University of North Carolina Wilmington, USA Ernesto Gamboa, University of Texas at El Paso, USA Milford B. Green, University of Western Ontario, Canada Robert D. Hisrich, Thunderbird School of Global Management, USA Juan Holguin, University of Texas at El Paso, USA Frank Hoy, University of Texas at El Paso, USA Trevor Jones, De Montfort University, UK Susanna Khavul, London Business School, UK Maria Kontos, Johann Wolfgang Goethe-University of Frankfurt, Germany Jerome Krase, The City University of New York, USA

ix

x

Contributors

Filiz Kurtoglu, Vorarlberg University of Applied Science, Austria Soo im Lee, Ryukoku University, Japan David Leong, Nanyang Technological University, Singapore Miri Lerner, Tel Aviv University, Israel Maggi W.H. Leung, The University of Hong Kong, Hong Kong Peter S. Li, University of Saskatchewan, Canada Ivan Light, UCLA, USA Enno Masurel, VU University Amsterdam, The Netherlands David McEvoy, Liverpool John Moores University, UK Rod B. McNaughton, University of Waterloo, Canada Pyong Gap Min, Queens College and the Graduate Center of the City University of New York, USA Bruce Mitchell, University of KwaZulu-Natal, Republic of South Africa Mohsen Mobasher, University of Houston-Downtown, USA Michael Morris, University of Syracuse, USA Robert H.J. Mosch, De Nederlandsche Bank, The Netherlands J. Mark Muñoz, Millikin University, USA Peter Nijkamp, Vrije Universiteit, The Netherlands Nicola North, Massey University, New Zealand Pál Nyíri, Macquarie University, Australia Vivian Besem Ojong, University of KwaZulu-Natal, Republic of South Africa Catarina Reis Oliveira, SociNova, Faculdade de Ciencias Sociais e Humanas, Lisbon, Portugal Robin Palmer, Rhodes University, Republic of South Africa Edwina Pio, Auckland University of Technology, New Zealand Robert Pütz, Johann Wolfgang Goethe-University of Frankfurt, Germany J. Rajasekaran, University of Wisconsin, USA and India Monder Ram, De Montfort University, UK Eran Razin, The Hebrew University, Israel Carlos L. Rodriguez, University of North Carolina Wilmington, USA Christopher A. Ross, Concordia University, Canada

Contributors Mediha Sahin, Vrije Universiteit, The Netherlands Verena Schreiber, Johann Wolfgang Goethe-University of Frankfurt, Germany Roy Sharp, University of Canterbury, New Zealand David Smallbone, Kingston University, UK Curt H. Stiles, University of North Carolina Wilmington, USA Mitsuru Tanaka, Kansai University, Japan Monica Treichel, Temple University, USA Andrew Trlin, Massey University, New Zealand Thierry Volery, University of St. Gallen, Switzerland Östen Wahlbeck, Åbo Akademi University, Finland Noel Watts, Massey University, New Zealand Isabell Welpe, Ludwig-Maximilians-Universität, Germany Pnina Werbner, Keele University, UK Cynthia White, Massey University, New Zealand David Blake Willis, Soai University, Japan Henry Wai-chung Yeung, National University, Singapore Nicholas Maurice Young, Stanford University, USA Zhu Yunxia, University of Queensland, Australia Min Zhou, UCLA, USA

xi

Foreword Successful entrepreneurial ethnic minorities are not of course a new phenomenon, and many interesting examples from the past spring to mind. There were the Jews who settled in Europe, the Chinese in Australia and Malaysia, and Indians in many places, including East Africa and Fiji. Many of those minorities had so strong a reputation for financial success that they were persecuted or, at the least, their political rights were (and in some cases still are) heavily circumscribed. What has changed markedly since the middle of the twentieth century is the scale of exchanges of peoples between countries, as travel has become easier and more affordable, and national economies more open and integrated. Thus many different ethnic minorities now exist in many different countries and their entrepreneurship can therefore have a significant influence on national economies. So it is important that we can understand what factors make for success. It would also be important to try to understand what factors can minimize the negative political consequences that members of successfully entrepreneurial ethnic minorities might face. This volume follows two earlier reference works in which the author, Léo-Paul Dana, from the University of Canterbury, in Christchurch New Zealand, has commissioned chapters from leading researchers in their field around the world. The first of the three volumes dealt with international entrepreneurship and the second the entrepreneurship exhibited by indigenous peoples. This present volume, similarly, is a collection of chapters which, in this case, cover examples of the entrepreneurship of ethnic minorities from all parts of the world. Authors of the chapters in the introductory section have set the scene by discussing definitions and frameworks. Then, in the bulk of the work, there are many detailed analyses of the entrepreneurship displayed by ethnic minorities in North America, Europe, Asia and the southern hemisphere. The final chapter of the book endeavours to draw together some conclusions and principles which might have universal application. Each of the previous two volumes on entrepreneurship has filled important gaps in our knowledge and will be important reference sources. I am confident that this present volume will do the same. Professor Roy Sharp Vice Chancellor University of Canterbury

xii

PART I INTRODUCTORY CHAPTERS

1

Global entrepreneurship and transnationalism1 Ivan Light

To an earlier generation of scholars, diasporas meant ethno-national communities scattered around the globe that nonetheless remained in continuous, long-term contact with one another as well as with their real or putative homeland (Armstrong, 1976; Cohen, 1997: 185). Their real or putative homeland constituted the hub of ethnic diasporas. The colonies scattered abroad represented the spokes. Thanks to their hub and spoke structure, diasporas linked distant continents in such a way that ethnic minorities resident in any one place had strong social ties and cultural ties with coethnics in many others. Ethnic diasporas were commercially important, but they were not numerous. Diasporas were uncommon because most immigrants just assimilated into host societies within three generations. As a result, unless renewed by new migration, the spokes ceased to communicate with one another and with the hub. Before globalization, which began in about 1965 (Dicken, 1992), and arguably changed this arrangement, the world’s international immigrants routinely assimilated to host societies in historically short order (Caliner, 2000). At a minimum, assimilation meant acquiring the language of one’s new homeland and forgetting the language of one’s ethnic origin. For immigrants, the road to assimilation went from mono-lingualism in a foreign language to bi-lingualism and back to monolingualism in a new language. In the United States, Canada, Australia and New Zealand, assimilation meant that, whatever one’s ethnic origins, one grandchildren would become English mono-lingual. Therefore, thanks to assimilation, international immigration routinely left no permanent ethnic colonies in place abroad as a permanent historical legacy. Diasporas were the exceptions to this generalization. In the early twentieth century, diasporic communities initially attracted Max Weber’s attention because of the remarkable commercial entrepreneurship they exhibited.2 Weber termed this entrepreneurship ‘pariah capitalism’ because of the local unpopularity of the entrepreneurial minorities. Subsequent scholars agreed that diasporic ethnic communities displayed exceptional entrepreneurship, especially in international commerce (Cohen, 1971; Light, Bhachu and Karageorgis, 1993: 38–43; Moallem, 1996; Laguerre, 1998). Entrepreneurial ethnic communities that operated around a diasporan structure earned the sobriquet ‘middleman minorities’ in the literature of social science (Bonacich, 1973; Kieval, 1997; Light and Gold, 2000: 6–8). Middleman minorities were non-assimilating ethnic minorities noteworthy for their abundant and persistent entrepreneurship wherever they lived. Among the middleman minorities, the Jews of Europe, the Hausa of Nigeria, the Sikhs of East Africa, the Chinese of South East Asia, the Armenians of the Near East and the Parsees of India were the most prominent, but there were others as well. Eschewing agriculture, middleman minorities were especially common in retail trade and international commerce. Indeed, the term ‘middleman’ reflected this specialization since the role of the middleman is to trade goods, not to manufacture or grow them. The exceptional involvement of middleman minorities in international trade arose in part because of the ethno-religious oppression to which they were subjected, but also because of 3

4

Handbook of research on ethnic minority entrepreneurship

the unique ethnic resources they enjoyed (Light and Gold, 2000: 6–7).3 Exploited and oppressed by host societies, which treated them as pariahs, middleman minorities turned to self-employment for self-defense amid the general absence of alternative earning options. This strategy increased their self-employment. However, the middleman minorities had also evolved over centuries distinct ethnic resources that facilitated commercial entrepreneurship. The middleman minorities were bi-lingual people, who bestrode international social networks of coethnics. They also controlled and enjoyed superior business skills, which had worked their way over centuries into the cultural fabric of the community. These three characteristics of the entire group created serious natural advantages in trade promotion for individual group members (Collins, 1998: vol. 2, 398–9; Lever-Tracy et al., 1991: xi, 113). First, such people more easily notice the business opportunities that cultural frontiers generate than do mono-cultural stay-at-homes. Second, such people have the international social capital that supports international business (Fukuyama, 1995; Walton-Roberts and Hiebert, 1997; Wong, 1998: 95).4 When they see a potential trading opportunity, they have the connections abroad to bring it to prompt fruition. Third, because they controlled superior business skills that they passed on through socialization to younger generations, middleman minorities produced many shrewd and effective business people. Taken together, these three characteristics (languages, networks, skills) supported and encouraged the entrepreneurship of group members to an outstanding degree, and the result was persistently high rates of self-employment among the middleman minorities. Trading diasporas shipped commodities around the diaspora to continents that were, in terms of travel time, much more distant from one another than they are now and in historical epochs that did not have today’s business-support electronics. In each diaspora site, coethnic merchants sold imported goods to locals. The middleman minority’s specialization in international trade was a product of the diaspora’s distinct advantages for this activity. The international disasporan structure conferred two well-known advantages on international traders recruited within each site. First, the ethno-linguistic homogeneity within diasporas supported the performance of the middleman minority’s trading specialty. For example, an Armenian merchant in Lima could order rugs from an Armenian merchant in Istanbul in the Armenian language, thus surmounting the language problem that Turks and Peruvians encountered when they attempted to trade. The Armenians in Lima sold at retail in Spanish; the Armenians in Istanbul sold at retail in Turkish. To one another Armenian merchants spoke fluent and colloquial Armenian. Thanks to the Armenian diaspora, Turks and Peruvians could trade without having to learn one another’s language. Additionally, the social capital of diasporas permitted enforceable social trust among merchants, even over long distances. As a result, for example, Armenian merchants in Istanbul could ship rugs to Armenian merchants in Lima in confidence that invoices would be paid and that, if unpaid, informal community pressures could compel payment without recourse to litigation in Peruvian courts. Lacking equivalent social capital in the other country, Turks and Peruvians could not trade without the intercession of Armenians whose unique resource was their bi-lingualism and their international social capital. Whatever initially caused a middleman diaspora, such as myths or projects of ultimate repatriation and redemption, once locked into international trading, middleman minorities had real economic motives to retain their cultural and social ties with their homeland. The mythos of repatriation and redemptive nationalism were cultural, but their consequence

Global entrepreneurship and transnationalism

5

was real economic motives that acquired an independent influence of their own in the life of the community. After all, their diasporan livelihood depended upon their retaining the ability to speak the language of their ethnic homeland as well as their social capital there and in the diaspora. Hence, assimilation attacked their livelihood. If unable to speak Armenian, a sign of assimilation, an Armenian merchant in Lima could neither buy rugs in Istanbul through a coethnic intermediary nor feel confident that Armenian exporters there would offer him credit. Remaining ethnically Armenian was a prudent business policy under these circumstances, not just a sentimental attachment to an ancient culture and homeland. The point is not to reduce international ethnic solidarity to economic interest, but only to acknowledge the self-renewing support that economic interest gave to ideologically motivated non-assimilation. The culture promoted the business, and the business supported the culture. Transnationalism and globalization Unlike the older literature of middleman minorities, which addresses non-assimilating communities, the contemporary literature of transnationalism addresses novel processes that generate a transnational elite even within immigrant communities (Wong, 1997; Guarnizo and Diaz, 1999; Guarnizo, Sanchez and Roach, 1999; Landolt, Autler and Paires, 1999; Smart and Smart, 1998). In an influential paper, Schiller, Basch and BlancSzanton define transnationalism as ‘processes by which immigrants build social fields that link together their country of origin and their country of settlement’. Immigrants who build such social fields they dub ‘transmigrants’. Transmigrants are resident in at least two societies between which they shuttle frequently enough to remain active participants in both, but fully encapsulated (mono-cultural) participants in neither. Transmigrants acculturate, but they do not assimilate.5 This cosmopolitan life style enables transmigrants to form bi-cultural colonies that lodge within mono-cultural host societies. In this respect, contemporary transmigrants resemble middleman minorities who also acculturated without assimilating. The single best and most accessible indicator of bi-cultural status is long-term maintenance of the transmigrants’ complete fluency in the language of their homeland when coupled with complete fluency in the language of the host society (Portes and Hao, 1998). Native speaker fluency in two languages distinguishes transmigrants from immigrants, who lose their foreign language fluency within three generations. Transnationalism arrives ‘from above’ when nation states give privileged access to entrepreneur immigrants, hoping thereby to stimulate economic growth (Wong, 2003). States award this privileged access when they set aside non-quota immigration priority to persons who pledge to start businesses or, at least, to invest in business in the host society. This increasingly common practice leavens immigrant populations with state-prioritized entrepreneurs, who were selected for admission precisely because of their existing business skills and financial capital. These entrepreneurs have class resources that their nonentrepreneur coethnics normally lack, but they nonetheless increase the percentage of self-employed within their immigrant group. Transnationalism also arrives from below. Recent interest in transnationalism ‘from below’ (Lever-Tracy and Ip, 1996; Lie, 1995; Chik, 2000) identifies social processes that generate transmigrants from the immigrant population without recourse to the mechanism of state pre-selection that characterizes transnationalism from above. The literature of transnationalism from below has returned to many of the ideas that animated the

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Handbook of research on ethnic minority entrepreneurship

middleman minorities literature as well. First, transmigrants have diasporas, just as did and do middleman minorities. However, because of transnationalism, it is argued, ethnoracial groups that were never middleman minorities can now have diasporas too. For example, Brazilians or Filipinos can have a diaspora such as was previously available only to middleman minorities like the Jews, Armenians or Chinese (Gold, 1997: 410). In an era of globalization, diasporas are easier to maintain now than they were earlier, and much more numerous around the world in consequence (Cohen, 1997: 176).6 Therefore, transnational studies examine groups that are not historic middleman minorities, but which have diasporas as well as, of course, classical middleman minorities. Haitians, Dominicans, Turks, Koreans, Colombians and Filipinos are exemplary transnational groups, who have never been middleman minorities. This novel combination of diaspora without a middleman minority’s history would not have occurred in the past when middleman minorities virtually overlapped with diasporan minorities. In effect, if contemporary theorists of transnationalism are correct, diasporas are no longer reserved to middleman minorities, so many more people can live in diasporas now than previously did so. Second, contemporary transmigrants are bi-cultural just as are and were members of the classic middleman minorities. As a result, transmigrants enjoy some of the same advantages for international trade that middleman majorities enjoyed in the past. The spokes of the transmigrants’ diaspora communicate with one another and with the diaspora’s hub in the mother tongue while selling locally in the local vernacular. They can do this because and to the extent that transmigrants, like middleman minorities, retain their native-speaker fluency in the mother tongue over generations; for example, they do not assimilate. This is the advantage that Armenian merchants in Lima enjoyed when trading with Persia in the eighteenth century. Third, like middleman minorities, contemporary transmigrants have international social capital that provides access to enforceable trust. International social capital hugely simplifies international trade. Enjoying international social capital, a Haitian transnational residing in New York City can buy and sell goods from a coethnic in Port-au-Prince in confidence that invoices will be paid or, if unpaid, can be informally collected without recourse to law. If Haitians simply assimilated, as do immigrants, that transnational merchant would lose the social networks that access Haitian business circles and underpin his or her creditworthiness. Because they shuttle frequently between Haiti and New York City, a life style made possible by jet airplanes, and because they receive and send satellite messages from and to Haiti, a facility made possible by satellite communication, Haitians in New York City can retain social capital in Haitian business circles for protracted, even indefinite periods, thus retaining the advantages in international trade that international social capital permits. Should they assimilate, they would lose those advantages. Given these similarities to middleman minorities, it is unsurprising that transmigrants from below display high entrepreneurship, especially in international trade (Portes, 2003). Some evidence reports that transmigrants are ten times more likely to become entrepreneurs than are coethnic immigrants. Portes, Haller and Guarnizo (2002) studied self-employment rates among immigrant Dominicans, Colombians and Salvadorans in five American cities. None of these ethno-racial groups is or was a middleman minority. Defining transnational entrepreneurs as those who went abroad for business twice a year or more, the authors found that only 5 per cent of each national-origin sample were transnational entrepreneurs,

Global entrepreneurship and transnationalism

7

but 58 per cent of the self-employed were transmigrants. ‘Transnational entrepreneurs represent a large proportion, often the majority, of the self-employed persons in immigrant communities’ (Portes, Haller and Guarnizo, 2002: 293). Better educated than coethnics, the transnational entrepreneurs also earned higher incomes than non-transnational coethnics. Transnationalism is even said to have affected middleman minorities. Ooka (2001) reports that ‘ethnic social capital’ did not increase the income of Chinese business owners in Toronto, but bridging social capital (connections to non-Chinese) did, as did class resources. Ethnic social capital would have been more characteristic of middleman minorities, so its ineffectiveness here suggests a new kind of international business among the Chinese. Wong and Ng (2002: 509) also claim that Chinese transnational business represents a new form of Chinese business. Although still small business, like the Chinese business of the past, the new transnational Chinese business supposedly has a different modus operandi (Yeung, 1999; Li, 1993). The Chinese transnational business owners have more business associates in Asia than non-transnational Chinese entrepreneurs; they are also more likely to make use of Chinese business contacts, and more likely to target non-Chinese customers than are non-transnational Chinese entrepreneurs. The international traffic in prohibited drugs, sex commerce and immigrant smuggling offer additional illustrations of transnational business. The bi-lingualism and international social capital that confer success in legal industries also confer it in these illegal ones.7 Massey et al. (1993: 446) observe that economic globalization ‘creates cultural links between core capitalist countries and their hinterlands’ and transnationalism is one of the ways globalization accomplishes this end. This line of thought eventuates in the hypothesis that transnationalism promotes international trade by multiplying the ethnic resources formerly restricted to middleman minorities. Transmigrants are a minority of the groups to which they belong whereas middleman minorities are whole groups, not just an elite. Middleman minorities enter business because of their underlying life style, which makes business congenial to them; transmigrants more commonly adopt a cosmopolitan life style in the interest of promoting their business. This life style is an elite life style. The past lingers. The era of transnationalism did not demolish middleman minorities. Middleman minorities did not vanish when transnational business elites appeared. However, if the theorists of transnationalism are correct, more people can have the key business-supporting resources now than could do so in the past when international commerce relied on middleman minorities. Therefore, more international trade is possible now. This attractive hypothesis already has some documentation to support it. The hypothesis links transnationalism and the expansion of world trade, which is the hallmark of globalization. Indeed, one could conclude that globalization requires transnationalism, which it also promotes. International trade requires international traders, and international traders are transmigrants. Hence, Silj and Cross (1999: 135) declare that transmigrant entrepreneurs no longer promote a ‘second-rate form of capitalism’ as Weber believed (Light and Gold, 2000: 6–7). Instead, transnational traders are ‘the forefront of new economic ties’. If so, transmigrant entrepreneurs arguably caused some of the last half century’s increase in international trade (Kotkin, 1996). That is, because more people had access to the requisite skills, the world sprouted more international entrepreneurs, and more world trade ensued. Strictly in its economic terms, globalization means the reduction of tariff and non-tariff barriers to trade, freer mobility of capital across international boundaries, international

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Handbook of research on ethnic minority entrepreneurship

standardization of products, specifications, and legal codes as well as the migration of Third World workers, skilled and unskilled, to the developed countries (Sassen, 1994; Hollifield, 1998). As globalization knits world markets, opportunities for trade increase, as does the importance of international trade. World trade has increased substantially in the last generation, a result usually attributed to globalization. In the United States of America, the share of exports in national income rose from 4 per cent to 7 per cent between 1950 and 1990. The share of merchandise exports in the output of manufactured goods, a more revealing ratio, increased over the same period from 6 per cent to nearly 20 per cent (The Economist, 1997), and other countries have seen comparable changes. Exports now account for more than 20 per cent of US economic growth. Exports create more than 11 per cent of American jobs (Rondinelli, Johnson and Kasarda, 1998: 75). This abrupt growth of international trade could not have relied upon middleman minorities whose supply of international traders could not expand rapidly enough to match the growing need. Rather, it appears that even classic middleman minorities like the Jews and Chinese added transmigrant elites (from below and also from above) to their existing population of middleman traders (Gold, 1997; Hamilton and Waters, 1997). Whether generated from above or from below, transmigrant elites utilized class resources of entrepreneurship, such as human and financial capital, more than the ethnic resources on which middleman minorities characteristically relied and continue to rely.8 Similarly, hitherto non-trading immigrant communities began to produce international traders as an elite whose entrepreneurial resources derived from their class status rather than from the ethnic resources of traditional trading minorities. The joint result was expansion of the supply of persons qualified to undertake international business. Without this expansion, the growth of international commerce would be constrained by an inadequate supply of traders with the requisite entrepreneurial resources of social and cultural capital. Transnationalism arguably accomplished this historical task, outfitting more or less every immigrant group with its own cosmopolitan, bi-cultural and non-assimilating business elite, who had the resources to become international business owners and traders (Farrell, 1993). The result was a globalized world in which old-fashioned middleman minorities now shared international trade with new transnational elites rather than dominating it by themselves as they once had. Globalization and English language dominance However, before pledging allegiance to this attractive hypothesis, we should examine the embeddedness of transnationalism in globalization, which is much bigger than just transnationalism. Globalization is changing the world in multiple ways, not just by way of transnational business elites. Kloosterman and Rath (2003: 7) and their colleagues have already drawn attention to possible increases in demand for immigrant entrepreneurs within the developed economies as a result of the transition to post-industrial economies in which small business has new advantages. Cultural globalization also generates demand in the developed countries for exotic food, merchandise and services (acupuncture, falafel, images of Buddha) that emanate from Third World countries and that immigrant entrepreneurs can readily provide (Light, 2004). In these cases, the impact of globalization tends generally to support and enhance the presence and viability of immigrant entrepreneurs abroad. But these positive effects, much celebrated though they are, may not end the story.

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An additional and less studied effect of globalization on immigrant business occurs via the increasing international dominance of the English language in science, business and government, a development that was not always welcomed (Crisafulli, 1996). English has not always been the world’s dominant language. Globalization created the dominance of English since 1945 (Phillipson, 1992; Fishman, 1998–99; Fox, 2000). In effect, the contemporary dominance of English and transnational immigration are both effects of globalization. The dominance of the English language embeds transnational business elites in a world quite different from the one in which classic middleman minorities lived. Possibly that difference affects the trading advantages that transmigrants and middleman minorities enjoy. We inhabit a globalized world in which English has almost become the universal second language of business people everywhere. In this world, bi-cultural transmigrants enjoy less linguistic advantage than classic middleman minorities earlier enjoyed, before globalization. This reduction arises because so many non-immigrants have learned English as their second language. If, in an extreme and limiting case, all the inhabitants of the world’s non-English-speaking countries achieved complete fluency in English, then anyone could trade with anyone elsewhere on the strength of their common second language, English. Immigrants would no longer need bi-cultural elites or middleman minorities to effectuate their international trade as they did when immigrants were mono-linguals. Today the Japanese business travelers in Eastern Europe prefer to speak English to their Polish or Czech trading partners rather than having to learn Czech or Polish, and the Poles and Czechs reciprocate the preference. Thanks to the dominance of English, Japanese, Czechs and Poles now have this option. Returning to the illustration earlier used, we recall that Peruvians in Peru and Turks in Turkey patronized the Armenian diaspora because Peruvians did not speak Turkish and Turks did not speak Spanish. Lacking a common language, Turks and Peruvians needed to communicate through bi-cultural Armenians, one group of whom spoke Spanish and the other Turkish. Armenian intermediaries (middlemen) were indispensable in that world’s rug business. In a fully globalized world, however, Turks speak English and Peruvians speak English. Therefore, Turks and Peruvians can communicate in English, and neither side needs Armenian middlemen any more just for the purpose of communication. Of course, this thought-experiment relies upon a fully globalized world that does not yet exist. Nonetheless, the increasing dominance of the English language in world business does tend to move the world in that direction. In continental Europe today, half of the adult population claims to speak English. This unprecedented state of affairs means that the French and Germans, the Spanish and the Italians, or any other European combination, can speak English to one another for purposes of international trade, reducing any need for either middleman minorities or transmigrants to interpret for them. Middleman minorities translated business into Armenian from local vernaculars; transnational immigrant traders speak their native language plus the adopted language of their destination country. Both acquire trading advantages to the extent that everyone does not already speak English. If everyone speaks English, then neither middleman minorities nor bi-lingual transmigrants have any linguistic resource to exploit in commerce. True, the European trading partners may not trust one another even though they communicate in English with other non-native speakers of English. To that extent, the Europeans would still need middleman minorities or the transmigrants whose international

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social capital stands surety for their business deals. Nonetheless, looking only at the linguistic indispensability, which the middleman minorities once exploited, we conclude that the dominance of English as a world language reduces even if it does not yet extinguish the linguistic advantage of both middleman minorities and of transmigrants today. If so, middleman minorities, like the Chinese, would have lost their trading advantage in intraEuropean trade, and would retain it only in the organization of trade between China and their current host country. This point is speculative. However, evidence has already begun to build up behind other, trade-related economic effects of English dominance (Van Parijs, 2000). Examining the foreign trade of the United States and Canada in the 1980s, David Gould (1990, 1994) found that the volume and skill levels of immigrants increased the dollar volume of both American and Canadian exports to the immigrants’ home countries without increasing imports from them. This discrepancy did not attend immigration from English-speaking countries. He explained the unexpected discrepancy by reference to transaction costs, arguing that immigrants enjoyed transactional advantages for exports, but not for imports. Light (2001) and Light, Zhou and Kim (2002) replicate Gould’s basic finding on a comparable but slightly different American data set. They too find that immigrants to the United States increased American exports to their home countries without increasing American imports from their home countries. However, this discrepancy does not attend immigration from English-speaking countries, which increased neither exports nor imports. Light and his colleagues considered the possibility that transnational immigrants increased international trade more than non-transnational immigrants, but less than middleman minorities who, unlike transmigrants, have centuries of entrepreneurial culture on which to draw. Comparing the Chinese diaspora and the Spanish diaspora, they found that both diasporas increased American trade with overseas homelands net of control variables, but the size of the Chinese effect was twice the size of the Spanish effect. Moreover, a measure of fluency in English found that, net of control variables, high fluency in English increased immigrants’ exports to their overseas homelands without increasing their imports from their homeland. This manipulation implied that Englishspeaking countries need the help of non-English speaking immigrants to export goods to the immigrants’ non-English-speaking homelands because, partially thanks to globalization, English-speaking countries lack foreign language skills. Even in the world of globalized international commerce, an ancient rule of marketing still prevails: ‘the merchant speaks the customer’s language’. Nineteenth-century Armenians in Peru peddled rugs in Spanish. Today this ancient rule requires English-speaking countries to peddle their exports in languages other than English when they export to non-English-speaking countries. Thanks to the dominance of English as a world business language, itself a product of globalization, the English-speaking countries have learned to rely on the rest of the world’s fluency in English, thus relieving them of the necessity of learning foreign languages. Therefore, when they have to market their exports in non-English-speaking countries, English-speaking countries rely upon the assistance of bi-cultural immigrants, who retain full fluency in foreign languages. Transmigrants have this capacity. Fully fluent in English, they are also fluent in the language of their homeland. However, again thanks to the world dominance of English, the opposite situation does not apply. When exporting to English-speaking countries, non-English-speaking countries

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enjoy a linguistic advantage. The exporters already speak English as a second language. Speaking English as their second language, the Spanish, the Koreans, the Chinese or the Swedes do not need the help of coethnic immigrants in the United States, Canada, Australia or New Zealand to market their exports to those English-speaking countries. As a result, Swedish or Spanish transmigrants residing abroad in English-speaking countries cannot contribute to the marketing effort of their homeland’s companies in those English-speaking countries. This observation would explain why immigrants in the United States and Canada increase those countries’ exports to the immigrants’ overseas homelands without increasing their homelands’ exports to the United States and Canada. They also explain or help to explain why immigrants from English-speaking countries have no effect on the imports or exports of the United States and Canada to their homeland. Immigrants from English-speaking countries have no linguistic advantage in another English-speaking country. It was correct to assert, as David Gould did, that cultural skills reduce the transaction costs of international commerce. However, Gould still thought of language as a trade friction, not a trade structure. Prior to globalization, when languages were more or less on an international standing of parity, with perhaps some superiority to French in the nineteenth century, one could conceptualize translation as a frictional cost of international business. Middleman minorities thrived in the shadow of that frictional cost. In the globalized world that is increasingly coming into existence, the global dominance of the English language is a global structure, not what economists call ‘a friction’. This global linguistic structure affects international trade in new ways that require new theory. The theoretical heritage of middleman minorities, properly amended, offers the tools to accomplish this task. Conclusion Existing literature has correctly inferred that transmigrants from above and from below enjoy linguistic and social capital advantages that outfit them advantageously for international commerce and entrepreneurship. On this view, transnationalism endows regional ethnic groups that were not historical middleman minorities and that do not inherit an ethnic culture of entrepreneurship with newly-acquired class resources of entrepreneurship. As a result, those class resources of entrepreneurship are more common than they were previously among immigrants; hence, international trade can progress more rapidly than it did earlier. International trade requires international traders, and international traders require the resources of enforceable trust and bi-culturalism. These inferences are correct as far as they go. However, missing from existing transnationalism literature, whether from above or from below, is any awareness that globalization reduces the utility of bi-lingual combinations that do not include English. Spanish to French competence is not useful when all French people and all Spanish people speak English. In this case, Spanish people can talk to French people in English, and vice-versa, so what additional utility is conveyed by speaking French as well as Spanish? Globalization increasingly embeds world commerce, science, cinema and diplomacy in a dominant language, English. This dominant language creates a global linguistic structure where previously only linguistic frictions existed. There is every reason to suppose that economic consequences flow from the global dominance of English, and some recent evidence supports that hypothesis. Presumably the dominance of the English language

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embeds the earth in a structure that transnationalism must subserve. Studying the manner in which transmigrants fit into this new language structure emerges as a future research path of consequence. Both practical and theoretical issues are at stake. On the theoretical side, we learn that transmigrants are not just middleman minorities redux and many times multiplied. Even if they were, the world has changed in some ways advantageous to immigrant entrepreneurs and in some ways disadvantageous. Even if post-industrial economies and cultural globalization enhance demand for immigrant-owned business, as some authorities maintain, the linguistic effect of globalization diminishes it. The global dominance of English reduces the advantage that bi-lingualism conveys in international trade, undermining transmigrants and middleman minorities alike. Both middleman minorities and transnational business elites exploit bi-lingualism for commercial advantage in international trade. Bi-lingualism is not their only resource; they also have enforceable social trust embedded in international networks. Nonetheless, the bilingualism has been a salient commercial advantage, which the increasing dominance of English tends to erode throughout the world. For this reason, extrapolating the dominance of English into the future, the long-term outlook for both transmigrants and middleman minorities, the modern and old-fashioned forms of international trade elites, is clouded. On the practical side, the four-fold expansion of international trade since 1950, which is a defining feature of globalization, owes something to transnationalism in the functional sense of mutual affinity and support. Transmigrants made the expansion of globalization possible, and profited from the opportunities this expansion afforded. In effect, globalization and transnationalism co-produced one another. Moreover, in the context of the increasing dominance of the English language, the English-speaking countries derived peculiar and idiosyncratic advantages from transnational business migrants who increased their exports without increasing their imports! Because of this lop-sided advantage, the massive and dangerous balance of payments deficit of the United States was reduced, but not eliminated. This reduction performed a service to world trade, rendering it more secure than it otherwise would have been. Operating in tandem, transnational business elites and the dominance of the English language jointly reduced the vulnerability of the United States to the normal monetary corrections that attend large and protracted trade deficits. The same would obviously be true as well of other Englishspeaking countries, but, since their international role is less pivotal than that of the world’s super power, their trade deficits are comparably less important. Since that American balance of payments deficit has been many times identified as the endangered cornerstone of the global economy, whose collapse would pull down the whole global edifice, transnational business elites have proved a social adjunct of globalization in the last generation. Notes 1. An early version of this paper was presented at the European Science Foundation’s ‘Asian Immigrants and Entrepreneurs Conference’ that was held at the Catholic University of Nijmegen, on 11 May 2001. Please direct all correspondence regarding this paper to [email protected]. 2. For an extended discussion, see Light and Karageorgis (1994). 3. The 2004 film Ararat offers Hollywood’s attempt to deal with the oppression of Armenians, and their recourse to commercial entrepreneurship in self-protection.

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4. ‘Trust and cultural affinities facilitate involvement in transnational ethnic businesses. The moment of business encounter is not solely determined by formal rationalized rules, but also by the presence of cultural codes favoring the process of trust building in business transactions. In small-scale transnational entrepreneurial activities, culture can both promote and limit business opportunities. In this context, formal and rationalized market structures are subordinated to the economic culture of the social agents’ (Moallem, 1996: 12). 5. To acculturate is to acquire the language and culture of a host society. To assimilate is to identify with the host society. Inter-marriage is the single most powerful indicator of assimilation. 6. ‘Globalization has enhanced the practical, economic, and affective roles of diasporas, showing them to be particularly adaptive forms of social organization’ (Cohen, 1997: 176). 7. The 2004 film Maria Full of Grace illustrates the operation of a drug smuggling ring around a Colombian diaspora. 8. The distinction between class and ethnic resources is discussed in Light and Karageorgis (1994).

References Armstrong, J.A. (1976), ‘Mobilized and proletarian diasporas’, American Political Science Review, 9, 393–408. Bonacich, Edna (1973), ‘A theory of middleman minorities’, American Sociological Review, 38, 583–94. Caliner, Geoffrey (2000), ‘The language ability of U.S. immigrants: assimilation and cohort effects’, International Migration Review, 34, 158–82. Chik, Frances (2000), ‘Hong Kong Chinese immigrant women in business: the impact of transnational networks’, paper presented at the Fifth Annual Metropolis Conference, Vancouver, 14 November. Cohen, Abner (1971), ‘Cultural strategies in the organization of trading diasporas’, in Claude Meillassoux (ed.), The Development of Indigenous Trade and Markets in West Africa, London: Oxford University Press, pp. 266–84. Cohen, Robin (1997), Global Diasporas, Seattle: University of Washington Press. Collins, Jock (1998), Cosmopolitan Capitalism: Ethnicity, Gender and Australian Entrepreneurs, vols 1 and 2, PhD dissertation, University of Wollongong. Crisafulli, Edoardo (1996), ‘La Diffusione dell’Inglese e l’Imperialismo Linguistico’, Rivista delle Lingue, 5, 20–23. Dicken, Peter (1992), Global Shift: The Internationalization of Economic Activity, NewYork: Guilford Press. Farrell, Christopher (1993), ‘Shut out immigrants and trade may suffer’, Business Week (5 July), 82, 84. Fishman, Joshua A. (1998–99), ‘The new linguistic order’, Foreign Policy, 28, 26–40. Fox, Justin (2000), ‘The triumph of English’, Fortune, 142, 209ff. Fukuyama, Francis (1995), ‘Social capital and the global economy’, Foreign Affairs, 74, 89–103. Gold, Steven (1997), ‘Transnationalism and vocabularies of motive in international migration: the case of Israelis in the United States’, Sociological Perspectives, 40, 409–27. Gould, David M. (1994), ‘Immigrant links to the home country: empirical implications for US bilateral trade flows’, Review of Economics and Statistics, 76(2), 302–16. Gould, David Michael (1990), ‘Immigrant links to the home country: implications for trade, welfare, and factor returns’, PhD dissertation, University of California, Los Angeles. Guarnizo, Luis Eduardo and Luz Marina Diaz (1999), ‘Transnational migration: a view from Colombia’, Ethnic and Racial Studies, 22, 397–421. Guarnizo, Luis Eduardo, Arturo Ignacio Sanchez and Elizabeth M. Roach (1999), ‘Mistrust, fragmented solidarity, and transnational migration: Colombians in New York City and Los Angeles’, Ethnic and Racial Studies, 22, 367–96. Hamilton, Gary G. and Tony Waters (1997), ‘Ethnicity and capitalist development: the changing role of the Chinese in Thailand’, in Daniel Chirot and Anthony Reid (eds), Essential Outsiders: Chinese and Jews in the Modern Transformation of Southeast Asia and Central Europe, Seattle and London: University of Washington. Hollifield, James F. (1998), ‘Migration, trade, and the nation-state: the myth of globalization’, paper prepared for Symposium on ‘Reconsidering Immigration in an Integrating World’, University of California at Los Angeles. Kieval, Hillel J. (1997), ‘Middleman minorities and blood: is there a natural economy of the ritual murder accusation in Europe?’, in Daniel Chirot and Anthony Reid (eds), Essential Outsiders: Chinese and Jews in the Modern Transformation of Southeast Asia and Central Europe, Seattle and London: University of Washington Press. Kloosterman, Robert and Jan Rath (2003), ‘Introduction’, in Robert Kloosterman and Jan Rath (eds), Immigrant Entrepreneurs: Venturing Abroad in the Age of Globalization, Oxford: Berg. Kotkin, Joel (1996), ‘Cities of hope: thanks to global trade urban America’s potential is revealed’, World Trade, 9(4), 24–30.

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Laguerre, Michel (1998), ‘Rotating credit associations and the diasporic economy’, Journal of Developmental Entrepreneurship, 3, 23–34. Landolt, Patricia, Lilian Autler and Sonia Paires (1999), ‘From Hermano Lejano to Hermano Mayor: the dialectics of Salvadoran transnationalism’, Ethnic and Racial Studies, 22, 290–315. Lever-Tracy, Constance and David Ip (1996), ‘Diaspora capitalism and the homeland: Australian Chinese networks into China’, Diaspora, 5, 239–71. Lever-Tracy, Constance, David Ip, Jim Kitay, Irene Phillips and Noel Tracy (1991), Asian Entrepreneurs in Australia, Canberra: Australian Government Publishing Service. Li, Peter S. (1993), ‘Chinese investment and business in Canada: ethnic entrepreneurship reconsidered’, Pacific Affairs, 66, 219–43. Lie, John (1995), ‘From international migration to transnational diaspora’, Contemporary Sociology, 24, 303–6. Light, Ivan (2001), ‘Globalization, transnationalism and trade’, Asian and Pacific Migration Journal, 10, 53–79. Light, Ivan (2004), ‘The ethnic economy’, in Neil Smelser and Richard Swedberg (eds), The Handbook of Economic Sociology, 2nd edn, New York: Russell Sage Foundation. Light, Ivan and Steven J. Gold (2000), Ethnic Economies, San Diego: Academic. Light, Ivan and Stavros Karageorgis (1994), ‘The ethnic economy’, in Neil Smelser and Richard Swedberg (eds), The Handbook of Economic Sociology, New York: Russell Sage Foundation. Light, Ivan, Parminder Bhachu and Stavros Karageorgis (1993), ‘Migration networks and immigrant entrepreneurship’, in Ivan Light and Parminder Bhachu (eds), Immigration and Entrepreneurship, New Brunswick: Transaction, pp. 25–50. Light, Ivan, Min Zhou and Rebecca Kim (2002), ‘Transnationalism and American exports in an Englishspeaking world’, International Migration Review, 36, 702–25. Massey, Douglas S., Joaquin Arango, Graeme Hugo, Ali Kouaouci, Adela Pellegrino and J. Edward Taylor (1993), ‘Theories of international migration: a review and appraisal’, Population and Development Review, 19, 431–66. Moallem, Minoo (1996), ‘Transnationalism, migrancy, and entrepreneurship’, Beatrice M. Bain Research Group and Sociology Department, University of California, Berkeley. Ooka, Emi (2001), ‘Social capital and income attainment among Chinese immigrant entrepreneurs in Toronto’, Asian and Pacific Migration Journal, 10, 123–44. Phillipson, Robert (1992), Linguistic Imperialism, Oxford: Oxford University. Portes, Alejandro (2003), ‘Conclusion: theoretical convergencies [sic] and empirical evidence in the study of immigrant transnationalism’, International Migration Review, 37, 874–92. Portes, Alejandro and Lingxin Hao (1998), ‘E pluribus unum: bilingualism and loss of language in the second generation’, Sociology of Education, 71, 269–94. Portes, Alejandro, William J. Haller and Luis Eduardo Guarnizo (2002), ‘Transnational entrepreneurs: an alternative form of immigrant economic adaptation’, American Sociological Review, 67, 278–98. Rondinelli, Dennis A., James H. Johnson, Jr. and John D. Kasarda (1998), ‘The changing forces of urban economic development: globalization and city competitiveness in the 21st century’, Cityscape, 3, 71–105. Sassen, Saskia (1994), ‘Economic internationalization: the new migration in Japan and the United States’, Social Justice, 21, 62–82. Schiller, Nina Glick, Linda Basch and Cristina Blanc-Szanton (1992), ‘Transnationalism: a new analytic framework for understanding migration’, in Nina Glick Schiller, Linda Basch and Cristina Blanc-Szanton (eds), Towards a Transnational Perspective on Migration, pp. 1–24. Silj, Alessandro and Malcolm Cross (1999), Ethnic Conflict and Migration in Europe, Rome: Consiglio Italiano per le Scienze Sociali and Centre for European Migration and Ethnic Studies. Smart, Alan and Josephine Smart (1998), ‘Transnational social networks and negotiated identities in interactions between Hong Kong and China’, in Michael Peter Smith and Luis Eduardo Guarnizo (eds), Transnationalism From Below, New Brunswick, NJ: Transaction, pp. 103–29. The Economist (1997), ‘The world economy’, 20 September. Van Parijs, Philippe (2000), ‘The ground floor of the world: on the socio-economic consequences of linguistic globalization’, International Political Science Review, 21, 217–33. Walton-Roberts, Margaret and Daniel Hiebert (1997), ‘Immigration, entrepreneurship, and the family: IndoCanadian enterprise in the construction of greater Vancouver’, Canadian Journal of Regional Science, 20, 119–40. Wong, Bernard (1998), Ethnicity and Entrepreneurship: The New Chinese Immigrants in the San Francisco Bay Area, Boston: Allyn and Bacon. Wong, Lloyd L. (1997), ‘Globalization and transnational migration’, International Sociology, 12, 329–51. Wong, Lloyd L. (2003), ‘Chinese business migration to Australia, Canada, and the United States: state policy and the global immigration marketplace’, Asian and Pacific Migration Journal, 12, 301–35.

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Wong, Lloyd L. and Michele Ng (2002), ‘The emergence of small transnational enterprise in Vancouver: the case of Chinese entrepreneur immigrants’, International Journal of Urban and Regional Research, 26, 508–30. Yeung, Henry Wai-Chung (1999), ‘The internationalization of ethnic Chinese business firms from Southeast Asia: strategies, processes and competitive advantage’, International Journal of Urban and Regional Research, 23, 103–27.

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Ethnic economies, social capital and the economic theory of clubs Craig S. Galbraith, Carlos L. Rodriguez and Curt H. Stiles

I Introduction Starting with Piore’s (1979) work on ethnic economies, sociologists and entrepreneurship theorists have focused on a number of underlying factors that appear to partially explain, or at least contribute to the explanation of, the coalescing characteristics of ethnic populations and entrepreneurs into ‘enclave’-type communities. Within this body of literature, explanations of behavior inevitably involve discussions of social capital, social embeddedness and network ties (for example, Portes and Sensenbrenner, 1993; Portes and Landolt, 1996, 2000; Portes, 1998; Kloosterman and Rath, 2001; Rath, 2002). Recently there has been increased focus on understanding the dynamics of ethnic economies and how, over time, their economic engines are tied to other social, religious, cultural and governance factors that ultimately frame the nature of an ethnic community (see, for example, Stiles and Galbraith, 2004). This interest in the dynamics of ethnic community formation and development has fueled a number of research paths, including fine-tuning the definitional distinctions between levels of coethnic cohesiveness, such as ethnic neighborhoods, ethnic economies and ethnic enclaves (for example, Waldinger, 1982; Waldinger et al., 1990; Light and Gold, 2000), directly examining the evolution of economic transactions among early and later stage ethnic entrepreneurs (for example, Greene, 1997; Galbraith et al., 2003), and investigating the role of religious and social institutions in capital, human and intellectual transfer during different periods of an ethnic community’s development (for example, Kwon, 1997; Martes and Rodriguez, 2004). In spite of the proliferation of recent research on ethnic economies, what appears to be missing is an underlying and unifying theoretical paradigm. While recognizing that there are perhaps several possible theoretical candidates, we offer the economic theory of clubs (for example, Buchanan, 1965; Ng, 1973; Berglas, 1976; Sandler and Tschirhart, 1980) as a potential unifying paradigm for the study of ethnic economies and the behavior of ethnic entrepreneurs. Within this context we conceptualize the benefits derived from an ethnic grouping (accumulated social capital, decreased transaction costs and so on) as a ‘club’ good supplied at the coethnic level, demanded by the various key stakeholders within an ethnic neighborhood, economy or enclave, and with clear characteristics of excludability. II Economic theory of clubs Modern discussions of economic clubs have their theoretical roots in Tiebout’s seminal 1956 paper on local public goods (Tiebout, 1956). In this paper, Tiebout responded to an earlier paper by Samuelson (1954) by arguing that the marginal efficiency of pure public goods violates the characteristics of market efficiency. Samuelson, taking a social justice perspective, had previously argued for larger municipalities populated with a myriad of 16

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government agencies that offer broad social, educational and economic programs while aggressively intervening to manage the multiple externalities associated with differential taxing and ‘free-riders’. This general ‘social justice’ approach was particularly attractive in the post-World War II industrial growth environment, providing much of the theoretical justification for the development of the 1950s’ and 1960s’ ‘megatropolises’ such as Los Angeles, Houston and Atlanta, as well as the more recent trend of municipal consolidations and annexations (for example, Huck, 2004). Tiebout, however, invoking the now classic ‘voting with one’s feet’, showed that a quasispatial adjustment mechanism could, under certain assumptions, lead to an efficient equilibrium or Pareto optimality for local public goods.1 Thus individual households, each attempting to maximize their own utility functions, will tend to congregate with similar households in geographical areas where local jurisdictions offer cost-competitive public goods that cater to those particular preferences. This should result in smaller, more homogeneous municipal constructs. As Heikkila observes, ‘an irresistible metaphor is a giant shopping mall with countless “municipality boutiques” offering specialized products or services for a well-defined clientele’ (Heikkila, 1996: 205). Households, upon completing a search process, then select the municipal boutique that best satisfies its vector of preferences and needs. Voting with one’s feet then leads to agglomeration around various vectors of local public goods offered by geographically different municipalities. In essence, Tiebout offered a counter point to the diversified, consolidated city and is often viewed as providing the essential explanatory model behind the other modern urban trend, that is, the proliferation of distinctly more homogenous, suburban bedroom communities (Le Goix, 2003). Over time, the general Tiebout model of municipal goods has been gradually subsumed under a broader class of economic models known as club theory (Buchanan, 1965; Cornes and Sandler, 1996). Club theory, as broadly defined by Hochman et al. (1995), is concerned about the formation and characteristics of optimal production and consumption groups, and their sustainability under various competitive conditions. This definition subsequently broadened the analysis beyond the core municipality to include specific institutions that provide some form of public goods, such as school, water and fire districts (for example, Sterbenz and Sandler, 1992; Rosen and Sexton, 1993; Frey and Eichenberger, 1996). Over the years, a number of different issues and directions have been examined within the general theoretical paradigm of clubs, including relaxing many of the restrictive Tiebout assumptions (Padon, 1999), advances in Pareto optimality (Ng, 1973; Brennan and Flowers, 1980), sharing between clubs (Sterbenz and Sandler, 1992), the conditions under which optimal club membership is mixed (Berglas, 1976; Brueckner and Lee, 1988; McGuire, 1991) and the effects of differences in the club agent’s abilities (Conley and Wooders, 2001). Clearly there are parallels between club theory and both neo-classical theories on diversified, multi-product firms (see Brueckner and Lee, 1988) and consumer preference theories that examine the relationships between segmented customer-markets and product positioning within a multi-dimensional perceptual space. Even Tiebout (1956) noted that spatial mobility provides the local public-goods counterpart to the private market’s shopping trip. Thus, under conditions of general efficiency, households will always reveal their particular vector of preferences by the process of agglomeration around various differentiable local public goods and tax packages.

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In addition to the obvious municipal services and local jurisdictional issues (see Dowding et al., 1994 for a review of empirical research) club theory has been used as the theoretical grounding for understanding the formation, composition and pricing for a variety of ‘groupings’, including recreational clubs (Hearne, 1988), adoption of voluntary codes of conduct (Prakash, 2000), adoption of ISO rules (Kollman and Prakash, 2002), the survival of international trade organizations (Fratianni and Pattison, 2001), optimum organization for farming co-operatives (Slangen, 1994) and political institution formation and voting behaviors (Kollman et al., 1997; Perroni and Scharf, 2001). The key to understanding these broader applications of club theory lies primarily in understanding a broader definition of a ‘club good’. In the next section we argue that one of the foundational concepts underlying ethnic economies – social capital – can, in fact, be properly considered a ‘club good’. III Social capital as a club good Over the last three decades, the concept of social capital has become one of the most enduring and important theoretical forces in explaining the social and economic behavior of immigrant populations (Portes, 1998). Given its roots in the sociological literature, social capital is traditionally defined as an asset, resource, or capability that arises from trust, reciprocity, goodwill, and knowledge among a well defined network of relationships (Woolcock, 1998). Two elements of social capital are critical, the complex vector of social capital assets and the social network that allows an individual or firm to locate, utilize and build upon these social capital assets (Coleman, 1988; Burt, 1992; Fukuyama, 1995; Portes, 1998). From a sociological perspective, having a common language, interacting with a common set of customs, and developing market exchange using common, and perhaps non-written, procedures help create a higher level of trust and access to information through the ethnic network. From an organizational economics perspective (Williamson, 1975), these components of social capital can reduce the transaction costs of contractual economic exchange: search time for appropriate economic partners is shortened, contracting and re-contracting costs are reduced, and enforcement efforts in the face of potential opportunistic behavior are lessened. In fact, from this transaction economic perspective alone, one would expect a greater degree of intra-ethnic vertical supplier–buyer relationships (Galbraith et al., 2003) as well as synergistic horizontal partnering (Teece, 1980; Galbraith and Kay, 1986) as immigrants find efficient coethnic market and coethnic organizational-based solutions by accessing social capital assets.2 While social capital is usually presented in the literature as a resource, recently it is being framed more as an ‘economic good’ with defined benefits and costs (Portes and Landolt, 1996, 2000; Knack and Keefer, 1997; Portes, 1998). From a macro perspective, potential costs are ‘free rider’ costs, where latecomers to an ethnic network benefit from the accumulated social capital without having to ‘pay’ for the benefit. From a micro perspective, individuals may, for example, be expected to give discounts and free service to other coethnics. Within this light, Fukuyama (2001) frames the basic theoretical point by noting that social capital is essentially a ‘private good’ that has various associated economic ‘externalities’. The notion of externalities associated with social capital, we believe, is critical to understanding the nature of the social capital ‘good’. And, within this context, we argue that

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the rise of externalities also gives rise to the possibility of institutionalizing the property rights associated with the underlying asset. This argument builds upon Demsetz (1967) who, noting the close relationship of property rights to the concept of externalities, writes ‘property rights develop to internalize externalities when the gains of internalization become larger than the cost of internalization’ (Demsetz, 1967: 350). Property rights, in fact, are one of the most important instruments of societal and economic development (North, 1990; DeSoto, 2000; Dabla-Norris and Freeman, 2004). If social capital is considered an ‘economic good’, then a form of property right must also be applied to the good if the externalities (positive or negative) become too great, particularly if social capital is a ‘private good’ as suggested by Fukuyama (2001). To Demsetz (1967) these property rights are the mechanisms that assist people to ‘form those expectations which [they] can reasonably hold in their dealings with others’ (Demsetz, 1967: 347). The view of social capital as an economic good fits well within the framework of club theory. Within this context, we therefore theoretically conceptualize the benefits derived from coethnic networks in the form of social capital as representative of a ‘club’ good. This club good of social capital is supplied at the coethnic level via the network within the ethnic population, and demanded (and ultimately consumed) by the various key stakeholders within an ethnic neighborhood, economy or enclave such as the coethnic laborers, immigrant small business owners, and leaders of the ethnic community, depending on the level of analysis (Galbraith, 2004). In this light, social capital, regardless of its various sociological sources (Portes and Sensenbrenner, 1993), is seen as a collective asset supplied at the coethnic ‘network’ level, derived from the sharing of production costs (contributing to ethnic causes and so on), and coethnic members’ characteristics. Also, considering that individuals outside the ethnic community may have limited access to some of the benefits derived from social capital that is ‘owned’ by the community (owing to differences in language and culture, for example) and that some community members can eventually be prevented from sharing those benefits (for example, via the exclusion from ethnic social networks as a form of ‘punishment’ for sub-par ‘contribution’ to the development of the network), there is an evident nature of excludability in social capital, making it a classic ‘club’ good. IV Ethnic economies, entrepreneurship and club theory Under the general Tiebout club hypothesis, assuming fixed costs and equal distribution of skills within the population, people and/or households of similar tastes and preferences will partition themselves into non-overlapping jurisdictions; that is, they will form ‘clubs’. This homogeneity characteristic is one of the most examined and tested of all the club hypotheses (Sandler and Tschirhart, 1980; Kelleher and Lowery, 2002) and there is growing empirical evidence to support this general argument (Dowding et al., 1994; Heikkila, 1996). This underlying Tieboutian homogeneity hypothesis of club theory appears to have immediate intuitive application when examining the formation and characteristics of an ethnic economy. Classic discussions of ethnic enclaves or economies, after all, almost always suggest that a coalescing component of coethnics is that they have a common vector of preferences, endowments and cultural beliefs and that these are visibly distinct from the general population. Thus, within the nomenclature of club theory, an ethnic enclave can be described essentially as a voluntary group of coethnics deriving mutual benefit from

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sharing production costs, coethnic members’ characteristics and/or excludable goods. The various benefits derived from membership in coethnic networks, such as accumulated social capital, can be considered a local ‘club’ good that is supplied at the coethnic enclave level. Although large-scale empirical studies of the Tiebout homogeneity hypothesis have not viewed ethnicity and language as the main component of economic club membership, they have typically employed ethnicity and language as input factors along with other socioeconomic variables such as income, occupation and education. As expected, ethnicity does typically provide an explanatory component of intra-jurisdictional homogeneity and inter-jurisdictional heterogeneity. Heikkila notes, for example, that ‘membership in “municipal clubs” helps to explain variance along four dimensions: urban scale, ethnicity, household type, and economic class’ (Heikkila, 1996: 223). While ethnicity offers some explanatory power in regional agglomeration as noted above, studies of voting behaviors and municipal formation suggest that income and landuse preferences, not ethnic or racial diversity/homogeneity, tend to be the primary motivators of jurisdictional formation (Musso, 2001). Thus, while club theory suggests a ‘sorting’ process among a diverse population, it appears that the sorting process involving coethnic social capital, preferences and consumption patterns, may not be locationspecific. And while housing and income factors certainly cause some ethnic population agglomeration, the core ethnic economies and entrepreneurial behaviors may, in fact, be more ‘supra-regional’ in nature. Club membership, including those described as ethnic economies, will never be completely homogeneous. There are always differences in potential club members’ preferences and utility functions, as well as differences in the production of a club ‘good’. In theory these differences can lead to less homogenous clubs (Berglas, 1976; Brueckner and Lee, 1989; McGuire, 1991) that are still optimal solutions, as well as overlapping clubs (Frey and Eichenberger, 1996) and core homogeneity with diffused edges (Conley and Wooders, 2001). Club formation is almost always a cost–benefit process. As McGuire writes, ‘the crucial tension governing group composition remains a conflict between the disadvantage dissimilar people find from cooperating in a collective consumption and the advantage they find from cooperating in production’ (McGuire, 1991: 1391). Consider the economic relationships between suppliers and buyers within an enclave economy. Here the ethnic ‘club’ is formed within an abstract multi-dimensional economic space, with the various ethnic businesses as club members. The club good represents the benefits from intra-enclave trade, including lower labor costs associated with employing coethnic workers and the lower transaction costs of intra-enclave contracting. The ‘price’ of club membership can come in different forms: higher input and product costs (Martes, 2000), various types of requests from other club members (discounts, hiring of relatives, preferential purchases and so on), as well as ‘leveling pressures’ or conformity requirements of the type described in Portes (1998). In a sense, if the strength of the within-club ties is based upon antagonism to another group (coethnic or not), the between-group relations are likely to become weaker. In the extreme, reciprocally hostile groups may become severely constrained in their potential for economic and cultural exchange, thus preventing ethnic entrepreneurs from accessing larger markets. In this case, the price of club membership could eventually be thought to be excessive.

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V Propositions and discussion With this background, we offer several propositions regarding ethnic economies and entrepreneurial behavior employing an economic club theoretic framework. First, social capital related to ethnic business is, in fact, a club good but a club good that is limited in scale and, as a result, one which shows diminishing returns. Second, the partial assimilation of older, more tenured ethnic business people in society results in a more heterogeneous set of preferences and utility functions, which in turn results in overlapping economic ‘clubs’ for these entrepreneurs. Third, social capital is not a free good, but rather a quasi-public good, and thus subject to both costs and externalities. And fourth, as an ethnic economy matures, the increased externalities of social capital are progressively internalized as a form of private property controlled by quasi-public institutions. While several more propositions could also be offered, the remainder of this chapter will focus on these four. As support for these propositions, two studies will be discussed. One study involves measuring the intra-enclave economic exchanges of Hispanic and Arab ethnic entrepreneurs in Paterson, NJ (see Galbraith et al., 2003; Stiles et al., 2007), and the other study traces the founding and development of an Hispanic ethnic economy and its associated social institutions in Wilmington, NC, from 1992 to 2004 (Galbraith et al., 2004). While both studies should be viewed as preliminary, they do provide an opportunity to frame our discussions of ethnic entrepreneurship within the context of club theory. Proposition 1 Social capital related to ethnic business is, in fact, a club good but a club good that is limited in scale and as a result shows diminishing returns. Social capital, as a club good, must be seen as a collective asset that is supplied at the coethnic network level. Its value stems from a number of sources including the sharing of production costs, such as coethnics contributing to ethnic causes, festivals and work training events, as well as the unique group characteristics, such as common language, culture or immigration experience, that result in excludable benefits for non-ethnics. Clearly social capital has value, and should encourage coethnic economic exchanges, contracts and institutional solutions. However, evidence of ethnic business development appears to indicate that the process is dynamic, with diminishing returns to social capital as a business matures. For example, utilizing an input–output analysis of goods and services for entrepreneurs belonging to two different ethnic enclaves in Paterson, NJ, we found that early stage ethnic entrepreneurs purchased from and sold their products to coethnics significantly more often than more established ethnic entrepreneurs; that is, the degree of importance of intra-enclave trade for the sustainability of emergent businesses decreased as ethnic businesses matured (Galbraith et al., 2003). For both Arab and Hispanic sub-samples, in every category of material inputs, labor inputs, service inputs and outputs, the percentage of coethnic economic exchange declined for more established businesses. This might suggest more of an evolutionary model of ethnic entrepreneurial behavior, in which potential immigrant entrepreneurs enter an enclave seeking employment, then accumulate resources and progress into a start-up phase that relies primarily upon intra-ethnic business ties, which in turn matures into a third stage of extra-ethnic market expansion (Iyer and Shapiro, 1999; Morris, 2001; Sequeira and Rasheed, 2004). Early

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stage ethnic entrepreneurs are better able to develop strong ties with suppliers and coethnic customers, and obtain the necessary workforce at lower costs. Business growth, however, requires expansion outside the enclave; or, as Woolcock (1998) argues, ‘the initial benefits of intensive intra-community integration . . . must give way over time to extensive extra-community linkages’ (Woolcock, 1998: 175). Proposition 2 The partial assimilation of older, more tenured ethnic business people in society results in a more heterogeneous set of preferences and utility functions, which in turn results in overlapping economic ‘clubs’ for these entrepreneurs. Another explanation for this evolutionary entrepreneurial behavior can also be provided within the context of club theory. This suggests that the utility function of early stage ethnic entrepreneurs tends to be more similar to the general coethnic community than later stage ethnic entrepreneurs. Several factors could cause this, including (a) lower levels of assimilation by new immigrants, making them more dependent upon the ethnic community, (b) higher levels of wealth and other endowments by more tenured entrepreneurs, compared to the standards of the ethnic group, and (c) the fact that in many ethnic communities early-entry immigrants are often from the same geographic region within their home country. If we considered the ethnic economy to be a ‘club’, we would, indeed, expect some heterogeneity in the ‘ethnic club’, with emergent entrepreneurs sharing more economic activity internal to the club than more established entrepreneurs, with the latter becoming more involved in ‘overlapping’ clubs – a coethnic economy combined with a non-coethnic (or other-ethnic) economy, representing increasing levels of assimilation. In fact, assimilation within this context may be framed as the relationship of evolving personal utility and preference functions with the perceived benefits of resources derived from coethnic social capital. In addition, ethnic markets are essentially small and as such will prevent ethnic businesses from achieving cost-efficiency in sectors where economies of scale are the basis of competition: in essence, the cost/benefit function of club membership changes as an ethnic business grows. This encourages, as McGuire (1991) argues, a more differentiated club. For these reasons, we would expect that mature ethnic businesses would progress towards lower dependency from intra-enclave trade, both in their purchases of inputs and in their sales of outputs. Under the light of club theory, this evolutionary pattern should not be surprising, and, in fact, may provide for an optimal efficient solution of maximization of social welfare for the ethnic economy as a whole. Proposition 3 Social capital is not a free good, but rather a quasi-public good, and thus subject to both costs and externalities. The basic Tiebout model assumes that club goods are ‘local public goods’, where the good, service or benefit is both ‘nonrival’ and ‘nonexcludable’ (Ostrom and Ostrom, 1977; Prakash, 2000). Rivalry represents the dimension of limitability, with ‘nonrival’ implying that the consumption or enjoyment of the good by an individual does not diminish the ability of others to enjoy the good. ‘Nonexcludibility’ means that other members of society cannot be prevented from enjoying the good. Fukuyama (2001), however, appears to draw a distinction, and calls social capital a ‘private good’. Note that, within this usage,

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‘public good’ defines a type of good, service, or benefit, and not whether the public or private sector provides it. In general, we lie in-between the traditional Tiebout assumption of local ‘public goods’ and Fukuyama’s ‘private good’ argument, and start with the view that social capital is more of a ‘quasi-public ethnic good’. Here we define quasi-public ethnic goods as goods, services and other benefits that are ‘offered’ to a particular segment of the community – the ethnic population – that members of the general community are unable to access because of their different ethnicity and/or language. To use Ostrom and Ostrom’s (1977) categorization, our quasi-public ethnic good is a class of ‘impure public goods’ in that they are generally ‘non-rival’ – or at least only partially rival – but are, indeed, like private goods, ‘excludable’. In the case of social capital, since the benefits derived from ethnic community membership have their source in having a common language, belief system, legal and business expectations, and cultural context, it is exactly those aspects that make them ‘excludable’ from other non-ethnics – and, possibly, as an ethnic economy matures, even excludable from other coethnics if, for example, congestion becomes an issue. But the benefits derived from social capital are not free; there are both costs and externalities. The cost or ‘fee’ for membership in this ‘ethnic club’ might include such things as discounts or free services that are demanded by coethnics, purchasing of ethnic goods at a higher price than is typically available outside the enclave (see Martes, 2000), hiring coethnic employees that are perhaps less skilled, and required contributions to various ethnic social and political causes. In this sense, there could be situations where the benefits of social capital, due to congestion, lose their non-rivalrous nature. Other costs might be seen as the ‘stereotyping’ cost derived from the close association with a discriminated ethnic group, or even the threat of exclusion from participating in the benefits of the ethnic club after investments or efforts to join have been made. As an economic good, there are also certain externalities associated with social capital. The most obvious is the free-rider problem that arises from late entrants to the ‘club’. After the networks have been established and the stock of coethnic social capital accumulated, new coethnic (and some opportunistic non-coethnic) entrants may desire to enjoy the benefits of the club without having paid their ‘dues’ in terms of, for example, services to the ethnic community that signal commitment to long-term membership. This is similar to the problem of the late nineteenth-century homesteaders in the Western US who, after the earlier cattlemen and railroaders risked their lives and wealth establishing a ‘club’ good of free-range ranching, entered the region and demanded the best land without any payment: inevitable conflicts arose. While the free-rider problem related to social capital comes in different forms, it ultimately results in the same consequence as any free-rider situation: late arrivals have little incentive to pay for access to potential benefits of community social capital without some form of centralized subsidy. This inevitably results in a ‘crowding’ – or, in classic club theory terminology, ‘congestion’ effect, where every coethnic wants to enjoy maximum benefit from their right to access to the pool of ethnic social capital, which, in turn, results in economic inefficiencies and, in some cases, even violence. Proposition 4 As an ethnic economy matures, the increased externalities of social capital are progressively internalized as a form of ‘private property’ controlled by quasi-public or pseudo-public institutions.

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In theory, the informal contractual agreement between the coethnic and the club that generates the club good (social capital) also allows the club good to be produced in quantities that are most efficient for consumption. But as the ethnic economy matures, the stock of accumulated social capital expands, and the influx of new entrants increases, the externality problem becomes more severe, and crowding occurs. As Demsetz (1967) argues, this will likely give rise to a regime of property rights associated with the economic good. Current ‘holders’ of ethnic community social capital must be satisfied that new entrants will not reduce, or even threaten to reduce, the value of their existing holdings. We posit that this incentive to internalize externalities in later stages of an ethnic economy development results in the proliferation of various private and non-profit institutional mechanisms such as specialized charities, church groups, social organizations and training programs. Access to such associations or networks is controlled, and membership is typically on the basis of reference or introduction, sometimes the common element being church or professional association membership (Martes and Rodriguez, 2004). Since there is usually not a readily available private competitive solution for the social capital tied to a particular ethnic grouping, enclaves and their associated networks are generally not easily replicable: another classic characteristic of club goods (Buchanan, 1965). Ethnic enclaves, defined in a broad sense, are essentially monopolistic in nature, thus the monopolistic ‘non-rival’ pie can be subdivided among the various associations in order to better manage the increasing cost of externalities. Confronted by the mounting externality problem, social capital can convert to a ‘pseudo-public good’. Padon (1999) defines a pseudo-public good as a privatized version of a public good when concentrated groups of individuals demand control over a good that is beginning to have high externalities. Pseudo-public goods can be used to explain the rise of privately developed communities with homeowners associations. In essence, the constituents establish a ‘shadow government’, providing greater control over membership and costs, including the capability of raising admission costs for latecomers. This could be seen as a pseudo-public equivalent to public ‘zoning laws’, a traditional issue in club theory. We argue that ethnic social capital acts essentially in the same manner. As an ethnic enclave matures, ‘shadow governments’ are established within the ethnic community that create a series of limiting conditions or access restrictions: older coethnic participants still enjoy the benefits of the club good, while new entrants pay more if they want to ‘play’. The existence of these sub-local impure public goods, or quasi-public ethnic goods, thus creates pockets of homogeneous ‘privatized’ clubs, each optimizing their consumers’ preference criteria under a combination of jurisdiction-wide public ethnic goods and subjurisdictional quasi-public ethnic goods. A longitudinal study of a Hispanic ethnic community in Southeastern North Carolina appears to support this argument (see Galbraith et al., 2004). In 1992, with a Hispanic population of less than a couple of hundred, there was only one Hispanic-related social organization, the Catholic Social Ministries. Over the next 12 years, the Hispanic population grew to several thousand and by 2004 there were more than 15 specialized social organizations, each controlled by a well-established hierarchy of older coethnic members. These included a Hispanic Economic Development Corporation, an Hispanic Chamber of Commerce, Hispanic charities, Hispanic social organizations, Hispanic training and education groups, Hispanic health initiatives and Hispanic political action groups. Each

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‘club’ provided a distinct but sometimes overlapping social benefit to the broader local Hispanic community, and most of these benefits were subsidized by charities or government grants. Membership in the ‘shadow governments’ that controlled these social organizations, however, was firmly restricted, with almost no new entrants allowed, unless the new entrant offered to commit substantial human or capital resources. The traditional business and entrepreneurial benefits that accrue from social capital networks, such as business referrals, contract bids and personal references were closely regulated, sparingly awarded, and in any case always restricted within the constituency of the ‘shadow governments’ for each association. Another interesting development has been the parallel development of Spanish language religious services. The first Spanish language service was started by a local Catholic Church in 1994, and by 2004 there were more than ten Spanish language services offered by a variety of Catholic and Protestant churches. Each of the churches offering a Spanish language service also had a separate Hispanic council, encouraged business networking among members, and provided charities to their Hispanic members. VI Final thoughts While the original Tiebout model includes some fairly restrictive assumptions, such as full knowledge of differences in revenues and public goods offered by competing jurisdictions, consumers that are fully mobile, and a sufficient collection of competing communities (for example, Oates, 1969; Epple et al., 1978; Padon, 1999) we believe that it is useful to examine ethnic neighborhoods, economies and enclaves within this context. Although theoretically attractive and capable of shedding light on various aspects of the dynamics of ethnic economies, the original Tiebout model cannot fully explain, for example, why the same jurisdiction (given the same housing stock, tax structure and the rest) may contain a collection of two or more distinct, and evidently sustainable ethnic enclaves, literally side-by-side, or why a single ethnic enclave might exist surrounded by a general population of non-coethnics within the same immediate area. Under the basic Tiebout model we would expect each ethnic club to ‘vote with their feet’, and seek out separate, more optimal jurisdictions such that the intra-jurisdiction population would be homogeneous, composed primarily of coethnics. While a number of possible explanations can be offered, three seem most promising. First, perhaps ‘voting with one’s feet’, in the case of ethnic communities, is more a slow crawl than a fast run. While there may be an overall tendency for ethnics to migrate to more fully homogeneous jurisdictions as the Tieboutian hypothesis might suggest, this process is not without friction. There are mobility barriers, particularly with lower income populations (for example, Dowding et al., 1994; Bickers and Stein, 1998; Huck, 2004). Other types of barriers may exist at the confluence of the human capital possessed by individual immigrants with the level of social capital that exists in the ethnic networks (Greene and Chaganti, 2004). Enclaves do evolve, expand, combine with other ethnic agglomerations, and even in some cases assimilate into the larger host society, but this evolution tends to be relatively sticky – which in turn may result in sub-optimization of an ethnic club’s bundle of preferences. Certain events can speed up the process, such as the violent attacks on the Korean community during the Los Angeles riots of 1992, but without this impetus enclave migration is generally slow, thus allowing other non-coethnic populations to expand near or around the ethnic enclave.

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Second, the general Tieboutian model requires a complete search, with full information about the package of local public goods and taxes offered by various jurisdictions. Applying this idea to the development of ethnic communities, there is a long line of research, however, that suggests that people follow a very limited search process in their immigration decisions. It is well documented, for example, that recent Mexican immigrants in U.S. cities tend to immigrate by following family and friends to a particular location, often times returning to their native village, then back to their host community (Piore, 1979). And in some cities a large number of immigrant residents are often found to be from only a few small villages in their native country (Galbraith et al., 2004; Martes and Rodriguez, 2004). A potential immigrant from a rural village in Mexico, for example, probably does not investigate the characteristics of Hispanic communities in each and every US city prior to ‘voting with his feet’. Instead, he or she relies more upon word of mouth, familial ties and convenience of transportation. This limited information search pattern is similar to that in consumer decision making, where brand loyalties and limited search patterns mean that consumers will select the same product, such as beer or breakfast cereal, time and time again without seeking additional information about competitive, and perhaps more optimal, products. Third, as we suggest in this chapter, ethnic economies and enclaves may simply be much more complex than the regional jurisdictions often studied by urban economists. Whereas certain government-supplied public goods related to housing, employment and health may be location-specific and thus may suggest some physical agglomeration of coethnics, the benefits derived from social capital may be more ‘supra-locational’ in nature, and thus tied more often to the ‘shadow’ jurisdictions of ethnic-specific agencies, charities and religious organizations that ultimately anchor a maturing ethnic economy. As a consequence, while the sticky nature of ethnic migration and limited search may produce sub-optimal results in terms of the use of the local public goods, the existence of supra-jurisdictional quasi-public ethnic goods offered by the ‘shadow’ jurisdictions still maintains a possible Pareto-optimal solution. This chapter is written to suggest one possible unifying approach to understanding the formation of ethnic neighborhoods, economies and enclaves, as well as the entrepreneurial behaviors within these ethnic groupings. By design, this chapter was meant to be neither a definitive study of club theory nor inclusive in its application to ethnic and entrepreneurial issues. We also recognize that the theory of clubs overlaps with several economic, strategy and marketing models, including the agglomeration theories of regional economics, central tendencies models in theoretical economics, strategic group theory in the strategic management literature, and consumer group and preference models in the marketing literature. Over the past decades the various sociological frameworks of social capital and social networks have provided powerful descriptive models of ethnic and immigrant population behaviors. However, almost by nature, these sociological models lack prescriptive power. One important advantage of more economic and strategic approaches to understanding ethnic enclave and entrepreneurial behavior is that these frameworks have not only a useful descriptive ability but also a normative, prescriptive capability to suggest avenues for optimizing economic development and entrepreneurial success. While the exact application of club theory to ethnic economies and entrepreneurial behavior remains to be examined in detail, the four propositions offered in this exploratory chapter will hopefully stimulate the investigation of this potentially valuable avenue of research.

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Notes 1. From Vilfredo Pareto (1848–1923), ‘Pareto improvement’ is an economic concept of social welfare improvement. Social welfare goes up if at least one person is made better off (in their own estimation) and no one else is made worse off. A Pareto optimum or efficient solution is reached when it is impossible to make one person better off, without making someone else worse off. 2. The relationship of social capital to the economics of both market and institutional solutions to economic exchange, vertical relationships, and scope economies within an ethnic economy has been touched on by several writers, but not fully explored as yet.

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Hochman, O., D. Pines and J. Thisse (1995), ‘On the optimal structure of local governments’, American Economic Review, 85(5), 1224–40. Huck, E. (2004), ‘Tiebout or Samuelson: the 21st century deserves more’, Marquette Law Review, 88, 185–93. Iyer, G. and J. Shapiro (1999), ‘Ethnic entrepreneurial and marketing systems: implications for the global economy’, Journal of International Marketing, 7, 83–110. Kelleher, C. and D. Lowery (2002), ‘Tiebout sorting and selective satisfaction with urban public services: testing the variance hypothesis’, Urban Affairs Review, 37(3), 420–31. Kloosterman, R. and J. Rath (2001), ‘Immigrant entrepreneurs in advanced economies: mixed embeddedness further explored’, Journal of Ethnic and Migration Studies, 27(2), 189–202. Knack, S. and P. Keefer (1997), ‘Does social capital have an economic payoff? A cross-country investigation’, The Quarterly Journal of Economics, 112(4), 1251–88. Kollman, K. and A. Prakash (2002), ‘EMS-based environmental regimes as club goods’, Policy Sciences, 35(1), 43–67. Kollman, K., J. Miller and S. Page (1997), ‘Political institutions and sorting in a Tiebout model’, American Economic Review, 87(5), 977–92. Kwon, V. (1997), Entrepreneurship and Religion: Korean Immigrants in Houston, Texas, London: Taylor & Francis. Le Goix, R. (2003), ‘Gated communities’ sprawl in Southern California and social segregation’, paper presented at the Conference, ‘Gated Communities: Building Social Division or Safer Communities?’, University of Glasgow, September. Light, I. and S. Gold (2000), Ethnic Economies, San Diego, CA: Academic Press. Martes, A. (2000), ‘Brasileiros nos Estados Unidos – um estudo sobre imigrantes em Massachussets’ (‘Brazilians in the US – a study about immigrants in Massachussets’), São Paulo: Editôra Paz e Terra. Martes, A. and C. Rodriguez (2004), ‘Church membership, social capital, and entrepreneurship in Brazilian communities in the US’, in C. Stiles and C. Galbraith (eds), Ethnic Entrepreneurship: Structure and Process, Amsterdam: Elsevier Science, pp. 171–202. McGuire, M. (1991), ‘Group composition, collective consumption, and collaborative production’, American Economic Review, 81(5), 1391–408. Morris, M. (2001), ‘The critical roles of resources’, Journal of Developmental Entrepreneurship, 6(2), v–viii. Musso, J. (2001), ‘The political economy of city formation in California: limits to Teibout sorting’, Social Science Quarterly, 82(1), 139–53. Ng, Y. (1973), ‘The economic theory of clubs: Pareto-optimality conditions’, Economica, 40 (August), 291–8. North, D. (1990), Institutions, Institutional Change and Economic Performance, Cambridge, UK: Cambridge University Press. Oates, W. (1969), ‘The effects of property taxes and local public spending on property values: an empirical study of tax capitalization and the Tiebout hypothesis’, Journal of Political Economy, 77 (Nov. /Dec.), 957–71. Ostrom, V. and E. Ostrom (1977), ‘Public goods and public choice’, in E. Savas (ed.), Alternatives for Delivering Public Services, Boulder, CO: Westview, (pp. 7–49). Padon, A. (1999), ‘Pseudo-public goods and urban development: a game theoretic model of local public goods’, Journal of Urban Affairs, 21(2), 213–35. Perroni, C. and K. Scharf (2001), ‘Tiebout with politics: capital tax competition and constitutional choices’, Review of Economic Studies, 68(234), 133–54. Piore, M. (1979), Birds of Passage: Migrant Labor and Industrial Societies, Cambridge, MA: Cambridge University Press. Portes, A. (1998), ‘Social capital: its origins and applications in modern sociology’, Annual Review of Sociology, 24, 1–24. Portes, A. and P. Landolt (1996), ‘The downside of social capital’, The American Prospect, 26, 18–22. Portes, A. and P. Landolt (2000), ‘Social capital: promise and pitfalls of its role in development’, Journal of Latin American Studies, 32, 529–47. Portes, A. and J. Sensenbrenner (1993), ‘Embeddedness and immigration: notes on the social determinants of economic action’, American Journal of Sociology, 98, 1320–50. Prakash, A. (2000), ‘Responsible care: an assessment’, Business and Society, 39(2), 183–209. Rath, J. (2002), ‘Needle games. A discussion of mixed embeddedness’, in J. Rath (ed.), Unraveling the Rag Trade. Immigrant Entrepreneurship in Seven World Cities, Oxford: Berg Publishers, (pp. 1–28). Rosen, M. and R. Sexton (1993), ‘Irrigation districts and water markets: an application of cooperative decisionmaking theory’, Land Economics, 69(1), 39–53. Samuelson, P. (1954), ‘The pure theory of public expenditures’, Review of Economics and Statistics, 36(3), 387–9. Sandler T. and J. Tschirhart (1980), ‘The economic theory of clubs: an evaluative survey’, Journal of Economic Literature, 18(4), 1481–521. Sequeira, J. and A. Rasheed (2004), ‘The role of social and human capital in the start-up and growth of immigrant businesses’, in C. Stiles and C. Galbraith, C. (eds), Ethnic Entrepreneurship: Structure and Process, Amsterdam: Elsevier Science, pp. 77–94.

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Slangen, L. (1994), ‘The economic aspects of environmental cooperatives for farmers’, International Journal of Social Economics, 21(9), 42–59. Sterbenz, C. and T. Sandler (1992), ‘Sharing among clubs: a club of clubs theory’, Oxford Economic Papers, 44, 1–19. Stiles, C. and C. Galbraith (2002), ‘The birthing process: a study of embryonic ethnic enclaves’, presented at the 22nd Annual Babson Research Conference, Boulder, CO, June, in P. Reynolds (ed.), Frontiers of Entrepreneurship Research, Babson Park, MA: Babson College. Stiles, C. and C. Galbraith (eds) (2004), Ethnic Entrepreneurship: Structure and Process, Amsterdam: Elsevier Science. Stiles, C.H., C.L. Rodriguez and C.S. Galbraith (2007), ‘The impact of ethnic–religious identification on buyer– seller behavior: a study of two enclaves’, International Journal of Business and Globalisation, 1(1), 20–33. Teece, D. (1980), ‘Economics of scope and the scope of the enterprise’, Journal of Economic Behavior and Organization, 1, 223–47. Tiebout, C. (1956), ‘A pure theory of local expenditures’, Journal of Political Economy, 64 (October), 416–24. Waldinger, R. (1982), ‘The occupational and economic integration of the new immigrants’, Law and Contemporary Problems, 45, 197–222. Waldinger, R., H. Aldrich and R. Ward (1990), Ethnic Entrepreneurs: Immigrant Business in Industrial Societies, Newbury Park, CA: Sage Publications. Williamson, O. (1975), Markets and Hierarchies, New York: The Free Press. Woolcock, M. (1998), ‘Social capital and economic development: toward a theoretical synthesis and policy framework’, Theory and Society, 27, 151–208.

3

Ethnic entrepreneurship: a theoretical framework Thierry Volery

1 Introduction With the recent growth of new ethnic populations in Western societies, ethnic business is no longer a matter of strictly historical interest; neither is it parochial American concern. Because new ethnic populations have grown at a time when Western economies are in a phase of slow growth and massive technological challenge, ethnic adaptation and mobility are central issues to economic research (Waldinger et al., 1990a: 13). In Europe, businesses run by persons from minority ethnic groups have always been present, but three changing historical circumstances have increased their salience and visibility over the past decades. Firstly, massive immigration from former colonies, southern Europe and North Africa has led to a considerable migration flows. Secondly, three decades of economic restructuring have led to a fundamental transformation of the labour market and a general shift away from employment in large firms to self-employment in small ones. This trend has hit certain immigrant groups much harder than indigenous populations, which is reflected by the higher unemployment rates among immigrants (Barrett et al., 1996). Thirdly, the opportunity structure for ethnic business has become more favourable as Europe’s changing industrial structure has led to a resurgence of small and medium-sized enterprises (Blaschke et al., 1990). The main objective of this chapter is to develop a framework for understanding the dimensions in ethnic entrepreneurship. Factors influencing the establishment of an ethnic enterprise are multifaceted and include education, generation, the local population, the economic situation, job opportunities, location, cultural and religious differences, and the origin. The result, viewed from a macroeconomic perspective, presents a very complex and dynamic mosaic, which usually moves too fast for statistics to keep up. This chapter begins with a conceptual consideration of the topic of ethnic entrepreneurship and examines the definition and evolution of ethnic entrepreneurship. We next discuss the different theories which can be drawn upon to frame the field. We conclude the chapter with the development of an enhanced model. 2 Defining ethnic entrepreneurship Ehtnic entrepreneurship is ‘a set of connections and regular patterns of interaction among people sharing common national background or migration experiences’ (Waldinger et al., 1990a:3). Since the emphasis for theoretical explanations of this phenomenon is based upon those patterns of interaction, the focus of the majority of studies in this area is the ethnic group. Various definitions for the term ‘ethnic group’ have been suggested. According to Yinger (1985:27) for example, an ethnic group is ‘a segment of a larger society whose members are thought, by themselves or others, to have common origin and to share important segments of a common culture and who, in addition, participate in shared activities in which the common origin and culture are significant ingredients’. An alternative term used to ‘ethnic’ is ‘immigrant entrepreneurs’, which in turn would only 30

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include the individuals who have actually immigrated over the past few decades. This definition excludes, however, members of ethnic minority groups who have been living in the country for several centuries, such as Afro-Americans in the USA, Jews in Europe or aborigines in general. ‘Ethnic’ on the contrary, does not exclude immigrant or minority groups. The term ‘immigrants’ will nevertheless be used hereafter when speaking specifically of the early stages in the process of ethnic entrepreneurship, that is, when an ethnic group is new in a host society and its members can clearly be considered as ‘immigrants’. Light and Gold (2000:3) for their part speak of ‘ethnic economy’, which they define as ‘any ethnic or immigrant’s self-employed group, its employers, their co-ethnic employees, and their unpaid family workers’. They further introduce the concept of ethnic ownership economy to distinguish between an ethnic economy that is based on property right and ownership and an ‘ethnic economy whose basis is de facto control based on numbers, clustering, and organization, the ethnic-controlled economy’. Whereas ethnic ownership economy consists of small and medium-size businesses owned by ethnic or immigrant entrepreneurs and their co-ethnic helpers and workers, ethnic control economy refers to industries, occupations, and organization of the general labor market in which co-ethnic employees (not owners) exert appreciable and persistent economic power. This power usually results from their numerical clustering, their numerical preponderance, their organization, government mandates, or all four. The ‘ethniccontrolled’ economy is completely independent of the ‘ethnic ownership’ economy. The participants in the ethnic controlled economy exert control rather than ownership authority. The authors believe that the ethnic-controlled economy permits fellow migrants to secure more and better jobs in the mainstream economy, reduce unemployment and improve working conditions. 3 Evolution of the concept Ethnic entrepreneurship is by no means a new phenomenon, as it is a firm part of any migration, most obviously observed in the United States, where the foreign born have been overrepresented in small businesses since 1880 (Barrett et al., 1996). The long history of ethnic entrepreneurship in the USA also explains why research in this subject has its roots there. An early and very prominent theory suggested that ethnic businesses are an obvious reaction to blocked opportunities in the labor market, which in many instances still holds true today. Europe, on the contrary, was at the turn of the century an emigration continent and remained very homogenous until after World War II, when large labor forces were needed by ever-growing industrial companies. Initially, the immigrants came as a temporary workforce, fulfilling jobs which required no skills and which could easily be replaced by a succession of sojourners (Waldinger et al., 1990a). As the immigrants started to settle down over time, the preconditions for ethnic businesses slowly started to evolve. In most cases, it was the ethnic community which created the demand for specific ethnic goods and services in the first place and which could only be fulfilled by co-ethnics with knowledge of tastes and buying preferences. Markets occupied by ethnic entrepreneurs are typically characterized by low barriers of entry in terms of required capital and educational qualifications, small-scale production, high labor-intensity and low added value, while cutthroat competition reigns. This leads to the emergence of a large number of start-ups and, in turn, a high rate of failure. In order to stay ahead and remain competitive under such conditions, the temptation to

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apply informal practices with respect to taxes, labor regulations, minimum wages and employing children and immigrant workers without documents is quite large (Rath and Kloosterman, 2002). The opportunities offered by the environment of a host society have a strong influence on the propensity of immigrants to turn to self-employment as a way of absorption and upward economic mobility. These external factors influence different ethnic and immigrant groups in different ways (Razin, 2002). The decision regarding business entry, being a central part of entrepreneurial behavior, is certainly a prime object of interest. Generally speaking, individuals who have no real chance of becoming employed are ‘pushed’ into self-employment in contrast to individuals who are ‘pulled’ into self-employment, possibly from an employee status, attracted by the rewards and independence that it offers (Borooah and Hart, 1999). The business entry decision has had a strong impact on the development of theories in ethnic entrepreneurship. Much attention has been given to the question whether cultural or structural factors influence the business entry decision and therefore are responsible for the rise of ethnic entrepreneurship. Supporters of the culturalist approach believe that immigrant groups have culturally determined features leading to a propensity to favor self-employment (Masurel et al., 2004). The structuralist approach, on the other hand, suggests that external factors in the host environment, such as discrimination or entry barriers on the labor market due to education and language deficits, pushes foreigners into self-employment. More recent approaches, which attempt to combine these two perspectives, show that a differentiated view is necessary to understand this complex phenomenon. Today, a gradual shift away from the stereotypical ethnic-run corner shop towards more diversified sectors can be observed (Freitas, 2003). Even though these types of self-help firms persist, new sectors such as computers, global trade, leisure and recreation management, real-estate agencies and cultural enterprises are developing as well. 4 Theoretical framework Sociology, anthropology and labor economics literature have each contributed to the development of theoretical frameworks addressing the effect of ethnicity and race on entrepreneurship. Research into ethnicity and entrepreneurship can be traced back to classic works such as those of Weber (1930), Sombart (1914) and Simmel (1950). These scholars’ concept of the stranger as trader, combined with the social structure of societies and pervasive religious canons, have influenced subsequent literature about and study of ethnic entrepreneurship. Enclave theory and middleman theory are two of the primary explanatory frameworks. Ethnic business typically starts when an entrepreneur begins serving other members of the ethnic community and satisfies their specific ethnic needs (Greene and Owen, 2004). This process is facilitated when larger ethnic groups live in geographically concentrated areas. Despite being widely recognized, this theory is itself insufficient to explain the entire phenomenon. Most initial theories on ethnic entrepreneurship stem from sociology. The disadvantage theory and the cultural theory are two major theories that can be drawn from this field to explain ethnic entrepreneurship. Disadvantage theory suggests that most immigrants have significant disadvantages hampering them upon arrival but which at the same time steer their behavior (Fregetto, 2004). Firstly, they lack human capital such as language skills,

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education and experience, which prevent them from obtaining salary jobs, leaving selfemployment as the only choice. Secondly, a lack of mobility due to poverty, discrimination and limited knowledge of the local culture can lead ethnic minorities to seek self-employment. This theory sees entrepreneurship not as a sign of success but simply as an alternative to unemployment. Therefore, it is probably more adequate to explain the development of informal and illegal activities, rather than to explain the widespread creation of immigrant businesses. This is because immigrant policies deny newcomers becoming legally self-employed in the first years of their stay, when the disadvantages would be the greatest. The cultural theory suggests that ethnic and immigrant groups are equipped with culturally determined features such as dedication to hard work, membership of a strong ethnic community, economical living, acceptance of risk, compliance with social value patterns, solidarity and loyalty, and orientation towards self-employment (Masurel et al., 2004). These features provide an ethnic resource which can facilitate and encourage entrepreneurial behavior and support the ethnic self-employed (Fregetto, 2004). Ethnic people often become aware of the advantages their own culture might offer only after arriving in the new environment: ‘Whether one is English, Albanian or Mongolian, the very act of transferring to a new society with alien customs and incomprehensible language is in itself likely to heighten awareness of one’s own cultural and national identity’ (Jones and McEvoy, 1986: 199). The differences in ethnic resources act also as an explanation for the different rates of self-employment between equally disadvantaged ethnic groups (Waldinger et al., 1990a). For example, cultural aspects are particularly popular for explaining the propensity of Asian people, for example, to become self-employed. The strong presence of Chinese people in the catering sector has many observers believing that a certain predisposition of the Chinese culture determines their participation in such economic sectors (Leung, 2002). New studies, however, have attempted to illustrate that these assumptions fail to consider other critical aspects of the complex phenomenon, such as employment alternatives, immigration policies, market conditions and availability of capital. Among economic explanations, middleman minority theory is the primary explanation for ethnic entrepreneurship. Ethnic enterprises rapidly pop up with the expansion and growth of an ethnic community and include businesses such as travel agencies, garment shops, specialized grocery shops, tearooms and fast-food stands. An important prerequisite for the broad emergence of ethnic businesses within a community is a sufficient number of potential consumers of ethnic products on the one hand, but also their aim of a permanent stay in the host country; that is, the immigrants have to bring their families along. Not only is the community otherwise too small to develop the necessary demand for ethnic goods, but an additional factor hindering business creation is the large sums of money sent home to families and relatives and thus not available for start-up capital. This phenomenon was discovered at the turn of the twentieth century when comparing Jewish and Italian immigrants in New York, with the latter group not having sufficient funds for new investments (Waldinger et al., 1990b). After a while, ethnic businesses can start to grow by engaging in trade with entrepreneurs from other ethnic groups. After reaching a critical mass and gaining acceptance within the indigenous population, they can become a viable and respectable business by expanding into the high-volume trade with the local population.

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5 Models Many of the theories previously described have been integrated into models attempting to explain the phenomenon as whole. Two commonly used models will be discussed in this section. We will then develop an enhanced model, which attempts to position the ethnic dimension into the classic entrepreneurial context. 5.1 The interactive model The interactive model, conceptualized by (Waldinger et al., 1990a), suggests that the development of an ethnic business cannot be traced back to a single characteristic that is responsible for the entrepreneurial success of an ethnic group. Instead, the success of an ethnic enterprise depends on a complex interaction between opportunity structures and group resources, as displayed in Figure 3.1. These two dimensions steer the strategies an ethnic entrepreneur has to implement in order to create a viable business in an alien environment. The opportunity structures are made up of market conditions, access to ownership, job market conditions, and legal and institutional frameworks. Typically, opportunities emerge from the development of a new ethnic community. These communities have specific needs which only co-ethnics are capable of satisfying. The greater the cultural differences between the ethnic group and the host country, the greater the need for ethnic goods and the bigger the potential niche market. But no matter how big the niche market is, the opportunities it offers are limited. Access to open markets, which are typically occupied by local entrepreneurs, is often blocked through high entry barriers, either on a financial or on a knowledge basis. But not all industries in Western economies are characterized by mass production or unattainable know-how. Especially markets with low economies of scale, such as the taxi industry, can offer opportunities which immigrants can successfully pursue. Further potential lies in markets either underserved or completely abandoned by the locals, because of insufficient returns and strenuous working conditions. The second dimension focuses on the resources shared by immigrants and ethnic people of the same origin. Here, ethnic people can draw on the resources provided by their cultural OPPORTUNITY STRUCTURE

RESOURCES

MARKET CONDITIONS Niche markets Open markets

CULTURAL TRADITIONS ETHNIC STRATEGIES

Access to Ownership Job Market Condition

ETHNIC SOCIAL NETWORKS

Legal Frameworks Source: Adapted from Pütz (2003) and Waldinger et al. (1990).

Figure 3.1 Interactive model of ethnic entrepreneurship development

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traditions and ethnic social networks. The explanation of cultural traditions is based on assumptions that self-employment of certain groups is the result of their specific cultural predisposition (Pütz, 2003). The importance of cultural traditions needs nevertheless to be considered with caution and should not be overemphasized. The significance of family and ethnic networks as resources is, however, undisputed. Such interrelational connections play a crucial role in the success of an ethnic enterprise and can compensate for many disadvantages foreigners face in an alien environment. Opportunity structures and ethnic resources constantly interact. In this sense, some aspects of the opportunity structure can be influenced and improved with the help, for example, of a strong ethnic network. Ethnic strategies are the solutions to the specific problems ethnic entrepreneurs encounter as a result of the interaction between the opportunity structures of the host society and the characteristics of their group. The problems ethnic entrepreneurs must contend with include the gathering of information, capital, training and skills, human resources, customers and suppliers, competition, and political attacks (Boissevain et al., 1990). 5.2 The mixed embeddedness model The concept of mixed embeddedness is a further development of ethnic resources and opportunity structure. It recognizes that the structures of a local economy and legal–institutional factors exert a strong influence on the creation and existence of the small business economy in general. The influence of these factors on the access of immigrants to small business is even greater (Razin, 2002). The economic environment, however, differs widely on a national scale, offering substantially different opportunities from one region to another. This phenomenon was emphasized by Razin and Light (1998), who provided evidence for spatial variations among the same immigrant groups and variations between different ethnic groups in the same economic milieu. The local influence depends not only on the local economy structure, but also on the characteristics of the local ethnic community, such as the specific location of ethnic networks. A further attribute is discrimination through the absorbing environment but also through the local community. Opportunities should therefore be analyzed on a national, regional and local level (Boissevain et al., 1990). The mixed embeddedness model is based on three assumptions: 1. 2. 3.

Opportunities must not be blocked by too high barriers of entry or government regulations; an opportunity must be recognized through the eyes of an potential entrepreneur as one that can provide sufficient returns; and an entrepreneur must be able to seize an opportunity in a tangible way.

The main weakness of this model is that it is still in an experimental phase. The validation of the phenomenon has not yet gone beyond descriptive case studies (see, for example, Collins, 2002; Jones et al., 2002; Peters, 2002). 5.3 Merging the interactive model with the entrepreneurial process The model depicted in Figure 3.2 is an attempt to capture the factors influencing an ethnic entrepreneur by recognizing two essential aspects: that the individual is from a different

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Handbook of research on ethnic minority entrepreneurship OPPORTUNITY STRUCTURE

ETHNIC DIMENSION

ENTREPRENEURSHIP DIMENSION Psychological characteristics

Information and knowledge ENTREPRENEURIAL PROCESS

ETHNIC STRATEGIES

OPPORTUNITY RECOGNITION

OPPORTUNITY EVALUATION

Creative processing

OPPORTUNITY EXPLOITATION

METROPOLITAN CHARACTERISTICS

Cognitive heuristics

ETHNIC GROUP RESOURCES

Figure 3.2

Enhanced interactive model in the context of entrepreneurship

ethnic group, and that this individual is an entrepreneur. As shown in Figure 3.2, the entrepreneurship dimension exists independently of a potential entrepreneur’s ethnical, cultural or religious background and influences the pursuit of entrepreneurial opportunities. Even people with the same nationality or from the same ethnic group have differences which affect the way they recognize and pursue opportunities. This does not mean that the entrepreneurship dimension is not influenced by the factors present in the ethnic dimension. Schaper and Volery (2004) remarked that people can be differentiated on the basis of four aspects: firstly, specific psychological characteristics, such as the need for achievement, the belief in control over one’s life, and a propensity to take risks, typically characterize the classic entrepreneur; secondly, information and knowledge not available to others can motivate an individual to search for and exploit opportunities in a specific domain. Furthermore, networks and social relationships play a decisive part in gathering information and gaining access to important resources; thirdly, the ability to analyze an opportunity and transform it into a commercially exploitable business idea implies special skills, aptitudes, insights and circumstances, related to creative processing; fourthly, an inevitable part of being an entrepreneur is the recurrent confrontation with new problems which require quick and efficient judgements and decisions. The ability to find and develop simplifying strategies

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to facilitate this crucial process is known as ‘cognitive heuristics’. These four aspects influence the entrepreneurial process, which includes the recognizing, evaluating and exploiting of opportunities. Conversely, the ethnic dimension encompasses the factors only relevant for ethnic entrepreneurs. The influence that the ethnic dimension exerts on the entrepreneurship dimension can vary tremendously, depending on how big the cultural differences are between host and home country, the discrimination the entrepreneur is subjected to, the progression of the social integration of the concerning ethnic group, the experience gained in the new environment, age and gender, and the education level of the entrepreneur. In the case of a highly educated and very well integrated individual, the influence of the ethnic dimension can shrink to a level where it is no longer relevant. As shown in the interactive model, the opportunity structures and the ethnic group characteristics determine the ethnic strategies and these three factors have an influence on the entrepreneurship dimension. When observing specific ethnic or immigrant groups, studies have often focused on the behavior of groups in only one particular location and have not thoroughly investigated the influence of the urban milieu on the prospects of entrepreneurship (Razin and Langlois, 1996:704). Results show, however, that spatial variations exist and are due to different metropolitan characteristics. Especially the size of communities, varying widely from one milieu to another, has an impact on the selfemployment rates. 5.4 Ethnic strategies It is common for ethnic entrepreneurs to set up a business which is easily portable and allows them to return to their homelands. This can be accomplished by acquiring skills or assets that can readily be transferred across geographic regions. Ethnic business is usually characterized by rather low innovativeness. Commonly, immigrants acquire the skills and capital needed to start an enterprise while employed. Subsequently, when the time is right and they feel confident about their capabilities, they take the step of establishing their own business. This stereotypical path represents a case of entrepreneurial reproduction; that is, the entrepreneurs perform a familiar activity and attempt to bring added value to their services or products through operational efficiency (Iyer and Shapiro, 1999:95). Do ethnic entrepreneurs have any advantages over indigenous entrepreneurs? While considering the risks which can typically face an entrepreneur – financial risks, career risks, health risks and social and family risks (Schaper and Volery, 2004:38) – one notices that the career and social risks are much less distinct for an ethnic entrepreneur. Firstly, a failed ethnic entrepreneur, because of the difficult circumstances he had to begin with, will probably be accorded more understanding than his local counterpart. Secondly, the jobs many immigrants practice do not require very high standards and are thus easy to regain. Thirdly, if family members work in the enterprise, as is commonly seen among Asian entrepreneurs, the entrepreneur will still be able to spend enough time with his loved ones and not risk social exclusion. 5.4.1 Ethnic communities and networks Virtually all ethnic entrepreneurs make extensive use of their social networks because these are a central source of ‘social capital’. Such migration networks can be defined as ‘sets of interpersonal ties that link migrants, former

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migrants, and non-migrants in origin and destination areas through the bonds of kinship, friendship, and shared community origin’ (Massey, 1988:384). The influence of an ethnic network is often intense and reaches further than is normally presumed. The decision to migrate or to stay, the selection of a destination, and the adjustment process at the destination are massively influenced by ethnic kinship and friendship networks in which people participate (Light et al., 1993). Having restricted opportunities, a good social structure can enable or at least facilitate a job search, hiring, recruitment and training, and, more importantly, organizing the information flows between newcomers and settlers (Waldinger, 1994). Networks can substantially improve the efficiency of searches, enabling immigrants to find jobs and housing faster. The community surrounding an ethnic entrepreneur is capable of delivering a number of crucial resources for the launch and the growth of the business, such as cheap and loyal labor and capital. However, even the strongest community support can only help improve (but does not guarantee) the survivability of the enterprise when confronted with the harsh conditions of the market (Jones and Ram, 1998). Ethnic networks can reduce the economic risks related to the creation of a new business, thus rendering the decision to become self-employed more attractive from a riskdiversification perspective. It is often the social support network of an ethnic community and the cultural background that give the required impulse to start a business. But if a successful entrepreneur seeks to grow and break out of the ethnic market serving the community’s needs, these same factors can present a serious limitation (Masurel et al., 2002). In general, firm survival and growth are explained in terms of the entrepreneur’s ability to acquire skills through learning-by-doing and to innovate (Jones and Ram, 1998:57). In addition, Waldinger et al. (1990a) suggest that cultural and social factors take up a central position in explaining growth in ethnic enterprises. More recent studies dismiss this idea. Basu and Goswami (1999) used a multivariate model including economic, cultural, social and managerial variables to identify the determinants of entrepreneurial growth in South Asian ethnic firms in Great Britain. Their results suggest that some individual cultural characteristics can hinder growth. The ability to overcome the inhibition to delegate responsibilities to non-family employees is just one example. The commitment to work hard, a virtue typical of Asian people, is crucial during the start-up process. Human capital factors, however, such as the entrepreneur’s educational attainments and employee training in the long run have a more important effect on growth. 5.4.2 Financing ethnic businesses Gathering the necessary capital to start a small business is indisputably one of the biggest challenges in the process of business creation. This is also true for ethnic entrepreneurs. Factors such as inner-city locations, highly competitive market sectors, the absence of a ‘track record’, language difficulties and discrimination, often comprise difficult conditions for a bank loan (Jones and Ram, 1998). Still, ethnic businesses would not develop and prosper in such numbers if ethnic entrepreneurs were not capable of raising formal or informal equity. Contrary to conventional expectations that an ethnic business is usually a small corner shop with little capital need, the capital required to establish an enterprise can quickly surpass $300 000 in the case of a restaurant. Several studies have shown that most ethnic entrepreneurs accumulate the bulk of their start-up capital through their own savings, some through arranged loans from relatives or within the ethnic community, whilst only a small number may acquire a

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bank loan (Basu and Goswami, 1999). This is surprising, since immigrants usually arrive with only a few savings and often earn their living with unskilled labour paying barely enough to survive. Enduring long working hours, spartan living and multiple employments for a few years are usually the only conceivable methods to amass necessary savings (Boissevain et al., 1990). A popular method for accumulating financial resources among Chinese and Korean ethnic entrepreneurs across the globe is via the rotating credit associations (RCA) (Bates, 1997). ‘These methods facilitate the birth of innumerable businesses globally, because they break through red tape, facilitate capital efficiency, and allow for quick business geneses in contexts in which people lack credentials to acquire loans from traditional channels’ (Iyer and Shapiro, 1999:97). RCAs typically flourish where formal financial institutions fail to satisfy the needs of large sections of the population, but also where ethnic groups are either subjected to discrimination, or cannot meet the demanded criteria. In general, RCAs can be defined as a ‘a voluntary grouping of individuals who agree to contribute financially at uniformly-spaced dates towards the creation of a fund, which will then be allotted in accordance with some prearranged principle to each member of the group in turn’ (Calomiris and Rajaraman, 1997:208). At periodic intervals, a member can withdraw the cash accumulated in the fund and use it for commercial purposes. Once a member has received a fund, he is excluded from the distribution of future funds, but has to continue paying until the end of the RCA period. Concluding that the variations in the rates of self-employment among ethnic and immigrant groups can be traced back to the intensive and widespread use of RCAs among Asian entrepreneurs would, however, be inexact. Despite being a good example of a social resource, solid evidence is missing as to whether RCAs really represent a major source in financing immigrant-owned firms (Bates, 1997). Conclusion Ethnic entrepreneurship has become an important aspect of modern urban life and fulfills a key economic and social role for ethnic communities. The restructuring of the Western economies has changed the situation for foreigners for the worse, but at the same time has given rise to businesses with low economies of scale. This presents a new chance for immigrants to regain lost ground, but only if they are not held back by immigrant policies or subjected to invisible barriers, such as discrimination. The influence of the socioeconomic context, or ‘opportunity structure’, will continue to affect the decision to enter self-employment. The aim of this model was to provide a mental aid which can help position and understand the ethnic factor within the broader context of entrepreneurship. Using it as a template for the empirical analysis would, however, prove to be a very difficult task. As shown in this chapter, a stand-alone theory is capable of explaining the business entry decision of a single ethnic entrepreneur and maybe of small groups with a similar immigration history and entrepreneurial activity. However, no theory can explain the phenomenon as a whole. The two models presented attempt to combine the ‘culturalist’ and ‘structuralist’ approach into an interactive concept. The theoretical frameworks described in this chapter offer guidance in investigating differences in entrepreneurial behaviors between ethnic groups, but perhaps more importantly in focusing upon different paths and strategies of the business creation process.

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References Barrett, G., T. Jones and D. McEvoy (1996), ‘Ethnic minority business: theoretical discourse in Britain and North America’, Urban Studies, 33(4–5), 783–809. Basu, A. and A. Goswami (1999), ‘Determinants of South Asian entrepreneurial growth in Britain: a multivariate analysis’, Small Business Economics, 13(1), 57–70. Bates, T. (1997), ‘Financing small business creation: the case of Chinese and Korean immigrant entrepreneurs’, Journal of Business Venturing, 12, 109–24. Blaschke, J., J. Boissevain, H. Grotenberg, I. Joseph, M. Morokvasic and R. Ward (1990), ‘European trends in ethnic business’, in R. Waldinger, H. Aldrich and R. Ward (eds), Ethnic Entrepreneurs: Immigrant Business in Industrial Societies, London: Sage, pp. 79–105. Boissevain, J., J. Blauschkee, H. Grotenberg, I. Joseph, I. Light, M. Sway, R. Waldinger and P. Werbner (1990), ‘Ethnic entrepreneurs and ethnic strategies’, in R. Waldinger, H. Aldrich and R. Ward (eds), Ethnic Entrepreneurs: Immigrant Business in Industrial Societies, London: Sage, pp. 131–57. Borooah, V.K. and M. Hart (1999), ‘Factors affecting self-employment among Indian and Black Caribbean men in Britain’, Small Business Economics, 13(2), 111–29. Calomiris, C.W. and I. Rajaraman (1997), ‘The role of ROSCAs: lumpy durables or event insurance?’, Journal of Development Economics, 56(1), 207–16. Collins, J. (2002), ‘Chinese entrepreneurs: the Chinese diaspora in Australia’, International Journal of Entrepreneurial Behaviour & Research, 8(1), 113–33. Fregetto, E. (2004), ‘Immigrant and ethnic entrepreneurship: a U.S. perspective’, in H.P. Welsch (ed.), Entrepreneurship: The Way Ahead, New York: Routledge, pp. 253–68. Freitas, M.J. (2003), The LIA Report, available online at http://www.lia-partnership.org/en/liareport/oreword06.htm [27.11.2004]. Greene, P. and M. Owen (2004), ‘Race and ethnicity’, in W.B. Gartner, K.G. Shaver, N.M. Carter and P.D. Reynolds (eds), Handbook of Entrepreneurial Dynamics: The Process of Business Creation, Thousand Oaks, CA: Sage Publications, pp. 26–38. Iyer, G. and J.M. Shapiro (1999), ‘Ethnic entrepreneurial and marketing systems: implications for the global economy’, Journal of International Marketing, 7(4), 83–110. Jones, T., D. McEvoy and C. McGoldrick (2002), ‘The economic embeddedness of immigrant enterprise in Britain’, International Journal of Entrepreneurial Behaviour & Research, 8(1/2), 11–31. Jones, T. and D. McEvoy (1986), ‘Ethnic enterprise: the popular image’, in J. Curran, J. Stanworth and D. Watkins (eds), The Survival of the Small Firm, vol. 1, Gower: Aldershot, pp. 197–219. Jones, T. and M. Ram (1998), Ethnic Minorities in Business, London: Small Business Research Trust. Leung, M. (2002), ‘From four-course Peking duck to take-away Singapore rice: an inquiry into the dynamics of the ethnic Chinese catering business in Germany’, International Journal of Entrepreneurial Behaviour & Research, 8(1/2), 134–47. Light, I. and S. Gold (2000), Ethnic Economies, San Diego: Academic Press. Light, I., P. Bhachu and S. Karageorgis (1993), ‘Migration networks and immigrant entrepreneurship’, in I. Light and P. Bhachu (eds), Immigration and Entrepreneurship, New Brunswick: Transaction Publishers, pp. 25–51. Massey, D.S. (1988), ‘Economic development and international migration in comparative perspective’, Population and Development Review, 14, 383–413. Masurel, E., P. Nijkamp and G. Vindigni (2004), ‘Breeding places for ethnic entrepreneurs: a comparative marketing approach’, Entrepreneurship & Regional Development, 16, 77–86. Masurel, E., P. Nijkamp, M. Tastan and G. Vindigni (2002), ‘Motivations and performance conditions for ethnic entrepreneurship’, Growth and Change, 33(2), 238–60. Peters, N. (2002), ‘Mixed embeddedness: does it really explain immigrant enterprise in Western Australia?’, International Journal of Entrepreneurial Behaviour & Research, 8(1/2), 32–53. Pütz, R. (2003), ‘Culture and entrepreneurship – remarks on transculturality as practice’, Tijdschrift voor Economische en Sociale Geografie, 94(5), 554–63. Rath, J. and R. Kloosterman (2002), ‘Working on the fringes: immigrant businesses, economic integration and informal practices’, available online at http://users.fmg.uva.nl/jrath/downloads/@rath%20NUTEK.pdf. Razin, E. (2002), ‘The economic context, embeddedness and immigrant entrepreneurs (Conclusion)’, International Journal of Entrepreneurial Behaviour & Research, 8(1/2), 162–7. Razin, E. and A. Langlois (1996), ‘Metropolitan characteristics and entrepreneurship among immigrants and ethnic groups in Canada’, International Migration Review, 30(3), 703–27. Razin, E. and I. Light (1998), ‘Ethnic entrepreneurs in America’s largest metropolitan areas’, Urban Affairs Review, 33, 332–60. Schaper, M. and T. Volery (2004), Entrepreneurship and Small Business: A Pacific Rim Perspective, Milton: John Wiley & Sons Australia. Simmel, G. (1950), ‘The stranger’, in K. Wolf (ed.), The Sociology of Georg Simmel, Glencoe Il: Free Press.

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Sombart, W. (1914), The Jews and Modern Capitalism, New Brunswick NJ: Transaction. Waldinger, R. (1994), ‘The making of an immigrant niche’, International Migration Review, 28(1), 3–28. Waldinger, R., H. Aldrich and R. Ward (1990a), ‘Opportunities, group characteristics and strategies’, in R. Waldinger, H. Aldrich and R. Ward (eds), Ethnic Entrepreneurs: Immigrant Business in Industrial Societies, London: Sage, pp. 13–48. Waldinger, R., D. McEvoy and H. Aldrich (1990b), ‘Spatial dimensions of opportunity structures’, in R. Waldinger, H. Aldrich and R. Ward (eds), Ethnic Entrepreneurs: Immigrant Business in Industrial Societies, London: Sage, pp. 106–30. Weber, M. (1930), The Protestant Ethic and the Spirit of Capitalism, New York: Scribner. Yinger, M.J. (1985), ‘Ethnicity’, Annual Review of Sociology, 11, 151–80.

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The economics of co-ethnic employment: incentives, welfare effects and policy options Frank A.G. den Butter, Enno Masurel and Robert H.J. Mosch

Co-ethnic employment refers to the stylized fact of many labour markets that there is an over-representation of workers of the same ethnic group within firms. This chapter presents empirical proof of the phenomenon and analyses the incentives for employees to work in co-ethnic firms. It argues that strong social networks and related high intra-group trust constitute the major reasons for co-ethnic employment by lowering information and co-ordination costs. In the short run, co-ethnic employment leads to more jobs for employees, easy access to labour for ethnic minority firms, strengthening of the group values and norms, and fewer unemployment and social security problems for society. In the long run, co-ethnic employment might form an obstacle to the social and economic emancipation of ethnic minority groups. It generates disincentives for individual group members to acquire general skills, hinders the development of ethnic minority firms, fosters the danger of the ethnic trap and stimulates the emergence of an enclave economy. In many Western economies there is a fierce policy debate on the welfare effects of immigration, and more specifically on the (lack of) integration of immigrant groups in the regular labour market. Empirical evidence suggests that the workforce of a considerable number of firms with an ethnic minority owner consists for the larger part of co-ethnic employees. We call this clustering of co-ethnic workers ‘co-ethnic employment’. In this chapter, we study the questions why so many ethnic minority employees work in co-ethnic firms and how this translates into welfare effects for the employees, the firms, the ethnic minority group and the society. In doing so we seek to explain the rationale behind co-ethnic employment from the perspectives of labour economics and institutional economics Most of the existing research in this field focuses on ethnic minority entrepreneurs and their ways of doing business. Usually, little attention is paid to the phenomenon that coethnic employees are over-represented in ethnic minority firms and, if this question is raised, the answer is often sought from the perspective of the employer. This chapter contributes to the literature by examining the issue of co-ethnic employment from a different angle, namely the perspective of the employees. Instead of studying why employers want to hire co-ethnic employees, we investigate the motivations of ethnic minority employees to work in co-ethnic firms. Our chapter argues that strong social networks and related high intra-group trust constitute the major reasons for co-ethnic employment by lowering information and co-ordination costs. Asymmetric information is a well-known phenomenon in the principal–agent relationship between employers and employees. The information asymmetry between bosses and workers is smaller when they have the same ethnic background than when their ethnic backgrounds differ. Therefore search costs, monitoring and bonding costs are lower in co-ethnic employment principal–agent relationships than in the case where the principal belongs to another ethnic group (say a 42

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majority group) than the agent (say a minority group). A similar reasoning holds for informational differences and incompleteness of information between workers. Co-ethnic employment seems to lead to immediate positive welfare effects in the short run, but the welfare effects are less prosperous in the longer run, when the dangers loom of ethnic minority group lock-in and inertia. The set-up of the chapter is as follows. Section 1.1 starts with a short overview of the literature on the labour market characteristics of immigrants. Here an operational definition is given and the incidence of co-ethnic employment is illustrated using the results of various surveys. Most of these results relate to our own country, the Netherlands. Given this empirical evidence, section 2 discusses the reasons for co-ethnic employment. Here the focus is on incentives and on the costs of information and co-ordination. Then we discuss the welfare effects of co-ethnic employment. Here we consider the positive and negative externalities associated with co-ethnic employment and its consequences for individual welfare and social welfare. This provides a clue for answering the question on policy options to enhance the (positive) welfare effects of co-ethnic employment. The final section summarizes the conclusions. 1 Ethnic entrepreneurship and co-ethnic employment Before we start with a description of the characteristics of co-ethnic employment, we first have to make clear what we mean by this phenomenon. We define as co-ethnic a firm whose owner (the employer) has the same ethnic minority background as the majority of his personnel (the employees). Co-ethnic employment refers to the situation where a substantial number of the employees of a specific firm belong to the same ethnic minority group. In this chapter, ethnic minorities are considered to be non-Western immigrants of the first and second generation. We follow the definition of the Netherlands Central Bureau of Statistics by defining first generation immigrants as persons born in a foreign country with at least one parent born in a foreign country (CBS, 2003). Second generation immigrants are persons born in the host country with at least one parent born in a foreign country. In short, immigrants are persons with at least one of their parents born in a foreign country.1 The major ethnic minority groups in the Netherlands consist of people from Turkey, Morocco, Surinam, the Netherlands Antilles and Aruba. The people from Turkey and Morocco were invited to work in the Netherlands to fill the labour shortages in the 1960s and 1970s. Surinam, the Netherlands Antilles and Aruba have been colonies of the Netherlands. Surinam became an independent country in 1975. Fear for poverty and the new government in Surinam motivated many Surinams to flee to the Netherlands. The Netherlands Antilles and Aruba are still part of the Kingdom of the Netherlands. This entitles the Antillans and Arubans to study, work and live in the Netherlands. 1.1 Labour market characteristics of ethnic minority groups Three general observations emerge from the literature on the labour market characteristics of ethnic minority groups: bad labour market performance, high incidence of selfemployment and entrepreneurship, and the important role of the ethnic minority group. The first observation is that immigrants tend to do worse on the labour market than members of the native born population, also when controlled for objective characteristics like education, gender, age and so on. This observation stands in stark contrast to the

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Table 4.1 Labour market position of persons aged 15 to 64 years in the Netherlands, 1996–2002

Labour participation (%) Natives Ethnic minorities From: Turkey Morocco Surinam Nl Antilles and Aruba Unemployment (%) Natives Ethnic minorities From: Turkey Morocco Surinam Nl Antilles and Aruba

1996

1997

1998

1999

2000

2001

2002

61 40

63 41

64 44

66 46

67 48

67 50

68 50

34 31 53 46

35 35 52 45

37 38 58 50

40 39 58 53

44 34 63 55

48 42 62 54

46 46 61 57

6 22

5 21

4 16

3 14

3 11

3 9

3 10

24 28 15 21

22 22 13 21

16 20 12 16

13 16 10 14

9 13 9 8

8 10 6 8

9 10 8 10

Source: CBS (2003: 138).

popular fear that natives lose their jobs as a result of immigration. In the Netherlands, non-Western immigrants and their offspring have a relatively high incidence of unemployment and a relatively low labour participation rate (see Table 4.1). Studies for the United States (for example Chiswick, Cohen and Zach, 1999) and for the UK (for example Wheatly Price, 2001; Blackaby et al., 1997) show the same kind of immigrant labour market problems. This poor labour market performance of first and second generation immigrants in the recent past, and the resulting small or even negative contributions to welfare, contrast with historical accounts of immigration. For example, the German peasants that migrated to the Netherlands at the end of the nineteenth century contributed considerably to welfare in the Netherlands. The second labour market characteristic of immigrants is their over-representation in self-employment and entrepreneurship figures. Ethnic entrepreneurs are defined as being united by a set of connections and regular patterns of interaction among people with common national background or migration experiences (Waldinger, Aldrich and Ward, 1990) or simply as business owners who are not members of the majority population (U.S. Department of Commerce, 1997). Ethnic entrepreneurship comprises a multi-faceted phenomenon that has at least as many sides as there are different ethnic groups. We refer to the studies of Boissevain and Grotenbreg (1986), Aldrich and Waldinger (1990) and Chaganti and Greene (2002) for general evidence and theory on ethnic entrepreneurship. The motivations for immigrants to start their own firm vary widely. Negative reasons or push factors are high unemployment (Kloosterman, Van der Leun and Rath, 1998), discrimination (Deakins, 1999; Johnson, 2000), socio-economic status and cultural factors (Rafiq, 1992), leaving immigrants no alternative but to start up on their own. Positive

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Table 4.2 Persons aged 15 to 64 years with one or more jobs as an employee as a percentage of the total ethnic group in the Netherlands, October 2000 Industry Agriculture and fishing Mining Industry Utility companies Construction Trade Hospitality Transport and communication Financial organizations Commercial services Public administration Education Health Culture and other services Unknown

Natives

Ethnic minorities

1.8 0.1 13.9 0.5 6.5 17.1 3.0 6.4 4.0 15.2 7.2 6.1 13.4 3.6 1.2

2.0 0.1 14.4 0.2 2.7 14.5 6.5 5.5 3.1 30.5 4.8 3.1 9.1 2.7 0.7

Source: CBS (2003: 146).

reasons or pull factors are the need for achievement and the wish to be their own boss. Especially sectors with low entry barriers (like retailing and hospitality – bars and restaurants) are attractive for these start-ups; they usually set up their businesses in those sectors where informal production (with low government control) can provide a competitive advantage. This is also the case in the Netherlands (see Table 4.2). In comparison with the native population, immigrants are over-represented in hospitality and commercial services. The issue of ethnic minority entrepreneurship is discussed in the literature in the context of the incorporation of new immigrants into the labour market. Classical theories of assimilation assume labour supply as a pool in which immigrants start at the bottom and gradually (and occasionally) climb up the socio-economic ladder, while gaining social acceptance. Integration and emancipation are just a matter of time in this view. A second line of theories considers new immigrants as being mainly additions to the secondary labour market linked with small peripheral firms. According to this theory, ethnic minorities experience prolonged problems in entering the regular labour market and thus seek refuge in self-employment. Wilson and Portes (1980) introduce a third possibility: the enclave economy, which consists of immigrant-owned firms that are isolated from the regular economy, thus constituting a dual labour market. In the words of Portes (1998: 13), enclaves are ‘dense concentrations of immigrant or ethnic firms that employ a significant proportion of their co-ethnic labor force and develop a distinctive physical presence in urban space’ (see also Peterson and Roquebert, 1993). The separation of the regular and the ethnic minority labour market is permanent in this case and integration has failed completely. The third typical aspect of ethnic minority labour and, especially, ethnic minority entrepreneurship is the crucial role of one’s own ethnic group. Almost by definition the

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entrepreneur has a strong focus on his (or her) own group, especially the first generation who starts out on his (her) own. Nijkamp (2003) stresses that, although network participation by creative entrepreneurs does not necessarily need an urban base, informal spatial networks may be favourable for ethnic entrepreneurs.2 In the fields of clients, finance, information and employment the ties with one’s own ethnic group strongly dominate (Waldinger et al., 1990; Ram, 1994; Greene, 1997; Kloosterman, Van der Leun and Rath, 1998). Van Delft, Gorter and Nijkamp (2000) argue that ethnic related social networks appear to be multi-faceted and flexible, and offer good possibilities for the efficient recruitment of personnel and capital. In general, ethnic businesses rely heavily on labour from their particular ethnic group or, more specifically, the (extended) family.3 Also capital can be more easily borrowed informally (Van Delft, Gorter and Nijkamp, 2000). In addition, within the network of the ethnic group, individuals are depending on informal ways of doing business and exchanging information, because there is mutual trust within the network. Lee, Cameron, Schaeffer and Schmidt (1997) call this phenomenon the social resources explanation: the success of ethnic minority business can in part be explained by the existence of such social resources as rotating credits, a protected market and a labour source. This third typical aspect of co-ethnic employment is elaborated further in the next section from the general perspective of relatively small information and co-ordination costs, but we will first consider the question whether we can find empirical evidence on over-representation of ethnic minority employees in co-ethnic firms. 1.2 Empirical evidence A number of studies indicate that co-ethnic employees dominate in ethnic minority firms (see Table 4.3). All of these studies are based on interviews with managers (mostly the owners) of small firms in or around Amsterdam. Most firms operate in the retail sector or in the hospitality sector. Together they form a dataset of 120 ethnic minority firms. Between 50 and 84 per cent of these firms only employ co-ethnic personnel. Some firms employ personnel with mixed co-ethnic background and between 16 and 33 per cent of the firms only employ non co-ethnic personnel. When we compare these figures with the benchmark of the size of the ethnic minority groups as a percentage of total population, this presents a clear idea that co-ethnic employment is a real phenomenon. Other evidence for the proposition that co-ethnic employees tend to cluster together in firms comes from a survey conducted by the Netherlands Economic Institute for the Construction Industry (EIB, 2003). Their survey was sent to 8883 firms and responded to by 3573 firms (40 per cent response rate). The definition of an ethnic minority employee in this research is a person of whom at least one parent was born in a non-Western foreign country. A typical aspect of the construction industry is that members of ethnic minority groups are under-represented in its employment (also see Table 4.2). Reported causes are the informal way of attracting new employees (which leads to a path dependency), the ‘tough’ culture in this profession, and discrimination and prejudice among employers about the language skills and the productivity of immigrants (EIB, 2003: 23). About 90 per cent of all firms in the construction sector report that they have no ethnic minority personnel. The prevalence of ethnic minority personnel in the construction industry in firms with at least one ethnic minority employee is shown in Figure 4.1. The interesting aspect of this figure is the ‘fat tail’ on the right. One would expect the frequency of firms to decrease

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Table 4.3 Prevalence of co-ethnic personnel in ethnic minority firms in the Netherlands a

Study Masurel et al. (2002)b

Ethnic background of ownere

Number of firms in dataset

Only co-ethnic personnel (% of firms)

No co-ethnic personnel (% of firms)

Personnel with mixed ethnic background

14 Turkey, 15 Pakistan/ 15 India, 12 Morocco Turkey

41

84.4 %

15.6 %

0.0%

25

69%

31%

0.0%

14

66.7%

33.3%

0.0%

40

50.0%

25.0%

25.0%

Baycan-Levent, et al. (2003)c Masurel et al. Morocco (2004a)d Masurel and Turkey Nijkamp (2004)

Notes: a The empirical evidence does not come from the papers as such, but from the underlying databases. It should be noted, furthermore, that we did not make a sharp distinction between active family members and formal personnel. b Two respondents work alone, 32 work with employees and the remaining seven do not work alone, but without employees, but with business partners, spouse and/or family members. Other ethnic minority personnel account for 6.3 per cent of the cases: this is now part of ‘no co-ethnic personnel’. c 13 of the 25 firms had employees. Only percentages of total volume were available; 5 per cent of the employees were family members. d Six work only with Moroccan employees, five only with Moroccan family members, two with only native employees, and one with native employees and Moroccan family members. e People from Turkey, Pakistan/India and Morocco as a percentage of total population in 2002, respectively 2.1, 0.1 and 1.8 (CBS, 2003: 116).

80 70 Firms (%)

60 50 40 30 20 10 0 0–20

20–40 40–60 60–80 Ethnic minority personnel (% of total)

80–100

Source: Calculations based on the survey reported in EIB (2003).4

Figure 4.1 Prevalence of ethnic minority personnel in the Dutch construction sector in firms with ethnic minority personnel, 2003

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when the prevalence of ethnic minority personnel rises. This can indeed be seen in the figure up to a prevalence of 80 per cent. After this, in the 80–100 per cent prevalence area, we see an unexpected hump that indicates that there is a substantial number of firms which mainly consist of co-ethnic employees. This confirms the idea that co-ethnic employees tend to flock together. Note, however, that we do not know the ethnicity of the entrepreneur in this case. Although the information from empirical research on co-ethnic employment is scarce, the data that we find all point in the direction that co-ethnic employment is a real and substantial phenomenon. However, there is ample scope for further research on the prevalence and magnitude of co-ethnic employment in different sectors of industry and in different countries. 2 Reasons for co-ethnic employment Given this empirical evidence on over-representation (and under-representation) of ethnic groups in specific firms and sectors of the economy, we now try to explain this phenomenon from the theoretical perspective of information and co-ordination costs. 2.1 Social capital, networks and trust In general social networks and social capital are seen as major reasons why ethnic firms hire a disproportionate number of co-ethnic workers and why co-ethnic workers want to work in co-ethnic firms. Social networks are networks based on some shared characteristics of people; for example, they have the same ethnic, cultural or religious background, live (or have lived) in the same region or neighbourhood, speak the same language, and/or have the same social–economic status. The importance of these networks is that they can create resources for the members of the network, which is known as social capital. In the words of Bourdieu (1986: 248), social capital is ‘the aggregate of the actual or potential resources which are linked to possession of a durable network of more or less institutionalized relationships of mutual acquaintance and recognition – or in other words, to membership in a group’. These resources range from highly implicit to concrete material benefits. Immaterial benefits are generated by the social control function of the network. This involves the creation of uniform values and norms, which ease the co-ordination of behaviour. Values and norms make the behaviour of other people more predictable. This lowers information costs as part of transaction costs by reducing uncertainty without needing the help of expensive formal co-ordination systems, like the police and the legal system. Social control and social sanctions uphold these informal rules. Breaking the rules leads to a depreciation of the reputation of the violator of the rules, sometimes with consequences for his whole family. This can go as far as social ostracism, which has serious consequences for the offender’s social, religious and business life. But values and norms also create loyalty of individual members to (other members of) the group. Even when the network is putting pressure on an individual member, he may decide to stay in the network (not to exit), not to raise his voice and protest (not to voice his anger), but to support the network (to be loyal) (Hirschman, 1970). The advantages of the network can also be found in its function as a communication device, through which reliable information about, for example, job opportunities, is spread through the community quickly and efficiently (Portes, 1998). Networks can also

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be helpful in starting up businesses by acting as a lending channel. A famous example is the Korean rotating credit associations in the United States (Light and Bonacich, 1988). The main force behind the networks is the members seeing themselves as belonging to the same group of people, who are ‘in the same ship’, and have to co-operate to ‘survive’ in the strange and maybe ‘hostile’ environment they have migrated to. This leads to general reciprocity, as Putnam (1993) calls it. Members of the network help each other. They do not do this to get their favour returned to the same extent, from the same person and as soon as possible, but with the idea they will receive some kind of help from someone in the network somewhere in the future when they need it in their turn. A characteristic of these networks is that there exists mutual trust: the members of the network expect that the other members will co-operate and will reciprocate in the future the favours received now. Results of micro-economic game experiments are in line with the above-mentioned characteristics of networks. People tend to have more trust in people that are of the same race or nationality than in other people (Glaeser et al., 2000; Buchan et al., 2002). Reciprocity has also been tested in laboratory experiments. The results suggest that both positive and negative reciprocity influence people’s behaviour (Fehr and Gächter, 2000). The effects – advantages and disadvantages – of networks are highly dependent on their degree of density. The more closed and dense the network, the better are the members able to uphold the implicit values and norms of reciprocity and trustworthiness, and the better they are able to circulate information. However, this can easily turn into a disadvantage, as a closed network increases the risk of missing new, potentially beneficial influences from outside the network. A feature of many high-density networks with high mutual trust among its members is that they evince very little trust in people from outside the network. Fukuyama (1995) argues that this could be the reason that countries in which people only have trust in their (extended) family seem to have relatively less large firms than countries in which people have a higher general trust in strangers, that is, in people from outside their own (extended family) network. For a firm to grow large, it is necessary to attract strangers with certain skills and capabilities that cannot be found in one’s own network or family. This hypothesis has been corroborated by the empirical research of La Porta et al. (1997). If the above is true, then it should be the case that firms owned by migrants from ‘low trust’ countries (like China, Turkey, Southern Italy and France) have a larger portion of co-ethnic employees than firms owned by migrants from ‘high trust’ countries (like Japan, Germany, Northern Italy, the Netherlands and the United States).5 When appropriate data are available, this hypothesis could be tested in future research. 2.2 Utility of co-ethnic employment We now turn to the incentives for a member of an ethnic minority group to find a job in a co-ethnic firm or a regular firm. A regular firm is a firm in which ethnic minorities are not over-represented in the personnel structure as compared with the prevalence of the ethnic minority group in the total population. A regular job is a job in a regular firm and a co-ethnic job is a job in a co-ethnic firm. We start with the basic assumption that a person wants to maximize her utility function. She can choose between a regular job and a co-ethnic job. The utility she derives from a job depends on the chance of finding the job (and the search costs) and the rewards of the job (corrected for investment costs in education and so on). She chooses a regular job if the utility of a regular job is higher

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Handbook of research on ethnic minority entrepreneurship

than the utility of a co-ethnic job. We first look at the incentive structure that is connected to the rewards; after that we continue with the incentives arising from the search process. 2.2.1 Rewards: management problems The rewards of an employee are largely determined by her productivity. A widely recognized problem considering productivity is that productivity is hard to measure. Asymmetric information with respect to tasks and their fulfilment between managers and personnel leads to the well-known principal–agent problem. The principal (the manager) has other objectives than the agent (the employee), but is not able to monitor the behaviour of the employee completely. Strong formal monitoring on the aspects of the employee’s behaviour that can be monitored often leads to perverse consequences. The employee will tend to do her utmost to perform well on the monitored tasks but will neglect her other duties. The principal–agent problem is aggravated by the inherent incompleteness of contracts. It is very costly to gather information; some information cannot be obtained at all; it is costly to write down an extensive contract and writing down all possible events may even create distrust among the contracting parties. Furthermore, even with a complete and legally binding contract, severe costs are involved with the enforcement of this contract through judicial procedures. They are costly, time consuming and some parts of the contract cannot be verified by third parties like judges. These highly incomplete contracts give contracting parties the opportunity and incentives to shirk at the expense of the other party (Williamson, 1985). Besides this monitoring problem, the bonding problem also comes forth, out of the combination of bounded rationality, scarcity of information and contracting problems. The productivity of an employee rises when she works longer in the same firm (learning by doing) and when specific investments are made. Specificity of an investment means that the value of an investment is directly dependent on the continuation of the relationship. An example is a firm investing in the skills of an employee while these skills are only valuable in this particular firm. The productivity of the employee in this firm rises and, as long as the employee stays within the firm, the investment leads to extra rents (to be divided between firm and employee). The lack of complete contracts hinders mutually advantageous investments in this case, because the ex ante (before the investment) commitments are not credible in the post-investment phase. The incentives for splitting the rents and continuing the relationship have changed by then. Although there are profitable investments to be made, potential investors may refrain from doing so, because they are afraid that their transaction partner will hold them up. This means that there is no formal way to solve the principal–agent based monitoring and bonding problems. The principal and his agent have to trust each other: they expect that the other will refrain from opportunistic behaviour and perform according to the letter and spirit of the agreement. The ability to trust is often seen as an important element of social capital, while networks are regarded as an essential framework for the development of trust and social capital (see, for example, the reviews by Nooteboom, 2002, and Sobel, 2002). Within a certain network, such as an ethnic minority group, members can easily transpose and enforce collective values and norms, which creates mutual trust. Acting in accordance with these values and norms leads to the positive reward of social recognition, while ‘bad’ behaviour results in a loss of reputation and, in the worst case, exclusion from the network. Because it takes some time to create a solid reputation (a valuable asset as it is useful in both business and social matters) while it can be destroyed

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at once by one unwise malevolent act, the implied trigger mechanism forms an indisputable strong incentive to behave by the rules. From this perspective, the ethnic network can be seen as a trust-creating device, which makes it possible to economize on the transaction costs that accompany management problems. The informal ties are used as a means of managerial discipline that mitigates the monitoring and bonding problems. Another advantage of this management device is that it is helpful in substituting formal procedures. Especially in the case of ethnic minority firms, the firm owner might have little or no knowledge of the official labour market and its regulations. Co-ethnic employees are for these reasons more productive in coethnic firms than employees with other ethnic backgrounds. The resulting extra rents for the co-ethnic firm may be split among owner and personnel, which forms a monetary incentive for co-ethnic employment. If the monitoring and bonding problems analysis is correct, we expect that the average tenure of ethnic minority personnel is lower in regular firms than in co-ethnic firms. The trust-creating network aspect is missing in regular firms, while it is doing its beneficial work in co-ethnic firms. It is hard to find data on firing decisions or average tenure of ethnic minority group members, but the EIB survey (2003: 36) about ethnic minorities in the Dutch construction industry reports an extraordinarily high volatility in ethnic minority personnel. Both inflow and outflow involves about 25 per cent of the total number of ethnic minority employees per year. This could be regarded as an indication that firms with a non-co-ethnic owner face substantial management problems in keeping their ethnic minority labourers inside the firm. 2.2.2 Rewards: general and culture-specific skills A more direct link between rewards and productivity is through the notion of general skills. General skills originate in formal education and raise the productivity of the employee and, thereby, her rewards. These skills are extremely important in regular jobs and natives might have a natural lead, for example because they are better speakers of the native language. In ethnic firms, these general skills might be somewhat less important, because the, on average, small size of these firms requires an, on average, lower level of skills and also fluency of the majority language may be less of a necessity. Culture-specific investments in knowledge of one’s own ethnic minority culture and language are useless for regular jobs, but are valuable for co-ethnic jobs. Knowledge of the specific culture and language gives the employees a comparative advantage over nonco-ethnic people in communicating with the co-ethnic boss, the other employees, the suppliers and the customers. This might also involve ‘tacit knowledge’ about the product, for example how it should taste or look. Furthermore, the customers might expect co-ethnic personnel, for example in a restaurant. So, because of their culture-specific skills, coethnic employees are more productive in co-ethnic firms than in non-co-ethnic firms, and co-ethnic employees are more productive in co-ethnic firms than employees with a different cultural background. Both reasons form incentives to work in a co-ethnic firm. 2.2.3 Rewards: positive and negative discrimination Obviously discrimination in regular firms has a negative effect on rewards for members of ethnic minority groups. Discrimination on cultural background leads to both monetary disincentives to work for a regular firm (not given promotion, not receiving bonuses) and non-monetary disincentives

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(victim of teasing by colleagues, always having to do the dirty jobs). Discrimination may work the other way round in co-ethnic firms. The employer might feel a moral obligation, resulting from the social network, to help and comfort co-ethnic employees. The employer is more benevolent to his co-ethnic personnel than a non-co-ethnic boss. This might even offer the possibility for the workers to have a ‘good time’ and shirk. A job in a co-ethnic firm might also offer better career perspectives, for example to get promoted, to become a partner or to take over the business when the owner retires. This issue can also be related to trust and networks. Ethnic minority employees only trust co-ethnic employers to be fair to them and not to discriminate against them. They might have less or no trust in (or are unaware of) the official labour market regulations and/or the motivations of non-co-ethnic employers. Their trust in co-ethnic employers is based on the knowledge that they can rely on the social network if they are mistreated by their co-ethnic boss, while this protection mechanism is not available when a nonco-ethnic employer is involved. The networks also deliver non-monetary rewards to the employees in the sense of a certain social recognition from other group members, when employees decide to work for a co-ethnic firm. In this way, both employers and employees obey an informal moral obligation to help each other. The employer helps the members of his co-ethnic group by offering employment. The employees help the co-ethnic employer by offering their labour. We now turn our attention to the incentives that come forth out of the search process. 2.2.4 Search: signalling As we saw above, principal–agent problems arise because of information asymmetries between employers and employees. The equivalent of this management problem for the search process emerges from the differences in asymmetric information about the qualities of applicants. Applicants know more about their own skills and motivations than the potential employer does and tend to present an over-optimistic view of their qualities. There are three reasons why ethnic minority applicants could make a better impression on a co-ethnic employer than on a non-co-ethnic employer. First is the problem that certain foreign diplomas are not recognized by native employers, but are recognized by co-ethnic employers. The magnitude of this problem increases when it is combined with communication problems between the employer and the applicant, for instance when the candidate has trouble in expressing herself in the majority language of the host country. This makes it more difficult for the applicant to communicate her skills and motivations to the native employer, while she has no problem discussing this subject in her native language with a co-ethnic employer. Second is the problem of discrimination. This can be outright discrimination, but also statistical discrimination (Loury, 1977). When a certain ethnic minority group gets a stigma attached for being ‘lazy’, ‘unproductive’ or ‘fraudulent’, this diminishes the chance of all members of this stigmatized group to be employed in a regular firm. Bad employees will drive out good employees. Since the rate of rejection is so high, it is not worthwhile anymore for ‘good’, unfairly stigmatized employees to invest in applications for such jobs. Only the ‘bad’ applicants keep on applying, because for them the rewards of success are much higher, as it enables them to shirk at the expense of the hiring firm. This confirms the stigma and increases the prejudice against members of this ethnic minority group. Even more good employees stop applying for jobs in the regular sector, and so on and so forth.

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A third issue is that applicants are backed by members of their own network. The credentials of native applicants are thus for the greater part backed by other natives who might be more highly valued by native employers than the ethnic minority references of ethnic minority applicants. This holds, vice versa, for applicants at ethnic firms. These are three objective reasons why it might happen that ethnic minority employees end up in co-ethnic firms, even if they themselves have no preference for the one above the other. 2.2.5 Search: search channels Social networks are often used as a channel for information about vacancies and job opportunities. Nan Lin has written extensively on this subject (for example, Lin, Ensel and Vaughn, 1981). Especially the ‘weak links’ of one’s network can be very helpful in finding a job (also see Granovetter, 1974). Given that the network of an ethnic minority group member consists in large part of other members of this group, information about vacancies will mainly consider job openings in ethnic firms. This information function of the network also works the other way round. Co-ethnic employers can more easily find a suitable co-ethnic employee than a non-co-ethnic one. The transaction costs involved in the search process are lower when using the social network than when using the official canals. Using panel data for the United Kingdom, Frijters et al. (2003) report on how the job search methods of unemployed immigrants vary from those of the native born. A striking result of this research is that all immigrant groups, and especially South Asian immigrants, rely more on their social networks for job search than the UK born. The researchers conclude, however, that the relative failure of immigrants to find a job ‘cannot generally be explained by differences in the choice of main job search method or in observable characteristics’ (Frijters et al., 2003: 1). This confirms the idea that immigrants make a relatively strong use of social networks to find a job. It also confirms that this is a rational thing to do, because it does not influence (read: it does not worsen) the probability of immigrants finding a job. The result of the extensive use of this search channel, however, is that ethnic minorities end up being over-represented in co-ethnic firms. 2.2.6 Conclusion We conclude, from our economic analysis of the labour market incentives of ethnic minority group members, that there is much economic rationality for ethnic minorities to find a job in a co-ethnic firm instead of in a regular firm. Their ethnic background makes them more productive in co-ethnic firms, because it enables firms to economize on management control and bonding costs. A second source of their higher productivity lies in the specific cultural capital they have accumulated and that is valuable in certain ethnic business niches. Discrimination and problems with the verification of their qualities form clear disincentives to work in regular firms. Finally, the social network allows ethnic minorities to lower their search costs when looking for a job. The fact that the behaviour of immigrants to find a co-ethnic job is rational does not automatically imply that this behaviour is beneficial for them in the longer term or beneficial for their employers, their ethnic community or for the society as a whole. We explore the positive and negative externalities of co-ethnic employment in the next section. 3 Welfare effects of co-ethnic employment The emphasis of this section lies on the welfare effects of co-ethnic employment. We first present a broad historical perspective of the welfare effects of immigrants, we continue

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with a somewhat smaller scope about the welfare effects of ethnic entrepreneurship and end with an analysis of the welfare effects of co-ethnic employment in the short and long run. 3.1 Welfare effects of immigrants In Dutch history the freedom of the Protestant religion, the high tolerance of other religions and the economic prosperity of the region attracted several waves of immigrants, particularly in the sixteenth to nineteenth centuries. Among them were the Huguenots, who fled France after the revocation of the edict of Nantes in 1685, that was directed against Protestantism, and among them were many (Portuguese) Jews who saw their lives threatened for religious reasons in other parts of Europe. These influxes of highly skilled and wealthy immigrants are generally seen as important contributions to the rise of the Low Countries as an economic superpower in the seventeenth century (De Vries and Van de Woude, 1995). For the immigrants themselves, their migration benefited them at least in the sense that it provided them with a way to survive the religious feuds in Europe. But even at the end of the nineteenth century immigration was substantial, especially from the poor regions of Germany. This wave of immigration benefited the Dutch economy in the sense that it provided a source of cheap labour. At the same time, it was beneficial for the immigrants, because they earned a better salary than at home. This picture has changed dramatically. Evaluations by the CPB Netherlands Bureau for Economic Policy Analysis (Roodenburg et al., 2003) and the Netherlands Scientific Council for Government Policy (WRR, 2001) are not optimistic about the contributions of recent immigrant inflows to the Dutch economy. Non-Western immigrants have a relatively low labour participation, have a relatively high unemployment rate and make a relatively high use of social security. Remarkably, these differences between the native population and immigrants are much greater in the Netherlands than in other countries, such as Italy, Spain, Canada and Australia (WRR, 2001: 121). The welfare effects of new immigrants whose social–economic characteristics correspond to those of the average non-Western resident are likely to be small and maybe even negative on residents’ incomes, and are a burden for the public budget (Roodenburg et al., 2003: 7–8). This can be partly blamed on the lagging performance of immigrants on the labour market, but is ‘also the reflection of the generous system of Dutch collective arrangements’ (Roodenburg et al., 2003: 8). 3.2 Welfare effects of ethnic entrepreneurship In 1998, the Netherlands Social Economic Council (SER) wrote an advice to the government on ethnic entrepreneurship as a reaction to the perceived labour market problems of immigrants (SER, 1998). The SER concludes that entrepreneurship of ethnic minorities is part of the solution of the problem and should therefore be stimulated by the government. The government has underwritten this advice in its official reaction. According to the SER, weak points of the present ethnic minority firms are the lack of entrepreneurial skills, the relative weak basis of many firms, the lacking presence of business networks and the insufficient accessibility of services for ethnic entrepreneurs. We agree that ethnic entrepreneurship is, in principle, a positive phenomenon that contributes to the integration and economic emancipation of ethnic minority groups.

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However, we have more doubts about the co-ethnic employment that is often involved with the creation of ethnic firms. We sum the pros and cons later, but first look at some actual developments. The number of ethnic enterprises in the Netherlands has risen sharply over the last ten years (Van den Tillaart, 2001). The type of firms is also changing. Originally, most ethnic firms were in the hospitality and retail sectors. Newly founded firms, mostly by second generation migrants, are more and more in commercial services. In this new sector, second generation ethnic entrepreneurs often choose more sophisticated branches like advice and consultancy, research and public-relations offices and travel agencies instead of driving schools and cleaning services (ibid.). Does this mean that the differences between ethnic and native entrepreneurs are disappearing? Yes and no. On the one hand, we see that the distribution of firms over the different sectors of second generation ethnic entrepreneurs has become more similar to that of the native entrepreneurs than it has ever been with regard to the first generation immigrants. This is in line with the thought that the second generation of immigrants has less strong ties within the migrants’ community. The rules and resources of the social ethnic network are less applicable to ‘newer’ generations. Although these figures only give an indication of the sectors of activity and not of employment policies, the broader picture that arises from it is that the phenomenon of coethnic employees and employers is less pregnant for newer generations, because they ‘break out’ of the old structures. On the other hand, however, one can notice that a part of the second generation ethnic entrepreneurs is explicitly focusing their activities on their own ethnic group. They develop ethnic niches to exploit, for example in culture, recreation and sports (Van den Tillaart, 2001). This makes the Scientific Council for Government Policy conclude that it is very troublesome that the immigrants, especially those coming from Turkey and Morocco, mainly use their own ethnic network to find a job, because of the restricted and internal focus of these networks (WRR, 2001: 119). 3.3 Welfare effects of co-ethnic employment In this subsection we discuss the welfare effects of co-ethnic employment for employees, co-ethnic firms, the ethnic minority group and society as a whole. Most of the positive welfare effects seem to lie in the short run. Structural problems that lead to negative welfare effects come to the fore when we analyse the long-term effects of co-ethnic employment. We pay extra attention to externalities: the external effects (positive and negative) that arise for society as (unintentional) consequences of individual behaviour. 3.3.1 Positive welfare effects and externalities The immediate effects of co-ethnic employment are positive at every level of analysis. The major reason why co-ethnic employment is associated with positive externalities is that it creates jobs for ethnic groups. This increases the labour participation and work experience of the individual employees. Although some of these jobs may be ‘network-subsidized’ jobs, such a job in a co-ethnic firm is better than no job at all. A second positive welfare effect for individual employees exists when their rewards are higher in co-ethnic firms than in regular firms. The monetary rewards may be higher, because their culture-specific skills enhance their productivity in co-ethnic firms (especially when active in ethnic niches) and lower management and search costs for firms. The non-monetary rewards may be higher, because co-ethnic employment leads to moral appraisal and recognition from the ethnic group.

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The co-ethnic firm benefits from co-ethnic employment for the same reasons. The productivity of co-ethnic personnel may be higher than the productivity of other personnel, and because of reductions in management and search costs. The welfare benefits for the ethnic group lie in the fact that all value created by the ethnic firms stays inside the ethnic group. The rents are split among the co-ethnic suppliers of capital, management and labour. This also makes the group less dependent on outsiders. A feeling of autonomy can be regarded as valuable. Above all, the ethnic network stays intact and dense. This makes it easier to uphold the (traditional) values and norms. The welfare effects for society are the less frequent recourse to social security, combined with higher income taxes. Moreover, poverty reduction among ethnic minorities is a positive good in itself. When one believes in the existence of poverty-related crime, one can argue that this poverty reduction may have positive external welfare effects for the society, because it translates into a reduction of the crime rate among ethnic minority groups. 3.3.2 Negative welfare effects and externalities There are also a number of negative externalities associated with co-ethnic employment. To start with, it may prevent the development of general skills among the co-ethnic employees. It reduces the necessity of (fluently) speaking the majority language and co-ethnic employees are not confronted with the native ‘work ethics’. Regardless of the fact whether this work ethic is better or worse, not being familiar with it does not improve your chances on the regular labour market. When, for some reason, immigrants lose their job at the co-ethnic firm, the pool of potential new employers is restricted for them only to the co-ethnic firms, while the possession of general skills would allow them to seek a job across all firms in the economy. A second negative welfare effect for employees may result from the fact that they keep very closely attached to their social ethnic network when they work in a co-ethnic firm. This makes it relatively easy for the other network members to enforce network rules, values and norms upon them. Social control co-ordinates the behaviour of group members and thus prevents sub-optimal outcomes in social dilemma situations. However, it also restricts individual freedoms. It impedes individual welfare, when social control and sanctions are used to enforce unwanted solidarity with other group members. In the worst case, this results in the exploitation of co-ethnic employees, who are obliged to work in ethnic firms under bad working conditions (hard work, low salary). Social pressure exercised by the network then sacrifices the welfare of the individual for the good of the group. The welfare or development of firms is faced by two dangers resulting from co-ethnic employment. The first relates to the fact that easy access of ethnic minority group members to employment in the firm automatically implies that applicants with other ethnic backgrounds are barred from access. This has two consequences. First, it may lead to a very narrow focus of the ethnic firm regarding suppliers and customers, because there are no natural links (established through the networks of employees) with suppliers and customers from outside their own group. Second, it may be difficult to find suitable employees within one’s own group, especially for certain specialized functions (Fukuyama, 1995). Both restrictions might seriously hinder the small family firm hoping to develop into a larger-scale enterprise. The second danger for the development of the firm also results from the situation that the firm becomes too enclosed in the social ethnic network. In some cultures, strong norms of mutual assistance and solidarity lead to high free-riding problems, because successful

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firms are overloaded with requests for loans and jobs from fellow kinsmen (Geertz, 1963; Portes, 1998). The social norms that allow for these excess claims on more successful group members severely impede the accumulation of wealth (and thus the incentives to gather wealth) that is needed for entrepreneurial success and development. Negative externalities of co-ethnic employment for the ethnic group also arise from the fact that co-ethnic employment leads to less interaction between different ethnic groups and networks. This implies that the separate networks stay relatively closed, small and isolated. One misses the positive external effects that would result from a single ‘combined’ large network. A concrete example of a negative externality of co-ethnic employment is that information about job opportunities and applicants’ skills is not public for all networks. As a result, members of ethnic minority groups may fall into the ‘ethnic trap’. They must find a job in the co-ethnic network, because they miss contacts in other networks. As a result, they also do not become members of other networks, which reduces the chance of other ethnic minority group members finding a job outside the social ethnic network. This problem of path dependency is worsened by the phenomenon of co-ethnic employment. A more extreme situation occurs when ‘group solidarity is cemented by a common experience of adversity and opposition to mainstream society’ (Portes, 1998: 17). Coethnic employment can be seen as a form of group solidarity. A prolonged period of discrimination by mainstream society may lead to downward levelling norms in the group. The group members do not believe anymore that they can be successful in society. This implies that there is no use in going to school or in making other long-term investments. Pride in the group for its own sake is the only thing that remains. Ambitious group members who do manage to be successful in the ‘hostile’ outside world, however, are perceived as traitors, because they undermine the group cohesion that is built on the alleged impossibility of such events. In this situation, the social norms of the group work out as a public ‘bad’, because they form fatalism-based disincentives for the social and economic emancipation of the group. The negative externalities for society originate in the missed network opportunities that result when ethnic groups keep their distance from the rest of society, for example via a high prevalence of co-ethnic employment. A major example is that the emergence of common values and norms in society is hindered. Common values and norms streamline the co-ordination of human behaviour in (economic) activities, because they form informal guidelines for behaviour. In this way, they reduce the transaction costs involved with co-ordination problems. Another example is that the economy is not running at its possible optimum, because best matches between vacancies and applicants are missed. This hinders the personal development of the employees, the emergence of strong firms and the growth of the national economy. More generally, we may conclude that co-ethnic employment enhances segregation instead of integration. The worst case situation would be the emergence of an ethnic minority enclave economy without ties to the rest of society. This would imply an isolated sub-society within a society and the complete failure of integration policies. 3.3.3 Conclusion The immediate effects of co-ethnic employment seem to be positive on balance. In the short run, co-ethnic employment leads to more jobs for employees, easy access to labour for ethnic minority firms, strengthening of the group values and norms,

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and fewer unemployment and social security problems for society. This bright picture is obscured when we take a long-term perspective. Co-ethnic employment might form an obstacle to the social and economic emancipation of ethnic minority groups, because it generates disincentives for individual group members to acquire general skills, hinders the development of ethnic minority firms, fosters the danger of the ethnic trap and may stimulate the emergence of an enclave economy. An enclave economy does not seem to be a realistic threat for Dutch society, but the other dangers certainly are. We therefore look at the possible policy options in the next section. 4 Concluding remarks and policy options Survey data from various sources in the Netherlands confirm anecdotal evidence of overrepresentation of co-ethnic employees in ethnic minority firms. This major characteristic of ethnic minority employment can be explained by the relatively low information and coordination costs in labour relationships in co-ethnic firms. When people belong to the same ethnic group, or network, they are bound to the same cultural values and norms, and this will enhance trust, for example within a group of immigrants from the same country or background. This implies that, within a group of workers from the same ethnic origin, information is less asymmetric and less incomplete than that between workers of different ethnic origins. In a hierarchical relationship between a supervisor and subordinates the monitoring and bonding costs may be lower in the case where all belong to the same ethnic groups than when they have different ethnic backgrounds. A similar argument holds for search costs when employing workers. These economics of co-ethnic employment suggest that there are both positive and negative externalities associated with this phenomenon. A positive externality is that it enhances labour participation and therefore reduces demand for social security provisions. However, a negative externality is that is hinders integration of minority groups in the society which will eventually cause these members of minority groups to be less productive. These positive and negative externalities can be considered as market failures. The economics of the public sector teach us that government policy should try to repair such market failures as much as possible. Hence the general rule for government intervention in the case of co-ethnic employment is to design policy options which will minimize the negative externalities and which will exploit the positive externalities. The biggest structural problem seems to be that the business networks of native and ethnic minority entrepreneurs are separated from each other. In the most extreme case, this would mean the complete isolation of an ethnic minority part of the regular economy: the enclave economy. To prevent the emergence of enclave economies in the Netherlands and to reap the positive external benefits of extended (business) networks, the government has a role to foster the integration of native and co-ethnic business networks. With respect to the phenomenon that co-ethnic firms are used as a ‘last resort’ for unskilled ethnic minority members, additional schooling programmes for co-ethnic employees are necessary to give them a chance on the regular labour market. Concerning the diploma comparison problem in the search process, one could think of government support in the form of a databank for diploma comparison. Furthermore, positive externalities should be exploited by promoting businesses of ethnic minorities, such as by providing assistance in setting up a business (through chambers of commerce), and guarantees for loans, and by not too much strict regulation. The

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chambers of commerce could play an important role in this process. They have information about the ethnic background of firm owners and play a natural role in stimulating entrepreneurship. Notes 1. We are aware of the discussion that people who were born in a foreign country, but migrated to the host countries before their sixth birthday, could be considered as second generation immigrants, because this early migration enabled them to receive their education in the host country (Veenman, 1996). As this discussion is somewhat removed from the main topic of this chapter, we leave this issue here. 2. According to De Graaff (2002), minimizing the costs of adaptation (or migration costs) is the main reason for the spatial clustering of immigrants. This can be translated into various positive spatial externalities, such as the possibilities of obtaining information, housing and even finding future spouses. 3. This may be a result of labour market discrimination, which is defined by Borjas (1996) as the arise of differences in earnings and employment opportunities among equally skilled workers employed in the same jobs simply because of the workers’ race, gender, national origin or sexual orientation and other seemingly irrelevant characteristics. This argument goes back as far as Becker (1957). 4. We acknowledge the help of the EIB in providing us with these data from the survey. 5. This distinction in high and low-trust countries is based on Fukuyama (1995).

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Hirschman, A.O. (1970), Exit, Voice, and Loyalty: Responses to Decline in Firms, Organizations, and States, Cambridge: Harvard University Press. Johnson, P.J. (2000), ‘Ethnic differences in self-employment among Southeast Asian refugees in Canada’, Journal of Small Business Management, 38(4), 78–86. Kloosterman, R., J. van der Leun and J. Rath (1998), ‘Across the border: immigrants’ economic opportunities, social capital and informal business activities’, Journal of Ethnic and Migration Studies, 4(2), 249–68. La Porta, R., F. Lopez-de-Silanes, A. Shleifer and R.W. Vishny (1997), ‘Trust in large organizations’, American Economic Review, 87(2), 333–8. Lee, Y., T. Cameron, P.V. Schaeffer and C.G. Schmidt (1997), ‘Ethnic minority small business: a comparative analysis of restaurants in Denver’, Urban Geography, 18(7), 591–621. Light, I. and E. Bonacich (1988), Immigrant Entrepreneurs: Koreans in Los Angeles 1965–1982, Berkeley: University of California Press. Lin, N., W.M. Ensel and J.C. Vaughn (1981), ‘Social resources and strength of ties: structural factors in occupational attainment’, American Sociological Review, 46, 393–405. Loury, G.C. (1977), ‘A dynamic theory of racial income differences’, in P.A. Wallace and A. LaMond (eds), Women, Minorities and Employment Discrimination, Lexington: Lexington Books, pp. 153–86. Masurel, E. and P. Nijkamp (2004), ‘Differences between first-generation and second-generation ethnic startups: implications for a new support policy’, Environment and Planning C: Government and Policy, 22(5), 721–37. Masurel, E., P. Nijkamp and G. Vindigni (2004), ‘Breeding places for ethnic entrepreneurs: a comparative marketing approach’, Entrepreneurship & Regional Development, 16(1), January, 77–86. Masurel, E., P. Nijkamp, M. Tastan and G. Vindigny (2002), ‘Motivations and performance conditions for ethnic entrepreneurship’, Growth and Change, 33(2), 238–60. Nijkamp, P. (2003), ‘Entrepreneurship in a modern network economy’, Regional Studies, 37(4), 395–405. Nooteboom, B. (2002), Trust: Forms, Foundations, Functions and Failures, Cheltenham, UK and Northampton, MA, USA: Edward Elgar. Peterson, M.F. and J. Roquebert (1993), ‘Success patterns of Cuban–American enterprises: implications for entrepreneurial communities’, Human Relations, 6(8), 921–37. Portes, A. (1998), ‘Social capital: its origins and applications in modern sociology’, Annual Review of Sociology, 24, 1–24. Putnam, R.D. (1993), Making Democracy Work: Civic Traditions in Modern Italy, Princeton, NJ: Princeton University Press. Rafiq, M. (1992), ‘Ethnicity and enterprise: a comparison of Muslim and non-Muslim owned Asian business in Britain’, New Community, 19(1), 43–60. Ram, M. (1994), ‘Unravelling social networks in ethnic minority firms’, International Small Business Journal, 12(3), 42–53. Roodenburg, H., R. Euwals and H. ter Rele (2003), Immigration and the Dutch Economy, The Hague: CPB Netherlands Bureau for Economic Policy Analysis. Sobel, J. (2002), ‘Can we trust social capital?’, Journal of Economic Literature, 40, 139–54. Sociaal Economische Raad (SER) (1998), Etnisch ondernemerschap, The Hague: SER. U.S. Department of Commerce (1997), The State of Small Business: a Report of the President, Washington D.C.: U.S. Government Printing Office. Van Delft, H., C. Gorter and P. Nijkamp (2000), ‘In search of ethnic entrepreneurship opportunities in the city: a comparative policy study’, Environment and Planning C: Government and Policy, 18, 429–51. Van den Tillaart, H. (2001), Monitor etnisch ondernemerschap 2000, Nijmegen: ITS. Veenman, J. (ed.) (1996), Keren de kansen? De tweede-generatie allochtonen in Nederland, Assen: Van Gorcum. Waldinger, R., H. Aldrich, R. Ward and associates (1990), Ethnic Entrepreneurs: Sage Series on Race and Ethnic Relations, vol. 1, Newbury Park, CA: Sage Publications. Waldinger, R., H. Aldrich, W.D. Bradford, J. Boissevain, G. Chen, H. Korte, R. Ward and P. Wilson (1990), ‘Conclusions and policy implications’, in R. Waldinger, H. Aldrich, R. Ward and associates, Ethnic Entrepreneurs: Sage Series on Race and Ethnic Relations, vol. 1, Newbury Park, CA: Sage Publications, pp. 177–97. Wetenschappelijke Raad voor het Regeringsbeleid (WRR) (2001), Nederland als immigratiesamenleving, Reports to the Government no. 60, The Hague: Sdu Publishers. Wheatly Price, S. (2001), ‘The unemployment experience of male immigrants in the English labour market’, Applied Economics, 33(2), 201–15. Williamson, O.E. (1985), The Economic Institutions of Capitalism, New York: Free Press. Wilson, K.L. and A. Portes (1980), ‘Immigrant enclaves: an analysis of the labor market experiences of Cubans in Miami’, The American Journal of Sociology, 86(2), 295–319.

5

Understanding the diversity of immigrant entrepreneurial strategies Catarina Reis Oliveira

Introduction The desire to explain the distinct propensity of immigrant groups to invest in business activities in host cities remains a challenge to researchers around the world. Up to now, explanations of immigrant entrepreneurship fall into three categories: one that emphasizes immigrants’ characteristics and their main predisposing factors to succeed in businesses (Portes and Zhou, 1999); a second that points out the importance of community networks and ethnic resources to engage entrepreneurial activities (Light and Gold, 2000; Portes and Manning, 1986); and a third that highlights how the labour market and the institutional and regulatory framework of the host society can restrain or encourage immigrants’ entrepreneurial success (Ward and Jenkins, 1984; Aldrich and Waldinger, 1990, Jones et al., 2000; Kloosterman, 2000; Barrett et al., 2001). Previous research on immigrant entrepreneurship gave monocausal explanations readily isolating the importance of gathering either family or ethnic resources. Waldinger, Aldrich and Ward (1990) were probably the first to underline the need for an integrative research into ethnic entrepreneurial strategies, concerning the role of group characteristics and the opportunity structure. Later on, Kloosterman and Rath (2001) in a critical overview of research on immigrant entrepreneurship proposed a complementary theoretical model based on the ‘mixed embeddedness’ hypothesis. These authors stress the importance of an interactive relation between the culture and social embeddedness of immigrants within the co-ethnic group (usually addressed by the majority of researchers in the field) and the economic and institutional embeddedness in host contexts (Kloosterman et al., 1999; Rath, 2000; Kloosterman and Rath, 2001; Rath, 2002). A consensual idea pervades these researches: immigrants adapt to the resources that are available in the environments in which they are embedded, which vary across countries, cities and over time. In this chapter I assess the relevance of those conceptual approaches to explain immigrants’ entrepreneurial strategies. I argue that, while Waldinger and his associates (1990) give a more inclusive explanation of immigrants’ entrepreneurship, they do not take into account the fact that, owing to the interaction of the opportunity structures and group characteristics, a variety of strategies emerge beyond the ethnic ones, even in the same host country and in the same period of time. As will be stressed in this chapter, immigrants’ cultural boundaries do not necessarily constitute opportunities or advantages to entrepreneurship. In some cases, immigrants tend to rely to a much greater extent on personal resources when they want to have a business, particularly in cases where their social ties channelled them into unskilled jobs in the host labour market. 61

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As will be shown in this chapter, what defines an immigrant entrepreneurial strategy is not only his or her ethnic background but the degree of resources and opportunities that are mobilized in the start-up process. According to this, immigrants’ entrepreneurial strategies are not unalike just because of individuals’ different cultural and ethnic references, but mostly because of their options and unequal opportunities of access. In other words, immigrants with different ethnic structures and cultural boundaries can in fact define similar entrepreneurial strategies in host contexts. Moreover, it is even possible to identify immigrants with similar strategies to those of natives. This chapter presents three case studies which show both the complexity and the diversity of the interaction between personal resources, social networks and structural opportunities. It starts with a more elaborated explanation of immigrants’ entrepreneurial strategies theory reaching out to a heuristic model. This entails, first, a more wide-ranging explanation of immigrant entrepreneurship. Second, it will explore the too-often-neglected personal resources component. Third, it intends to highlight the diversity of immigrant strategies. Finally, I provide an assessment test of the heuristic model through an analysis of data from a survey of 704 entrepreneurs of Chinese, Indian and Cape Verdean origin residing in Portugal.1 Even within this sample, with only three different groups, there is a surprisingly wide variety of entrepreneurial strategies, ranging from individuals desperately struggling to survive with small personal savings, to highly successful businesses benefiting from strong social networks with important entrepreneurial resources. Conceptual approaches on immigrant entrepreneurship: literature review Earlier research on immigrant entrepreneurship tended to explain foreigners’ high motivation to create businesses by a specific cultural inheritance.2 In a Weberian logic, specific values were seen as congenial with starting entrepreneurial activities. Those were mainly monocausal explanations readily isolating the importance of gathering either family or ethnic resources.3 The emphasis on these resources and the role of social networks were particularly present in the theories about ethnic enclaves (Wilson and Portes, 1980; Portes and Manning, 1986) and middleman minorities (Bonacich, 1973). However, analyses based purely on cultural attributes proved to be dangerous and responsible for the stereotyping of certain immigrant groups (Chan and Cheung, 1985: 145). Differences in entrepreneurial rates of identical ethnic groups in diverse countries and cities confirm the necessity of finding other explanatory variables.4 To counterbalance the previous lack of economic environment analysis, Waldinger, Aldrich and Ward (1990) developed an interactive model, arguing that group characteristics should be considered in their interaction with an opportunity structure. In so doing, the authors opted to explain immigrant entrepreneurship within the demand–supply relation that is what the customers want to buy and what immigrants can provide. They include the market conditions within the opportunity structures, characterizing the relation between entrepreneurs, consumers (from an open or ethnic market) and competitors (native, co-ethnic or from another immigrant group). To explain the supply side, the authors included the predisposing factors that immigrants demonstrate towards entrepreneurship and resources mobilization in ethnic networks. The authors argue that ethnic strategies emerge in the interaction of opportunity structures and group characteristics. Accordingly, they believe that ‘The strategies adopted by the various ethnic groups in

Understanding the diversity of immigrant entrepreneurial strategies 63 capitalistic societies around the world are remarkably similar’ (Aldrich and Waldinger, 1990: 131). Although the interactive model provides an important contribution to the literature, namely because it was the first inclusive explanation of immigrants’ entrepreneurship opening the grounds for both theoretical discussion and empirical investigation, it proved to have certain limitations. As Rath (2000: 7) points out, Waldinger and his associates assume that immigrants define naturally ethnic entrepreneurial strategies just because they have a certain ethnicity or identify themselves with a group with ethnic cultural traditions. However, this being the case, how can business initiatives among immigrants that belong to groups with no prior history of entrepreneurship be explained?5 Following the interactive model, would this mean that their different economic behaviour is a consequence of not sharing a cultural identity with their co-ethnic group? Empirical research has shown that even immigrants embedded in their ethnic group can have a different economic integration, not reproducing their group options in the host society (Oliveira, 2004). And, as I will stress further, in those cases, entrepreneurial initiatives prove to be much more a result of human capital and individual characteristics than a product of ethnic resources. Owing to the lack of analysis regarding individuals’ resources, some important questions remain unanswered. For example, how can immigrants tied to an ethnic group with no past experience of entrepreneurship and not benefiting from any host encouragements still define a successful business? Against the Waldinger and associates’ hypothesis, immigrant entrepreneurs do not necessarily define ethnic strategies and can actually act as any other mainstream entrepreneur.6 Adding to that, other privileged connections and supports within non co-ethnics’ social networks can be mobilized. Consequently, not only may the various immigrant and ethnic groups in host societies around the world adopt a range of quite different strategies, one may also identify within the same city a rich multiplicity of immigrant entrepreneurial strategies. Light and Bhachu (1993) further suggest that the interactive model ignores the influence of the host economy on immigrant entrepreneurial initiatives. Furthermore, it fails to take into account the distinctiveness of, among other things, the banking system and the regulatory, institutional and policy frameworks and their role in either favouring or discouraging immigrant entrepreneurial purposes. In this sense, the mixed embeddedness hypothesis from Kloosterman and Rath (2001) provides a more wide-ranging explanation of immigrants’ entrepreneurship. As the authors suggest, immigrant entrepreneurship is a much more complex field than the analyses of demand and supply sides. They stress that previous research did not consider that opportunities on the demand side have to be accessible for the aspiring entrepreneurs. Accordingly, the authors consider the role that obstacles, rules and regulations stemming from public or semi-public institutions may play. Kloosterman and Rath (2001) argue that immigrants’ entrepreneurial strategies must also be explained within labour and entrepreneurial markets’ policies, migration laws, social benefits rights and the banking system. Even though the authors recognize that immigrants’ embeddedness in the cultural, social, economic and political spheres is fairly complex and can be relatively diverse, they do not take into account that immigrants knit, in their own way, the opportunities and resources that they access in order to define entrepreneurial strategies, and they do not necessarily mix all spheres in which they are embedded.

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There is also a more fundamental obstacle that explains the notable diversity of immigrants’ entrepreneurship among different groups and individuals: not all immigrants have access to the same resources and opportunities to define an entrepreneurial activity. Therefore, defining an entrepreneurial project is a creative process that can include different economic strategies, depending on the combination chosen of the resources and opportunities gathered. In other words, in the definition of an entrepreneurial project, immigrants do not necessarily bring together all spheres of their embeddedness (cultural, social, economic and political) but only those that give them the possibility to do so. There are at least three reasons for this shortcoming. First, opportunities available in open market and institutional encouragements7 can be quite appealing and contribute to the decline in the dependence on the resources controlled by ethnic institutions.8 As a consequence, there are cases where cultural embeddedness becomes less relevant for the immigrants’ economic integration. Second, while setting up a business, immigrants can also ignore structural opportunities and just follow what other co-ethnic entrepreneurs did with success. As soon as an ethnic entrepreneurship structure is settled, immigrants with similar aspirations (not being innovative at all) can just follow the patterns of others.9 In other words, although immigrants are embedded in the socio-economic environment of the host society (if no constraints are set on their investment), they can demonstrate lack of knowledge of the market demand for certain goods and services and just follow ethnic networks and their economic options.10 Third, and perhaps less considered in the general literature on immigrant entrepreneurship, is the case of immigrants that, even without ethnic resources and with no encouragements from the host context, can still set up a successful business. There is evidence that in those cases immigrants rely much more on personal resources (Oliveira, 2004). So, beyond a communal and a contextual reading of entrepreneurial strategies, it is also fundamental to consider the individual projects. Admitting this fact is the same as accepting that immigrants and natives may develop similar entrepreneurial strategies. With these contributions in mind, the framework for understanding immigrants’ entrepreneurial strategies in host environments is built on three changeable components: personal resources, group opportunities and host context structural opportunities. A heuristic model of immigrant entrepreneurial strategies In this section, I intend to define a heuristic model in which I will summarize the most relevant explanatory elements (and their relationships) to immigrant entrepreneurial strategies in host environments. I use the term ‘heuristic model’ because the variety of immigrant strategies is still being discovered. This model can highlight several ideal-types of entrepreneurial strategies opening the trail of explanations, but it is not intended to be exhaustive or static. The model follows other attempts to show that there are no random factors in immigrant entrepreneurship. Moreover, it intends to reflect the resourceful dealings that immigrants establish within their personal resources, social networks and structural opportunities (encountered in the host society) with the aim of defining an entrepreneurial tactic. Because opportunities are not necessarily clear or transparent11 to all actors, and because they are not available to all individuals or ethnic groups,12 immigrants’ entrepreneurial strategies are a result of negotiation, adaptation, imagination (towards innovative dynamics) and even reproduction (of entrepreneurial patterns already defined by others).

Understanding the diversity of immigrant entrepreneurial strategies 65 In other words, immigrants react to the opportunities and constraints with which they are confronted during the process of business creation. Thus immigrant entrepreneurs are not passive actors; neither have they a strict rational behaviour in their economic options. As Etzioni (1988) discussed, being rational does not imply cutting themselves off from all privileged contacts or social capital guaranteed through the community. In fact, the use of those resources and privileged relations can be part of a rational economic behaviour, put into practice in entrepreneurial strategies. Following on from this, this chapter suggests that immigrant entrepreneurial strategies emerge from an inventive and lively interaction of three components: entrepreneur personal characteristics, group opportunities and the structural opportunities of the host society. Thus there are three main entrepreneurship agencies: (a) the host society (labour market, policy and regulatory frameworks), (b) group opportunities, that is the co-ethnic group or other social networks in which immigrants are embedded, and (c) the immigrant personal resources (see Figure 5.1). The first entrepreneurship agency emphasizes the entrepreneurial opportunities that immigrants found either in the labour market or in the political and regulatory frameworks. In other words, it considers that, to do well in business, immigrants have to find vacancies in the entrepreneurial market and no constraints in the host country regulatory regime. The second (the group opportunities) considers the role of social networks in the immigrants’ economic options. As noted above, explanations of immigrant entrepreneurship had extensively considered the importance of ethnic resources. Recently, Light and Gold (2000) have even reorganized the theories produced around the connections between entrepreneurship and immigrant communities. The authors highlight the importance of ethnic and class resources in the development of businesses. Even though it is true that co-ethnic communities play a significant part in immigrant entrepreneurial strategies, it is possible to identify other relevant business resources’ suppliers within the social networks. As is highlighted below, family ties and privileged contacts within non co-ethnic groups can also motivate immigrants towards entrepreneurship. Finally, and perhaps less explored, is the consideration of the role of personal resources in entrepreneurial strategies. Those resources include predisposing factors such as savings, education, entrepreneurial and work experience, age, legal status in the host country, and aspiration levels. It is important to point out that the absence of opportunities in either one or two of these agencies does not necessarily mean that immigrants will not develop a business strategy, mainly because they can rely on only one strong source of entrepreneurial resources. That becomes particularly true in the cases of immigrants that belong to a group with no prior history of entrepreneurship and who are able to create a successful business. As a consequence, the flows between these three agencies become the vibrant core of the explanation as to why certain immigrants develop entrepreneurial activities and others are not able to do so. Before going into the details of the specific types of entrepreneurial strategies, it should be noted that, in general, although all business projects are defined within the interaction of those three agencies, a strategy reflects the sphere where the immigrant gathers more entrepreneurial opportunities and resources to succeed. Accordingly, ideal-types of entrepreneurial strategies are constrained in the access to personal resources, group opportunities or host society opportunities (or a bit of all defining mixed strategies).

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Handbook of research on ethnic minority entrepreneurship – – – – – – –

Education Age Business and work experience Personal savings Language knowledge Migratory experience Legal status in host context and citizenship

– Immigrant community and its position in the labour market – Ethnic resources: financial capital, workers, consumers, suppliers, associations, solidarity networks – Social networks: family, community (namely ethnic), friends, others (which include natives) – Family resources

(c) Personal Resources

(b) Group Opportunities

Social Strategies Ethnic Strategies

Personal Strategies

Family Strategies

Mixed Strategies

Immigrants’ Entrepreneurial Strategies

Mixed Strategies

Contextual Strategies

(a) Host Society Opportunities

Labour and Entrepreneurial Market

– Consumers: diversification of tastes (e.g. entrepreneurial opportunities within ethnic tourism) – Competitors

Figure 5.1

Regulatory and Political Context

– Immigration policy; special programmes towards immigrant entrepreneurs – Access to bank loans – Formal and informal economies – General rules (taxes, safe, health, etc.)

The main entrepreneurship agencies

In other words, depending on the predominant source of opportunities and resources it is possible to identify theoretically: (1) social strategies, mainly dependent on entrepreneurial resources gathered through social networks (which include the ethnic strategies and family strategies dependent on ethnic or family resources and goals), (2) contextual strategies, defined within the host society opportunity structure, (3) personal strategies based on

Understanding the diversity of immigrant entrepreneurial strategies 67 individual resources; and, finally, (4) mixed strategies, whenever it is not possible to identify a main source of the entrepreneurial motive or when the sources are equally distributed. Furthermore, in this dynamic process, immigrants can change the course of entrepreneurial tactics, depending on the resources and opportunities gathered over time and in host contexts (both countries and cities), since, as the human capital, host contexts are in permanent flux.13 Peters (2002) further suggests that it is also important to deal with the development of immigrants’ entrepreneurship over time. In other words, it is important to include the impact of generations on the immigrants’ entrepreneurial process (Peters, 2002: 39). Having that in mind, it is important to consider that entrepreneurial strategies are not constant in time and can change their nature: starting as personal strategies and then turning into family strategies through heritage processes. Hence it is suggested that the foundation of an entrepreneurial strategy is not only a creative exercise but also an unfinished process. Entrepreneurial Strategies’ diversity: evidence from immigrant entrepreneurs in Portugal14 This section makes an attempt to replicate and assess the main arguments proposed in the heuristic model and apply it to Portugal. The selected comparison groups are Cape Verdean, Chinese and Indian immigrants. I present both a cross-variable analysis and a correspondence analysis model based on a survey of 704 entrepreneurs conducted in 2002 in the Lisbon Metropolitan Area. Entrepreneurs from each group were selected on a random basis from the list enumerated through immigrants’ associations. Several entrepreneurs were also included in the survey through a snowball process conducted in neighbourhoods with a high concentration of immigrant businesses. Because those populations do not have similar propensities towards entrepreneurship in Portugal, the samples of the ethnic groups have a different number of entrepreneurs: 142 Cape Verdeans, 309 Chinese and 253 Indians. Before going into the specific types of entrepreneurial strategies highlighted in these three case studies I start with a characterization of Portugal as a host country to immigrant entrepreneurs. In so doing, I intend to include the immigrant entrepreneurial strategies within the existing economic, political and regulatory environments. Entrepreneurship among immigrants in Portugal Over the last 30 years, immigrant entrepreneurs have spread across Portugal.15 Revitalizing commercial streets with new products, defining new marketing tactics and opening new economic links with other countries, these entrepreneurs were responsible for the reconfiguration of immigrants’ economic integration in the country. Moreover, following the trend of other receiving countries, immigrants became more likely to be self-employed than Portuguese natives (Oliveira, 2004). Particularly taking into account the share of entrepreneurs in the correspondent labour force, immigrants have a greater propensity to become an employer than Portuguese natives have to be workers on their own account (see Figure 5.2). However not all foreigners prove to have the same propensity towards entrepreneurship (see Table 5.1). Africans are the group with the lowest rates of entrepreneurship, as Europeans (particularly from European Union), Americans and Asians have the highest rates. In view of this immigrants do not have homogenous conditions for entrepreneurship in Portugal.

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Handbook of research on ethnic minority entrepreneurship 30 25 20

% 15

Employers Persons working on own account

10 5 0 1996

1997 1998 Foreigners

1996

1997 1998 Portuguese

Source: Estatísticas Demográficas do INE e Relatórios Estatísticos do SEF.

Figure 5.2 Share of employers and persons working on their own account in the corresponding labour force, 1996, 1997, 1998 Even if it is true that cultural factors can influence the different economic performance of foreigner groups in Portugal, I will identify the role of contextual factors. Particular opportunities in the Portuguese economy and structural changes in the regulatory regime, in specific periods of time, had a crucial influence in the present incorporation of immigrants in the labour market and in the way foreigner entrepreneurs have been operating. Immigrant entrepreneurship in Portugal has been strongly oriented towards traditional segments (mainly retail, restaurants and construction). It is also within these sectors that work experience is accumulated in the Portuguese labour market.16 This is a result of the opportunity structure defined in recent years. While Africans, and particularly Cape Verdean immigrants, came to Portugal in the 1960s as part of a governmental labour force recruitment programme aiming to meet shortages in specific segments of the market sector (especially in the construction sector), Asian and South American immigrants arrived in the mid-1980s, when Portugal was starting to be recognized as an immigration country and was about to become part of the European Union. During this last period, there was an enlargement of the recruitment areas that led to the diversification of the socio-professional composition of the foreign populations in Portugal. Hence, in recent years, the Portuguese labour market started to be differentiated ‘ethnically’ (Baganha et al., 2000). The African labour force in Portugal is concentrated in construction and industrial activities (79 per cent in 1998) as wage earners and salaried employees (96 per cent in the same year), as Europeans and North Americans have been incorporated in highly qualified professions (41 per cent and 49 per cent, respectively) with an elevated share of entrepreneurs (37 per cent and 29 per cent, respectively). Moreover Asian immigrants also stand out in self-employment activities (26 per cent in

Understanding the diversity of immigrant entrepreneurial strategies 69 Table 5.1 Entrepreneurs in Portugal according to the region of origin and their share in the corresponding labour force in 1990 and 1998 Number of entrepreneurs

Share of entrepreneurs in the labour force (%)

Region of origin

1990

1998

1990

1998

Rate of change from 1990 to 1998 (%)

Europe Central and South America Africa North America Asia Rest

8 506 2 418

10 122 2 763

50.4 39.0

36.9 25.6

16.0 12.5

1 597 1 507 654 118

1 867 1 382 879 117

6.9 49.8 30.2

4.3 38.9 26.1

14.5
9.0 25.6
0.9

14 800

17 130

28.6

19.3

13.6

Total of foreign entrepreneurs

Source: Estatísticas Demográficas, INE.

1998), having the highest growth of entrepreneurial rates in the past decade (see Table 5.1). This last group has been linked particularly to retail and catering sectors (Malheiros, 1996; Oliveira, 2004). The existence of relatively low barriers to setting up a business in these traditional sectors (retail, catering and construction and so on), also explain the ‘ethnic’ differentiation of the Portuguese labour market. Moreover, as Rath (2002: 13) argues, the sector in which immigrants invest is also a consequence of the resources that they can collect: more or less capital (financial and social) and more or less labour, define different types of economic possibilities. Engelen (2001: 206) further suggests that investments in different goods markets generate different rules, needs, consumers, demands, suppliers and so on. Thus, because those activities do not need too much capital or specific skills, the investment becomes more flexible. Additionally the perceptions of racial discrimination in the access to the labour market also constitute an involuntary influence, either to become self-employed17 or to invest in specific segments of the opportunity structure. From the three case studies, Cape Verdean entrepreneurs prove to be more vulnerable with respect to discrimination in Portugal (see Table 5.2). As a consequence, the immigrants’ perceptions about their access to the labour market determine both the way they see the opportunity structure and their businesses options. Moreover, immigrants who lack community resources oriented towards entrepreneurship (the case of Cape Verdeans) become much more aware of constraints and barriers to entry into the labour market. However, the investments in sectors with low barriers bring high competition. In addition, the ‘ethnic’ differentiation identified in Portugal defines, in some cases, competition within the same ethnic group (see Table 5.3). It becomes clear that, depending on the sector of investment, the entrepreneur finds different competitors. The majority of Chinese invest in Chinese restaurants (68.3 per cent)

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Table 5.2 Entrepreneurs’ opinion about racial discrimination in the Portuguese labour market Origin of the entrepreneur Cape Verdean

Chinese

Indian

Total

Think that there is discrimination in the Portuguese labour market Think that there is no discrimination in the Portuguese labour market Think that there is discrimination but only in specific sectors of the Portuguese labour market Refuse to answer the question

N % N % N %

104 73.2 17 12.0 18 12.7

27 8.7 214 69.3 34 11.0

57 22.5 152 60.1 12 4.7

188 26.7 383 54.4 64 9.1

N %

3 2.1

34 11.0

32 12.6

69 9.8

Total

N %

142 100

309 100

253 100

704 100

Source: Oliveira (2003: 82).

Table 5.3

Competitors’ origin of the entrepreneurs questioned Origin of the entrepreneur

Competitors’ origin Do not have competitors Co-ethnic Portuguese (native) Other ethnic groups Co-ethnic and Portuguese (native) Co-ethnic and other ethnic groups Other ethnic groups and Portuguese (native) Undifferentiated Large shopping areas Total

Source: Oliveira (2003: 88).

Cape Verdean

Chinese

Indian

Total

N % N % N % N % N % N % N % N % N %

1 0.7 22 15.5 40 28.2 19 13.4 27 19.0 3 2.1 18 12.7 12 8.5 0 0.0

21 6.8 223 72.2 21 6.8 5 1.6 25 8.1 9 2.9 1 0.3 4 1.3 0 0.0

31 12.3 19 7.5 88 34.8 33 13.0 7 2.8 0 0.0 5 2.0 54 21.3 16 6.3

53 7.5 264 37.5 149 21.2 57 8.1 59 8.4 12 1.7 24 3.4 70 9.9 16 2.3

N %

142 100

309 100

253 100

704 100

Understanding the diversity of immigrant entrepreneurial strategies 71 so their main competitors are co-ethnic (72.2 per cent), different from Cape Verdeans who, because they are found in sectors such as construction (45.1 per cent) and retail (35.9 per cent), have Portuguese as competitors (28.2 per cent). The same happens with Indian entrepreneurs: because they gravitate to the retail sector (88.6 per cent), Portuguese natives are their most important competitors (34.8 per cent). Nevertheless, it should be pointed out that, because some immigrant entrepreneurs rely much more on ethnic resources to define their strategy, they have a larger number of coethnic competitors since they all share similar plans of social mobility.18 As I will present in more detail, this is the case of Chinese entrepreneurs in Portugal who mainly capitalize ethnic strategies. Furthermore, it should be pointed out that the immigrants with the lowest rates of entrepreneurship are also the group that is the largest foreigner recipient of unemployment benefits and ‘guaranteed minimum income’,19 according to Portuguese official statistics (mainly African and Eastern European citizens). In other words, immigrants that are benefiting more from resources made available by the Portuguese welfare state tend to have less entrepreneurial initiative. Accordingly, it should be discussed whether those resources are decreasing the entrepreneurial motivation of certain immigrant groups, mainly because, in case of exclusion from the Portuguese labour market, it becomes less risky to stay legally in the country through subsidies than by creating a business. Finally, there are also relevant characteristics from the Portuguese political and regulatory framework that had important impacts on immigrants’ propensity towards entrepreneurship. As Peixoto (2002) argues, the difficulties of controlling immigration flows to Portugal led to particular policies from the early 1990. In the past 15 years three regularization processes regarding illegal immigrants took place. However, those regularizations did not resolve only the problem of illegal immigrants residing in the country. As the data collected on immigrant entrepreneurs highlight, other illegal immigrants arrived from other European countries during these periods. While close to half of the Cape Verdeans entrepreneurs arrived to Portugal during the 1970s, nearly 80 per cent of the Indian entrepreneurs arrived in the mid-1980s and almost 70 per cent of the Chinese came during the 1990s (see Table 5.4). Additionally, whereas the majority of the entrepreneurs of Indian origin arrived in Portugal via Mozambique with Portuguese nationality,20 the Cape Verdeans and especially the Chinese used a tourist visa to make their way into the country. It is therefore not surprising that the majority of the Chinese questioned arrived in Portugal during the periods of extraordinary regularization21 (which took place in the 1990s) after other migration experiences.22 The different legal conditions (at the moment of arrival in Portugal, whether immigrants are residents, tourists or have citizenship) influence the initiation of entrepreneurial activity in Portugal. Collected data show that Indians, who arrived as citizens, started to become self-employed earlier than the other two groups. On average, the majority of Indians become entrepreneurs by the age of 25, while Cape Verdean started at about 30 years and Chinese 31 years of age. Portuguese nationality is perceived by immigrant entrepreneurs as the best legal condition to define an entrepreneurial strategy in Portugal since, among other things, it facilitates the access to bank loans. Having said this, it is not surprising that the majority of the entrepreneurs questioned intend to acquire Portuguese nationality in the near future

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Table 5.4

Year of arrival in Portugal according to entrepreneurs’ origins Origin of the entrepreneurs

Year of arrival in Portugal 1960s 1970s 1980s Since 1990 Born in Portugal Total

Cape Verdeans

Chinese

Indians

Total

N % N % N % N % N %

5 3.7 64 47.4 37 27.4 27 20.0 2 1.5

3 1.0 9 3.0 76 25.1 215 71.0 0 0.0

3 1.2 91 36.0 114 45.1 20 7.9 25 9.9

11 1.6 164 23.7 227 32.8 263 38.0 27 3.9

N %

135 100

303 100

253 100

692 100

Note: 13 entrepreneurs refused to answer this question (7 Cape Verdeans and 6 Chinese). Source: Oliveira (2003: 57).

(Oliveira, 2004). This fact also reflects the existence of barriers in the Portuguese regulatory and institutional environments for setting up businesses. Until 2001, immigrants that intended to set up a business needed to have an authorization of residence. To obtain this, some conditions were required, including proof of minimal income, the absence of a criminal record in the country and evidence of the legal status of the business. This last condition defines the need of the immigrant to resolve all bureaucratic proceedings of setting up a business before asking for residency in Portugal. However, because the authorization of residence should be granted in the country of origin, the immigrant had to come to Portugal in an earlier phase (with a temporary visa) to legalize his/her future entrepreneurial activity (Oliveira, 2004). Immigrants that were already residing in Portugal but with another legal condition could also require an authorization of residence if they worked as a wage earner or a salaried employee for a period of three years. The law approved in 2001 limits immigrants’ entrance according to the jobs availability in the labour market. Within this new legal framework temporary work stays were defined for the first time and the employment of illegal immigrants became subject to severe punishment. Even if this new law did not have a direct impact on immigrant entrepreneurs, it generated structural changes in the way entrepreneurs can operate. First, because entrepreneurs have now to declare the need for wage earners to the Employment Institute of the Portuguese Government (Instituto de Emprego e Formação Profissional), it became more difficult to contract (legally) co-ethnic workers. Consequently, since co-ethnic labour was one of the relevant resources of entrepreneurial strategies, this change may have important impacts on immigrants’ tactics. Second, with the new law and the reinforcement of the legal notion of temporary work visas, immigrants now apply for a ‘permit to stay’. To obtain this, they have to possess,

Understanding the diversity of immigrant entrepreneurial strategies 73 among other requisites, a work contract. The immigrants that get this permit only become able to work (legally) as wage earners or salaried employees. As a consequence, until the end of 2003, there were 183 655 legal immigrants that were not allowed to develop an entrepreneurial activity in Portugal but only work as wage earners. Furthermore, those immigrants can only apply for an authorization of residence and legalize a business after a period of five years working as a wage earner (Oliveira, 2004). After this brief characterization of the opportunity structure and the regulatory and political framework in Portugal, I will now analyse in more detail the diversity of immigrants’ entrepreneurial strategies. The option to compare Cape Verdean, Indian and Chinese entrepreneurs aims to assess different tactics of mobilizing resources in the definition of entrepreneurial strategies in a similar host society. The correspondence analysis model 23 The correspondence analysis model provides a multi-variate reading of immigrant entrepreneurial strategies, by examining the contribution of personal resources, ethnic opportunities (or opportunities gathered in other social networks) and contextual attributes (see Figure 5.2). The model is two-dimensional and explains 76.3 per cent of the total inertia (the first factor explains 54.2 per cent and the second 22.1 per cent).24 The contingency tables revealed a positive association between personal resources and Cape Verdean entrepreneurs, ethnic resources and Chinese entrepreneurs and family resources and Indian entrepreneurs. In other words, each population mobilizes different resources in the definition of the entrepreneurial strategy. Because Chinese have more difficulties in their integration into Portuguese society (they are not familiar with the laws and do not speak the language) they associate their entrepreneurial strategy with ethnic resources (for example, co-ethnic workers, loans from the community, co-ethnic suppliers). Indians and Cape Verdeans, although with diverse strategies, are not so confined within their communities. Both groups claim to have a high proficiency in Portuguese language and knowledge of Portuguese laws which might mean a higher integration into the Portuguese society. The correspondence analysis model reveals the complex nature of generalizations concerning immigrant entrepreneurial strategies, as it is greatly influenced not only by social networks (namely ethnic) but also by personal resources and the specific spatial and temporary contexts. (See Figure 5.3.) Ethnic strategies The ‘ideal type’ of ethnic strategy mobilizes essentially opportunities and resources intrinsic to a certain ethnic population. It is based on cultural, financial, human, political and social resources acquired through networks of solidarity and reciprocity inherent to an ethnic group. The Chinese entrepreneurs constitute the group who best illustrate this strategy in Portugal. Some researchers showed that ethnic resources might be fundamental to the development of an entrepreneurial initiative through the privileged access to capital,25 labour force, suppliers and so on (Waldinger et al., 1990; Light and Gold, 2000). On the other hand, the ethnic population itself might constitute a consumer market which encourages the growth of an entrepreneurial class (Chan and Cheung, 1985: 149; Portes, 1999: 58). In either case, the majority of entrepreneurs of immigrant origin studied here do not target a market of

74

–0.8

Family Strategies

Indians

Other work experiences Non co-ethnic labour

Experience in retail Business in retail 0.2

0.4 Never work as wage earner

Business inherited

0.6

Do not intend to return to the country of origin

Ethnic Strategies

–0.6

Correspondence analysis graph

Business in civil construction

Individual Strategies

Axis 1

–1

Have been Invest in the country of origin subjected to discrimination in Work experience in civil construction –0.8 the labour market

Cape Verdeans

Intends to return to the country of origin –0.4

Worked for Portuguese employers

Co-ethnic ties helped to find the first job in Portugal

Argues that immigrants are discriminated in the labour market

citizens

Immigration for economic reasons

Argues that immigrants Financial support from relatives are not discriminated in Not important young generation to continue the business the labour market Familiar with Portuguese laws Not familiar with Portuguese language Speak Portuguese language Did not have financial Privileged contacts with co-ethnic Chinese Business in catering support from friends 0 –0.6 –0.4 0 entrepreneurs 0.2 0.4 0.6 0.8 –0.2 Financial support by friends Work experience in catering Arrived in the 1980s Very important that young Co-ethnic and family Work experience with Personal savings Not familiar with generation continue the ties helped to find the co-ethnic employer Privileged contacts with Co-ethnic Did not have financial Portuguese laws business first job in Portugal Portuguese entrepreneurs labour support from relatives –0.2

Immigration caused by political instability in the country of origin

Figure 5.3

Axis 2

Understanding the diversity of immigrant entrepreneurial strategies 75 co-ethnic consumers but rather Portuguese clients (especially in the case of the Chinese26 and of the Indians). This tendency might be related to the investment sector of these entrepreneurs, but it can also be a temporary tendency given the recent settlement and small size of the Chinese population in Portugal: 11 per cent of the entrepreneurs of Chinese origin even complained about the lack of an ethnic labour force (see Oliveira, 2002). Among the ethnic resources, the availability of financial capital might have a vital function in the development of an entrepreneurial activity. A number of ethnic groups have developed financial practices with the goal of responding to the necessities of the community (Light and Gold, 2000: 116). Among the entrepreneurs questioned, 50.4 per cent created their business with the support of their families and 24.7 per cent had also the help of friends. In this way, and as suggested by other studies,27 ethnic entrepreneurs count on a number of capital sources apart from the official institutions. This shows the importance of the ethnic community. However, the sources of capital vary according to the origin of the entrepreneurs. While 44 per cent of the Chinese questioned identified the availability of financial support provided by friends as a complementary source of capital for the creation of a business, in the case of the Cape Verdeans the availability of this source is not very significant (9.2 per cent). Family economic support is also particularly important for the Chinese (66.7 per cent) and reduced in the case of the entrepreneurs of Cape Verdean origin (only 13.4 per cent). Hence, whereas Chinese entrepreneurs rely on family and ethnic resources, Cape Verdeans count on their own savings and personal resources to set up a business (78.9 per cent). This determines a different set of entrepreneurial investments: as the first group opens stores and restaurants, Cape Verdeans define small businesses as manpower with no need of infrastructures (such as recruiters of labour to the civil construction sector). The loans acquired through the ethnic group or family are normally tax-free, generating a sense of reciprocity in the community. Honour is a fundamental value for any Chinese to survive in an ‘adverse’ society. Failing to fulfil one’s duties towards the community may lead to exclusion from that community, and this can be economically fatal (Oliveira, 2002). Ethnic labour has also a competitive advantage for these businesses. As noted by researchers in other countries, businesses of immigrant origin employ predominantly coethnic workers (Chan and Cheung, 1985: 149). The networks of solidarity among immigrant populations allow the creation of an ethnic labour force which accepts labour conditions unacceptable to others: lower payment and longer hours (Waldinger et al., 1990: 142). Some employers make decisions on labour force recruitment based on ethnic preferences. The social networks are thus an effective source to locate potential employees.28 However, this study showed that the three populations of immigrant origin in Portugal have distinct options for hiring workers (see Table 5.5): while the Chinese had a strong preference for co-ethnic workers (52.4 per cent),29 the Indians prefer to hire non-coethnics. The majority of the Chinese questioned justified their option with reasons of trust and convenience when communicating in the same language. The Indians prefer not to hire co-ethnics because they quickly learn how a business works and rapidly open their own entrepreneurial activity, becoming competitors. These highly distinct strategies illustrate two different ideas regarding the opportunities commonly associated with co-ethnic workers. In the Chinese case, the entrepreneurs invest in employees with whom they established relationships of trust and solidarity, sustaining

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Table 5.5

Preferences on hiring workers according to group of immigrant origin Origin of the entrepreneurs

Preferences on hiring workers

Cape Verdeans

Chinese

Indians

Total

Hires preferentially co-ethnic workers Hires preferentially non co-ethnic workers Does not answer the question

N % N % N %

50 35.2 57 40.1 35 24.6

162 52.4 70 22.7 77 24.9

28 11.1 178 70.4 47 18.6

240 34.1 305 43.3 159 22.6

Total

N %

142 100

309 100

253 100

704 100

Source: Oliveira (2003: 98).

a circle of mutual reciprocity (as suggested by Portes, 1999, and Light and Gold, 2000). Mostly, employers hire co-ethnics who even speak the same dialect. This encourages a paternalist relationship between the workers and the employer. The instability of the Chinese worker, who most of the time does not mind working longer hours than the native Portuguese, is associated, in many cases, with their illegal status (Oliveira, 2003). Indians, in another perspective, highlight how the reciprocity requirement in social networks may generate conflicts within the co-ethnic community. And, as Light and Gold (2000: 127) also suggest, the inability to control competition can bring the end of favourable relations between co-ethnic employers and workers. Nevertheless, social networks are also used to find employment. That proves to be the case of the majority of entrepreneurs questioned: almost 55 per cent obtained their first job in Portugal through co-ethnic contacts (see Table 5.6). It is interesting to note that the ‘ethnic’ differentiation of the Portuguese labour market described above has also influenced the investments of different immigrant groups in Portugal, as those entrepreneurs have been investing in sectors where they accumulated work experience (Oliveira, 2004). As Waldinger and associates (1990: 133) argue, social networks are also important sources of information and advice on entrepreneurial strategies. As a consequence it is not surprising that the majority of the entrepreneurs questioned (55.8 per cent) have coethnic contacts within the same business sector. Once again, Chinese entrepreneurs stand out in that respect, having the highest percentage (71.8 per cent). The majority of Chinese entrepreneurs also meet their suppliers within their co-ethnic network (70.6 per cent). This illustrates once more the importance of social networks in their ethnic entrepreneurial strategies. Family strategies Family strategies are characterized by the resort to the opportunities intrinsic to a familial network. Although these entrepreneurial strategies can be personified in a single individual they are the result of a family project. They are inherited and maintained through the financial and social resources of the family.

Understanding the diversity of immigrant entrepreneurial strategies 77 Table 5.6 Strategy adopted to find the first job in Portugal according to the origin of the entrepreneur Origin of the entrepreneur

Contacting friends, relatives or other co-ethnics Contacting co-ethnic employees Contacting Portuguese (native) friends Through official announcements of available jobs As soon as arrive in Portugal invested as an entrepreneur Total

Cape Verdean

Chinese

Indian

Total

N % N % N % N % N %

88 62.0 15 10.6 12 8.5 19 13.4 8 5.6

216 69.9 10 3.2 2 0.6 2 0.6 79 25.6

82 32.4 7 2.8 8 3.2 17 6.7 139 54.9

386 54.8 32 4.5 22 3.1 38 5.4 226 32.1

N %

142 100

309 100

253 100

704 100

Source: Oliveira (2003: 101).

It is particularly interesting to inquire to what extent the family transmission of social and economic capital can become a decisive factor for entrepreneurial aptitude and predisposition: that is, how the family determine individual trajectories more or less directly translated into entrepreneurial trajectories.30 Thus, similarly to the Portuguese entrepreneurial structure, there is a proliferation of family enterprises among immigrant entrepreneurs, but only a very small number of companies are acquired by inheritance, donation or marriage (3.8 per cent).31 The entrepreneurs with an Indian background are the ones who have the least experience as employees. In fact, these are the entrepreneurs who more promptly create their own job, which substantiates the framing of the family project. It should be kept in mind that a great many (54.9 per cent) of these entrepreneurs developed their entrepreneurial activity or helped in a family business immediately after arriving in Portugal.32 In this way, and taking into account their acquisition of enterprises by inheritance, the transference to Portugal of family entrepreneurial strategies developed in Mozambique was verified (in some cases).33 On the other hand, Indian entrepreneurs are linked to activities in the commercial sector even if their professional experience is not limited to this sector (as shown by Figure 5.2). This shows that, in some cases, the entrepreneurial strategy is not a result of the individual’s entrepreneurial experience but from his/her family. Furthermore, similar to the Portuguese entrepreneurial structure of small size, family work has a preponderant role.34 Among the immigrant entrepreneurs questioned, only 27.4 per cent did not use family workers. When compared to the Chinese and Indians, the Cape Verdean entrepreneurs have the lowest number of family workers. Among those who have family workers, 13.1 per cent do not provide their employees with any sort of remuneration for their services. The Chinese hold the highest number of

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non-remunerated family workers: 16.2 per cent against 10.3 per cent of the Indian entrepreneurs and 11.3 per cent of the Cape Verdeans. However, it is important to mention that, in the Indian case, the entrepreneurial strategy is strongly based on family workers:35 55.6 per cent of those entrepreneurs did not have Portuguese workers and a mere 7.9 per cent had workers of other ethnic backgrounds (non co-ethnics and non-Portuguese natives). The characteristics of this strategy are constituted on the basis of family participation and family descent. The entrepreneurs of Indian origin also hold the highest number of family members in the same business sector (74.3 per cent). Moreover, they are the group who benefit the most from family financial support when developing the entrepreneurial strategy (51.8 per cent). Personal strategies As argued by Chan and Cheung, the proliferation of immigrants’ businesses must take into account not only the influence of the group and its resources (such as solidarity, cohesion, mutual trust and communication skills) but also the individual competencies or the personal resources of the entrepreneur (1985: 144). Indicators such as social class, qualifications, professional experience, age and migration experience are able to provide a concrete explanation of the way personal resources affect immigrants’ economic options. According to the proposed typology, individual strategies are mainly defined within the personal resources of the entrepreneur. Savings (as the main source of financial investment) and professional experience have a central role in those strategies. Professional experience provides the necessary knowledge to invest with security in a business activity.36 Thus it is not surprising that the groups questioned develop entrepreneurial initiatives in the same field as that of their previous economic activity. An association between the origins of immigrants and the field of activity was identified for the three case studies under consideration: Cape Verdean entrepreneurs had work experience in the construction sector, the Chinese had work experience in the catering sector, and the Indians in the retail sector. In either case, only 24.3 per cent of the individuals questioned said that the reason for developing an entrepreneurial activity was a good knowledge of a particular business sector. While Cape Verdeans refer mainly to individual reasons for developing entrepreneurial strategies, such as ‘I wanted to be independent’ (52.8 per cent), ‘I knew the business sector well’ (35.9 per cent) and ‘I wanted to have a better life’ (23.9 per cent), the Chinese and the Indians stated the importance of individual reasons but gave special emphasis to family requests and demands (25.2 per cent and 34 per cent respectively). Cape Verdean entrepreneurs appear to illustrate particularly well the individual strategies (as can be seen in Figure 5.2). The development of their activities is based mostly on their personal savings rather than on financial help from family, friends or other ethnic acquaintances. On the other hand they are associated with the establishment of their own business. Contrary to the other two groups, Cape Verdeans show the highest interest in returning to the country of origin (73.9 per cent). Hence, as argued by Bonacich (1973), perhaps it is this intention to return to the country of origin that generates the high predisposition for entrepreneurial activities of those particular immigrants, since they belong to a group with no history of entrepreneurship in Portugal. As shown here, the group of immigrant

Understanding the diversity of immigrant entrepreneurial strategies 79 origin with greatest predisposition to return to the country of origin is the same one that associates less its economic integration (in Portugal) with entrepreneurial strategies. Furthermore, they are also the entrepreneurs who invest the most in the country of origin. Among the 47.2 per cent Cape Verdean entrepreneurs investing in Cape Verde, 67.2 per cent buy property and housing and 17.9 per cent invest in the creation of new enterprises and businesses. These entrepreneurs also have privileged contacts with Portuguese (non-co-ethnics) in the same area of business. Additionally, they had come to Portugal through recruitment by a Portuguese employer. Nonetheless, they are also associated with the acquisition of a first job through a direct contact with a co-ethnic employer. Finally, and in contrast to entrepreneurs of Indian and Chinese origin, Cape Verdean entrepreneurs consider the continuation of their entrepreneurial strategies by the new generations more important. This attitude appears to be the consequence of the effort put into gaining their present position (as an entrepreneur), which is not such a common position among their group of origin. In this sense, will these individual strategies be transformed into family strategies in the future? The answer is still unknown. Conclusions The main contribution of this chapter was to propose a heuristic model on immigrant entrepreneurial strategies, which mainly takes into account the diversity of immigrant tactics and the limits of generalizations concerning immigrant strategies. Empirical comparative research conducted in Portugal served to frame the theoretical definitions more precisely and provide a stepping-stone for highlighting such a diversified and complex field. Furthermore, this chapter reports an attempt to replicate and evaluate that heuristic model by using the results of a survey of Chinese, Indian and Cape Verdean entrepreneurs conducted in the Lisbon Metropolitan Area. Using the theoretical framework presented I have found three different entrepreneurial strategies: ethnic strategies, family strategies and individual strategies. In each one the entrepreneurs mobilized preferentially different resources. As I stressed, the characteristics of the Portuguese economy and regulatory regime explain why only those strategies have been developed. Accordingly, research on different host contexts may assess the existence of other sorts of immigrant entrepreneurial strategies. The results of the study, which involved a correspondence analysis based on the survey, can be summarized in the following generalizations: (1) immigrant entrepreneurial strategies are quite diverse, depending on the resources and opportunities that they were able to gather in the spheres in which they are embedded; (2) Chinese entrepreneurial strategies were mainly dependent on ethnic resources, namely on financial capital, labour and suppliers. Ethnic ties prove also to be crucial in the accumulation of business know-how; (3) Indians defined their entrepreneurial options within family resources, which prove to be another important social network; and (4) Cape Verdeans, because of their community’s poor conditions in the Portuguese labour market and weak ties to entrepreneurship, defined their strategy within personal savings. Nevertheless, the experience acquired as employees (namely in the construction sector) gave them the necessary expertise to succeed in their businesses. Furthermore, dissimilarities identified in the three populations also suggest that not all spheres where immigrants might be embedded are utilized and, in consequence,

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it is suggested that the definition of an entrepreneurial strategy be brought into play. Immigrants neither find the same opportunities and constraints in those spheres of embeddedness, nor do they have the same pre-disposing factors to be an entrepreneur. Therefore, the definition of an entrepreneurial strategy is a creative process and results from individuals’ ability to negotiate and gather resources in a given space and period of time. One implication of these conclusions is that it is necessary to engage in a debate about the multiple factors to explain immigrant entrepreneurship in a multi-variate approach. Moreover, immigrant entrepreneurial strategies are not homogeneous, especially if one takes into account the differences in characteristics, resources and opportunities gathered and exploited by immigrants and ethnic groups in the definition of a strategy in a given country. Notes 1.

Research funded by Calouste Gulbenkian Foundation and Portuguese Science and Technology Foundation. 2. Zapalska and Edwards’ research on the Chinese highlights this cultural perspective. The authors argue that Chinese have a specific entrepreneurial culture imprinted in the Confucian ideology (2001: 289). 3. Conceptualized in Light and Gold (2000). 4. Rekers and Kempen (2000: 55–6) give several examples of immigrant entrepreneurs from the same ethnic group in different cities and countries, showing that these have different entrepreneurial behaviours. 5. See Light and Rosenstein (1995) for an example of Cubans and Koreans in the United States. 6. In Portugal, it is possible to identify to some extent several similarities between native entrepreneurial strategies and immigrant strategies, namely in the access to family labour and family financial support (see Guerreiro, 1996; Oliveira, 2003). 7. As the Hague case highlights (Santokhi, 2002). 8. Sanders and Nee further suggest that ‘the less dependence on ethnic resources, the weaker the social mechanisms that maintain bounded solidarity and enforceable trust within the ethnic group’ (Nee, 1996: 233). 9. A good example of this is that of Chinese entrepreneurs opening ethnic restaurants all over the world, following other innovative entrepreneurs that succeeded. 10. Although, as soon as they are settled into the labour market, they become aware (if they were not before) of competitors, suppliers’ routes, clients, rules and the rest. 11. As Kloosterman (2000: 93) suggests, ‘there is no concrete institutionalised “market for entrepreneurs” with clearly advertised vacancies and a more or less easily identifiable supply. Opportunities for the selfemployed (“vacancies”) may go unnoticed or neglected for all kinds of reasons’. 12. Light and Gold (2000) highlight how immigrants’ social class can define an unequal access to community resources. 13. As Barrett et al. (2001) suggest in the British case, changes in rules and regulations over time can give different effects towards immigrants and natives entrepreneurship. 14. Research funded by Gulbenkian Foundation and the Portuguese Foundation for Science and Technology. 15. It is important to take into consideration that Portugal only became an immigration country in the late 1970s. And the first law that regulated immigrants’ entrance, permanence and expulsion only dates back to 1981 (Law-Decree nº 264-B/81). 16. The cases studied also highlighted the importance of work experience in entrepreneurial options. The majority of the entrepreneurs questioned invested in the same sector where they worked before as wage earners: 45.1 per cent Cape Verdeans worked and invested in construction, while 68.3 per cent Chinese worked and invested in the catering industry. 17. See Boissevain (1984), Chan and Cheung (1985: 143), Jones et al. (2000: 39) and Rekers and Kempen (2000: 54). 18. Also suggested by Waldinger et al. (1990: 146). 19. The minimum income was established in 1996 in Portugal to combat exclusion and poverty (for more details see Baganha et al., 2000). 20. In fact there is even a certain imbalance on the distribution of citizenship among the entrepreneurs questioned: 85 per cent of the entrepreneurs of Indian origin hold Portuguese nationality, against 13.3 per cent of the Chinese and 50 per cent of the Cape Verdeans. 21. A high degree of non-answers by Chinese entrepreneurs should be noted. This fact can lead the researcher to believe that there are more illegal arrivals.

Understanding the diversity of immigrant entrepreneurial strategies 81 22. 23. 24. 25. 26. 27. 28. 29.

30. 31. 32. 33. 34. 35. 36.

132 out of the 359 Chinese entrepreneurs had other migration experiences of which only 16 occurred in non-European countries. The correspondence analysis is the categorical data analysis method developed by Benzécri (1980). The correspondence analysis model only includes the categories with absolute contributions above average within 23 variables. Chan and Cheung show how the existence of associations of rotating credit and cultural organizations with funds for informal support explains the strong entrepreneurial success of the Chinese and Japanese in Canada (1985: 144). This situation opposes the one described in the case of the Chinese in Toronto, with only 22 per cent of the entrepreneurs having non-co-ethnic clients while 54 per cent had exclusively Chinese clients (Chan and Cheung, 1985: 149). See Waldinger et al. (1990: 137–40) and Sanders and Nee (1996: 235). As shown by Light and Gold (2000: 119). In the Chinese case, this situation is even more apparent if we consider that 87.1 per cent of the entrepreneurs state that they do not have native-Portuguese workers and only 2 per cent have workers of other ethnic origins apart from the co-ethnic workers. On the other hand, only 24.9 per cent say they do not have co-ethnic workers. Guerreiro also notes the existence in Portuguese businesses of a social reproduction of the family trajectory with ‘entrepreneurial vocations’ (Guerreiro, 1996: 19). From the 27 immigrants questioned that said they had acquired a company through inheritance, donation or marriage, 19 were of Indian origin. By contrast, the Cape Verdean entrepreneurs had the highest number of employers before initiating an entrepreneurial activity. As had already been suggested by Ávila and Alves (1993). Waldinger et al. state that family work is important not only for ethnic enterprises but for all businesses of small size (1990: 142). Only 22.6 per cent of the Indian businesses do not have family workers. See Waldinger et al. (1990: 140).

References Aldrich, H. and R. Waldinger (1990), ‘Ethnicity and entrepreneurship’, Annual Review of Sociology, 16, 111–35. Ávila, P. and M. Alves (1993), ‘Da Índia a Portugal – trajectórias sociais e estratégias colectivas dos comerciantes indianos’, Sociologia – Problemas e Práticas, 13 (115–33). Baganha, M.I., J.C. Marques and G. Fonseca (2000), Is an Ethclass emerging in Europe? The Portuguese Case, Lisbon: Luso-American Foundation. Barrett, G., T. Jones and D. McEvoy (2001), ‘Socio-economic and policy dimensions of the mixed embeddedness of ethnic minority business in Britain’, Journal of Ethnic and Migration Studies, 27(2), April, 241–58. Benzécri, J.P. (1980), L’Analyse des données. L’Analyse des correspondances, vol. 2, Paris: Dunod. Boissevain, J. (1984), ‘Small entrepreneurs in contemporary Europe’, in R. Ward and R. Jenkins (eds), Ethnic Communities in Business. Strategies for Economic Survival, London: Cambridge University Press, pp. 20–38. Bonacich, E. (1973), ‘A theory of middleman minorities’, American Sociological Review, 37, 583–94. Chan, J. and Y. Cheung (1985), ‘Ethnic resources and business enterprise: a study of Chinese business in Toronto’, Human Organization, 44(2), summer, 142–54. Engelen, E. (2001), ‘ “Breaking in” and “breaking out”: a Weberian approach to entrepreneurial opportunities’, Journal of Ethnic and Migration Studies, 27(2), April, 203–23. Etzioni, A. (1988), The Moral Dimension. Toward a New Economics, New York and London: The Free Press. Guerreiro, M.D. (1996), Famílias na Actividade Empresarial: PME em Portugal, Oeiras: Celta. Jones, T., G. Barrett and D. McEvoy (2000), ‘Market potential as a decisive influence on the performance of ethnic minority business’, in J. Rath (ed.), Immigrant Businesses. The Economic, Political and Social Environment, London: Macmillan Press, Ltd, pp. 37–53. Kloosterman, R. (2000), ‘Immigrant entrepreneurship and institutional context: a theoretical exploration’, in J. Rath (ed.), Immigrant Businesses. The Economic, Political and Social Environment, London: Macmillan Press Ltd, pp. 90–106. Kloosterman, R. and J. Rath (2001), ‘Immigrant entrepreneurs in advanced economies: mixed embeddedness further explored’, Journal of Ethnic and Migration Studies, 27(2), April, 189–201. Kloosterman, R., J. Leun and J. Rath (1999), ‘Mixed embeddedness: (in)formal economic activities and immigrant business in the Netherlands’, International Journal of Urban and Regional Research, 23, 253–67. Light, I. and P. Bhachu (eds) (1993), Immigration and Entrepreneurship: Culture, Capital and Ethnic Networks, New Brunswick, NJ: Transaction Publishers.

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Light, I. and S. Gold (2000), Ethnic Economies, San Diego and London: Academic Press. Light, I. and C. Rosenstein (1995), Race Ethnicity and Entrepreneurship in Urban America, New York: Aldine de Gruyter. Malheiros, J.M. (1996), Imigrantes na região de Lisboa. Os anos da mudança, Lisbon: Edições Colibri. Oliveira, C. (2002), ‘Immigrants’ entrepreneurial opportunities: the case of Chinese in Portugal’, special issue on Economic Growth and Innovation in Multicultural Environments (ENGIME), Fondazione Eni Enrico Mattei: Milan, Note di Lavoro 75.2003; also available at http://www.feem.it/NR/rdonlyres/076B874F-3A944754-9600-67DEB77/789/7503.pdf. Oliveira, C. (2003), Empresários de origem imigrante: estratégias de inserção económica em Portugal, Lisbon: ISEGI-UNL. Oliveira, C. (2004), Estratégias empresariais de imigrantes em Portugal, Lisbon: Immigration Observatory/High Commission for Immigration and Ethnic Minorities; also available at http://www.oi.acime.gov.pt/docs/pdf/ Estrat%20Empresariais%20Imigrantes%20em%20Portugal.pdf. Peixoto, J. (2002), ‘Strong market, weak state: the case of recent foreign immigration in Portugal’, Journal of Ethnic and Migration Studies, 28(3), July, 483–97. Peters, N. (2002), ‘Mixed embeddedness. Does it really explain immigrant enterprise in Western Australia?’, International Journal of Entrepreneurial Behaviour & Research, 8(1/2), special edition, ‘The economic context, embeddedness and immigrant entrepreneurs’, edited by J. Rath, R. Kloosterman and E. Razin, pp. 32–53. Portes, A.(1999), Migrações Internacionais. Origens, Tipos e Modos de Incorporação, Oeiras: Celta Editora. Portes, A. and R. Manning (1986), ‘The immigrant enclave: theory and empirical examples’, in S. Olzak and J. Nagel (eds), Competitive Ethnic Relations, Orleo and London: Academic Press Inc., pp. 47–68. Portes, A. and M. Zhou (1999), ‘Entrepreneurship and economic progress in the 1990s: a comparative analysis of immigrants and African Americans’, in F. Bean and S. Bell-Rose (eds), Immigration and Opportunity. Race, Ethnicity, and Employment in the United States, New York: Russell Sage Foundation, pp. 143–71. Rath, J. (2000), ‘Introduction: immigrant businesses and their economic, politico-institutional and social environment’, in J. Rath (ed.), Immigrant Businesses. The Economic, Political and Social Environment, London: Macmillan Press Ltd, pp. 1–19. Rath, J. (2002), ‘Needle games: a discussion of mixed embeddedness’, in J. Rath (ed.), Unravelling the Rag Trade. Immigrant Entrepreneurs in Seven World Cities, Oxford and New York: Berg, pp. 1–27. Rekers, A. and R. Kempen (2000), ‘Location matters: ethnic entrepreneurs and the spatial context’, in J. Rath (ed.), Immigrant businesses. The Economic, Political and Social Environment, London: Macmillan Press, Ltd, pp. 54–69. Sanders, J. and V. Nee (1996), ‘Immigrant self-employment: the family as social capital and the value of human capital’, in American Sociological Review, 61, April, 231–49. Santokhi, S. (2002), ‘Neighbourhood transformation and economic activities. Aspects of urban economic activities in segregated areas in The Hague’, paper presented in the Workshop ‘Communication Across Cultures in Multicultural Cities’, that took place in the Institute of Higher European Studies, The Hague, The Netherlands, 7 to 8 November. Waldinger, R., H. Aldrich and R. Ward (1990), Ethnic Entrepreneurs. Immigrant Business in Industrial Societies, Newbury Park, CA: Sage Publications. Ward, R. and R. Jenkins (eds) (1984), Ethnic Communities in Business. Strategies for Economic Survival, London: Cambridge University Press. Wilson, K. and A. Portes (1980), ‘Immigrant enclaves: an Analysis of the labor market experiences of Cubans in Miami’, American Journal of Sociology, 86(2), 295–319. Zapalska, M. and W. Edwards (2001), ‘Chinese entrepreneurship in a cultural and economic perspective’, Journal of Small Business Management, 39(3), 286–92.

6

Immigrant women in small business: biographies of becoming entrepreneurs Caroline B. Brettell

Lourdes ordered custom-made signs for her bakeries in red, white, and blue with her name printed at the bottom right-hand corner: LOURDES PUENTE: PROPRIETOR. . . . Lourdes felt a spiritual link to American moguls . . . She envisioned a chain of Yankee Doodle bakeries stretching across America to St. Louis, Los Angeles, her apple pies and cupcakes on main street in suburban shopping malls everywhere. Each store would bear her name, her legacy: Lourdes Puente, PROPRIETOR. (Cristina Garcia, Dreaming in Cuban)

In a 2004 report for the Brookings Institution, Audrey Singer (2004) writes about emerging and reemerging cities of immigration in the United States of the twentieth century. These are cities that witnessed a dramatic rise in the proportion of the population that was foreign-born during the 1980s and particularly the 1990s. While number of people is one way to assess the impact of immigration on local communities, most of us need to do no more than to walk through the urban landscape and take in the smells from Salvadoran pupuserias, Chinese dim sum shops, and Brazilian churrasquerias, or the sight of Indian sari and jewelry stores, Vietnamese nail salons, Korean dry cleaners and halal grocers. These are the immigrant entrepreneurs who, it is claimed, have revised small business in America in the face of the ‘Walmartization’ of both US cities and suburbs. The literature on immigrant entrepreneurship is by now extensive, beginning with early work by Bonacich (1973), Light and Bonacich (1988) and others (Portes and Manning, 1986; Zhou and Logan, 1989), extending to a host of group-specific studies (Gold, 1988; Hosler, 1998; Min, 1988; Min and Bozorgmehr, 2000; Miyares, 1998; Tseng, 1995; WaltonRoberts and Hiebert, 1997; Wong, 1998; Zhou, 1992) and, most recently, to particular urban contexts and to the global comparative context (Halter, 1995; Light and Bhachu, 1993). This literature is characterized by a few key debates. One focuses on group differences. Why, for example, do Asian immigrants start small business enterprises at a greater rate than Latinos (Butler and Herring, 1991; Chinchilla and Hamilton, 2001; Fernandez and Kim, 1998; Levitt, 1995; Raijman and Tienda, 2000, 2003; Yoon, 1991)? Some of the explanations for these differences point to the cultural traits that predispose groups such as the Chinese, the Jews, the Armenians and the Indian Gujaratis to selfemployment (Bonacich, 1973; Smith-Hefner, 1995).1 Others focus on differences in human capital and other class resources or social capital/ethnic resources that facilitate selfemployment (Bates, 1994; Chan and Cheung, 1985; Light and Bhachu, 1993; Zimmer and Aldrich, 1987). An equally important question is why the rates of self-employment are higher among the foreign-born by comparison with the native-born (Borjas, 1986). Here explanations focus on the structural/opportunity factors that advantage or disadvantage immigrants (Marger and Hoffman, 1992; Fawcett and Gardner, 1994; Waldinger et al., 1990). It is hard for immigrants to find employment in the mainstream economy because they lack the linguistic skills, because they cannot be accredited to work in the field they worked in 83

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prior to migration, or because of discrimination. Self-employment, in other words, permits labor market assimilation when other avenues are blocked (Alund, 2003). Finally, some scholars focus on outcomes, asking, for example, if self-employment increases earnings (Portes and Zhou, 1996) or if employment in the enclave economy is a cost or a benefit in relation to longer term social mobility (Bates, 1994; Fong and Ooka, 2002; Kaplan, 1998; Logan, Alba and Stults, 2003). Curiously, in this vast corpus of scholarship very little attention has been paid to immigrant women entrepreneurs. In this chapter I take up this issue. I begin with a brief review of the small extant literature on this topic, noting points of emphasis and key arguments. I then turn to several case studies of immigrant women entrepreneurs drawn from a larger sample of interviews with small business owners from diverse national backgrounds who have established themselves in the Dallas–Fort Worth (henceforth DFW) area. These interviews were collected in conjunction with a broader study of immigrant incorporation in the DFW metroplex.2 My discussion of these cases emphasizes the agency of women, examining their decisions to become entrepreneurs and some aspects of how they operate their businesses. Women as migrants/women as entrepreneurs Twenty-five years ago there was very little research on immigrant women, but as migration patterns have changed, so too has scholarship. Not only are women often the first to migrate (sometimes they receive the initial job contract), but in some international migration streams they outnumber men (Brettell, 2003; Donato, 1992; Constable, 1997; Ho, 1993). Indeed, the increasing numbers of women involved in both internal and international population flows has led some scholars to speak of the ‘feminization of migration’ (Castles and Miller, 1993). The growing literature on women immigrants has shown that gender is important in the decision to migrate (when, where and who) as well as in the process of settlement in the receiving society. It is apparent that, while some women still move as dependants (as wives, daughters, mothers), there are many who are labor migrants moving in search of economic opportunities that are sometimes distinct from those for men. Pessar (1999) has traced the trajectory of scholarship reflecting this change from the migrant as male, to the study of immigrant women, to the engendering of migration research.3 Much of engendered migration research has focused on the changes that occur in gender and kin relations as a result of migration (for example, Holtzman, 2000; Kibria, 1993; Pessar, 1984). Among the questions addressed are the following: does wage earning enhance the power and status of immigrant women within their households; does greater sharing of household activities emerge as a result of the work obligations of women; how do changes in employment, and family structure and life style affect women’s public activities as well as their own assessments of their well being (Chavira-Prado, 1992; Giles, 2002; Groves and Chang, 1999; Hirsch, 1999; Ui, 1991)? Recently Hondagneu-Sotelo (1999) has identified several additional questions that are now being explored: the nature of gendered transnational communities, the spatial contours of immigrant occupational sex segregation, and similarities and differences in the experiences of second-generation boys and girls. Despite a proliferation of research on women immigrants and on the role of gender in the migration process, only a handful of scholars have addressed the topic of immigrant

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women entrepreneurs. This is somewhat surprising because historians writing about the third wave of immigration to the United States have often indicated how important ‘Mom and Pop’ stores were as a path to economic incorporation. These were generally enterprises that relied on family labor and many were strongly patriarchal. And yet, as historian Donna Gabaccia (1994: 56) has pointed out, ‘within family businesses women have been apt to exercise managerial influence as operators of cash registers and keepers of business accounts. Immigrant businesswomen have often begun their careers as workers in family enterprises’. Gabaccia cites several examples of women who rose through the ranks: Ida Cohen Rosenthal who started in the family clothing business, designed the modern brassière, and launched Maidenform; Helena Rubenstein who founded an international beauty enterprise; and Nellie Cashman who ran restaurants and boarding houses in Alaska and Arizona. Historian Hasia Diner (1983) reminds us of the Irish women who ran boarding houses to provide support for their families. ‘Some of the Irish boarding houses run by women also expanded into hotels and restaurants. Irish women also set up dressmaking shops, millinery shops, grocery stores, book stores, and even breweries and liquor stores’ (Diner, 1983: 96). Alice Chai (1987a, 1987b) was one of the earliest scholars to examine the role of women in family-operated small businesses among post-1965 immigrants to the United States. Chai discusses Korean women who came to Hawaii with professional backgrounds but eventually found themselves helping out in family-owned grocery stores, restaurants and gift shops. Although they work longer hours, women prefer this kind of work, particularly its freedom and flexibility, to waged employment in factories or working for others in service sector jobs. Korean women in Hawaii view self-employment as an avenue out of a racist and sexist labor market and toward greater interaction with their spouses. Although not specifically addressing the issue, scholars working among Korean immigrants in other parts of the United States have equally noted the significant role of women as family laborers in small businesses. In the survey that he conducted in New York City, Min (1998) found that 38 per cent of the women in the labor force were working with their husbands in the same business; 12 per cent ran their own businesses independent of their husbands; and 36 per cent were employed in co-ethnic businesses. ‘When two partners run the same business, the wife is usually in charge of the cash register and the husband takes care of the total management of the store. The wife’s control of the cash register is one of the central factors that make Korean retail businesses, such as produce, grocery and liquor retail businesses, successful’ (Min, 1998: 40; see also Yoon, 1998). Min goes on to describe the way that the 1500 Korean-owned nail salons in New York operate. ‘Some Korean men just drive their wives to and from the nail shop and help them open and close it while they either babysit or play golf during the daytime’ (Min, 1998: 40). He notes the significant effect of this kind of role reversal on Korean men. Other scholars have also explored the impact of self-employment on gender roles. Espiritu (1999) observes that, for immigrant women in small businesses, their work is an extension of their domestic responsibilities. Often they find themselves cooking at the store. Indeed she argues that the Asian immigrant small business sector is built on the backs of Asian and other immigrant women. One of her points is that, depending on where they are in the labor market, there are different outcomes for Asian immigrant women. Overall, however, Espiritu’s conclusion is that in this form of family-based selfemployment women experience extreme isolation and family dependency. Gilbertson

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(1995) comes to a similar conclusion based on her research among Dominicans and Colombians in New York. Immigrant women who are employed in small businesses within enclave economies do not achieve the same level of success as their male counterparts. Indeed they are often highly exploited. However, and important to note, Gilbertson excluded the small number of female business owners from the research sample. Dallalfar (1994) is one of the few scholars to focus on female business owners. Indeed she notes the paucity of research on immigrant women as actual entrepreneurs, ‘as innovators who use their gender, class, and ethnic resources to start up businesses and introduce products and services in the ethnic economy’ (Dallalfar, 1994: 542). Dallalfar argues that the ethnic economy is a site of empowerment for immigrant women. She describes Iranian women in Los Angeles who are sole owners and operators of their businesses and often the primary breadwinners. These women are found in both family-run and homeoperated businesses. The home-operated businesses are generally characterized by minimal start-up costs, the use of personal savings as well as ethnic and class resources to get it underway, a largely co-ethnic clientèle, word of mouth as the primary mechanism for attracting clientèle, and cash-based exchange. In the family-run businesses, women work longer hours but are coequal partners. Again, personal savings and ethnic resources are helpful in starting these businesses. In both cases these businesses involve both social and economic transactions; work and social life are merged. Dhaliwal (1995) equally explores this blurring of boundaries between home and work in her analysis of the way gender ideologies are created and maintained in the everyday activities and interactions of one South Asian woman named Kaur, who works in a small grocery business. ‘The new gender arrangement (Kaur working outside the home) is made consonant with previous gender expectations and ideologies by framing Kaur’s work as an extension of family and household responsibilities’ (Dhaliwal, 1995: 81). There has been some work in the European context on immigrant women as entrepreneurs. Indeed, Bhachu (1988) describes another Mrs Kaur who, with her husband, runs a sports shop in London. She and her husband share both the work and childcare responsibilities. The most common reasons for starting a business cited by the Sikh couples Bhachu studied are the ceiling to promotion and discrimination elsewhere in the labor market and the desire to forge one’s own destiny ‘without whites telling us what to do’ (Bhachu, 1988: 94). And yet women often give up a waged job, which was important when the business was first set up, and move back into a kinship/gender system that is more patriarchal. They assume a subordinate position. By contrast, Josephides (1988: 43) argues that immigrant Cypriot women ‘perceive themselves as building up a family business with their husbands rather than working for them’ and hence being exploited. These women, she suggests, are ‘tenacious entrepreneurs’ who are ‘constantly looking for openings in the market’ (Josephides, 1988: 48). Clearly, differences in cultural background matter. In a special issue of the International Journal of Sociology, several authors (Apitzsch, 2003; Kontos, 2003) suggest that, by focusing on biographies of self-employment we will develop a better understanding of women as active agents in the entrepreneurial process. Why do they choose this avenue of labor market engagement? What motivates them and how might their motives be different, if at all, from those of their husbands? While these are questions that these authors apply to women entrepreneurs more broadly, they cer-

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tainly have application to immigrant women entrepreneurs more specifically. In the remainder of this chapter I discuss the biographies of several immigrant women entrepreneurs in the DFW area who have entered the realm of small business. These biographies were generated in the context of a structured research interview. They reveal the motives, choices and values of women who decided to become business owners. Immigrant women’s biographies of entrepreneurship4 Serving the ethnic community: the small grocery store business One of the most common enterprises opened by immigrant newcomers is the retail grocery store. While some of these stores cater to a broad customer base (for example, the Korean greengrocers scattered throughout New York City) more frequent are the storeowners who serve their own ethnic community, importing foodstuffs from the homeland that immigrants are accustomed to using in their cooking and consuming. Food, as anthropologists and historians argue, carries cultural meaning and therefore reinforces and communicates identity (Counihan, 1999; Gabaccia, 1998). These stores are often operated by an immigrant couple, sometimes with the support of other family members. But, as the examples presented here indicate, they can equally be the domain of women working on their own. Suma P. Suma P.’s family was originally from Gujarat, India, but she was born in Kenya. She came to the United States and Dallas in 1981 with her husband, when she was in her twenties. Her first job was at a McDonalds where she was employed for seven years. She started as a night manager and then worked her way up the ladder. In 1986, she decided that she wanted to stop working at McDonalds as a manager and to open her own grocery store. In 1987, a place became available in Irving. She put down $50 000 to rent it for a year and another $50 000 to import the food necessary to start up an import grocery store. Her husband supported her decision and helped to solicit the money, including a small loan from a bank. He also backed it himself. Suma said she decided to go into business for herself because she became tired of ‘working someone else’s hours and always being on call. I wanted to own my own time . . . and own myself. I did not like being tied down to a certain number of hours or a certain set of hours . . . I like to decide when to get up each morning, when to take a vacation, when to go home at night, and when to keep the shop closed. At McDonald’s these things were always at the whim of someone else. I felt like I had no control of my life’. She chose the grocery business because it did not require much in the way of start-up costs. She had no prior experience in this kind of business but she did not imagine that it would be too difficult. She is not sure that, had she known then what she knows now, she would have gone forward. When she began, other members of her family, including her husband, helped out with the financing, but she is the one who owns the business. She focused on the Irving area because the Indian population in this part of the metroplex was growing and there was no grocery store for them. They had to travel all the way to the Taj Mahal Grocery in Richardson to find what they needed. She located the store in a small shopping center where three other Indian businesses are now located. She hires Indians to work for her but only the management positions are full-time and pay well. For other positions there is a lot of turnover and she hires several times each year.

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Her store specializes in northern Indian food items. She sells everything, from various types of rice and flour, to candy and oils, pickles and relishes, hot sauces and all the spices and vegetables that are necessary for good Indian cuisines. The products are mostly imported from India and Britain. About 50 per cent of her customers are Indians and the rest are a mix of other nationalities. They find things less expensive here. She uses English, Gujarati and Hindi to speak with her customers. She does some advertising in Indian papers, magazines, radio shows and at Indian community events, but most of her customers come through word of mouth. Besides the flexible hours this line of work gives her the opportunity to deal with her community, something she finds most rewarding. She indicated that she felt lucky that things had worked out on the first try and in the first location. Suma sees a good future for her business. She has already expanded once and might do so again in the next five years. She says business was difficult in the short term after 9/11 but it improved in 2002. She said that she is ‘not a get-rich-quick type of person. I just want to own my business and run it well. I do not want to be a grocery mogul’. She would only recommend this kind of business to someone else if they have knowledge of Indian food. ‘Indians know when they walk into a store if the people selling the food know what they are doing. Incompetence is a sure way to have an unsuccessful business. I didn’t have to work hard to know this food because I am Indian . . . It is extremely important to know Indian culture and how the food fits in with that culture.’ Gloria G. Gloria G., who was born in El Salvador in 1963, owns two import grocery stores and three courier services. She first came to the United States in 1978 and found a job working in the laundry at one of the big hotels in Dallas. She then worked cleaning houses. Finally she started her business – something that had been a goal all along. She said that her father, who was in the hennequen business, and her grandfather had taught her the value of being her own boss. Her first business was a courier service, shipping goods to and from El Salvador. She said she started this business in order to remain close to people in El Savador. She had no training or previous experience although she had grown up in a family business environment and this helped. When she opened the grocery store she chose a location near her house that is in an area where many Salvadorans live. No one else in the area had opened a store. Spanish is a necessity for this line of work, English is not. Some 70 per cent of her customers are Central Americans – Salvadoran predominately, but also including Honduran and Guatemalan. The remaining 30 per cent are made up of approximately equal parts Peruvian and Colombian. Although she advertises in Spanish newspapers, on Spanish radio and sponsors soccer games, most people learn about the store through word of mouth. About 90 per cent are regulars. She would like to expand her appeal to Bolivians in the area who are beginning to come into the store but to do that she needs to import Bolivian products. Gloria G. used her personal savings to start the business and has secured a bank loan for expansion. At the beginning money was tight and she had to cut back on her own expenses in order to keep the business going. She began with $14 000 and the help of an American friend who showed her how to apply for permits and such. The greatest sacrifice she has made was her family. She had to spend so much time working that she had little time left for her daughters. Typically, she works 16-hour days, seven days a week. She devotes this much time because ‘it does not run as smoothly when I am not there’. Today her expenses are about $16 000 per month, her receipts about $29 000. She works from

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about 5:30a.m. to 11p.m. She estimates that the business would be worth about $130 000 if she wanted to sell it. She has several employees. She says that her main goal in hiring is to find someone who she feels is trustworthy. For this reason she never hires someone who just comes in asking for a job. She only hires people that she knows or people who are referred to her by close friends. As a result, most of the people she hires are from El Salvador. Gloria finds that her greatest challenge is balancing all her entrepreneurial enterprises. She wants to expand them all and that is difficult. She relies on the help of one of her daughters and has hired a good manager for the grocery stores. She wants to add a restaurant and needs to devote more energy to these plans. ‘In five years I see myself with a big restaurant full of people. I will not have to work so hard, maybe only ten hours a day.’ Gloria considers the DFW area a good place to start a business – much less expensive than other cities. And in America in general, especially by comparison with El Salvador, there are many opportunities: ‘Anyone who works hard can get ahead.’ She plans to retire some day, sell the businesses to her daughters (if they are able to handle it) and move to El Salvador. From the ethnic market to the mainstream: the restaurant business Immigrant entrepreneurs, as Waldinger and Der-Martirosian (2001) have noted, gravitate toward a narrow set of economic activities. One of these is the restaurant business. Ethnic restaurants clearly have a deep history in America, whether founded to serve the co-ethnic community or to serve a broader clientèle. The Chinese moved quickly into this particular niche (one of the few opportunities available to them early on) and, as Light (1972: 7) has noted, after 1896 they began to ‘win the patronage of the white middle class’ because ‘they served cheap and appetizing meals’. To a large extent where a restaurant is located will determine the customer base. Ethnic restaurants are often family-operated enterprises, frequently relying on unpaid family labor or on co-ethnic labor. But increasingly such restaurants employ a mix of immigrants. Vivian T. Vivian T. operates a Vietnamese restaurant, working herself in both the kitchen and the dining room. She was born in Vietnam in 1951. In Vietnam, she and her husband had a small market stall where they sold clothes. They came to the United States in 1986. Her first occupation was in home sewing: she worked for a company for almost a decade. Meanwhile her husband set up a construction firm. He also owns apartments where he does most of the repairs. Vivian opened the restaurant in 1995. Her husband technically owns the business but she is the manager. ‘He owns. I keep the money, lady first!’ He helped out a lot at first to do the work necessary to convert the space into a restaurant but she is the one in charge of daily operations. But, she added, ‘my husband and friends have always been involved in my decision making. They are still involved when I make plans for the future’. Given her background in Vietnam, starting a business seemed like the natural thing to do. ‘I wanted to be my own boss. I did not want to stay at home or work for others.’ She considered other options, such as opening a liquor store, a gas station, a hotel, or buying a Seven-Eleven. But she also had some friends who owned restaurants and that is what she settled on. In addition to applying for the proper licenses, she had to take a three-week class to get a Food Service Manager certificate. There is no Vietnamese or Asian restaurant in

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the area where they are located so she thought she would ‘give it a try’. The restaurant, which is located in what used to be a thrift store, serves authentic Vietnamese–Chinese food, ‘not like the Green Papaya which caters to American customers’. Vivian does not speak much English, although she wishes she knew more, because it would help. She is thinking she might go to school to study English. Her family helps her out and that is one reason why she employs them. When she opened she was thinking she would have primarily Asian customers. However it turned out that ‘Americans are nice and easy to serve, they just point to the name of the dish they want.’ Vivian said that, when she was getting started, many of her friends helped her out. She has a lot of friends and they ‘gave as much as they could’. She used credit cards to pay for the initial expenses. A lawyer whom her daughter knew helped with some of the original paper work to set up the business. It was hard at first to find a good cook, to decide what kind of food they would serve, and to build up a customer base. Now they have a good menu and a steady stream of customers, over 90 per cent of them Americans. Until recently they advertised on Vietnamese radio and in Vietnamese newspapers, and they are listed in the ethnic telephone directory. They also had stories in the Dallas Morning News and the Dallas Observer when they first opened. They have also served as a sponsor for Asian refugee community events which increases their visibility. Vivian believes customer service is very important. She does not see an emphasis on this at other Vietnamese restaurants. Her greatest challenge is finding and keeping good employees. She needs employees who can speak some English. The restaurant employs three Vietnamese cooks, two men and one woman. Two of them work full-time and the third part-time. Vivian’s son-in-law is one of the cooks and one of her daughters works at the restaurant full-time when she is not in school. Another daughter used to take care of all the paper work but after her marriage she stopped and now Vivian handles it with her husband’s help. There is also a young Mexican dishwasher. Vivian and her daughter serve the customers. There are no other waiters. She thinks that ‘it is better to have family members working, they are more trustworthy’. The expenses are between $20 000 and $25 000 per month; rent alone is $2300. She works long hours (the restaurant opens at 9 a.m. for coffee and closes at 10 p.m.) and has very little time for herself. Her daughter, who assisted with the interview, noted that, if there is a wedding or a party of some kind, she never goes because she cannot get away from the restaurant. The family wants her to give up the business for this reason and they are currently looking for someone to buy it. Vivian would like to open a small store next, a ‘dollar store’, or help her husband take care of his apartments. One day she would like to retire and return to Vietnam. She concluded by saying that, while there are opportunities in America, it can be difficult to get a business started and ‘women have to try harder and to learn more’. Angelica S. Angelica S. was born in El Salvador in 1940. Her father was a farmer who grew and processed sugar cane; her mother was a housewife. In 1974, she emigrated to Los Angeles where she and her husband had some contacts and where she knew there was a Salvadoran community. They lived in LA for three months. Angelica found work at a Sony circuit factory. Then her husband’s sister-in-law contacted them and told them that there were work opportunities in Dallas, so they decided to move there. This woman

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introduced her to a family for whom she worked as a nanny and housekeeper for several years. In the late 1990s, she saw an ad in a Spanish-language newspaper indicating that there was a restaurant in Irving for sale. She had not really considered going into business but the ad caught her attention and she bought the place. It was not planned, she insisted. Her husband did not even know until after the deed was done. He was a bit angry because he had been planning to return to El Salvador rather than start a business. They were already over 50 years of age. Angelica said she spent her savings, $24 000, to buy the restaurant. She then took out a $10 000 loan from a group called Accíon Texas, based in San Antonio, to remodel the place and buy equipment. She found out about Accíon Texas when she went to the Dallas Hispanic Chamber of Commerce looking for help and advice. She used some of her jewelry as collateral for the loan. The restaurant, which is located in a small strip mall where there are two other Salvadoran businesses, and in a neighborhood where many Central Americans have settled, serves Salvadoran and Mexican food. Angelica also sells imported cheeses and creams which are easy to get because so many people travel back and forth between the US and El Salvador. The language used in the restaurant is largely Spanish but Angelica needs English to deal with vendors, and with legal and insurance matters. She has learned all her English since coming to the US. Angelica said her husband works for her. ‘His help comes naturally, as part of our marriage.’ She hires other Salvadorans because they are aware of the customs and food habits of the majority of her customers. All of these employees have come through word of mouth or recommendations Angelica was attracted to the restaurant business because she had always liked to work in the kitchen. She had cooked a good deal and even catered some parties and banquets. But her inexperience was the most difficult initial problem. Her major sacrifice is the long hours she works: from about 6 a.m. to 10:30 p.m. Another challenge is the financing. She estimated gross annual receipts at $75 000, but she spends about $50 000. She was robbed once and changed the name of the restaurant in order to change the image. She also incurred the cost of installing an alarm system and security cameras. Angelica said she feels better working on her own, as it gives her more independence and personal time. However, she was quick to point out that she was very happy with the family she used to work for. She has tried to make some changes from time to time, expanding her menu, for example, to include some non-Hispanic dishes. But that did not work. Nor did launching a lunch buffet. She does not advertise in newspapers or radio, although she does carry a listing in the Hispanic Yellow Pages at a cost of about $1200 each year. Angelica plans to sell the restaurant eventually and retire to El Salvador. She wants to go home because the climate there is better for her health. Neither of her children, one of whom is a policeman and the other an interior designer, is interested in continuing it. ‘I do not care who I sell it to, as long as they pay what I ask.’ Woman to woman: personal care and into the mainstream Another sector that has attracted immigrants is personal care. Historically, the best example of this kind of business is the Chinese laundry. White men shunned this activity but needed the service; Chinese immigrant men satisfied their need. Koreans who own and operate dry cleaning enterprises are one late twentieth-century example of the personal care business niche. This niche is particularly suited to immigrant women. It requires a

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minimum amount of training and low overhead, and the potential for building up a largely mainstream customer base is great. The best example of a personal care niche into which many immigrant women have entered is the nail salon, an enterprise that was rare a quarter of a century ago but which has proliferated in cities across America during the decades of the 1980s and 1990s. It is a niche that has become particularly attractive to Vietnamese women. Donna N. Donna N. was born in Vietnam in 1973. Her father, who was an army nurse, came to the United States in 1981. Her mother joined him ten years later, bringing Donna with her. They settled in San Jose, California and Donna started beauty school. She pursued this profession because her aunt in San Jose had a beauty shop and had a place for her to work. Once she received her nail technician license she began work at her aunt’s nail salon in San Jose. ‘In Vietnam, people talk about being in the manicuring business. They say that if you are going to the United States you can go into the nail business. You do not need too much English to start and you can get a license in a short time. But now there are a lot of people, too many!’ Donna moved to the Dallas area in 1991 with a friend. ‘San Jose was too expensive and my friend knew someone who needed manicurists in her nail salons.’ She worked in two other salons before moving to her present location in one of the classier salons in north Dallas. She said that she heard from a friend of hers that the owner of this salon wanted to lease the space to a nail technician. She saw this as a good opportunity because she did not like the person she was working for. At the moment she operates under the name of the salon owner but her business is independent. She is located in the same neighborhood as where she previously worked so she is able to keep her former clients. She might not have been able to do it if she did not already have a solid client base, 100 per cent of whom are Americans. But she needs to give good service to retain them. She said that she is always thinking of ways to make her business better. At the moment, the business is growing but Donna acknowledged that she has ‘only two hands’. Donna hesitated to put a value on her business. ‘Clients can’t be bought’, she responded. She said that they are her best form of advertising. They bring in other clients. Donna says she pursued this kind of business because it matches her training and skills. She has a manicurist license and a small business license. She used her personal savings to get set up. She manages the scheduling, product ordering and customer relations aspects of her business. Breaking out of the ethnic mold: product markets and manufacturing The examples so far are those that one might expect among immigrant women entrepreneurs: small-scale businesses tied closely to the ethnic market or an ethnic background, or to minimal start-up costs, limited training and flexibility. There are, however, immigrant women who break out of these traditional molds and set up businesses based on experience and training they have acquired in the US, an innovative idea, or knowledge that they have brought with them from their own country. The final two cases offer examples of such enterprises. Rashmi S. Rashmi S. was born in Lahore in 1948 but her family moved to India after the partition and she was raised in Bombay. Her father was a surgeon in the Indian army.

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She pursued a Bachelors degree in interior design and then worked for several years as a flight attendant for Air India until her marriage in 1972. Rashmi went with her husband to Kuwait where he was employed in the construction business. For a time she also lived in London because that is where they decided to send their children to school. When the work in the Middle East began to decline she and her husband began to consider emigration to the United States, a country where her husband had received an engineering degree in the 1960s. They arrived in the US in 1987, settling in Richmond, Virginia, where her husband bought a company with a colleague. Rashmi was shocked by Richmond. ‘It was such a small place compared to London, and there were few foreigners.’ In 1989, they moved to the Dallas area. For a year Rashmi continued as a housewife and then, in 1990, she decided to start her company – a company that imports stone (largely granite and marble) from India to provide to architects, designers, contractors and individuals who are doing kitchens and bathrooms. ‘I was bored. My husband was gone a lot – finishing jobs in Europe and the Middle East – my children were gone a lot. I did not just want to sit at home.’ Rashmi said that she ‘got into’ stone by accompanying her husband to his construction sites and to the stone quarries that his father owned, and by remodeling her own home. She found that people working in this area did not really have a lot of knowledge so she saw an opportunity. She started the business herself. ‘I read a lot. I had to become knowledgeable because I was a woman working in a business where people do not expect to find women.’ Rashmi opened the business in northeast Dallas in a large warehouse building that her husband owned. He had a manufacturing plant there already and gave her a corner. At first her husband owned her business because she did not have a work visa, but now she is the full owner and has no partner. The operation was small when it started: she used savings she had put aside for her children’s education. ‘I have more than earned this back and my children have gone to good schools.’ Later, as the business began to grow, she took out some bank loans. The company now employs 22 individuals from diverse ethnic backgrounds who work the stone to suit customer needs. ‘I never knew that I could do this and particularly that I could manage 22 employees, but I have done it. I had to build my credibility and earn respect.’ Indeed, she was honored with a small business award by the Dallas Asian Chamber. Rashmi said she must have a good command of English because she buys material in Europe and the clients are largely English speakers. People learn about her business through word of mouth but she has also had articles written about her in trade magazines and she has had jobs in major hotels. In 2003, sales were above five million. Rashmi said that 9/11 had actually worked to her advantage because people were staying home, putting money into their homes instead of traveling. Rashmi thought that she had been in the right place at the right time in starting this business. She launched it during a building boom and a big expansion in housing. ‘America,’ she said, ‘is the land of opportunity and if you work hard as a woman you can make it. It is very different from England where things work much more on the old boy network system. I have a daughter there right now looking for a position in finance and finding it very difficult. If she came back here she would find a job in no time.’ When I asked her about Asian women in business she acknowledged that many were under the control of their husbands and that, other than doctors, there are not so many who start a business on their own, all from scratch. ‘They need to get into business and participate.

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They need to come out of their cocoons.’ She is, she thought, ‘a bit unique’, in having a business of this scale. Fatema M. Fatema M. was born in Pakistan in 1977, but grew up in Saudi Arabia. When she was 15, in 1992, her parents sent her to the US so that she could attend an English language school. She went to live with her aunt in Chicago, completed high school and then entered a Chicago-area university to pursue a degree in computer science. She met her husband, also a Pakistani, in a class. They were married in 2000. When Fatema was offered a job with Microsoft in Irving, they relocated to Texas. Her husband found a position with a financial firm. Both were on H1 visas, hoping eventually to secure their green cards with the assistance of their employers. But the economic downturn resulted in layoffs for both of them. After spending several months looking for work, Fatema, who by this time had a new baby, and her husband decided to open a cell phone store. They used the contacts they had to get the proper paper work and dealership authorizations. They used personal savings as well as loans from family members in Saudi Arabia and Pakistan. They used these funds to renovate the space they rented, to build up inventory and to advertise before their grand opening. Fatema even worked at a friend’s store for a month in order to learn the ropes. She said that her technical background made it easy to learn what was necessary to become knowledgeable about the product. Fatema said they chose the cell phone business because the start-up costs were low and because ‘cell phones are always in demand; there are always new accessories and new products and people like to change with the times’. They decided to locate their store in a northern suburb because it was close to where they lived and it was a growing area. People are moving in and they are looking for cell phone service. Fatema reported that their customers are 80 per cent American and 20 per cent Hispanic. Many are loyal and spread information about the store to their friends. Fatema does much of the work at the store herself because her husband has been travelling back to Pakistan frequently to take care of his elderly parents. She has one American employee. Fatema says she prefers this job now because she is her own boss, can set her own schedule, and accommodate her responsibilities as a mother. She can also take risks because it is her own store, and she is freer. The negative aspects of the business are that there are no fringe benefits and that they must have profits in order to make a living. The shortterm challenges are to balance the books at the end of the day and to meet the prices that bigger national chains set by offering similar deals. The longer-term challenges are to expand the customer base and to meet the estimated yearly profit. But Fatema is optimistic because ‘business is growing. The wireless industry is constantly changing and customers always want the latest gadgets that we sell’. Fatema has business ambitions. Her long-term goal is to own a lot of real estate and start a multinational business to import/export cell phones and accessories. Conclusion In general these female-owned and operated immigrant businesses are started up with small amounts of personal or family capital. Some women have no prior training or experience, others acquire the necessary short-term training, and still others draw on their own life experience or inner resources, some of them gendered resources, to make the business work. Like men who move to self-employment, these women are motivated by the desire

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to be their own boss. For them it is a step-up and a step toward the ‘American Dream’ and one they can take as individuals with minimal formal education. Several of these women began their working lives in the United States in more traditional labor market niches for immigrant women: in domestic service, in factories, or in home piecework. They used these positions as a springboard to self-employment, saving what they needed to get themselves launched. These women are equally attracted to self-employment because it offers them the ability to create a flexible schedule and hence balance home life with work life. Yet many of them also find themselves making domestic sacrifices because the business demands long hours and constant attention. What is most striking in the biographies presented is the agency of these women. In the cases presented here they generally came to the decision to start the business on their own; in some cases, with family advice; in one case without a spouse even knowing that the business had been purchased until after the fact. Indeed, in most of the cases presented here, it is the husbands who are in the secondary role, assisting when necessary but otherwise leaving their wives alone to operate the enterprise. The women whose cases are described here demonstrate astuteness in assessing market, including locational, niches for their businesses. They can be described as innovators who are introducing new products and services to both the ethnic and mainstream economies. Clearly one of the satisfactions that these women derive from their work is the social environment. They establish and value the rapport that they have with their customers. They value the connections that the business allows them to maintain with their own ethnic communities. Occasionally they even make donations to community events, something that serves to their advantage in raising their profile, particularly if they are in a business that depends on a co-ethnic clientèle. The cases presented here suggest that, perhaps, as broader feminist analysis has done already, we need to move away from an analytical framework that focuses on whether small business self-employment is emancipatory or exploitative for immigrant women and emphasize instead the agency of women who move into this sector and the values that shape their decision making. Equally, we need to assess the structural constraints and opportunities that are available to them and how these influence the decisions they make as they move into the role of immigrant entrepreneur. Notes 1. Werbner (1999) has recently expressed some important and grave concerns about this approach. Not only does it essentialize different populations, but it also defines ‘success’ for immigrants in a particular way. 2. The research was funded by the Anthropology Program of the National Science Foundation (BCS 003938). Other investigators involved with this project are James F. Hollifield, Dennis Cordell and Manuel Garcia y Griego. Any opinions, findings and conclusions or recommendations expressed in this chapter are those of the author and do not necessarily reflect the views of the National Science Foundation. 3. There are a number of edited volumes focusing on female immigrants or on gender and migration. Among them are Anthias and Lazaridis, 2000; Buijs, 1996; Chang, 2000; Simon and Brettell, 1986; and Willis and Yeoh, 2000. 4. The names used in these cases are all pseudonyms.

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Apitzsch, Ursula (2003), ‘Gaining autonomy in self-employment processes: the biographical embeddedness of women’s and migrants’ business’, International Review of Sociology, 13(1), 77–87 Bates, Timothy (1994), ‘Social resources generated by group support networks may not be beneficial to Asian immigrant-owned small businesses’, Social Forces, 72(3), 671–89. Bhachu, Parminder (1988), ‘Apni Marzi Kardhi: home and work – Sikh women in Britain’, in Sallie Westwood and Parminder Bhachu (eds), Enterprising Women, London: Routledge, pp. 76–102. Bonacich, Edna (1973), ‘A theory of middleman minorities’, American Sociological Review, 38, 583–94. Borjas, Georg (1986), ‘The self-employment experience of immigrants’, Journal of Human Resources, 21(4), 485–506. Brettell, Caroline B. (2003), ‘Gender and migration’, Anthropology and Migration: Essays on Transnationalism, Ethnicity, and Identity, Walnut Creek, CA: Altamira Press, pp. 139–51. Buijs, Gina (ed.) (1996), Migrant Women: Crossing Boundaries and Changing Identities, Oxford: Berg Publishers. Butler, John and Cedric Herring (1991), ‘Ethnicity and entrepreneurship in America: toward an explanation of racial and ethnic group variations in self-employment’, Sociological Perspectives, 34, 79–94. Castles, Stephen and Mark Miller (1993), The Age of Migration. International Population Movements in the Modern World, New York: Guilford Press. Chai, Alice Yun (1987a), ‘Adaptive strategies of recent Korean immigrant women in Hawaii’, in Janet Shristanian (ed.), Beyond the Public/Domestic Dichotomy: Contemporary Perspectives on Women’s Public Lives, New York: Greenwood Press, pp. 65–100. Chai, Alice Yun (1987b), ‘Freed from the elders but locked into labor: Korean immigrant women in Hawaii’, Women’s Studies, 13, 223–33. Chan, Janet and Y. Cheung (1985), ‘Ethnic resources and business enterprise: a study of Chinese business in Toronto’, Human Organization, 44, 142–54. Chang, Grace (2000), Disposable Domestics: Immigrant Women Workers in the Global Economy, Cambridge, MA: South End Press. Chavira-Prado, Alicia (1992), ‘Work, health, and the family: gender structure and women’s status in an undocumented migrant population’, Human Organization, 51, 53–64. Chinchilla, Norma Stoltz and Nora Hamilton (2001), ‘Doing business: Central American enterprises in Los Angeles’, in Marta Lopez-Garza and David R. Diaz (eds), Asian and Latino Immigrants in a Restructuring Economy: The Metamorphosis of Southern California, Palo Alto, CA: Stanford University Press, pp. 188–214. Constable, Nicole (1997), Maid to Order in Hong Kong: Stories of Filipina Workers, Ithaca: Cornell University Press. Counihan, Carole (1999), The Anthropology of Food and Body: Gender, Meaning and Power, New York: Routledge. Dallalfar, Arlene (1994), ‘Iranian women as immigrant entrepreneurs’, Gender and Society, 8(4), 541–61. Dhaliwal, Amarpal (1995), ‘Gender at work: the renegotiation of middle-class womanhood in a South Asianowned business’, in Wend L. Ng, Soo-Young Chin, James S. Moy and Gary Y. Okihiro (eds), Reviewing Asian America: Locating Diversity, Pullman, WA: Washington State University Press, pp. 75–86. Diner, Hasia (1983), Erin’s Daughters in America: Irish Immigrant Women in the Nineteenth Century, Baltimore: The Johns Hopkins Press. Donato, Katherine M. (1992), ‘Understanding U.S. immigration: why some countries send women and others send men’, in Donna Gabaccia (ed.), Seeking Common Ground: Multidisciplinary Studies of Immigrant Women in the United States, Westport, CT: Greenwood Press, pp. 159–84. Espiritu, Yen Le (1999), ‘Gender and labor in Asian immigrant families’, American Behavioral Scientist, 42(4), 628–47. Fawcett, James T. and Robert W. Gardner (1994), ‘Asian immigrant entrepreneurs and non-entrepreneurs: a comparative study of recent Korean and Filipino immigrants’, Population and Environment, 15(3), 211–38. Fernandez, Marilyn and Kwang Chung Kim (1998), ‘Self-employment rates of Asian immigrant groups’, International Migration Review, 32(3), 654–81. Fong, Eric and Emi Ooka (2002), ‘The social consequences of participating in the ethnic economy’, International Migration Review, 36(1), 125–46. Gabaccia, Donna (1994), From the Other Side: Women, Gender and Immigrant Life in the U.S. 1820–1990, Bloomington: Indiana University Press. Gabaccia, Donna (1998), We Are What We Eat: Ethnic Food and the Making of Americans, Cambridge: Harvard University Press. Gilbertson, Greta A. (1995), ‘Women’s labor and enclave employment: the case of Dominican and Colombian women in New York City’, International Migration Review, 29, 657–70. Giles, Wenona (2002), Portuguese Women in Toronto: Gender, Immigration, and Nationalism, Toronto: University of Toronto Press. Gold, Steven J. (1988), ‘Refugees and small business: the case of Soviet Jews and Vietnamese’, Ethnic and Racial Studies, 11, 411–38.

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Groves, Julian McAllister and Kimberly A. Chang (1999), ‘Romancing resistance and resisting romance: ethnography and the construction of power in the Filipina domestic Worker Community in Hong Kong’, Journal of Contemporary Ethnography, 28, 235–65. Halter, Marilyn (ed.) (1995), New Migrants in the Marketplace: Boston’s Ethnic Entrepreneurs, Amherst: University of Massachusetts Press. Hirsch, Jennifer S. (1999), ‘En el Norte la Mujer Manda: gender, generation, and geography in a Mexican transnational community’, American Behavioral Scientist, 42, 1332–49. Ho, Christine G.T. (1993), ‘The internationalization of kinship and the feminization of Caribbean migration: the case of Afro-Trinidadian immigrants in Los Angeles’, Human Organization, 52, 32–40. Holtzman, Jon D. (2000), ‘Dialing 911 in Nuer: gender transformations and domestic violence in a Midwestern Sudanese refugee community’, in Nancy Foner, Rubén G.Rumbaut and Steven J. Gold (eds), Immigration Research for a New Century: Multidisciplinary Perspectives, New York: Russell Sage, pp. 390–408. Hondagneu-Sotelo, Pierrette (1999), ‘Gender and contemporary U.S. immigration’, American Behavioral Scientist, 42(4), 565–76. Hosler, Akiko S. (1998), Japanese Immigrant Entrepreneurs in New York City: A New Wave of Ethnic Business, New York: Garland Publishing. Josephides, Sasha (1988), ‘Honour, family, and work: Greek Cypriot women before and after migration’, in Sallie Westwood and Parminder Bhachu (eds), Enterprising Women, London: Routledge, pp. 34–57. Kaplan, David H. (1998), ‘The spatial structure of urban ethnic economies’, Urban Geography, 19, 489–501. Kibria, Nazli (1993), Family Tightrope: The Changing Lives of Vietnamese Americans, Princeton: Princeton University Press. Kontos, Maria (2003), ‘Considering the concept of entrepreneurial resources in ethnic business: motivation as a biographical resource?’, International Review of Sociology, 13, 183–204. Levitt, Peggy (1995), ‘A Todos Les Llamo Primo’ (I Call Everyone Cousin): the social basis for Latino small businesses’, in Marilyn Halter (ed.), New Migrants in the Marketplace: Boston’s Ethnic Entrepreneurs, Amherst: University of Massachusetts Press, pp. 120–40. Light, Ivan (1972), Ethnic Enterprise in America, Berkeley: University of California Press. Light, Ivan and Parminder Bhachu (1993), Immigration and Entrepreneurship: Culture, Capital, and Ethnic Networks, New Brunswick, NJ: Transaction Publishers. Light, Ivan and Edna Bonacich (1988), Immigrant Entrepreneurs, Berkeley: University of California Press. Logan, John R., Richard D. Alba and Brian J. Stults (2003), ‘Enclaves and entrepreneurs: assessing the payoff for immigrants and minorities’, International Migration Review, 37(2), 344–88. Marger, Martin N. and Constance A. Hoffman (1992), ‘Ethnic enterprise in Ontario: immigrant participation in the small business sector’, International Migration Review, 26(3), 968–82. Min, Pyong Gap (1988), Ethnic Business Enterprise: Korean Small Business in Atlanta, Staten Island, NY: Center for Migration Studies. Min, Pyong Gap (1998), Changes and Conflicts: Korean Immigrant Families in New York, Needham Heights, MA: Allyn and Bacon. Min, Pyong Gap and Mehdi Bozorgmehr (2000), ‘Immigrant entrepreneurship and business patterns: a comparison of Koreans and Iranians in Los Angeles’, International Migration Review, 34, 682–706. Miyares, Ines M. (1998), ‘Little Odessa–Brighton Beach, Brooklyn: an examination of the former Soviet refugee economy in New York City’, Urban Geography, 19(6), 518–30. Pessar, Patricia R. (1984), ‘The linkage between the household and workplace of Dominican women in the U.S.’, International Migration Review, 18, 1188–211. Pessar, Patricia (1999), ‘Engendering migration studies; the case of new immigrants in the United States’, American Behavioral Scientist, 42(4), 577–600. Portes, Alejandro and Robert D. Manning (1986), ‘The immigrant enclave: theory and empirical examples’, in S. Olzak and J. Nagel (eds), Comparative Race Relations, New York: Academic Press, pp. 47–68. Portes, Alejandro and Min Zhou (1996), ‘Self-employment and the earnings of immigrants’, American Sociological Review, 61(2), 219–30. Raijman, Rebeca and Marta Tienda (2000), ‘Immigrants’ pathway to business ownership: a comparative perspective’, International Migration Review, 34(3), 682–706. Raijman, Rebeca and Marta Tienda (2003), ‘Ethnic foundations of economic transactions: Mexican and Korean immigrant entrepreneurs in Chicago’, Ethnic and Racial Studies, 26, 783–801. Simon, Rita James and Caroline B. Brettell (eds) (1986), International Migration: The Female Experience, Totowa, New Jersey: Rowman and Allenheld. Singer, Audrey (2004), The Rise of New Immigrant Gateways, Washington, DC: The Brookings Institution, Center on Urban and Metropolitan Policy. Smith-Hefner, Nancy, J. (1995), ‘The culture of entrepreneurship among Khmer refugees’, in Marilyn Halter (ed.), New Migrants in the Marketplace: Boston’s Ethnic Entrepreneurs, Amherst: University of Massachusetts Press, pp. 141–65.

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Tseng, Yen-fen (1995), ‘Beyond little Taipei: the development of Taiwanese immigrant businesses in Los Angeles’, International Migration Review, 29, 34–45. Ui, Shiri (1991), ‘ “Unlikely heroes”: the evolution of female leadership in a Cambodian ethnic enclave’, in Michael Burawoy et al. (eds), Ethnography Unbound: Power and Resistance in the Modern Metropolis, Berkeley: University of California Press, pp. 161–77. Waldinger, Roger D. and Claudia Der-Martirosian (2001), ‘The immigrant niches: pervasive, persistent, diverse’, in Roger D. Waldinger (ed.), Strangers at the Gate: New Immigrants in Urban America, Berkeley, CA: University of California Press. Waldinger, Roger D. Howard Aldrich and Robin Ward (1990), Ethnic Entrepreneurs: Immigrant Business in Industrial Societies, New York: Sage Publications. Walton-Roberts, Margaret and Daniel Hiebert (1997), ‘Immigration, entrepreneurship, and the family: IndoCanadian enterprise in the construction of industry of Greater Vancouver’, Canadian Journal of Regional Science, 20, 1–20. Werbner, Pnina (1999), ‘What color “success”? Distorting value in studies of ethnic entrepreneurship’, Sociological Review, 47(3), 548–67. Willis, Katie and Brenda Yeoh (eds) (2000), Gender and Migration, Cheltenham, UK and Northampton, MA, USA: Edward Elgar Publishing Limited. Wong, Bernard (1998), Ethnicity and Entrepreneurship: The New Chinese Immigrants in the San Francisco Bay, Boston: Allyn and Bacon. Yoon In-Jin (1991), ‘The changing significance of ethnic and class resources in immigrant businesses: the case of Korean immigrant businesses in Chicago’, International Migration Review, 25(2), 303–32. Zhou, Min (1992), Chinatown: The Socioeconomic Potential of an Urban Enclave, Philadelphia: Temple University Press. Zhou, Min and John R. Logan (1989), ‘Returns on human capital in ethnic enclaves’, American Sociological Review, 54, 809–20. Zimmer, C. and H. Aldrich (1987), ‘Resource mobilization through ethnic networks, kinship and friendship ties of shopkeepers in England’, Sociological Perspectives, 30, 422–45.

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Migrant entrepreneurship from the perspective of cultural diversity Mediha Sahin, Peter Nijkamp and Tüzin Baycan-Levent

1 Migration in a modern society Modern cities mirror the openness of an industrialized global society, as they have become a meeting place of people from different national, cultural and migrant origins. In the past decades, most cities in the industrialized world and especially metropolitan areas in many countries have seen a huge influx of people with a different socio-cultural or migrant origin (Cross, 1992; Esping-Andersen, 1993; Massey and Denton, 1993). In an era of mass migration, migrant workers will be found in many different segments of the labour market, depending on their wage level and professional qualifications. In economic terms, their individual marginal productivity will determine which position they assume on the labour market (Sahin et al., 2006). Since entrepreneurship is one of the frequently used ways to escape unemployment in a host country, it is expected that migrants will attempt to choose self-employment. Entrepreneurship affects the economy both directly and indirectly, and at various levels, through innovation, competition and restructuring (Wennekers and Thurik, 1999). Empirical research has shown that both a higher rate of new business start-ups and a higher rate of turbulence (the sum of start-ups and closures) enhance, after a certain time lag, economic growth and job creation (Carree and Thurik, 2003). The study of migrant entrepreneurship started preponderantly in the USA (Light, 1972), while later studies on this topic also emerged across Western Europe for the United Kingdom and France (Simon, 1993) and in Israel (Razin, 1993). These studies recognized the significant share of migrants in SME activities. Research on migrant entrepreneurship in Europe lags behind research in the US. Recent papers in the rising literature on this issue in Europe and the US, and other immigration countries, include Verheul et al. (2001), Audretsch (2002), Blanchflower (2004) and Masurel and Nijkamp (2005). Since the early 1980s, self-employment among migrant minorities has increased significantly in Europe and migrant entrepreneurship has become an important topic in the EU, with a great impact on micro, meso and macro levels of development. The booming economy in Europe and the available opportunities in various market niches appear to have led to the emergence of a new breed of migrant entrepreneurs. The migrant minorities in Europe are expected to continue growing and thereby the business ownership among these migrant groups will grow as well. It is generally found that contemporary migrant communities generate entrepreneurs able to contribute more and more to economic growth and the welfare of the host countries (Rettab, 2001). Migrant entrepreneurs make a variety of contributions to the economic environment of their host and home countries. At the micro level, migrant entrepreneurs help to satisfy a variety of migrant needs and wants for both migrant and non-migrant consumers (Super, 2005). More entrepreneurship is not only desirable and attractive, but also unavoidable. The most important reason is that, 99

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because of globalization and increasing competition, there is an enforced tendency towards more flexible job relations in the business. With the advent of the era of mass migration in Europe, the issue of cultural diversity has gained increasingly societal and political interest, unfortunately often from a negative perspective. It has even become a source of considerable concern in European societies. Generally speaking, migrant minorities are found to have lower labour force participation rates and lower employment rates, to be less qualified, to accept relatively lower skilled jobs, and are particularly specialized in production. The majority of migrant minorities tend to earn relatively less than the population as a whole. Cultural diversity is the variety of human cultures in a specific region, or in the world as a whole (Wikipedia, 2006). In the context of migrant entrepreneurship, several scholars have highlighted the impact of different ethnic group cultures on entrepreneurship. They emphasize the importance of values like social or business attitude, close family and religious ties, and trust, which enable some migrant groups to compete successfully in business (Ward, 1983; Werbner, 1990; Waldinger et al., 1990). The literature also points out differences in entrepreneurial abilities; some people are more entrepreneurial than others. There are several reasons – such as economic and psychological motives (profit, propensity to take risk, a spirit of adventure, access to information or knowledge and desire to innovate) – why migrants opt for self-employment. The interaction between culture and migrant entrepreneurship is complex (Basu and Altinay, 2002). Cultural and socio-psychological attributes of different migrant groups affect their entrepreneurial behaviour. Ethnic minorities may differ in terms of their reasons for migration, their religion, their language, their educational attainment, their demographic background (whether other relatives are in business or not) and their access to family business networks. Some of these differences reflect cultural diversity among the relevant groups concerned. Culture, in the form of a family tradition in business and strong family ties, has an impact on business entry motives, on the financing of new start-ups and on the nature of business chosen. Some aspects of culture like family tradition seem to have a greater impact on entrepreneurship than others, such as religion (Basu and Altinay, 2002). It is still a source of debate in the literature whether specific forms of a religion do exert an influence on entrepreneurial behaviour. Furthermore, there is some evidence that suggests that the interaction between culture and entrepreneurship may change over time, that is between business entry and later business operations. Against this background, the aim of this chapter is to evaluate migrant entrepreneurship from the perspective of cultural diversity. The chapter investigates the socio-economic and cultural aspects of migrant entrepreneurship and then addresses different migrant group entrepreneurs in the Netherlands in order to compare the differences between various migrant groups and to explore the cultural diversity in migrant entrepreneurship. The next section examines the basic concepts of entrepreneurship and migrant entrepreneurship on the basis of main characteristics and a range of determinants from psychological and sociological to economic and demographic, and evaluates migrant entrepreneurship from a socio-economic and cultural diversity perspective. Section 3 evaluates the development of migrant entrepreneurship in the Netherlands since the 1960s. The following section, section 4, addresses four active and dominant migrant groups, viz. Turks, Moroccans, Surinamese, and Antilleans in the Netherlands, and compares these groups with each other as well as with native Dutch groups in terms of their entrepreneurial behaviour and performance. Therefore, the section highlights the socio-economic

Migrant entrepreneurship from the perspective of cultural diversity 101 and cultural differences among these groups. Section 5 concludes with recommendations for future research in this field. 2

Entrepreneurship and migrant entrepreneurship: a socio-economic and cultural diversity perspective

2.1 Basic concepts of entrepreneurship and migrant entrepreneurship Entrepreneurship is a multidimensional concept, the definition depending largely on the focus of the research undertaken (Verheul et al., 2001). Entrepreneurship or selfemployment normally involves setting up a new business or buying an existing business. Some people are more entrepreneurial than others. Entrepreneurship in the classical sense refers to the combining of resources in novel ways so as to create something of value (Aldrich and Waldinger, 1990). Another definition of an entrepreneur is ‘someone who specializes in taking responsibility for and making judgemental decisions that affect the location, form and the use of goods, resources and institutions’ (Hébert and Link, 1982). This definition is more from an economic point of view. In a textbook on economics (Stiglitz and Driffill, 2000), the entrepreneur is defined as a person who creates new businesses, brings new products to market, or develops new processes of production. In the literature the following four characteristics and main issues centring on entrepreneurship are also examined (Hébert and Link, 1982; Van Praag, 1996): (i) the position of the entrepreneur both in the surrounding economic system and within his own corporate organization; (ii) the identification of the economic tasks of the entrepreneur; (iii) the financial remuneration of the entrepreneur for his risk-taking activities, based on his economic motives; (iv) the dynamics in (local and global) markets, seen from the perspective of the entrepreneur. These four attributes of an entrepreneur show up with varying intensities in the literature on the essence of entrepreneurship. There are scientific contributions on entrepreneurship offered by Cantillon, Say, Marshall, Schumpeter, Knight and Kirzner, respectively. The pioneering study of Cantillon (1931) on the role of entrepreneurship made a main distinction between the following economic agents: (i) land owners who were financially independent; (ii) arbitrageurs (entrepreneurs) who were involved in risk taking activities with a view to profit-making, and (iii) ‘servants’ who were assured of a fairly stable income by means of a labour contract. In Cantillon’s view, the market economy was a ‘self-regulating network of reciprocal exchange arrangements’ which were able to produce equilibrium prices through free entry and exit of business firms. In Cantillon’s perception of entrepreneurship, the mediating role of the economic actor, who needs to anticipate uncertain future events and to see uncertainty as an economic opportunity, is more important than his innovative attitude. The ‘survival of the fittest’ would be best guaranteed by those entrepreneurs who know how to handle risk situations properly. Different determinants of entrepreneurship, which combine various factors into an eclectic framework, have been defined by Verheul et al. (2001): (i) psychological determinants, focus on motives and character traits; (ii) sociological determinants, focus on the collective background of entrepreneurs; (iii) economic determinants, focus on the impact of the economic climate and technological development; (iv) demographic determinants; focus on the impact of demographic composition on entrepreneurship.

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In the literature we observe also a broader treatment of business activities by migrant people. In recent years we have observed a significant shift in the orientation of migrant groups, namely towards self-employment (Baycan-Levent et al., 2003). This movement is generally referred to as migrant entrepreneurship (Van Delft et al., 2000; Masurel et al., 2002; Waldinger et al., 1990). The latter phenomenon distinguishes itself from ‘normal’ entrepreneurship through its orientation on migrant products, on migrant market customers or on indigenous migrant business strategies (Choenni, 1997). Migrant entrepreneurship is also generally regarded as an important self-organizing principle through which migrant minorities are able to improve their weak socio-economic position (BaycanLevent et al., 2003). There is a significant difference among various migrant groups. Chaganti and Greene (2000) make the following distinction into three groups of migrant businessmen: (i) immigrant entrepreneurs; individuals who, as recent arrivals in the country, have had to start a business as a means of economic survival (Butler and Greene, 1997); (ii) migrant entrepreneurs; who are united by a set of socio-cultural connections and regular patterns of interaction among people sharing a common national background or migration experiences (Waldinger et al., 1990); (iii) minority entrepreneurs who are business owners who are not of the majority population. The literature mentions both culture and the disadvantage context in explaining why migrants become self-employed (Johnson, 2000). Some migrants left their own country in the first place to start their own business in the host country, because they had no opportunity to do this in their own country (Choenni, 1997). This phenomenon stimulates the growth of self-employment drastically (Rath, 1998). According to Lee et al. (1997) there is a ‘social resources explanation’: the success of migrant minority businesses can in part be explained by the existence of such social resources as rotating credits, a protected market and a labour source. Another explanation and argument that migrant minorities are more likely to become entrepreneurs in comparison with native people can be related to the margination theory, stating the importance of a (negative) event, triggering the start-up of new firms (Verheul et al., 2001). According to this theory, the creation of an enterprise is not always the result of a deliberate and intentional act or a result of rational decision making. For most people, starting a business begins with the shattering of a previous life pattern. After this general overview of the concept of migrant entrepreneurship, we will investigate now migrant entrepreneurship from socio-economic perspective, including the main characteristics of migrant entrepreneurs, their motivation and performance. 2.2 Migrant entrepreneurship from a socio-economic perspective Within the literature migrant entrepreneurs are characterized by certain general features. These features of course do not apply to all migrant entrepreneurs; it is merely an indication of what the migrant entrepreneur is, and in what way they do differ from the regular entrepreneur. For individuals or people who are unable to adapt to a social system, such as migrant and migrant minority groups, their marginal social position is a driving force to become self-employed. Self-employment in this case is not only a means of earning a living; it is also a means of recognition and social acceptance (Veciana, 1999). Motivation is an important aspect of any form of entrepreneurship, but especially in migrant entrepreneurship (Masurel et al., 2005). Cantillon and Marx emphasized that profit may motivate people towards business entry and self-employment. The desire to take a risk and a

Migrant entrepreneurship from the perspective of cultural diversity 103 spirit of adventure may be another motive (Knight, 1921). Some have greater access to information or knowledge and wish to exploit that advantage (Kirzner, 1973). The entrepreneur may be driven not only by economic motives but also by psychological motives like the desire to innovate and create new products (Schumpeter, 1934). There is also a negative and a positive view in motivation of migrant entrepreneurship. Within the negative view migrant entrepreneurship exists because of forceful reasons, such as high unemployment rates and discrimination. Kloosterman (1998) stressed the fact that high levels of unemployment provide the motivation for migrants to become entrepreneurs. In countries with a high unemployment rate among natives, migrants are pushed out of the labour market and become entrepreneurs (Tubergen, 2004). It is argued that migrants opt for self-employment in order to avoid racial discrimination in the host country’s labour market, which forces them to accept low-paid jobs and blocks upward mobility (Ram, 1994). Some individuals may even have no other option but to choose selfemployment. This is frequently advanced in the context of migrant entrepreneurship. Recently, attention has been paid to monitoring the social and economic position of minorities. The latter has been found to be weak as compared to the native people. Migrant workers have a lower level of education, and their children exhibit higher dropout rates (Tesser et al., 1999). They often occupy unskilled and simple or very simple jobs (Veenman, 1999). Their unemployment rates are higher and their average incomes are lower in comparison with the native workers (Kee, 1993; Rettab, 1995). The level of education of these new entrants is a variable for which contrasting results have been obtained. The results vary on the existence of a significant impact and nature of this impact. Among the studies finding that education has a significant impact, the nature of impact varies from study to study. Some find a positive relation, while others find a negative one. Cooper and Dunkelberg (1987) and Robinson and Sexton (1994) show that the self-employment decision is influenced by educational attainment. However, a study at the macro level by Uhlaner and Thurik (2004) shows that a higher level of education in a country is accompanied by a lower self-employment rate. De Wit and van Winden (1989) reports that education is positively correlated with self-employment in the US, but negatively in the EU. Migrant minorities consist of two types of migrants. One is the first-generation group, consisting of traditional migrants who were directly recruited for employment reasons. This group is less educated, with most education being achieved in the country of origin. The second group is the second generation, consisting of young dependants born in the host countries, where their entire education has been attained. This group masters the language of the host country better than the first generation does, and is relatively more qualified and acquainted with the local labour market. Not surprisingly, this group is generally found to be more ambitious and selective in choosing a job. Mostly first generation migrant entrepreneurs undertake their own business impulsively without first deciding a good stocktaking market. As a consequence of this start they serve the same customers group with the same products and service as their competitors without any distinction. This leads to enormous price competition, a falling behind in entrepreneur’s income and a high fall-out percentage amongst young migrant businesses. Masurel and Nijkamp (2003) distinguish some general features that are typically applicable to migrant entrepreneurs, such as informal and formal networks, clients, business financing, workforce and geographic clustering. In cases of information gathering or help in certain situations

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migrants make use of their own migrant groups. This is also referred to as the ‘own group’. Usually, migrant entrepreneurs find a niche in their migrant community and start up in an ethically well-defined market, so as to provide typical services and products. An enclave economy can then positively affect the perspective of migrant entrepreneurs. Migrant groups that produce a strong entrepreneurial group can be of great economic significance for the migrant business community as well as for the total community, through job and opportunity creation (Rettab, 2001). Besides co-migrant clients, the migrant entrepreneur is also close to his own migrant group when it comes to the work force, or business financing. The social networks offer a flexible and efficient opportunity to recruit employees. Migrant entrepreneurs prefer hiring and supporting other migrants in their economic ventures as they enjoy privileged access to the migrant labour and can frequently employ paternalistic arrangements to extract more labour, as well as pay lower wages (Razin, 1989). Migrant entrepreneurs can satisfy special needs of co-migrant clients, since they share the same language, culture and religion and therefore communicate better. The migrant entrepreneur can also acquire financial capital and borrow production resources from the informal networks. While native entrepreneurs usually borrow their starting capital from the bank, migrant entrepreneurs are less likely to receive bank funding than native entrepreneurs are (Rath, 2000), and therefore often borrow capital from family or other group members. Migrant entrepreneurs usually join up less with native formal networks, like retailer groups, trade associations and franchise organizations. Foreign activities are usually concentrated in certain geographic clusters. We find this geographical concentration especially in the bigger cities, since migrants start their businesses in places where already a large population of people live with the same migrant background. If migrant businesses remain limited to the migrant market, their potential for growth is sharply circumscribed (Aldrich and Waldinger, 1990). The obstacle to growth is the migrant market itself, which can support only a restricted number of businesses, because it is quantitatively small and because the migrant population is often too impoverished to generate sufficient buying power to fuel growth (ibid.). Rath (2000) emphasized that the opportunities and strategies of entrepreneurs are closely linked to their embeddedness in the economic, political–institutional and social environments; these external factors, such as social embeddedness, also have a great influence on the start and development of migrant businesses. It is important to identify the causes and backgrounds of differences in performance of these groups, seen against the background of mainly American experiences. Are migrant entrepreneurs a ‘sign of hope’ for social cohesion problems in the city? Migrant groups that produce a strong entrepreneurial group can be of great economic significance for the migrant business community as well as for the total community, through job and opportunity creation (Rettab, 2001). Van Delft et al. (2000) revealed that migrant-related social networks may provide several advantages: they appear to be multifaceted and flexible, and offer good possibilities for the efficient recruitment of personnel and capital. The major advantage of migrant entrepreneurship may however be the fact that it may contribute to resolving the problematic employment situation of young people in migrant segments of the urban economy (Masurel and Nijkamp, 2005). 2.3 Migrant entrepreneurship from a cultural diversity perspective Culture can be described as the values, norms and attitudes in a group (Verheul et al., 2001). As mentioned before, cultural diversity is the variety of human cultures in a specific

Migrant entrepreneurship from the perspective of cultural diversity 105 region, or in the world as a whole (Wikipedia, 2006). The phenomenon of cultural diversity has been extensively investigated by Hofstede (1991, 2001). He interprets culture as a collective and interactive set of common identity values that are decisive for a group response (or behaviour) vis-à-vis its external environment. Cultural differences are the result of national, regional, migrant, social class, religious, gender and language variations. Culture manifests itself in different appearances in relation to geographic location, physical environment, nation, history, socio-economic traditions and conditions, political systems, religious circumstances, common language or dialect, technologies and work modes, or education and deeds. Clearly, culture is not always an unambiguous concept and may often be fuzzy in nature. Consequently, cross-cultural research is often based on qualitative characteristics of the target group and not so easy to quantify. The great merit of the work of Hofstede is that he has managed to design quantifiable indicators for crosscultural comparison. His research has prompted an avalanche of interesting research on cultural diversity, with a particular view to the development of cross-cultural comparative studies in industrial organizations and management practices. Interesting follow-up of his work can be found, inter alia, in Trompenaars (1993), Milberg et al. (1995), Verbeke (2000), Ardichvili and Kuchinke (2002), Christie et al. (2003), Shulruf et al. (2003), McSweeney (2002), Stephen et al. (2004) and Bergeron and Schneider (2005). The economic benefits of cultural diversity in the city may be manifold, as this may enrich the socio-economic opportunity base, create a varied supply of talents on the labour market, or enhance the creativity possibilities in the city (Jacobs, 1961; Florida, 2002). In the context of migrant entrepreneurship, several scholars have highlighted the impact of different migrant group cultures on entrepreneurship. The international literature on entrepreneurship and innovation pays much attention to the importance of cultural diversity in business behaviour. In the recent literature on cultural diversity we can observe two major strands (see, for an interesting overview, Vermeij, 2006), viz. the assimilation perspective and the identity perspective. The assimilation perspective takes for granted that interaction between different cultural or migrant groups may ultimately eliminate cultural boundaries (see Alba and Nee, 1997). The identity perspective on the other hand assumes that belonging to a migrant culture may have an indigenous meaning, as it creates a support system based on group identity (see Nagel, 2002). Three environmental factors may be distinguished that have an impact on someone’s migrant positioning: economic or socio-cultural competitive conditions (labour market, life style and so on) (see, for example, Olzak, 1992), resource mobilization (due, for example, to the strength or size of a specific population group) (see, for example, Moghaddam and Perrault, 1992) or social identity (on the basis of, for example, positive role models, high self-esteem or a high social status of some group members) (see, for example, Austin and Worchel, 1979). The assimilation–identity dilemma is not only (and perhaps not predominantly) determined by socio-cultural and migrant factors, but also (and perhaps mainly) by the economic context of migrants. In many cases, it turns out to be difficult for migrant groups to enter the regular labour market owing to language deficiencies, low skills, lack of network relations and so on. This may easily create a dual labour market system, in which migrant groups are condemned to the lowest segment as a result of filtering-down phenomena. This will not stimulate assimilation. Those who feel the drive to climb higher up the socio-economic ladder may then be forced to become self-employed and start their

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own business as a migrant entrepreneur, especially in those cases where the migrant market has a sufficiently large critical mass (cf. Halter, 2000). This may be another form of lack of assimilation (or group identity formation), although an expanding migrant business may again lead to more assimilation after a break-out strategy. In conclusion, cultural diversity is an essential component of the study of migrant entrepreneurship. Differences in culture – interpreted in a broad sense – may prompt different types of economic behaviour and entrepreneurship. The driving forces and the conditional framework of cultural diversity call for further empirical work. In what follows we will illustrate a few of the above-mentioned arguments by reference to some facts in the Netherlands. 3 Migrant entrepreneurship in The Netherlands In the 1960s, The Netherlands mainly recruited low-skilled workers from Spain, Italy and Greece, while later on guest-workers were acquired from Turkey and Morocco. Before the arrival of the first-generation migrants from Turkey, Morocco, Italy and Spain, the indigenous working population in The Netherlands had largely quit working in the industries. Therefore the arrival of these migrant groups was required to meet the need for lowskilled workers in the industrial sector. From 1956 to 1963, different industries also recruited workers from Surinam, but this recruitment stopped because of negative experiences with this group (Rath, 1998). Also large inflows of people from the Dutch Antilles could be observed. The 1960s were remarkable for the large-scale labour migration from countries from around the Mediterranean. At the beginning of the 1970s people thought the majority of the foreign workers should stay in The Netherlands only temporarily, but after a couple years it became clear that many migrants would settle there definitely. And finally, owing to conflicts in various parts of the world in the past decade – both inside and outside Europe – asylum seekers and refugees entered the Dutch society, for example from Yugoslavia, Somalia, Afghanistan and Iran. The Netherlands has shown a remarkable openness vis-à-vis foreigners, a situation that can clearly be observed in the history of Amsterdam. At present, the share of migrants in Dutch society is approximately 20 per cent, while the share of non-Western migrants is about 10 per cent (CBS, 2003, 2004). From the non-western migrant population, three groups have a dominant position (approximately 60 per cent): Turks, Moroccans and Surinamese. It is noteworthy that migrant entrepreneurship is typically occurring in the city. Amsterdam, for instance, has a rich variety of migrant entrepreneurs. For a long time Amsterdam was the place of settlement for major migrant groups of different national and cultural origin. Jewish people were a driving force, but not the only entrepreneurial group in the city (Lucassen and Penninx, 1994); other examples of early entrepreneurial groups were Belgian manufacturers, German bakeries and breweries, and Italian plaster sculpture sellers (Henkes, 1995; Miellet, 1987; Schrover, 1996). The rich history of the city of Amsterdam has clearly demonstrated that a large influx of dedicated and professional migrants from several countries has generated new production modes and innovations, which have contributed significantly to the wealth and international position of the city. According to Hessels et al. (2005) more highly educated people form a majority of those involved in early-stage entrepreneurial activity in The Netherlands. They also have a more positive perception of setting up their own firm compared to people with a more limited education and are comparatively often active in business services and

Migrant entrepreneurship from the perspective of cultural diversity 107 consumer-oriented sectors. If their skill levels are below average Dutch standards, they may most likely be found in lower segments of the labour market (Borjas, 1995). In general, their wages turn out to be lower than the Dutch average (de Graaff, 2002), but there is also a great variation in wage levels among different migrant groups. The tendency or ability to become self-employed differs also between native people and migrants; immigration involves taking risks and this is also the case for entrepreneurship. Migrants are therefore considered to have an appropriate attitude or mindset to start a business (Verheul et al., 2001). Jansen et al. (2003) concluded that, despite certain disadvantages compared with the native Dutch population, migrants from Turkey show the same rate of entrepreneurship. This group is definitely not afraid of taking risks. In their eyes, if it works out well, it is great. If not, it is just seen as a misfortune and they are helped and supported by family and friends to set up a new business when they go bankrupt. The Dutch are careful when compared to the Turks as they think ten times before starting off. The Turkish entrepreneurs on the other hand do believe in their motto ‘Pratik zeka’ which stands for ‘practical mind’. The next subsection will compare and evaluate in a more detailed way the entrepreneurial behaviour of different migrant groups in The Netherlands in order to highlight the socio-economic and cultural differences among them. 3.1 Socio-economic and cultural diversity in migrant entrepreneurship: evidence from The Netherlands In order to evaluate migrant entrepreneurship from the perspective of cultural diversity, in this section we address different migrant group entrepreneurs in The Netherlands and we compare the socio-economic and cultural differences between these migrant groups; therefore we aim to highlight the cultural diversity in migrant entrepreneurship. We focus mainly on four active and dominant migrant groups: Turks, Moroccans, Surinamese and Antilleans in The Netherlands and we compare these groups with each other as well as with native Dutch groups in terms of their entrepreneurial behaviour and performance. Our comparison and evaluation are, of course, limited to the available data. Since 1970, the number of migrants in The Netherlands has shown a rapid increase. Most migrants into The Netherlands originate from non-Western countries (Jansen et al., 2003), from Turkey, Morocco, Surinam and the Antilles. Table 7.1 illustrates in absolute Table 7.1 Important migrant minorities and natives in The Netherlands (2000–06) in absolute figures (1000)

Total population

Year

Turks

Moroccans

Surinamese

Antilleans

Dutch

2000 2001 2002 2003 2004 2005 2006

308.9 319.6 330.7 341.4 351.7 358.8 364.6

262.2 272.2 284.1 295.3 306.2 315.8 323.3

302.5 308.8 315.2 320.7 325.3 329.4 332.0

107.2 117.1 124.9 129.3 130.7 130.5 120.4

13 088.6 13 116.9 13 140.3 13 153.8 13 169.9 13 182.9 13 184.1

Source: CBS (2006).

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figures the number of migrant individuals living in The Netherlands. We can see that the Turkish migrant group is the biggest of the four migrant groups. The population increased each year for each group. The migrant populations from Turkey and Morocco into The Netherlands are very similar as regards their demographic composition. They are on average the least well educated and most often married, and most migrants from these countries consider themselves to be Muslim. The migrants from Surinam and Antilles are better educated, more familiar with the Dutch culture and language, and more often single or single parents. All migrant populations have in common that they are relatively young as compared to the native Dutch population (Jansen et al., 2003). Migrants from Surinam and the Antilles also have similar demographical characteristics. Their age distribution is similar to the age distribution of migrants from Turkey and Morocco. Regarding the labour force participation rate of women and the share of married couples in the total number of households, they have much in common with the native Dutch population. The educational level is lowest among migrant groups from Turkey and Morocco. Migrants from Surinam and the Antilles have on average higher educational levels, yet not as high as those of the native population. The above-mentioned migrants often find themselves in marginal economic positions. Entrepreneurship can be a way to improve the economic position of migrants (Choenni, 1997). The rate of entrepreneurship shows a considerable variation over time and between countries. This is especially true for populations of migrants. This is also the case for The Netherlands. More and more, entrepreneurship is recognized as an important source of job growth and economic development in The Netherlands (Van Stel et al., 2002). In recent years, entrepreneurship has increased among people of different migrant minority groups in The Netherlands. One in five newly set-up businesses in The Netherlands is undertaken by a migrant entrepreneur. This group is mostly working in the service sector and delivers high-quality products. It takes risks much more readily, because it is supported by parents. In Table 7.2 we can also see that the number among first and second generation entrepreneurs has risen steadily during the last decade. From the figures in Table 7.2 we can conclude that first generation migrants are far more entrepreneurial than the second generation migrants. Among the Turkish and Moroccan migrant groups it can be seen that men are relatively more entrepreneurial. The other two major groups of migrants from Surinam and the Dutch Antilles show that entrepreneurship is more or less evenly distributed among males and females. When considering the second generation migrants from the Turkish and Moroccan groups it can be seen that male entrepreneurs are relatively more common than female entrepreneurs. With the Surinamese and Antillean groups it can be seen that second generation women are more entrepreneurial. The net gender effect is very strong for the Surinamese population within The Netherlands. The labour force participation rate in general is relatively high for female migrants from Surinam. However, besides the relative high labour force participation rate, there is still a relative low entrepreneurship rate for female Surinamese migrants when compared to the native female Dutch population. On the other hand, the entrepreneurship rates for female Surinamese are still somewhat higher than entrepreneurship rates for female Turkish and Moroccan migrants. Female migrants from Turkey and Morocco are far less entrepreneurial than, for instance, the native Dutch females. This is probably

Migrant entrepreneurship from the perspective of cultural diversity 109 Table 7.2 Distribution of main migrant entrepreneurs in The Netherlands (1999–2003) in absolute (1000) and relative figures Turks Year total

Moroccans

Surinamese

Antilleans

m

f

total

m

f

total

m

f

total

m

f

First generation entrepreneurs

’99 % ’00 % ’01 % ’02 % ’03 %

7.2 91 8.2 88 9.6 87 9.9 86 10.2 86

5.9 92 6.8 89 8.0 88 8.3 87 8.6 87

1.3 87 1.4 82 1.6 84 1.6 84 1.6 80

2.5 89 3.0 88 3.5 88 3.7 88 3.9 89

2.2 92 2.6 90 3.1 89 3.3 89 3.4 89

0.3 75 0.4 80 0.4 80 0.4 80 0.5 83

5.1 80 5.6 79 6.2 79 6.2 78 6.3 79

3.5 80 3.9 80 4.4 81 4.3 78 4.3 78

1.6 80 1.7 77 1.8 75 1.9 76 2.0 80

1.1 70 1.2 67 1.4 71 1.4 64 1.5 71

0.7 70 0.8 67 1.0 71 0.9 64 1.0 71

0.4 80 0.4 67 0.4 67 0.5 67 0.5 71

Second generation entrepreneurs

’99 % ’00 % ’01 % ’02 % ’03 %

0.8 10 1.0 11 1.3 12 1.5 13 1.7 14

0.6 9 0.8 11 1.0 11 1.2 13 1.3 13

0.2 13 0.2 12 0.3 16 0.3 16 0.4 20

0.3 11 0.4 12 0.4 10 0.5 12 0.5 11

0.2 8 0.3 10 0.3 9 0.4 11 0.4 11

0.1 25 0.1 20 0.1 20 0.1 20 0.1 17

1.2 19 1.4 20 1.6 21 1.8 22 1.8 23

0.8 19 0.9 19 1.1 20 1.2 22 1.2 22

0.4 20 0.5 23 0.5 21 0.6 24 0.6 24

0.5 33 0.6 33 0.6 30 0.7 33 0.7 33

0.3 30 0.4 33 0.4 29 0.5 36 0.5 35

0.2 40 0.2 33 0.2 33 0.2 29 0.2 29

Total of entrepreneurs

’99 ’00 ’01 ’02 ’03

7.9 9.3 11.0 11.5 11.9

6.4 7.6 9.1 9.5 9.9

1.5 1.7 1.9 1.9 2.0

2.8 3.4 4.0 4.2 4.4

2.4 2.9 3.5 3.7 3.8

0.4 0.5 0.5 0.5 0.6

6.4 7.1 7.8 8.0 8.0

4.4 4.9 5.4 5.5 5.5

2.0 2.2 2.4 2.5 2.5

1.5 1.8 2.0 2.1 2.1

1.0 1.2 1.4 1.4 1.4

0.5 0.6 0.6 0.7 0.7

Note: Percentage mean: the share of migrant entrepreneurs of a generation cohort in the total of migrant entrepreneurs of the total population category concerned. Source: CBS (2006).

related to cultural and/or religious differences. Besides entrepreneurship rates, labour force participation rates are also much lower than those of native Dutch women. The combination of a high labour force participation rate and a low rate of entrepreneurship for female Surinamese migrants may be related to the relatively high share of single parent families for this migrant group (assuming that most of the single parents are women). Antilleans and Surinamese seem very successful in Table 7.3 and the second generation entrepreneurs in these groups have almost the same rate of profit as the first generation. When we looked at the migrants from Turkey and Morocco, the profit of the first generation entrepreneurs is much higher than that of the second generation. Although the Surinamese and Antillean group are much smaller than the other two groups, they have a higher profit. This may be caused by differences in their entrepreneurial behaviour.

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Table 7.3 Profit of migrant entrepreneurs in The Netherlands (1999–2003) in absolute figures (1000) Year

Turks (€)

Moroccans (€)

Surinamese (€)

Antilleans (€)

Profit of first generation entrepreneurs

’99 ’00 ’01 ’02 ’03

18.0 21.0 19.3 19.2 18.0

15.5 19.4 17.2 18.0 17.0

19.2 21.4 21.4 22.9 21.9

22.0 22.3 21.8 24.1 23.1

Profit of second generation entrepreneurs

’99 ’00 ’01 ’02 ’03 ’99 ’00 ’01 ’02 ’03

13.9 14.9 14.0 13.8 12.8 17.6 20.3 18.7 18.5 17.2

12.2 15.7 12.7 15.2 12.6 15.2 19.0 16.7 17.6 16.4

21.2 23.0 20.9 22.2 20.7 19.6 21.7 21.3 22.7 21.6

18.8 19.4 19.7 22.2 22.1 21.0 21.3 21.1 23.4 22.7

Profit of total entrepreneurs

Source: CBS (2006).

4 Retrospect and prospect With the advent of the era of mass migration in Europe, the issue of cultural diversity has gained increasing societal and political interest, unfortunately often from a negative perspective. It has even become a source of major concern in European societies. Modern societies in the Western world are increasingly faced with cultural diversity as a result of international migration. Diversity is increasingly valued and its social, cultural and economic benefits are recognized. Modern cities mirror the openness of an industrialized global society, as they have become a meeting place of people from different national, cultural and migrant origins. For example, an open city like Amsterdam will soon have a majority of people from a different migrant origin from the indigenous Dutch population. In order to evaluate migrant entrepreneurship from the perspective of cultural diversity, in this section we address different migrant group entrepreneurs in The Netherlands and we compare the socio-economic and cultural differences between these migrant groups. We focus mainly on four active and dominant migrant groups, namely Turks, Moroccans, Surinamese and Antilleans in The Netherlands, and we compare these groups with each other as well as with native Dutch group in terms of their entrepreneurial behaviour and performance. All in all, migrant entrepreneurs deserve more attention. In order to succeed in the current business climate it is essential that businesses recognize that customers all over the world have choice and consumers have to be pursued for their business. Working with migrant minority businesses offers the opportunity to do just that. Migrant minorities are usually a highly motivated and qualified entrepreneurial group. Migrant minority businesses mostly fall into the category of small and medium-sized enterprises (SMEs). Small and medium-sized enterprises play a significant role in the domestic economies of most

Migrant entrepreneurship from the perspective of cultural diversity 111 countries. Each and every successful self-employed migrant or minority business contributes to improved social and economic integration. A growing migrant economy creates a virtuous circle: business success gives rise to a distinctive motivational structure, breeding a community-wide orientation towards entrepreneurship. Migrant entrepreneurs also deserve more attention, since this group has to deal not only with arbitrary problems of entrepreneurship, but also with specific problems that occur among these group members. Firstly, communication is an important aspect which needs attention. One of the main problems is the distance involved and the loads of information sent via letters and on the Internet. This type of communication is not effective among migrant entrepreneurs, since they would prefer the personal approach. Secondly, the fact that most migrant entrepreneurs are uninformed and have a limited network is a main problem. Most of the time they are unaware of the rules and the facilities which are provided. They are usually unprepared and without a business plan. Developing role models would help in this case. Finally, the minimum contact between entrepreneurs and advice organizations such as business associations, Chambers of Commerce and native entrepreneurs is a problem as well. One important consequence is that migrant entrepreneurs do not make use of the information/ support/ assistance possibilities. Motives for not making use of the facilities are unfamiliarity, communicational problems and limited access to information. References Alba, R. and V. Nee (1997), ‘Rethinking assimilation theory for a new era of immigration’, International Migration Review, 31, 826–74. Aldrich, H.E. and R. Waldinger (1990), ‘Ethnicity and entrepreneurship’, Annual Review of Sociology, 16, 111–35. Ardichvili, A. and K.P. Kuchinke (2002), ‘Leadership styles and work-related values of managers and employees of manufacturing enterprises in post-communist countries’, Human Resource Development Quarterly, 12, 363–83. Audretsch, D.B. (2002), ‘Entrepreneurship: a survey of the literature’, prepared for the European Commission, Enterprise Directorate General, Brussels, July. Austin, W.G. and S. Worchel (eds) (1979), The Social Psychology of Intergroup Relations, Monterey, CA: Brooks/Cole, pp. 33–47. Basu, A. and E. Altinay (2002), ‘The interaction between culture and entrepreneurship in London’s immigrant businesses’, International Small Business Journal, 20, 371–93. Baycan-Levent, T., E. Masurel and P. Nijkamp (2003), ‘Diversity in entrepreneurship: migrant and female roles in urban economic life’, International Journal of Social Economics, 30, 1131–61. Bergeron, N. and B.H. Schneider (2005), ‘Explaining cross-national differences in peer-directed aggression: a quantitative synthesis’, Aggressive Behavior, 31, 116–37. Blanchflower, D.G. (2004), ‘Self-employment: more may not be better’, Working Paper No. 10286, Cambridge, MA: National Bureau of Economic Research. Borjas, G. (1995), ‘Ethnicity, neighbourhoods, and human-capital externalities’, American Economic Review, 85, 365–90. Butler, J.S. and P.G. Greene (1997), ‘Migrant entrepreneurship: the continuous rebirth of American entrepreneurship’, in D.L. Sexton and R.W. Smilor (eds), Entrepreneurship, 2000, Chicago, IL: Upstart Publishing, pp. 267–89. Carree, M.A. and A.R. Thurik (2003), ‘The impact of entrepreneurship on economic growth’, in Z.J. Acs and D.B. Audretsch (eds), Handbook of Entrepreneurship Research, Amsterdam: Kluwer, pp. 437–71. CBS (Central Bureau of Statistics) (2003, 2004, 2006), Allochtonen in Nederland 2003, Voorburg. Chaganti, R. and P.G. Greene (2000), ‘Who are migrant entrepreneurs? A study of entrepreneurs’ migrant involvement and business characteristics’, Journal of Small Business Management, 40, 126–43. Choenni, A. (1997), Veelsoortig Assortiment, Amsterdam: Het Spinhuis. Christie, P.M.J., I.W.G. Kwan, P.A. Stoebel and R. Baumhaut (2003), ‘A cross-cultural comparison of ethical attitudes of business managers’, Journal of Business Ethics, 46, 263–87. Cooper, A.C. and W.C. Dunkelberg (1987), ‘Entrepreneurial research: old questions, new answers and methodological issues’, American Journal of Small Businesses, 1, 11–23.

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Cross, M. (ed.) (1992), Migrant Minorities and Industrial Change in Europe and North America, Cambridge: Cambridge University Press. Esping-Andersen, G. (ed.) (1993), Changing Classes. Stratification and Mobility in Post-Industrial Societies, London: Sage. Florida, R. (2002), The Rise of Creative Class, New York: Basic Books. De Graaff, T. (2002), ‘Migration, migrant minorities and network externalities’, Thela thesis, Amsterdam. Halter, M. (2000), Shopping for Identity, New York: Schoiken. Hébert, R.F. and A.N. Link (1982), The Entrepreneur, New York: Praeger. Henkes, B. (1995), Heimat in Holland, Duitse Dienstmeisjes, 1920–1950, Amsterdam: Babylon-De Geus. Hessels, J., N. Bosma and S. Wennekers (2005), Nieuw Ondernemerschap in Herstel, Zoetermeer: EIM. Hofstede, G. (1991), Culture’s Organization, Software of the Mind; Intercultural Cooperation and Its Importance for Survival, London: Mc Graw-Hill. Hofstede, G. (2001), Culture’s Consequences: Comparing Values, Behaviors, Institutions, and Organizations across Nations, Thousand Oaks, London, New Delhi: Sage Publications. Jacobs, J. (1961), The Life and Death of Great American Cities, New York: Random House. Jansen, M., J. de Kok, J. Spronsen and S. Willemsen (2003), ‘Immigrant entrepreneurship in the Netherlands – demographic determinants of entrepreneurship of immigrants from non-western countries’ Zoetermeer: EIM. Johnson, P.J. (2000), ‘Migrant differences in self-employment among Southeast Asian refugees in Canada’, Journal of Small Business Management, 38, 78–86. Kee, P. (1993), ‘The economic status of male immigrants in the Netherlands’, (dissertation), University of Amsterdam. Kirzner, I.M. (1973), Competition and Entrepreneurship, Chicago: University of Chicago Press. Kloosterman, R. (1998), ‘Immigrant entrepreneurship and the welfare state’, in J. Rath (ed.), Immigrant Businesses on the Urban Economic Fringe. A Case for Interdisciplinary Analysis, Houndmills, Basingstoke: Macmillan Press. Knight, F.H. (1921), Risk, Uncertainty and Profit, New York: Houghton Miffin. Light, I. (1972), Migrant Enterprises in America, Berkeley: University of California Press. Lee, Y., T. Cameroen, P. Schaeffer and C.G. Schmidt (1997), ‘Migrant minority small business: a comparative analysis of restaurants in Denver’, Urban Geography, 18, 591–621. Lucassen, L. and R. Penninx (1994), Nieuwkomers, Nakomelingen, Nederlanders. Immigranten in Nederland 1550–1993, MES-Reeks 1, Amsterdam: Het Spinhuis. Massey, D.S. and N.A. Denton (1993), American Apartheid: Segregation and the Making of the Underclass, Cambridge, MA: Harvard University Press. Masurel, E. and P. Nijkamp (2003), ‘Allochtoon ondernemerschap’, in P. Risseeuw and R. Thurik (eds), Handboek Ondernemers en Adviseurs; Management en Economie van het Midden- en Klein Bedrijf, Amsterdam: Kluwer, ch. 11. Masurel, E. and P. Nijkamp (2005), ‘Migrant minority entrepreneurs and their lack of institutional collaboration reasons and perceptions in the franchise sector’, Tinbergen Institute, Amsterdam. Masurel, E., P. Nijkamp, M. Tastan and G. Vindigni (2002), ‘Motivations and performance conditions for migrant entrepreneurship’, Growth & Change, 33, 238–60. McSweeney, B. (2002), ‘Hofstede’s model of national cultural differences and their consequences: a triumph of faith – a failure of analysis’, Human Relations, 55, 89–118. Miellet, R.L. (1987), ‘Immigratie van Katholieke Westfalers en de Modernisering van de Nederlandse Detailhandel’, Tijdschrift voor Geschiedenis, 100, 374–93. Milberg, S.J., S.J. Burke, H.J. Smith and E.A. Kallman (1995), ‘Values, personal information, privacy and regulatory approaches’, Communications of the ACM, 38, 65–74. Moghaddam, F.M. and S. Perrault (1992), ‘Individual and collective mobility strategies among minority group members’, Journal of Social Psychology, 132, 343–58. Nagel, C. (2002), ‘Constructing difference and sameness’, Migrant and Racial Studies, 25, 258–87. Olzak, S. (1992), The Dynamics of Migrant Competition and Conflict, Stanford: Stanford University Press. Ram, M. (1994), Managing to Survive: Working Lives in Small Firms, Oxford: Blackwell. Rath, J. (1998), ‘Een Etnische Stoelendans in Mokum. Over de Economische Incorporatie van Immigranten en hun Nakomelingen in Amsterdam’, in A. Gevers (ed.), Uit de Zevende. 50 Jaar Sociaal-Culturele Wetenschappen aan de Universiteit van Amsterdam, Amsterdam: Het Spinhuis, pp. 235–49. Rath, J. (2000), ‘Introduction; immigrant business and the economic, politico-institutional and social environment’, in J. Rath (ed.), Immigrant Business: The Economic, Political and Social Environment, London: Macmillan Press, pp. 1–19. Razin, E. (1989), ‘Relating theories of entrepreneurship among ethnic groups and entrepreneurship in space – the Case of the Jewish population in Israel’, Geografiska Annaler, 71, 167–81. Razin, E. (1993), ‘Immigrant entrepreneurs in Israel, Canada and California’, in I. Light and P. Bhachu (eds),

Migrant entrepreneurship from the perspective of cultural diversity 113 Immigration and Entrepreneurship, Culture, Capital, and Migrant Networks, New Brunswick: Transaction Publishers, pp. 111–32. Rettab, B. (1995), ‘Economic performance of the immigrant workforce: case study of the Netherlands’, EUR Proefschrift. Rettab, B. (2001), The Emergence of Migrant Entrepreneurship: A Conceptual Framework, EIM/Business and Policy Research, Zoetermeer: EIM. Robinson, P.B. and E.A. Sexton (1994), ‘The effect of education and experience on self-employment success’, Journal of Business Venturing, 9, 141–56. Sahin, M., M. Rietdijk and P. Nijkamp (2006), ‘Ethnic employees’ behaviour vis-à-vis customers in the service sector’, Research Memorandum, 2006-2. Schrover, M. (1996), ‘Omlopers in de Keulse potten en pottentrienen uit het Westerwald’, in M. ’t Hart, J. Lucassen and H. Schmal (eds), Nieuwe Nederlanders. Vestiging van Migranten door de Eeuwen Heen, Amsterdam: Stichting Beheer IISG en SISWO/Instituut voor Maatschappijwetenschappen, pp. 101–20. Schumpeter, J.A. (1934), The Theory of Economic Development, trans. R. Opie from the 2nd German edn [1926], Cambridge: Harvard University Press. Shulruf, B., J. Hattie and R. Dixon (2003), ‘Development of a new measurement tool for individualism and collectivism’, paper presented at the NZARE/AARE Joint Conference 2003, Auckland, New Zealand. Simon, G. (1993), ‘Immigrant entrepreneurs in France’, in I. Light and P. Bhachu (eds), Immigration and Entrepreneurship. Culture, Capital and Migrant Networks, London: Transaction Publishers, pp. 125–39. Stephen, W.L., J.C. Crotts, and F.L. Hefner (2004), ‘Cross-cultural tourist behaviour: a replication and extension involving Hofstede’s uncertainty avoidance dimension’, International Journal of Tourism Research, 6, 29–37. Stiglitz, J.E. and J. Driffill (2000), Economics, New York: W.W. Norton & Company. Super, I. (2005), ‘Country of origin as a source of opportunity’, Masters thesis, RSM Erasmus University, Rotterdam. Tesser, P.T.M., J.G.F. Merens and C.S. van Praag (1999), ‘Rapportage Minderheden 1999, Positie in het Onderwijs en op de Arbeidsmarkt, Sociaal en Cultureel Planbureau’, The Hague. Trompenaars, F. (1993), Riding the Waves of Culture: Understanding Cultural Diversity in Business, London: Nicholas Brealey. Uhlaner, L. and A.R. Thurik (2004), ‘Post-materialism: a cultural factor influencing total entrepreneurial activity across nations’, papers on Entrepreneurship, Growth and Public Policy no. 70-2004, Max Planck Institute of Economics, Jena, Germany. Van Praag, C.M. (1996), Determinants of Successful Entrepreneurship, Amsterdam: Thesis Publishers. Van Delft, H.C. Gorter and P. Nijkamp (2000), ‘In search of migrant entrepreneurship opportunities in the city: a comparative policy study’, Environment and Planning C: Government and Policy, 18, 429–51. Van Stel, A., S. Wennekers, R. Thurik, P. Reynolds and G. de Wit (2003), ‘Explaining nascent entrepreneurship across countries’, paper presented at the BKERC Conference, Babson College, 4–7 June 2003. Van Tubergen, F. (2004), The Integration of Immigrants in Cross-national Perspective, Wageningen: Ponsen & Looijen b.v. Veciana, J.M. (1999), ‘Entrepreneurship as a scientific research programme’, Revista Europea de Dirrecion y Economia de la Empresa, 8, 2–10. Veenman, J. (1999), Participatie en Perspectief, Verleden en Toekomst van Etnische Minderheden in Nederland, Lelystad: K.V. bv. Verbeke, W. (2000), ‘A revision of Hofstede et al.’s (1990), Organizational Practices Scale’, Journal of Organizational Behavior, 21, 587–602. Verheul, I., S. Wennekers, D. Audretsch and R. Thurik (2001), ‘An eclectic theory of entrepreneurship: policies, institutions and culture’, Research Report 0012, Zoetermeer: EIM. Vermeij, C. (2006), ‘What is cooking?’, Ph.D thesis, Utrecht University. Waldinger, R., H. Aldrich, R. Ward and associates (1990), Ethnic Entrepreneurs, London: Sage. Waldinger, R.D., H.E. Aldrich, R. Ward and J. Blaschke (1990), Migrant Entrepreneurs: Immigrant Business in Industrial Societies, Newbury Park, CA: Sage Publications. Ward, R. (1983), ‘Ethnic communities and ethnic business: an overview’, New Community, 11, 1–9. Werbner, P. (1990), ‘Renewing an industrial past: British Pakistani entrepreneurship in Manchester’, Migration, 8, 7–41. Wennekers, S. and R. Thurik (1999), ‘Linking entrepreneurship and economic growth’, Small Business Economics, 13, 27–55. De Wit, G. and F.A.A.M. van Winden (1989), ‘An empirical analysis of self-employment in the Netherlands’, Small Business Economics, 1, 263–72. Wikipedia (2006), The Free Encylopedia.

PART II ETHNIC MINORITY SELF-EMPLOYMENT IN AMERICA

8

Ethnic business owners and their advisors: the effects of common ethnicity Linda M. Dyer and Christopher A. Ross

The presence of small businesses that are owned and operated by members of ethnic communities is a phenomenon that exists in most countries. In some countries, these ethnic businesses dominate important sectors of business activity, particularly in the developing world (Rapley, 1996). With increasing migration, the growing presence of ethnic businesses in the industrial countries of the world has been the subject of much study. Researchers and scholars in Canada, Europe and the United States, in particular, have been concerned with understanding the development and growth of ethnic small businesses. Ethnic small businesses in industrial countries face a number of obstacles and challenges that relate specifically to their ethnic character. Ethnic business owners often have different business norms and expectations, for example (Tracogna, 1998). They sometimes have difficulty getting financing, they may lack important managerial skills and they often lack access to critical mainstream markets. The ethnic owner may also experience problems with language and may be unfamiliar with the dominant business culture. Finally, many ethnic businesses operate in the retail and service sectors, and they are often cut off from the major business networks in the mainstream society. In short, ethnic firms generally exist in marginal sectors with low barriers to entry and intense competition, and display heavy reliance on the fellow-ethnic market for their customers (Phizacklea and Ram, 1995). An almost universal reaction, on the part of governments, to the challenges faced by ethnic small businesses is to establish programmes of support and advice. Many large ethnic communities have also established business associations and ethnic Chambers of Commerce that provide business support for their members. Of course, independent from these ethnically focused government or community organizations, there exists a wide array of trade associations, government-sponsored programmes, and private providers such as accounting firms, consulting companies, lawyers and other professionals in the mainstream culture who offer business support for small enterprises. The goal of this chapter is to examine the question: Does ethnicity matter? In other words, is there a specific advantage when the ethnic business owner receives information and advice about business activities from a fellow-ethnic advisor? Are there special benefits to be gained from membership of an ethnic Chamber of Commerce or business association beyond a mainstream business-support organization? Are government-sponsored ethnocentric programmes an effective tool for aiding communities? Does it profit an owner to select a business-support professional from within his or her own ethnic community, compared with approaching a mainstream advisor? Relatively few investigators have studied the relationships between ethnic minority enterprises and the providers of business development support, be they mainstream providers or ethnic-centred institutions (Ram and Barr, 1997). A notable exception is Oc and Tiesdell (1999), who found that 117

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one of the key needs of ethnic entrepreneurs was the availability of financial resources. Moreover, for business development support providers to be successful with ethnic businesses, they must demonstrate awareness and sensitivity, and must have credibility. We are unaware of any study in the small business literature, however, that specifically compares the usefulness of having a business-support advisor from within (as opposed to from outside) the entrepreneur’s own ethnic group. The format of this chapter is as follows: first we discuss the propensity of ethnic small business owners to use business-support advisors; next we describe some specific examples of ethnic institutions that provide advice to small firms; third we review the literature to construct a rationale for the potential advantages and disadvantages of an ethnocentric advising process; finally we present some exploratory empirical data related to this issue, and we draw some lessons for future research. Before proceeding further, we must first be clear that there are various meanings associated with the term ‘ethnic’. Confusion has often arisen because researchers tend to use the term ‘ethnic’ interchangeably with ‘immigrant’ and ‘minority’ business owners (Chaganti and Greene, 2002). These categories sometimes overlap, though not always. Ethnicity can also be defined as ‘identification with an ethnic group’, which is a psychological construct that goes beyond a straightforward focus on biology or birthplace. In this chapter we will use two definitions: ethnicity as the easily recognizable physical characteristics that can be readily observed in certain individuals, and ethnicity as the extent of their self-identification with a particular cultural or racial group. Advice seeking by ethnic small businesses Many businesses seek outside help and advice at some point in their life cycle. This help may be of a formal nature, with the hiring of fee-for-service consultants and professional advisors, or it may be of an informal nature with the business owner having discussions with family members, associates, customers or suppliers, for example (Mitchell, 2003). But what of the ethnic small businesses? Various studies show that, in the main, these ethnic business owners are seldom seekers of help and advice from mainstream institutions. They tend to avoid business support agencies such as Chambers of Commerce, commercial banks and government-sponsored institutions (Marlow, 1992). Ram, Sanghera, Abbas and Barlow (2000), in their study of ethnic minority businesses, state quite explicitly that their study ‘confirms the reluctance of many small businesses to utilise formal programmes of training’ (p. 339). Oc and Tiesdell (1999) and Young (2002) reported similar findings in their study of business support for ethnic minority businesses. But why would ethnic businesses avoid seeking help from business support agencies? This is an important question, especially since the problems they face are those that all small businesses encounter, and these are superimposed on the problems that are specific to ethnic small businesses, such as lack of familiarity with mainstream norms and expectations, lack of information, and lack of access to markets and to suppliers. Scholars have advanced several reasons to explain this behaviour on the part of these businesses. Ethnic business owners may regard such support as shameful or even insulting, or they may self de-select by assuming that their businesses did not qualify for support (Oc and Tiesdell, 1999). Other researchers argue that the absence of ethnic businesses in training schemes is the result of a mis-identification of the needs of these businesses and that there is little effort by the authorities to use professionals such as management consultants, bankers and

Ethnic business owners and their advisors 119 accountants, who are members of the target ethnic group. Many of the business people expressed an interest in having advisors from their own ethnic group because many of their problems were related to their ethnicity as opposed to the business (Marlow, 1992). Ethnic business-support institutions and advisors As a result of the perceived absence of sources of mainstream advice for ethnic small businesses, many ethnic communities have developed institutions that offer help and advice to business members of their community. Thus there is the Asian Institute of Management in the United Kingdom, and The Indus Entrepreneurs, which is an organization with 30 chapters in eight countries around the world. The Indus Entrepreneurs include the following ethnic groups: Bengali, East Indian, Nepali, Pakistani, Punjabi, Sri Lankan and Tamil. These are organizations, ethnic in character, that have been established to provide support to a specific ethnic group (www.tie-vancouver.org). Similar organizations exist in several different countries. Boissevain and his colleagues (1990) provide several examples of these specialized associations. Pakistani clothing manufacturers in Britain set up a trade association; Korean real estate developers created the Koreatown Development association in Los Angeles; in Berlin, a Turkish organization provided regular advice to its entrepreneur-members. Silverman (1999) describes how black manufacturers of beauty products in Chicago established an association to discuss marketing strategies. In some cases government provides the impetus for creating these ethnic business support services (Boissevain et al., 1990). In Montreal, for example, the provincial government created the Mathieu Da Costa Business Development Corporation in 1992 for the sole purpose of providing loans to the black community. In Toronto, Business Improvement Associations sponsored by the city government serve as ethnic resources when they are located in neighbourhoods that are predominantly ethnic. It might be useful to sketch, in some detail, the objectives of one of these ethnic organizations. The Montreal Association of Black Business Persons and Professionals (MABBP), located in Canada, is a good example. This organization was formally established in 1981. Its initial objectives were the following: 1. 2. 3. 4. 5.

To create a climate that encourages trade and industry for the association and its members. To promote opportunities for the association and its members in areas of business, the professions, science, arts and technology. To undertake business ventures and to hold real estate and other property. To provide representation for the black business community. To provide guidance and counselling advice and referral services to small and startup businesses.

Currently the MABBP provides professional business training for members and nonmembers, encourages cooperation between its members and promotes the business and services of its members. In addition, it tries to make it easier for young black professionals and business people to enter the marketplace and helps its members get experience in different areas of business management (MABBP.org, 2005). This organization was instrumental in lobbying the provincial government to create the Mathieu Da Costa Business Development Corporation mentioned above.

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In addition to these formal organizations, there are also private individuals who, on a fee-for-service basis, provide help and advice to members of their own ethnic community. These consultants have frequently been trained in mainstream educational institutions and thus have become familiar with the norms and expectations of the dominant business community. Their training, too, makes them familiar with the legal, marketing and financial systems. They are thus able to combine their knowledge of the dominant culture with their familiarity with the ethnic culture, and are able to play the role of a middleman. These consultants are often accountants, lawyers or business school professors, for example. It is the use of these formal institutions and individuals by ethnic businesses that concerns us in this chapter. To restate our original question: is it advantageous to an ethnic small business owner to seek advice from these ethnic business-support organizations and fellow-ethnic individual advisors? Does an ethnocentric advice process confer advantages beyond those available from mainstream business-support providers? Parenthetically, we are not unmindful of the fact that ethnic resources are just one set of factors that can influence business success. The functioning and success of a business also depends on ‘class resources’ such as education and financial capital (Marger, 1989). Basu and Goswami (1999) found, for example, that business growth among ethnic businesses is positively related to educational attainment, prior experience and personal financial commitment. The opportunities in the marketplace also have a significant impact on the development of the business. Without opportunity, resources will seldom be useful, although it is possible to use resources to create opportunity. Finally, the strategies used by the business will also have an impact. Our focus in this chapter, however, is on ethnic resources and our intent is to answer the question: does the use of these fellow-ethnic resources convey a competitive advantage to ethnic small businesses? Some scholars have argued that ethnic firms exist in a context of discrimination, limitation and disadvantage, and that any kind of ethnocentric strategy is unlikely to be advantageous in the long term (Ram and Barr, 1997). On the other hand, some scholars see the fact of ethnicity, ethnic values and culture as providing a distinctive advantage for entrepreneurial start-up and subsequent firm development. Advantages of same-ethnicity advising Greene (1997) explored the notion that an ethnocentric advising process might be advantageous. The researcher used a strategic management framework to assert that the use of ethnic organizations can fulfil the requirements of sustainable competitive advantage. Briefly stated, sustainable competitive advantage is secured when a resource adds value, when few competitors have access to the resource, and when it is difficult for others to duplicate. In her case study of Ismaili–Pakistanis in one American city, Greene concluded that their community association provides entrepreneurs with long-term access to funds and advice that could add value. Since access is limited to entrepreneurs from this particular ethnic group, other competitors cannot use the resource. Finally, the unique historical, cultural and social bonds within this community create a form of commitment between entrepreneurs and advisors that would be impossible to duplicate in mainstream associations. She concluded, therefore, that the ethnic community association creates a sustainable competitive advantage for these entrepreneurs. A more ‘micro’ approach to answering the questions posed in this chapter would allow us to discuss the process by which the interaction between an individual business owner

Ethnic business owners and their advisors 121 and an advisor of the same ethnic group is established, developed and leads to particular organizational outcomes. In this regard, it is useful to examine some of the work that has been done in the organizational behaviour literature on same-ethnicity dyads. Issues of race and ethnicity have been addressed under the general rubric of diversity research. Researchers have examined the performance of dyads or small groups that are ethnically homogeneous or heterogeneous and frequently have found that, when a group comprises people of different ethnic backgrounds, group performance is inhibited. This negative performance outcome seems to be related to group interaction problems: low cohesiveness, mis-communication and conflict (Kochan, Bezrukova, Ely, Jackson, Joshi, Jehn, Leonard, Levine and Thomas, 2003). Watson, Kumar and Michaelsen (1993), for example, studied culturally homogeneous (White) and heterogeneous (including White, Black, Hispanic, Asian and MiddleEastern) student work teams over a four-month period. The researchers found that intergroup interaction was significantly better in the homogeneous groups than in the culturally diverse groups, during the first three months. The diverse groups had more difficulty with agreeing on what was important, for example, or ensuring a free flow of information. Moreover, the homogeneous groups performed better on the tasks of case analysis – considering a range of perspectives, problem identification, generation of multiple alternatives and the quality of solutions. In a field setting, Kochan et al. (2003) studied workgroups in four large organizations, examining the effects of racial diversity on group processes such as communication, conflict, cohesion, information sharing and creativity. They also looked at the performance of the workgroup, and financial outcomes of the unit or firm as a whole. Although their overall results were somewhat ambiguous, some of the data were consistent with a negative impact of diversity. In one firm, for example, they found that racial diversity within teams inhibited constructive group interactions, which in turn had a negative effect on team performance. This was particularly true in units that had a competitive culture and growth-oriented strategies. In another firm, service teams’ ethnic diversity was negatively related to the achievement of team goals (Kochan et al., 2003). Consistent with these findings is Hill and Gant’s (2000) research on a mentoring programme at a large US firm. They found that same-race (black) mentor–protégé dyads had short and easy initiation periods, created a sense of identification and an increased level of intimacy, and so resulted in trusting relationships that enhanced the careers of protégés. On the other side of the coin, cross-race pairs posed more difficulties for the formation of trust. Thomas (1989) described tensions between black/white mentor–protégé dyads, which prevented the open exchange that is so desirable in an advising relationship. He notes that, because of these tensions, mentor and protégé keep their emotional distance, depersonalizing the relationship. The theoretical underpinnings of these negative effects of diversity on process and performance come from the social psychology literature (Harrison, Price and Bell, 1998). Two paradigms – the similarity-attraction hypothesis and the self-categorization approach – take centre stage. The similarity-attraction hypothesis (Byrne, 1971; Tsui, Egan and O’Reilly, 1992) posits that, when attitudes between two people are similar, this is a primary source of attraction between them. Similarity in attitudes or beliefs is inferred from a variety of readily observable characteristics, including physical traits such as sex, age or race. Put differently, people tend to assume that, if another person is physically similar to

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them, they will have common beliefs, values or personality. The outcomes of this attraction may be frequent communication, an interest in maintaining an affiliation with the other person, and the formation of interpersonal bonds. It is not even necessary that the two people interact for this preference to occur. Self-categorization theory (Ashforth and Mael, 1989) proposes that people define themselves in terms of an easily observable social category such as race, sex or membership of an organization. This self-categorization is the basis of self-identity, and leads to perceptions of in-groups (‘people who are like me’) and out-groups (‘people who are not like me’). People in one’s in-group tend to be seen positively, while those in the out-group are seen as less trustworthy and less cooperative, even when interaction with these out-group members is minimal or absent. Together, the similarity-attraction and self-categorization theories are consistent with the empirical finding that an ethnically similar other will be preferred to someone who is dissimilar, even before any significant interaction occurs. Moreover, the subsequent interpersonal processes will be smoother and performance will be better in homogeneous groups. By this reasoning, a business owner might prefer to choose a business-support advisor of his or her own ethnicity, and that relationship should lead to more successful outcomes. It must be noted that group process variables are particularly important in the development of the advisory relationship. A certain comfort level between advisor and entrepreneur is necessary before the latter will discuss confidential matters or express the uncertainties and doubt that are inherent in managing a business. When the entrepreneur and advisor achieve this comfort level, the open communication that ensues is the prerequisite to better-quality advice and more effective problem solving (Maister, Green and Galford, 2000). Similarly, Gumpert and Boyd (1984) speak of the loneliness of the small business owner, noting that input from a trusted confidant can reduce stress, provide comparative benchmarks which allow for improved decision making, and thus lead to better financial results. We can conclude from this review that, if the business owner and advisor are of the same ethnicity, their communication, the success of the relationship and the quality of their joint problem solving might be better than if owner and advisor are from different ethnic groups. The case for heterogeneity The desirability of same-ethnicity groups has not gone unchallenged, however. An increasingly diverse labour market and customer base have caused many business leaders and researchers to remark that ethnic diversity is now a social reality as well as a societal value (Kochan et al., 2003). Many people have a vested interest in finding ways in which effectiveness can be achieved within the inescapable context of workforce heterogeneity. Their goal is to build a case for the positive effect of ethnic diversity on organizational performance (ibid.). Indeed, some researchers have pointed out that the so-called ‘dark cloud’ of ethnic or cultural diversity may have a ‘silver lining’ (Watson et al., 1993). Ethnic diversity implies varied past experiences among people of different cultural or national backgrounds, and this variety should allow a group to consider a greater range of viewpoints and innovative ideas, which in principle should allow for superior problem solving. Under what conditions, then, would the proposed positive effects of diversity emerge? The longitudinal study of ethnically homogeneous versus heterogeneous groups conducted

Ethnic business owners and their advisors 123 by Watson and his colleagues (1993) found that the initial advantage accruing to homogeneous groups disappeared over time; by the end of the four-month period under study, intra-group processes were just as good in the heterogeneous groups, and the heterogeneous groups outperformed homogeneous groups in the range of perspectives considered, and the number of alternatives generated. The authors asserted that much of the earlier literature described simplistic tasks done by newly created groups, which lasted only for the duration of the research. Thus the comparatively good performance of same-ethnicity groups may be limited to newly formed groups. For normal, permanent workgroups, we might predict equality in group process and perhaps improved problem solving in heterogeneous groups. In other words, time might be an important moderator of the link between diversity and performance. Convergent evidence comes from a study by Harrison, Price and Bell (1998) who examined interdependent work teams in two settings: hospitals and grocery stores. Their research suggests that, over time, the negative effect of differences in observable physical characteristics like race, age and sex diminished. Instead it was ‘deep-level’ differences in job attitudes and organizational commitment which affected group processes. Apart from time, aspects of the organizational context also affected the diversity– performance relationship. Kochan et al. (2003) found that, when workgroups in an information-processing firm were specifically trained to manage intra-group processes, the negative effects of racial diversity were reduced. Watson et al. (1993) also suggested that an environment that provided feedback about group processes could resolve problems with group interactions. Similarly, Kochan et al. (2003) studied 480 retail branches of a financial services firm, and found that, when the branch culture affirmed that diversity was a source of learning and a valued resource, racial diversity had a positive effect on performance. Finally, in another information-processing firm, Kochan and his fellowresearchers (2003) found that, when ethnically diverse service teams existed within ethnically diverse organizational units, the diverse teams performed better than homogeneous teams. We draw two lessons from this review. First, we propose that the advantage of having a same-ethnicity advisor would obtain early in the relationship, during the original choice of the advisor and the early, ‘getting-to-know-you’ period. Ethnic homogeneity would be less important over time, however. Deeper-level similarities in attitudes or values might be more predictive of success in mature relationships between advisor and business owner. Second, we note that context variables such as the ethnic make-up of the business environment in which the owner finds him- or herself could be an important moderator of the link between ethnic homogeneity and the success of the relationship that develops. Stated differently, the organizational context might be an important variable to explore. Several business-related variables might influence the salience of ethnicity in the organizational context. One such variable is the extent to which the business encourages fellow-ethnic customers. Some retail outlets provide ethnic products and clothing, some restaurants prepare ethnic food; there are ethnic media businesses and other services established to cater to the needs of an ethnic clientèle. For the owner, involvement in the ethnic community may be one way to promote the business and expand his or her customer base. This community involvement, and the frequent interactions with fellowethnic customers, would serve to increase the salience of ethnicity to the business owner. Another variable likely to affect the salience of ethnicity in the organizational context is

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the number of employees who are from the same ethnic background as the owner. Again, frequent workplace interactions with employees who have common cultural practices, values and communication patterns may increase the extent to which ethnicity is salient to the business owner. We must also reconsider the notion of self-categorization (Ashforth and Mael, 1989), that is, the extent to which the business owner sees his or her own ethnic identity as relevant (Donthu and Cherian, 1994). The ethnic self-identity of any individual varies along a continuum, and might depend on geography, social surroundings or other antecedent conditions (Stayman and Deshpande, 1989). Thus variation in ethnic identity may certainly be related to race and place of birth, but can also result from influences such as the neighbourhood in which one lives, the size of the ethnic group relative to the mainstream, or even the time of year, in particular, around the dates of traditional ethnic holidays. Within any (demographic) ethnic group of business owners, therefore, there will be some to whom ethnicity is seen as relevant to a wide range of their activities, and who strongly identify with their ethnic group, and others to whom their own demographic characteristics are essentially irrelevant to their daily lives or their business activities. Thus any exploration of the link between advisor ethnicity and organizational outcomes should take into account the ethnic self-identity of the owner. In summary, after looking at the relevant literature in organizational behaviour, small business management and strategic management, we return to our broad question: does ethnicity matter in the business advisory process? Our review of past research has revealed several variables that seem worthy of investigation. They include the ethnicity of the owner and the advisor, the quality of the interaction between them, the length of time they have known each other, the ethnic make-up of the business environment, including the ethnicity of employees and customers, the ethnic self-identification of the owner, the owner’s membership of ethnic associations, and the performance of the firm (Figure 8.1).

Owner/advisor dyads Same ethnicity Different ethnicity

Quality of interaction Ease of communication Interpersonal liking Range of viewpoints Conflict Creativity

Outcomes Business performance Satisfaction

Ethnic self-identification Organizational context Fellow-ethnic customer base Fellow-ethnic employees

Figure 8.1

Effects of ethnicity on owner/advisor interactions and business outcomes

Ethnic business owners and their advisors 125 Empirical work: procedures We proceeded to collect data from a small sample of ethnic business owners. Our aim was to take a preliminary look at the major variables that emerged in order to develop propositions for testing our theoretical framework. This initial exploration is not presented as a definitive test of hypotheses; rather, it could aid methodological choices for future research. We approached 140 small business owners from six ethnic minority groups: Black, Chinese, Greek, Italian, Middle-Eastern and South Asian business owners. These groups were selected because they are the major ethnic groups in the two cities in which data were collected. We used a snowball sampling technique to develop the sample; starting with key contacts in Montreal and Toronto, we created a list of potential participants from each of the six ethnic groups under study. After each interview, we asked the respondent whether he or she could suggest the names of other owners who might be willing to participate. It was important as well to ensure that all our business owners did not belong to the same network, so a number of ‘cold calls’ were made, and the same snowball techniques were used to get further names from the networks of these new participants. In the end, we were able to achieve a diverse sample of respondents. About 75 per cent were male, and 58 per cent of them had a university education. The representation from each of the six ethnic groups was roughly equivalent, ranging from a low of 14 per cent (Greek) to a high of 21 per cent (South Asian). The owners had been in business for an average of 10.5 years, with an average of 20 full-time employees and modal annual sales of (Canadian) $50–500 thousand. The firms were widely diverse as to industry: food services (19 per cent) and retail trade (17 per cent) were the modal categories, but information industries, finance and insurance, manufacturing firms and a range of other service firms were among those represented in the sample. A semi-structured interview was conducted with each participant. During the interview, owners were asked about the person they would approach most frequently for information and advice as they faced business problems, or as they dealt with the general challenges of life in their firms. Thus their choice of a primary advisor was elicited in free response. Follow-up interview questions asked the participant about the characteristics of the advisor, including ethnicity and the length of time they had known the advisor. We also asked them to describe the nature of their interactions with the advisor, in particular, whether it was a collegial/professional relationship, or whether the advisor could be considered to be a mentor or a friend. The owners’ membership of ethnic associations was also part of the interview data: we asked whether participants currently belonged to trade, professional or ethnic associations. After the interview, each participant completed a paper-and-pencil questionnaire. One of the measures, ethnic self-identification, was a two-item scale taken from Donthu and Cherian (1994) which measured the owners’ perceptions of identification with an ethnic group and the importance of maintaining this ethnic identity. Each question had a rating on a five-point scale: a five on the scale represented very low identification, while a score of one represented very high ethnic identification. In our sample, the reliability of this two-item scale was 0.73. We also measured two aspects of the organizational context; the percentage of employees from the same ethnic group as the owner was measured with one item on the written questionnaire, and a similar question asked the owner to estimate the percentage of fellow-ethnic customers who patronized the business.

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We measured business performance by questioning the business owners about their perceptions of success. This ten-item measure was part of the paper-and-pencil questionnaire and was adapted from Beal (2000). The respondent rated on a five-point scale the importance to the business of five performance measures of sales and profits. Next, the respondent’s satisfaction with the same measures of business performance was rated, also on a five-point scale. For each performance indicator, importance was multiplied by satisfaction and the products were averaged to form a composite measure of business success. This measure was found to have good reliability in the sample (alpha0.87). Finally one question asked for their view of the usefulness of the advice provided by ethnic associations. Empirical work: findings Use of fellow-ethnic business-support advisors Of the 140 business owners, we found that a relatively small proportion participated in an ethnocentric advice process. Nearly 20 per cent of them told us that there was no specific person who could be identified as a primary advisor. Many others did not provide details about the ethnicity of the advisor. Of the remaining owners, 37 had advisors of the same ethnicity as themselves, while 28 had advisors from a different ethnic group. Some 65 per cent of the owners with same-ethnicity advisors said that the relationship was like that of a mentor or a friend. In comparison, 42 per cent of the owners with different-ethnicity advisors categorized the relationship in these terms. This is suggestive, but not statistically significant (see Table 8.1). Of course, the small sample size meant that our test had low statistical power. Our measure of the interaction process was also quite rudimentary. For this reason we will not rule out the possibility that same-ethnicity advising leads to a more congenial interaction between owner and advisor, which is consistent with what one would expect, given the review of past research. In the future, however, it would be useful to have a larger sample size and a more detailed, multi-item measurement of the interaction process, which could be used to determine the level of intimacy and trust between the business person and the advisor. On average, the owners had known their advisors for just over 11 years. The sameethnicity owner/advisor dyads relative to the heterogeneous dyads were in existence for a Table 8.1

Ethnicity of advisor, process and context variables, and outcomes Closeness of interaction*

Time advisor known (yrs)

Ethnic identity**

Fellowethnic customers

Fellowethnic employees

Perceptions of success

Same ethnicity Different ethnicity

65%

14.2

2.64

24.4%

48.3%

2.51

42%

8.7

2.92

17.0%

27.4%

2.86

p-value

0.109

0.041

0.053

0.240

0.012

Advisor ethnicity

0.487

Notes: * % who said advisory relationship was like that of a mentor or a friend; ** five-point scale; a lower value is associated with a stronger ethnic identity.

Ethnic business owners and their advisors 127 longer time – the former for 14.2 years and the latter for 8.7 years. This is an interesting result which suggests that same-ethnicity dyads are more stable than dyads made up of different ethnicities. It is likely that the stability of same-ethnicity dyads is the result of the social comfort engendered by shared experiences, ease of communication, commonly held beliefs, language and attitude towards the mainstream society held by the members of the dyad. These shared beliefs and attitudes provide the foundation for an enduring relationship. This finding is consistent with the view that the most successful relationships occur when advisors are of the same ethnic group as the advisee (Hill and Gant, 2000; Thomas, 1989). Only 18 of the participants had new advisory relationships, that is, less than one year old. Because of the small sample size, we were unable to examine directly the notion that a positive effect of same-ethnicity pairings would obtain early in the relationship, but that this would disappear over time. We noted, however, that longer relationships tended to be closer relationships. Advisors who were described as mentors or friends had been known for 13 years on average, whereas the professional or collegial relationships were 7.5 years old, on average. The sample size issue poses a real challenge to future research in this area. We believe that it would take a very large sample indeed to get a reasonable sub-sample of new relationships, some of which are same-ethnicity and others that are different-ethnicity dyads. A more efficient way to achieve this might be to approach a large business-support agency, perhaps governmental or para-public, which employs advisors of diverse ethnicities. In this context, researchers might be more successful at finding an adequate sample of new, naturally occurring, homogeneous and heterogeneous owner–advisor pairs. We can also comment on the proposed relationship between the choice of a fellowethnic advisor and the ethnic self-identity of the owner. It turned out that the participants whose advisors were of the same ethnicity as themselves also had a significantly stronger identification with their ethnic group. This is a simple non-causal analysis, of course, but it seems a more likely explanation that the relatively enduring characteristic that is ethnic self-identity would have an effect on the choice of advisor (rather than the reverse cause – that choosing an advisor would affect self-identity). The participants also described the salience of ethnicity in the business context in which they operated their firms. They reported that, on average, about 10 per cent of their customers were fellow-ethnic, (median  10 per cent; range  0 to 95 per cent), and that just under one-quarter of their employees were fellow-ethnic (median  23 per cent; range  0 to 100 per cent). Having a large proportion of customers from their own ethnic group was not related to having a same-ethnicity or different-ethnicity advisor. On the other hand, owners whose advisors were fellow-ethnic operated firms in which, on average, just under half the employees came from their own ethnic group. Owners with differentethnicity advisors had a significantly smaller proportion of employees from their own ethnic group. To summarize the results of our empirical work so far: owners with same-ethnicity advisors tended to have a stronger ethnic identity, to have known their advisor longer, and to have a larger percentage of fellow-ethnic employees relative to different-ethnicity dyads. Taken together, we might speculate about an ethnocentric ambiance in the daily activities of the business. Ethnic ambiance here describes a situation where the owner’s ethnic identity and the large percentage of fellow-ethnic employees create a company culture in which

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internal communication may take place in the language of the ethnic group, ethnic music may be played, and holidays and celebrations may conform to ethnic norms. In a situation such as this, the internal operations of the business and the self-image of the owner are internally consistent and mutually reinforcing. This ambiance may be linked to choice of a same-ethnicity advisor. While the percentage of fellow-ethnic customers was not related to advisor ethnicity, in many businesses customer ethnicity has a lesser impact on the firm’s culture than does employee ethnicity. Future empirical research could explore the notion of ethnocentric ambiance, to clarify the concept and develop valid measures for it. We noted earlier that biology does not overlap fully with ethnic identity; in the same way, ethnic business ownership need not mean that the business has an ethnocentric culture. Finally, there was no direct impact of advisor ethnicity on business success, measured in terms of self-reported financial performance. Nor was the type of relationship between owner and advisor linked to success. We could draw a conclusion that fellow-ethnic understanding in the advice process has no direct impact on business performance. The small sample and the weakness of our measure of interaction processes make any conclusion premature, however. Furthermore, the measure of success could be expanded beyond satisfaction with overall financial performance. We might be more likely to find relationships if we included more proximate outcomes of advice as mediating variables. Such mediators might include the launching of new products or services, improved business strategies, or simply the quality of recommendations of the advisor. An owner–advisor pair may share great empathy, but if the advice given is inappropriate, it cannot be expected to result in positive outcomes for the business. Clearly this part of the framework would benefit from further investigation, with a larger sample and improved measures. Use of ethnic associations About 40 per cent of our respondents told us that they did not belong to any business associations at all. Just 42 owners said that they belonged to an ethnic business association and 72 belonged to mainstream trade or professional organizations. Thirty-two belonged to both types of associations, while just ten belonged to an ethnic association only. There was no statistical relationship between having a fellow-ethnic advisor and belonging to an ethnic business association. This suggests that, for this sample, the individual advisors described above are independent service providers and not part of the service offerings of an ethnic association. Again, the extremely small size of some of these sub-samples means that these findings are suggestive only. It is interesting, though, that there was a significant relationship between ethnic identity and membership of organizations; however, the relationship was in a direction opposite to that expected (Table 8.2). In other words, having a stronger ethnic identity decreased the likelihood that the owner would restrict his membership to ethnic associations only. Further, the proportion of fellow-ethnic employees was not significantly linked to the type of associations to which the owners belonged. Thus the notion of ethnocentric ambiance proposed above has no impact, or a negative impact, on association membership. This is difficult to explain without a better understanding of why owners choose to join the various types of business associations. We recommend that future research should explore the motivation behind these membership decisions. Another finding of interest was that the percentage of fellow-ethnic customers was significantly higher among the owners who belonged to ethnic associations, compared to

Ethnic business owners and their advisors 129 Table 8.2

Membership of associations, context variables and outcomes

Membership Ethnic association only Both ethnic and trade/professional Trade/professional association only p-value

Ethnic identity**

Fellow-ethnic customers

Fellow-ethnic employees

Usefulness of associations*

Perceptions of success

3.33

51.3%

44.3%

3.50

2.11

2.74

24.3%

38.3%

3.81

2.50

2.67

16.6%

29.4%

3.82

2.77

0.005

0.508

0.766

0.201

0.016

Notes: ** Five-point scale; a lower value is associated with a stronger ethnic identity; * five-point scale; a lower value is associated with a lower level of usefulness.

those who belonged to mainstream trade / professional associations or to both types of associations. Since there was no significant difference in the usefulness of the advice provided by various types of associations, it may be that the decision to join an ethnic association may be a marketing strategy for businesses with a large percentage of fellow-ethnic customers: owners realize the importance of establishing and maintaining social connections with their customers, and what better way could there be than by being a member of the community’s association? By this symbolic gesture, the firm’s visibility is enhanced, the owner and the business are seen as an integral part of the community and, consequently, they are more likely to be part of the evoked set of the potential customers. Consistent with this view is the idea that small business owners often intuitively practise cultivating relationships (Barnes, 2001). The suggestion above that future research should seek to understand the motivation for joining associations would allow us to test these ideas about membership as a marketing strategy. Finally, as with the ethnicity of the advisor, belonging to a specifically ethnic organization did not predict the owners’ ratings of business performance. Put differently, an ethnocentric approach to joining business associations was unrelated to perceived success. We recall the point that ethnocentric focus in business activity may stem from the business owner being shut out of mainstream society (Chaganti and Greene, 2002; Ram and Barr, 1997). Although the business may be growing, the owners might feel less than successful if they think they are ‘stuck’ in an ethnic market, and that long-term growth is likely to be limited. In other words, they may be experiencing competitive advantage, but they doubt that it will be sustainable. A more detailed measure of success, and what it means to the owner, could clarify these relationships. Conclusion This chapter examined research which suggested that same-ethnicity dyads between owner and advisor, as well as membership in ethnic associations, would have some effect on the success of the advice relationship and the success of the enterprise itself. We presented some preliminary empirical work that explores some of the variables that emerged from the literature, and that will help sharpen methodological choices for future research. We found that business owners who used advisors from their own ethnic group tended to

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have a longer-lasting relationship with the advisor, to have a stronger ethnic identity and to employ a larger percentage of fellow-ethnic employees. Moreover, membership of ethnic associations correlates with a larger number of fellow-ethnic customers. However, none of these factors had any effect on the measured success of the enterprise. Several limitations to our tentative findings obtain. We have already made reference to the size of the sample as a major limitation. In addition, the sample was restricted to the cities of Montreal and Toronto, where there is a concentration of diverse ethnic groups. This choice of locale may have an impact on target customers, products and services provided, the effectiveness of the various ethnic associations and the availability of fellowethnic advisors. Resources may vary, depending on whether the ethnic groups are geographically concentrated or dispersed. In addition, it is likely that some ethnic groups are better organized than others, or longer-established in Canada, for example Italians relative to Middle-Easterners. This difference may have an impact on how much assimilation into the mainstream culture has taken place. We made no predictions here about inter-ethnic differences, but neither do we rule out the possibility. Another limitation is that we did not control for industry; it would be wise to do so, since this would make comparisons about financial performance more meaningful. Finally, our data were crosssectional, but our framework describes a process; a better test of hypotheses about the advising process would collect measurements at more than one point in time. Nevertheless, this chapter revealed some intriguing areas for research into the choices made by ethnic small business owners as they try to solve their operational and strategic problems. The pattern of findings suggests the concept ‘ethnocentric ambiance’ of a business may be useful in the study of ethnic entrepreneurship. Ethnocentricity is not itself a business objective, but the objectives of the business owner may make ethnicity highly relevant or completely irrelevant to the firm. What emerges too is the need to measure explicitly the owner’s motivation for choosing an advisor or association, the need to define success in the advisory process, and the need to improve measures of the key variables in the framework. When ethnicity is personally salient to the small business owner as well as being particularly relevant to business activities, choosing ethnic resources for advice may seem to be an attractive option. Owners may be encouraged in this course of action by governments and communities, which continue to invest resources in the creation of ethnocentric structures for the support of ethnic small businesses (Oc and Tiesdell, 1999). But promoting an ethnocentric focus in business advising is not always appropriate. The literature is equivocal about the wisdom of having a same-ethnicity advisor and, on the basis of our results, we suggest that there may be some circumstances that call for it and others which do not. Possibly the pressure for the creation of ethnocentric institutions and programmes is political, and this makes it very difficult to evaluate the usefulness of these programmes objectively. There is a role for such institutions and for spending resources on them. If resources are distributed carte blanche, however, the inefficiency of such indiscriminate activity is bound to be exposed, which will only sour the whole project. It would be wiser to identify the areas where ethnicity matters – where an ethnocentric focus will be useful on pure business grounds – and to concentrate resources on those. References Ashforth, B. and F. Mael (1989), ‘Social identity and the organization’, Academy of Management Review, 14, 20–39.

Ethnic business owners and their advisors 131 Barnes, J. (2001), Secrets of Customer Relationship Management, Toronto: McGraw-Hill. Basu, A. and A. Goswami (1999), ‘South Asian entrepreneurship in Great Britain: factors influencing growth’, International Journal of Entrepreneurial Behaviour and Research, 5(5), 251–66. Beal, R. (2000), ‘Competing effectively: environmental scanning, competitive strategy and organizational performance in small manufacturing firms’, Journal of Small Business Management, 38(1), January, 27–47. Boissevain, J., J. Blaschke, H. Grotenberg, I. Joseph, I. Light, M. Sway, R. Waldinger and P. Werbner (1990), ‘Ethnic entrepreneurs and ethnic strategies’, in R. Waldinger, H. Aldrich and R. Ward (eds), Ethnic Entrepreneurs, London: Sage Publications. Byrne, D. (1971), The Attraction Paradigm, New York: Academic Press. Chaganti, R. and P. Greene (2002), ‘Who are ethnic entrepreneurs? A study of entrepreneurs’ ethnic involvement and business characteristics’, Journal of Small Business Management, 40, 126–43. Donthu, N. and J. Cherian (1994), ‘Impact of strength of ethnic identification on Hispanic shopping behaviour’, Journal of Retailing, 70, 383–93. Greene, P. (1997), ‘A resource-based approach to ethnic business sponsorship: a consideration of Ismaili–Pakistani immigrants’, Journal of Small Business Management, October, 58–71. Gumpert, D. and D. Boyd (1984), ‘The loneliness of the small-business owner’, Harvard Business Review, November–December, 18–24. Harrison, D., K. Price and M. Bell (1998), ‘Beyond relational demography: time and the effects of surface- and deep-level diversity on work group cohesion’, Academy of Management Journal, 41, 96–108. Hill, S. and G. Gant (2000), ‘Mentoring by minorities for minorities: the organizational communications support program’, Review of Business, 21, 53–7. Http://www.MABBP.org (accessed 17 Feb, 2005). Kochan, T., K. Bezrukova, R. Ely, S. Jackson, A. Joshi, K. Jehn, J. Leonard, D. Levine and D. Thomas (2003), ‘The effects of diversity on business performance: report of the diversity research network’, Human Resource Management, 42, 3–21. Maister, D., C. Green and R. Galford (2000), ‘What is a trusted advisor?’, Consulting to Management, 11, 36–41. Marger, M.N. (1989), ‘Business strategies among East Indian entrepreneurs in Toronto: the role of group resources and opportunity structure’, Ethnic and Racial Studies, 12(4), 539–63. Marlow, S. (1992), ‘The take-up of business growth training schemes by ethnic minorities’, International Small Business Journal, 10(4), 34–45. Mitchell, B. (2003), ‘Ethnic entrepreneurship: preliminary findings from a South African study’, Journal of Small Business and Entrepreneurship, 17(1), Fall, 47–62. Oc, T. and S. Tiesdell (1999), ‘Supporting ethnic minority business: a review of business support for ethnic minorities in city challenge areas’, Urban Studies, 36(10), 1723–46. Phizacklea, A. and M. Ram (1995), ‘Ethnic entrepreneurship in comparative perspective’, International Journal of Entrepreneurial Behaviour and Research, 1(1), 48–62. Ram, M. and P. Barr (1997), ‘Ethnic minority enterprise: an overview and research agenda’, International Journal of Entrepreneurial Behaviour and Research, 3, 149ff. Ram, M., B. Sanghera, T. Abbas and G. Barlow (2000), ‘Training and ethnic minority firms: the case of the independent restaurant sector’, Education and Training, 42(4/5), 334–41. Rapley, J. (1996), Understanding Development, Boulder, Colorado: Rienner Publishers. Silverman, R. (1999), ‘Black business, group resources and the economic detour’, Journal of Black Studies, 30, 232–58. Stayman, D. and R. Deshpande (1989), ‘Situational ethnicity and consumer behaviour’, Journal of Consumer Research, 16, 361–71. Thomas, D. (1989), ‘Mentoring and irrationality: the role of racial taboos’, Human Resource Management, 28, 279–90. Tracogna, J. (1998), ‘Business immigration: opportunities for local economic development’, http://www. ecdevjournal.com/pubs/1998/art012_98.htm (retrieved 2005-02-17). Tsui, A., T. Egan and C. O’Reilly (1992), ‘Being different: relational demography and organizational attachment’, Administrative Science Quarterly, 37, 549–79. Watson, W., K. Kumar and L. Michaelsen (1993), ‘Cultural diversity’s impact on interaction process and performance: comparing homogeneous and diverse task groups’, Academy of Management Journal, 36, 590–602. Young, M.(2002), ‘An examination of information sources and assistance programs available to minority-owned small businesses’, Journal of Developmental Entrepreneurship, 7(4), 429–44.

9

Ukrainian farmers in Canada Tom Allen

Introduction It has been widely recognized that entrepreneurship is a major factor in promoting economic growth. Typically, when a discussion is held concerning entrepreneurship, it usually refers to an individual: a man or woman who perceives an opportunity, assumes the risk and creates an organization to exploit it, thus stimulating the economy in a small incremental way. Occasionally, it is not an individual but rather a group of individuals who perceive an opportunity and collectively pursue similar but individual ventures. Such an occurrence can be referred to as ‘mass entrepreneurship’ and has occurred several times in Canadian history. European fishermen came to Eastern Canada to start fishing operations in order to harvest the abundant supplies of cod fish; French and British fur traders established trapping and trading operations across Canada; and pioneers came to the provinces of Ontario and Quebec in Central Canada to establish agrarian ventures. However, by far the largest and most dramatic instance of mass entrepreneurship in Canadian history occurred in the late nineteenth and early twentieth centuries when hundreds of thousands of European immigrants came to Western Canada in pursuit of land. They risked their wealth, their standard of living and even their lives in their quest to establish agricultural ventures and to find a better way of life for themselves and their children. Mass entrepreneurship, like individual entrepreneurship, stimulates the economy, but in a monumental, nation-changing way. This chapter will look at one aspect of the mass entrepreneurship movement that changed the Canadian prairies from an area of virgin prairies sparsely populated by nomadic Indigenous Nations to one of the world’s major producers of agricultural commodities. In the period from 1896 to 1913, over one million people moved to the prairie region of Western Canada. This chapter will focus on the large number of Ukrainian immigrants who came to Canada in the first wave of Ukrainian immigration. A wave of immigration lasting from 1891 to 1914 and resulting in approximately 170 000 Ukrainians coming to the region in hopes of acquiring agricultural land. It must be noted that, while the prairie region of Western Canada was first developed as an agriculture-based economy, within a hundred years agriculture was no longer the dominant industry. Many of the immigrants from around the world who flocked to the undeveloped prairie region in their quest for freedom and adventure did not remain in the agricultural industry. Those who succeeded in establishing a successful farm were often unable to pass the land on to later generations as the adoption of technology changed the agricultural industry from a labour-intensive to a capital-intensive industry. By the end of the twentieth century, there was a transformation of the self-sufficient agricultural communities, based on the tradition of the homeland of the immigrants, to a social structure of an assimilated, urbanized society. Settling the Canadian West In the last part of the nineteenth century a large portion of the region that was to become the Western Provinces of Canada was purchased by the government of Canada from the 132

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Hudson Bay Company. An area including this region had been granted to the Hudson Bay Company by the British Crown in 1670. In the 1870s, treaties were signed with the Aboriginal population and the area was made available for agricultural settlement. Within the almost two million square kilometres of the three prairie provinces in Canada lies a geographic sub-region of arable land referred to as the ‘prairies’. This sub-region is defined by the Rocky Mountains to the west; the rocks, lakes and trees of the Canadian Shield to the north and east; and by the forty-ninth parallel to the south. It was an inhospitable region sparsely populated by several nomadic Indigenous Nations who depended largely on the large bison herds as an economic base – a base that provided them with food, shelter and clothing. In 1870, there were only about 1600 white settlers in the whole region as well as 9800 Métis people. In fact it has been estimated that there was only a total population of 73 000 in the entire region at that time (Conway, 1994: 21). Despite the small population, the land was similar to farmland in North and Eastern Europe and large parts of it were capable of producing annual grain crops and livestock. After the Confederation of Canada in 1867 the new government initiated action to make the Canadian prairies an integral part of Canada. A national policy was implemented that consisted of three basic parts: a transcontinental railway, settlement of the prairies and a system of protective tariffs to keep out cheap American goods. The first step by the Canadian government prior to the implementation of the new national economic policy was the signing of a series of treaties with the nomadic First Nation Peoples of Western Canada. The treaties basically moved the First Nation Peoples onto small isolated reservations and opened the way for settlement of the now empty prairies. In 1896, 140 million acres of land were available for settlement in the prairie region. The railway arrived in the prairie region in the 1880s, reaching Calgary in 1883, and the first part was realized. Central Canada hoped that a settled West would result in the development of new trading opportunities for Central Canada as the withdrawal in 1866 of a reciprocity treaty between Canada and the United States had resulted in the loss of attractive American markets and new trade opportunities were desperately needed. Central Canada was also looking for a hinterland that would supply raw materials for the their factories. In 1903, Wilfrid Laurier, Prime Minister of Canada, wrote: The best way you can help the manufacturers of Canada is to fill up the prairie region of Manitoba and the Northwest with a prosperous and contented people, who will be consumers of manufactured goods of the east. (Conway, 1994: 29)

Now tariffs were imposed on American imports as Central Canada expected that the protective tariff would force the settlers to buy Canadian produced supplies. They hoped this policy would lead to a growing industrialization in Central Canada as they supplied the expanding home market (Conway, 1994). Now all that was required was a multitude of settlers to develop the empty land into an agricultural hinterland. A system of holding and settling land was developed for Western Canada in order to prepare for an anticipated settlement. The Canadian government assigned surveyor John Stoughton to split the area up in such a way as to allow for the development of farms (Herk, 2005). The land holding and settlement system chosen by Stoughton for Western Canada was a modified version of the one that had been introduced in the United States by then President Abraham Lincoln. This system consisted of a basic square survey that divided the arable country into townships of six sections by six sections, each section a

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mile square, and quarter sections that were one half mile by one half mile. The Dominion Lands Act of 1872 copied the American Homestead Act of 1862 and enabled every man of twenty-one years of age or older to claim a 160-acre homestead for a filing fee of $10. This Act ensured the dispersion of settlers by requiring each settler to cultivate a minimum acreage, build his house on his homestead quarter and to maintain residence there for at least six months of the year for a minimum of three years as a requirement for obtaining title to the land (Fowke, 1957). The forced dispersion of farming people resulted in a drastic and unforeseen change for the settlers who came from Europe or Central Canada, where agricultural communities had developed around compact farming villages, often located beside rivers, streams or other transportation modes. The Dominion Lands Act discussed previously promoted a farming settlement that was widely dispersed geographically and that in many cases also resulted in a cultural mosaic. Since homesteads were selected on a first-come, first-served basis, people from divergent ethnic backgrounds often settled in close proximity to each other. This occurred in spite of early attempts by settlers from Ontario to build a British society in the West. Their efforts were thwarted by a failure to attract British or Canadian settlers in sufficiently large numbers. Consequently, the Canadian government was forced to look to non-British regions for prospective immigrants. It became evident that Eastern Europe was a region containing a large number of eager prospective immigrants. The Canadian government relaxed their homestead policies to encourage the immigration of various ethnic groups to Western Canada. In some cases tracts of land were set aside exclusively for a particular group. The first ethnic groups to come were Russian Mennonite immigrants who settled in areas such as Rosthern Saskatchewan. They were followed by a group of Icelandic immigrants who settled in the Gimli district of Manitoba. In a short time the Mennonites and Icelanders were followed by large numbers of other East Europeans from the regions of Galicia, Ruthenia, Slovakia, Bosnia and Herzogovina. The Eastern European diasporas in particular tended to settle in distinctive regions in compact communities. Nevertheless, they were still subject to the provisions of the Homestead Act requiring that individual farms be established instead of small villages surrounded by farming land. Fortunately there was one important consequence of allowing ethnic groups to settle in blocks, albeit scattered blocks: it encouraged the retention of ethnic cultural identity and retarded the assimilation process. One of the largest and most recognizable groups to immigrate to the Prairie region was the Ukrainian immigrants. They settled in diasporic communities across the Prairie region, creating and maintaining an identity that persevered for generations. It was not until the latter part of the twentieth century that the distinctive rural Ukrainian communities began to disappear. This occurred when a radical change in the agricultural industry resulted in a rural–urban migration that devastated many of the small prairie communities. At this time the small diasporic communities were largely assimilated into the larger and more sparsely populated prairie society. The Galacians The government of Canada in particular encouraged Ukrainian settlers from the AustroHungarian Empire to consider migrating to the Canadian prairies. This group was commonly described as Galacians after the ancient region they originated from, a region that encompasses the western portion of present-day Ukraine and some parts of what is now southeastern Poland. While many of the Ukrainian immigrants did come from Galacia,

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a significant number also were native to Bukouyna. This was an historical part of the Austro-Hungarian Empire that is now part of Southwestern Ukraine and Northern Romania. The two regions were adjacent to each other and, while there were differences in culture and religion, both groups spoke the Ukrainian language. The Ukrainians may not have been liked by many of the English–Canadians but they were a particular favourite of Interior Minister Clifford Sifton, who pronounced: I think a stalwart peasant in a sheepskin coat, born on the soil, whose forefathers have been farmers for ten generations, with a stout wife and a half-dozen children is good quality . . . These men are workers. They have been bred for generations to work from daylight to dark. They have never done anything else and they never expect to do anything else. (Lehr, 1985)

It should be noted that the German-speaking Mennonites and Hutterites as well as the Russian-speaking Doukhobors also emigrated from the Galacia region of Eastern Europe. The Ukrainian immigrants discussed in this chapter refer to the true Ukrainians who spoke the language and whose ancestors had resided for centuries in the regions of Galacia and Bukouyna. The Ukrainians were one of the oldest Slavic people of Eastern Europe and had occupied the land north of the Black Sea lying between the Wisla and the Volga Rivers for centuries. Despite periods of independence the Ukrainians had almost continually suffered under the control of various foreign powers. By the 1890s, the situation had turned desperate for many Ukrainian people. Although serfdom had been abolished in 1848, the poverty experienced by the peasants had never been worse. A limited land base combined with unsympathetic Polish landlords forced many peasants into a state of destitution. Land holdings usually consisted of a couple of acres, or less, if the peasant was one of the fortunate few who owned land; more commonly the peasant farmer simply worked for a Polish landlord. It was the custom for the Ukrainian peasants to divide their property among their sons. This practice caused a continual fractionation of property size with each generation. By the 1890s, the situation had developed to the point where most sons were inheriting too little land to sustain a family and the only alternative was for some to leave for less populated areas where land was still available in sufficient quantities to support a family (Stechishin, 1992). With little hope of bettering their position at home it is little wonder that many Ukrainians began to look abroad for opportunities to better their lot. One of the few possible avenues for betterment was emigration to the New World. Brazil and Argentina had been identified as potential sources of land, as had Canada. If land had been available the United States would probably have been a preferred destination; however, by the end of the nineteenth century, little land was left for settlement in that country. It should be noted that desperate economic conditions were not the only reason Ukrainians emigrated to Canada. Stechishin (1992) argues that this was only one of many reasons for leaving. He suggests that the reasons for emigrating may have also included social, nationalistic, political, religious and perhaps even psychological factors. The Eastern European social system with a strict class distinction could definitely have been a factor in the decision of many to emigrate. As well, religious and political intolerance may have been contributing factors. There were probably also some adventurous types who possessed a thirst for new experiences. Whatever their reasons, the Ukrainians did immigrate to Canada by the thousands.

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As is often the case, the actions of many are influenced by the opinions of one. This was the case in Galacia as one man, Dr Osyp Oleskiw, is often credited with being the father of the Ukrainian immigration movement to Canada (Stechishin, 1992). Dr Oleskiw was an agronomist and an economics professor in L’viv. He visited Canada in 1895 and upon his return to Ukraine extolled the virtues of Canada as a preferred emigration destination. He was a strong advocate of emigration to Canada rather than to Brazil or Argentina, both of which had also become destination points for Ukrainian emigrants. He felt that the Canadian prairie region was more similar to the homeland than other regions and could better support the Ukrainian immigrants. Dr Oleskiw also argued that the Ukrainians’ traditional homeland was not capable of supporting the current population, especially noting the desperate economic conditions of the peasants and thus reinforcing his argument that Ukrainian peasants should consider an empty country like Canada as the preferred destination when looking for land. Dr Oleskiw argued for agricultural settlements in Canada, but it should be noted that not all Ukrainian immigrants were homesteaders. Although a policy of ‘Only farmers need apply’ was a supposed cornerstone of the Canadian immigration policy until 1906 (Thompson, 1998: 75), many immigrants found work in railroad construction, while others found employment in factories, shops and as farm labourers. However, Ukrainians by the tens of thousands did file for homesteads and although many failed to establish successful homesteads, there were thousands who became successful farmers. Dr Oleskiw envisaged an orderly and controlled immigration of hand-picked and wellfunded peasant farmers who would be assisted by the Canadian government. During his visit to Canada, he lobbied the Canadian Department of the Interior for special concessions for Ukrainian immigrants, but was unable to get a commitment to assistance. However, he was not deterred by the lack of monetary support from the Canadian government and, on his return to the homeland, he used every opportunity to promote Canada as the preferred emigration destination (Stechishin, 1992). The first wave of Ukrainian immigrants occurred during the period 1891 to 1914. The numbers were small at first but in 1896 the first significant group of Ukrainian settlers arrived in Canada and settled in the Edna district of Alberta. The Ukrainian settlers continued to come to the Edna area for the next 15 years, until the settlement stretched from east of Edmonton to the Saskatchewan border. This resulted in the largest bloc settlement of Ukrainians in Canada. This first group of immigrants was followed in rapid succession by others who settled in communities scattered across the North-West Territories – an area that was to become the three prairie provinces of Manitoba, Saskatchewan and Alberta. The Ukrainian settlements were located in a rough line from southeast of Winnipeg to northwest of Edmonton. This line included communities like Stuartburn and Dauphin in Manitoba, Yorkton and Kamsack in Saskatchewan, and Edna and Vegreville in Alberta. This grouping of communities was sometimes referred to by the non-Ukrainian community as the ‘kielbasa curtain’ or the ‘perogy line’ (Thompson, 1998: 169). These pioneer immigrants had settled in the parkland areas of Western Canada and, while not the easiest land to settle, it was productive after the trees had been cleared and the sod broken. The early years for the agricultural entrepreneurs The early homesteaders were entrepreneurs in the truest definition of the term. Whether one employs the view of an entrepreneur as someone who assumes the social, psychological and

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financial risks necessary to start and run a small business (Hisrich and Peters, 1992), or identifies entrepreneurship as a principal agent of change in society (Tropman and Morningstar, 1989), these homesteaders were true entrepreneurs. This group was willing to leave their traditional homeland for an unknown wilderness because of their desire to develop a new venture (a farm) that would provide them and their children with a better life. They were willing to risk their savings and, in some instances, their lives to make this dream a reality. Many of the Ukrainians had left their homeland with limited money and by the time they reached Western Canada had used up what little financial resources they had. Thus they lacked the means to return to their homeland even if they wanted to, creating a tremendous incentive to succeed in their new venture. The immigrants may have left desperate conditions in the homeland but most were illprepared for the circumstances they were to face in their new country. In many instances they arrived in Canada penniless and had to spend the first winter in the harshest of conditions. Food was often in short supply, or non-existent, and often it was only the generosity of their neighbours that kept them from perishing. The first task of a newcomer was to build some form of shelter to house them and their family over the first winter. For many, the building was a co-operative effort with the more established residents helping the newcomers. Despite this collaborative effort the first home was often little more than a dug-out shelter, basically a hole in the ground with a roof over the top. As noted previously, many of the Ukrainian settlers ended up in the parkland region of the prairies, land that was characterized by rolling terrain, a significant amount of tree cover and often soil that was quite rocky in nature. The English–Canadian settlers had previously claimed much of the best farmland, therefore the Ukrainian settlers were forced to settle on marginal land or land covered in bush. This land usually required extensive clearing of bush before it was productive and stones were always a challenge. In spite of the less than ideal land, the majority of the Ukrainian settlers persevered, as the effort and determination of the Ukrainian settlers was incredible. A shortage of cash meant that the husband would work off the homestead while the wife and children struggled to claim the holding. The wives of these early settlers suffered the greatest hardships when their husbands had to leave to seek work. The wives were left to manage the family and start developing the farm, often with few resources and meager accommodations. The contribution of the Ukrainian women cannot be overstated and, as noted by a British Canadian: ‘The average Ukrainian woman often contributes more to the farm than does the average hired man, she follows the family to the field where she may hoe or drive a gang plow, stook, etc.’ (quoted in Thompson, 1998: 83). Dr Oleskiw had been adamant that the Ukrainians who wanted to emigrate should be adequately prepared, but unfortunately many were not. The financial resources that immigrants had available when they arrived in Canada were the critical factor in whether the settler could quickly clear and cultivate his land, or whether he had to find employment off the farm in order to survive. The quicker the farm was developed the sooner it became a viable economic unit able to support the settler and his family. Agriculture provided the economic base for the Ukrainian settlements, but this primary industry did require an extensive support system. That is, opportunities existed to develop new ventures providing the supplies and services needed by the homesteaders. However, the diasporic communities had developed a solidarity based on common and unique language, culture and religion. This made it difficult for non-members to develop ventures

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serving and supporting the diaspora community. Therefore these opportunities could best be realized by Ukrainian-speaking entrepreneurs. As a result, Ukrainian entrepreneurs quickly established restaurants, retail shops, farm supply shops and service industries to support the diasporic community and the communities became self-sustaining enclaves that resisted assimilation. A period of prosperity during the 1920s came to an abrupt end in 1929 when the Great Depression of the 1930s devastated prairie agriculture. The impact of the collapse in the economy was compounded by a decade of severe drought. The agricultural industry was hit especially hard, with a 94 per cent decline in net money income from 1929 to 1933 (Conway, 1994: 99). The Ukrainian farmers were negatively affected by the depression but often less so than some of their neighbours. The Ukrainian farmers were less likely to practise a mono-culture system of agriculture dependent on growing one crop: wheat. Rather they tended to be mixed farms that produced a variety of crops and animals, making them more self-sufficient at least in regard to the production of food. Prejudice and discrimination Early attempts to establish a British society in Western Canada had proved unsuccessful because of a lack of settlers but this did not mean that the English were ready to accept the Eastern Europeans with open arms. A daily paper in Winnipeg, the Nor’Wester, published an editorial on 23 December 1896 that began with the title, ‘Undesireable Immigrants’. Parties of Galician immigrants continue to arrive in Winnipeg. If our foreign immigration agents cannot send us a better class of immigrants than these it is almost time to consider whether we might not dispense with immigration agents altogether. (Stechishin, 1992, p. 135)

The prejudice was compounded by the fact that the Ukrainians dressed differently, often worshipped at a different church and spoke a language unfamiliar to their British and Western European neighbours. The Cyrillic alphabet used in the written Ukrainian language was totally foreign to the English westerners and probably contributed to the uneasiness and mistrust felt towards these Eastern European newcomers. The extreme prejudice of some was especially apparent when a local branch of the Ku Klux Klan was established in Saskatchewan. The Klan attacked Eastern Europeans, Catholics, Jews, Orientals and, for that matter, anything or anybody they considered to contradict true morality, British Institution and the Anglo-Saxon ‘race’ (Conway, 1994: 129). The silver lining to the prejudice cloud was the increased resistance to assimilation, as the communities often became more united in reaction to the prejudice. Creative destruction: rapid change in the agriculture industry Joseph Schumpeter (1934) described entrepreneurship as a process. He also argued that it was a force of ‘creative destruction’ whereby the creation of new and modern ways of doing things destroyed the traditional manner of getting things done. The Ukrainian immigrants left a labour-intensive peasant agricultural economy in the homeland with the hope of bettering their lot in the new land. They left farms that were often less than five acres in size for homestead farms of 160 acres. The tools used in creating the new homesteads were only slightly different from those used for centuries in Eastern Europe. The basic tools of the Ukrainian settlers were oxen and walking ploughs combined with a variety of hand tools such as grubbing hoes and scythes. While the homesteads of 160 acres must have seemed

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enormous to the new settlers working with primitive tools, in fact these farms were already too small as a wave of technology was changing the agricultural industry forever. Innovations in technology soon meant that the old traditional manner of farming was being replaced by a new mechanized way of getting the job done. The adoption of this new technology resulted in changes to the agricultural industry whereby traditional labour-intensive methods were replaced by modern technologyintensive methods. The technological change had started in Western Europe in 1769, when James Watt patented an improved steam engine, a technology that later led to the development of powered farm machinery. By the 1850s, the agrarian industrial revolution had spread to North America with Cyril McCormick’s introduction of a mechanical harvesting machine. This tool allowed two men to cut as much grain in a day as four or five men using scythes. This also meant that a single person could farm much greater tracts of land than had ever been possible before. Steam tractors were introduced into Canada by the end of the nineteenth century and were quickly replaced by the internal combustion engine as farmers eagerly adopted the labour-saving innovations. By the early twentieth century, progressive farmers in Western Canada were using mechanized equipment and power units to replace the labour-intensive job of breaking virgin sod with ox and plough. The mechanical harvester, followed by steam engines and gasoline-powered tractors, were in turn followed by chemical herbicides that further reduced the labour required to farm a given amount of land. The technology revolution reduced the per unit cost of producing wheat and, despite temporary blips, the reduced cost has resulted in a reduction in the real price of wheat almost continually over the last 90 years, as shown in Figure 9.1. The second consequence of the technological changes was not only to enable farmers to increase the size of their holdings but also to force them to expand. The reduced price that farmers realized for their grain could only be compensated for by growing more 1200

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wheat, and the most common strategy to achieve greater output was to acquire a bigger land base. It was apparent that the first homesteads were too small and almost immediately farmers expanded by buying their neighbour’s land. By 1916, the average farm size in Saskatchewan had increased to 354 acres, from the initial homestead size of 160 acres, and the farms continued to increase for the rest of the century (see Figure 9.2). There are only a finite number of acres of arable land and expanded farm size necessarily meant fewer farms, and fewer farms meant fewer people and fewer and/or smaller communities. In many instances the communities had hardly become established before they started to die. Stabler, Olfert and Fulton (1992), in their study of Saskatchewan communities, note, ‘Changes in transportation as well as in production technology rendered the initial system of communities obsolete almost before it was fully in place.’ Changes in the way agricultural products were produced, transported and stored were instrumental in the reorganization of the industry. However, the rate of change and the way in which technology was adopted were not consistent across the prairies. Areas close to major centres, or in regions more geographically conducive to mechanized farming, adopted technology first. Areas that had significant tree cover, poorer quality soils or that were isolated were slower to change. Many of the Ukrainian communities fitted the latter description and to some extent were isolated from the more drastic effects of technological change until later in the twenthieth century. Maintaining the identity The English–Canadian Westerners were determined to create a society that reflected English-based conformity but the ethnic identity of the Ukrainian immigrants was not easily changed. When the Ukrainian immigrants came to Canada about a hundred years

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ago, they established communities that developed a unique identity based on the culture, language and religion brought from the homeland. However, this identity was not simply a continuation of their Galacian identity but rather a Ukrainian–Canadian identity. The Ukrainian immigrants had survived under numerous masters, such as Poland, Russia and the Austro-Hungarian Empire, in the homeland and consequently did not have a strong sense of being ‘Ukrainian’ when they arrived in Canada. However, they did miss their own church and, when a priest arrived, they quickly developed spiritual communities. Supporters of both the Ukrainian Orthodox and Ukrainian Catholic Church were present among the immigrants and many communities were highlighted by churches of both religious rites. No matter which faith was supported, the development of a strong faith community further helped to develop a strong Ukrainian identity in the diasporic community (Stechishin, 1992). An educational system serves many functions in a community, one of which is to maintain the culture. The fact that Amish communities in the Eastern United States and Hutterite communities in Western Canada have been able to maintain their strong identity is due in no small part to the way that they have been able to control the schooling of their children. The early Ukrainian community leaders organized schools either on their own or with government support. The Province of Manitoba allowed bilingual education, thus enabling the Ukrainian students to be taught solely in Ukrainian. However, the provinces of Saskatchewan and Alberta had a different policy and would allow Ukrainian to be taught for only one hour a day. This did allow for some Ukrainian instruction in the school, combined with informal instruction at home and in the community. Special teacher training schools were established in Winnipeg, Regina and Vegreville to produce Ukrainian language teachers. While the schools did not exist for long, they did turn out over 250 teachers. The graduates of the bilingual teacher training schools became the educated leaders of the diasporic communities and they led the movement that defined a Ukrainian national identity within the framework of Canada (Stechishin, 1992). Unfortunately for many small rural communities, the educational system changed radically in the second half of the twentieth century. For the first half of the twentieth century, educational services were provided in small community schools across the prairies. The small schools quickly became Ukrainian cultural centres in the diasporic communities and made an enormous contribution to warding off unwanted assimilation (Stechishin, 1992). However, small schools were not considered efficient and with the advent of better roads and improved transportation it became economical to centralize the educational system. Between 1951 and 1971, almost three thousand schools in rural areas and small communities of Saskatchewan were closed (Stabler, Olfert and Fulton, 1992: 2). As schools were closed, students were transported by school bus into nearby communities, often outside the diasporic community. The students were now exposed to other students, teachers and cultures that were from a completely different ethnic origin. Until this time the Ukrainians, like other ethnic minorities, may have used the English language when needed, but Ukrainian persisted as the language of the home. The closing of the local schools was a catalyst for greater assimilation of the Ukrainian diaspora into the English–Canadian society. The students were now exposed to the English language for greater periods of time and speaking in Ukrainian, or with a Ukrainian accent, often resulted in ridicule. While some large urban schools were still able to offer Ukrainian

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language instruction, it became increasingly rare, with instruction offered largely in English with limited second language instruction, usually in French. The future The time when agriculture was the largest and most powerful sector in the Canadian economy is long past. Farms have become large professionally managed businesses and the percentage of the population associated with the agrifood sector has declined significantly. Some of the current farms may be owned and operated by direct descendants of the original Ukrainian immigrants, but the owner is just as likely to be of German, French, American or First Nation ancestry. The original treaties have been subject to numerous claims for remedy and a very significant amount of land in the northern fringe of the prairie region, home of many of the original Ukrainian immigrants, has now been regained by its original occupants, the First Nation Peoples of Western Canada. Unfortunately, many of the small Ukrainian communities have disappeared, the farms have been sold, the schools closed and the churches are no longer in use. The rural–urban transition is reflected in the current populations of the five largest prairie cities: Winnipeg, Regina, Saskatoon, Calgary and Edmonton. The 2001 Census of Canada reported that the total population of the three prairie provinces was just over five million people in 2001, with approximately 565 000 individuals self-declaring as being of Ukrainian descent. At the present time over 60 per cent of the Ukrainian–Canadians on the prairies reside in one of the five largest cities. The original Ukrainian settlers prospered and multiplied, but they were unable to maintain most of the small agrarian-based communities. It is only in some of the larger rural communities like Dauphin in Manitoba, Kamsack in Saskatchewan and Vegreville in Alberta that a strong Ukrainian–Canadian culture is still dominant. It is fortunate that, although the farms are becoming fewer and the communities have often disappeared, the cultural identity is still strong. Descendants of those original immigrants have gone on to become premiers of provinces, governor generals of Canada, as well as successful doctors, lawyers and teachers; for that matter they are evident in every fibre of modern prairie society and all proclaim themselves proudly to be Ukrainian–Canadians. The Ukrainian diaspora has not disappeared; the onion bulb towers of Ukrainian Orthodox Churches in larger centres, and prominent edifices like the Ukrainian Easter Egg, ‘Pysanka’, of Vegreville attest to that. Descendants of the original peasant immigrants have maintained a cultural and ethnic identity while becoming almost totally assimilated into the economy of Canada. Bibiliography Agricultural Statistics (2003), Saskatchewan Agricultural, Food and Rural Revitalization. Conway, J. (1994), The West: The History of a Region in Confederation, 2nd edn, Toronto: James Lorimer. Cox, W.M. and R. Alm (1999), Myths of Rich and Poor, Jackson, TN: Perseus Books Group. Fowke, V.C. (1957), The National Policy and the Wheat Economy, Toronto: University of Toronto. Hay, A.H. and G.S. Basran (eds) (1992), Rural Sociology in Canada, Toronto: Oxford University Press. Herk, C. (2005), ‘How the West was divided’, Canadian Geographic, Jan./Feb. Hisrich, R.D. and M.P. Peters (1992), Entrepreneurship: Starting, Developing, and Managing a New Enterprise, 2nd edn, Homewood, IL: Irwin. Holt, D.H. (1992), Entrepreneurship: New Venture Creation, Englewood Cliffs, NJ: Prentice-Hall. Kotash, M. (1992), All of Baba’s Children, Edmonton: NeWest Press. Lehr, J.C. (1985), ‘ “The peculiar people”: Ukrainian settlement of marginal lands in Southeastern Manitoba’, in David C. Jones and Ian MacPherson (eds), Building Beyond the Homestead: Rural History on the Prairies, Calgary: University of Calgary Press.

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Morris, M.H. (1998), Entrepreneurial Intensity: Sustainable Advantages for Individuals, Organizations, and Societies, Westport, CT: Quorum Books. Regehr, Ted (1979), Remembering Saskatchewan: A History of Rural Saskatchewan, Saskatoon: University of Saskatchewan Extension Division. Schumpeter, J.A. (1934), The Theory of Economic Growth, Boston: Harvard University Press. Stabler, J.C., M.R. Olfert and M. Fulton (1992), The Changing Role of Rural Communities in an Urbanizing World, Regina: Canadian Plains Research Centre. Statistics Canada (2001), Census of Canada, community profiles. Stechishin, Julian, V. (1992), A History of Ukranian Settlement in Canada, Saskatoon: Ukrainian Self-Reliance League of Canada. Thompson, J.H. (1998), Forging the Prairie West, Toronto: Oxford University Press. Tropman, J.E. and G. Morningstar (1989), Entrepreneurship Systems for the 1990s, New York: Quorum Books.

10 Business engagement of Chinese immigrants in Canada Peter S. Li

Chinese immigrants, like their counterparts in the US, are known to have been enterprising in small businesses in their host country. This historical image of Chinese immigrants in Canada is certainly justified, especially in view of the harsh treatment of the Chinese in the late nineteenth and early twentieth centuries, when they were excluded from many lines of work owing to racial discrimination and legislative restriction. However, since the end of the Second World War, many changes have taken place in Canada and in the Chinese–Canadian community. A monolithic understanding of Chinese immigrants’ engagement in business is no longer adequate. The purpose of this chapter is to provide an overview of the changes in business engagement among the Chinese in Canada, and to offer some explanations as to how and why these changes have come about. Defining immigrant business engagement Several terms have been used to refer to the phenomenon of immigrants engaging in business, as opposed to engaging in employment. These terms include ‘ethnic entrepreneurship’, ‘immigrant businesses’, ‘immigrant self-employment’ and ‘immigrant enclave economy’. Despite obvious differences in these terms, they have been used casually and broadly to describe a similar phenomenon: the tendency of some ethnic or immigrant groups to engage in business. The notion of entrepreneurship implies an ideological predisposition or a spirit, like the Weberian notion of ‘spirit of capitalism’. The term also implies that it is the possession of a venturing spirit and certain cultural qualities that propel some immigrant groups into business venture. Thus the term assumes a Weberian orientation and the thrust of explaining immigrant entrepreneurship involves why some immigrants possess the venturing spirit and cultural qualities to enable them to take a chance and succeed in businesses (see Redding, 1993; Wong, 1988). The term ‘immigrant business’ suggests that there is a certain characteristic of the business that is linked to immigrants. Often such a linkage is loosely implied to mean immigrant ownership of businesses, but there are other features which also enrich or complicate the notion of ‘immigrant business’, such as that the clientèle which the business serves is of the same ethnic background as the business owner, the merchandise marketed or services provided are of a particular cultural flavour, and the location of the business is among residential neighbourhoods of immigrants. Thus the term ‘immigrant business’ tends to suggest some combinations of the above features to refer to the operation of immigrant business owners serving immigrants in immigrant-congregated neighbourhoods. The term also suggests the use of business firms, as opposed to using individual owners, as the unit of analysis (see Ip, Lever-Tracy and Tracy, 2000). 144

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The notion of ‘immigrant self-employment’ refers to the labour market activity of individual immigrants in terms of whether an individual is employed by others or selfemployed. The assumption is that individual immigrants who engage in self-employment do so as a business operation, earning an income through some business activities and paying out expenses related to the business operation. Thus the term ‘immigrant selfemployment’ is often used as an indicator of the level of business ownership or engagement, although the analysis of self-employment is often performed at the individual level (see Light and Gold, 2000; Portes and Zhou, 1996; Waldinger et al., 1990). ‘Immigrant enclave economy’ represents a more mature theoretical notion that seeks to capture the relationships of a type of economic structure that is linked to the interdependence of businesses owned by immigrants of similar ethnic background as well as the mutual dependence between immigrant owners and workers (see Sanders and Nee, 1987; Wilson and Portes, 1980). Despite the potential theoretical richness of the term, it has been used broadly to refer to the success of businesses in immigrant enclaves or immigrant-congregated locations. For the purpose of this chapter, the term ‘business engagement’ is used as a more neutral term to refer to immigrant ownership or proprietorship of businesses. Such businesses include, but are not limited to, those that provide ethnic-specific goods and services, businesses that provide professional and other services to immigrant communities and the general population, as well as corporate businesses linked to immigrant investment and offshore capital. Historical patterns of Chinese business engagement in Canada The Chinese immigration to Canada began in 1858, largely as a response to the discovery of gold in the Fraser Valley of British Columbia. Initially Chinese miners came from the west coast of the US, but later from China directly. However, a larger scale of Chinese immigration to Canada only began as Canada faced acute labour shortages in developing the West. Chinese workers were brought to Canada from China to build railroads, to clear forests, and to work in fish plants and canneries. At the height of the construction of the western section of the Canadian Pacific Railway between 1881 and 1884, about six to seven thousand of the 16 000 Chinese entering Canada were estimated to be directly employed by railway contractors (Lee, 1967: 128; Campbell, 1969: 37). As was to be expected, the vast majority of the Chinese in Canada in the latter half of the nineteenth century belonged to the working class, although there has always been a small number engaging in business. Based on the records of Chinese entering Canada between 1885 and 1903, about 6 per cent of the Chinese arrivals indicated that they were merchants or storekeepers (Li, 1998: 24). The later half of the nineteenth century also saw the development of Chinese quarters, dubbed ‘Chinatowns’, in Victoria and mining centres of British Columbia (Anderson, 1991; Lai, 1988). The small Chinese mercantile class was mainly made up of those engaged in import and export businesses, supplying Chinese miners with provisions and equipment, and running businesses that serviced the growing Chinese community (Lai, 1988: 187–9). The Chinese merchants were also involved in labour contracting to bring Chinese workers to Canada; some speculated in land development (Lai, 1988: 189–90). Thus the early business development of the Chinese in Canada was mainly tied to the growth of the Chinese population, but the

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businesses quickly branched out into different areas, including exporting and importing, land speculation and providing goods and services to the Chinese community. Towards the end of the nineteenth century and in the early twentieth century, Canada developed many policies that aimed at restricting further entry of the Chinese to Canada and limiting the rights of those already in Canada. The federal government passed the Chinese Immigration Act in 1885 to impose a head tax of $50 on practically every Chinese entering Canada, and the tax was raised to $100 in 1900 and then to $500 in 1903 (Li, 1998). In 1923, the federal government passed the Chinese Immigration Act that prevented further immigration of Chinese; the Act was not repealed until 1947. Even before the exclusion, the provincial government of British Columbia passed numerous laws to limit the economic and political rights of the Chinese, barring them from voting and taking up certain professions and jobs (Li, 1998). At the same time, white workers were increasingly hostile to the Chinese labourers and demanded their exclusion from jobs in the core labour market. Organized labour and politicians too were using the Chinese immigration issue as a basis to advance their interests (Li, 1998). The hostile economic and social atmosphere made it increasingly difficult for the Chinese to compete with white workers for unionized employment and high-paying jobs, and many Chinese retreated to ethnic enclaves by operating small businesses such as laundries and restaurants that provided personal services to the larger population. The white population seemed to accept the Chinese in the role of personal service providers as they did not pose much competition for white workers (Li, 1998). Data from the Canadian censuses indicate that, in 1920, 23 per cent of the Chinese in Canada’s labour force were in personal services, while store owners, restaurant keepers and laundry owners made up another 20 per cent, but only 0.2 per cent of the Chinese workers in Canada were employed in the food canning industry (Dominion Bureau of Statistics, 1936). Earlier statistics in the city of Victoria indicate that 29 per cent of the Chinese were engaged in food canning in 1901 (Royal Commission, 1902). By the 1920s, the Chinese in Canada had expanded their business operations to personal services and food services, largely as a means of economic survival. Engagements in these lines of services persisted throughout the first half of the twentieth century, and the food service industry remained an important sector of employment and self-employment for the Chinese in Canada even after the Second World War. Prior to 1900, close to 98 per cent of the Chinese in Canada were concentrated in British Columbia. The intensification of the anti-Chinese movement on the west coast had the effect of dispersing the Chinese community to the interior of Canada (Li, 1998). The Chinese migration followed the railroad line, settling in the prairies and eastern provinces. As a result, Chinese-operated small businesses also grew in various parts of Canada. Not much has been written about the organization of Chinese-operated firms developed during the period of exclusion. A study of Chinese-operated restaurants in the prairie towns of Canada in the 1920s and 1930s described such business as typically small, poorly decorated and labour-intensive. Interview data from Chinese old-timers suggest that these operations provided an economic refuge for many Chinese during times of economic hardship. Ironically, the absence of family members made it necessary for the Chinese men to go into business partnership, by earning meagre capital to start the business and sharing the labour to operate it. The informal partnership system, usually based on kinship and friendship ties among immigrants originating from the same hometown region, allowed

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the Chinese to economize on capital cost and labour cost in running a business. These features explained why the Chinese restaurants remained economically viable even during the Great Depression. The partnership business among the Chinese immigrants declined after the Second World War as more Chinese were allowed to bring their families to Canada. The family members provided the additional labour power to run the restaurant, and the partnership-based Chinese restaurants were turned into family-operated businesses. Chinese immigration to Canada after the Second World War The repeal of the 1923 Chinese Immigration Act in 1947 and the subsequent liberalization of immigration policy made it possible for Chinese immigration to Canada to resume, first mainly as family members and, after 1967, as independent immigrants as well (Hawkins, 1988; Li, 1998). In 1967, Canada adopted a universal point system to assess all prospective immigrants irrespective of origin, and the emphasis on educational credentials facilitated the entry of Chinese immigrants with professional and technical skills. These changes hastened the growth of the Chinese community in Canada and, in particular, the expansion of the Chinese middle class. Shortly after the Second World War, the Chinese population in Canada was about 33 000 in 1951, compared to 47 000 in 1931 (Li, 1998: 67). Undoubtedly, the exclusion of Chinese from entering Canada between 1923 and 1947 had an effect on the size of the Chinese community. The Chinese Canadian population grew rapidly after the 1960s, rising from 58 000 in 1961 to 119 000 in 1971, then 289 000 in 1981 and to 634 000 in 1991 (Li, 1998: 67). By 2001, the Chinese–Canadian population had reached over a million people, accounting for 3.5 per cent of Canada’s total population (Chui, Tran and Flanders, 2005). Occupational data from the Canadian censuses indicate that the Chinese middle class, broadly defined as those in managerial, professional, technical and supervisory jobs, grew from 23 per cent of the Chinese work force in Canada in 1981 to 28 per cent in 1991 (Li, 1998). By 2001, Chinese in managerial and professional positions accounted for 33 per cent of all Chinese in Canada’s labour force, but if those in semi-professional, supervisory and administrative and senior clerical positions were included, then as many as 48 per cent of the Chinese in the Canadian labour force could be classified as belonging to the middle class.1 The rapid expansion of the Chinese–Canadian population in the period between 1981 and 2001, and the affluent Chinese consumer market that has been created by the emerging Chinese middle class, have created new business demands for professional and other services. Several studies have noted the impact of the increased migration of Chinese capitalists, financiers and professionals, including importing investment capital to Canada and changing the consumer demand of the Chinese–Canadian consumer market (Wong, 1993, 1995, 1997; Li, 1992; Li and Li, 1999). These changes have created the conditions for the diversification of business engagements among the Chinese immigrants in professional services, corporate-style firms and other capital-intensive investments (Li, 1990). Correspondingly, there are other changes in the conventional Chinese-operated businesses in retailing and food services in major cities across Canada. Chinese business engagement in food services and professional services By the 1980s, it became clear that Chinese engagement of business in Canada extended far beyond the historical proprietorship in small-scale and family-operated firms mainly

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in retailing and personal services. At least four types of Chinese investment and business in Canada can be identified: (1) the traditional type of family-operated and individualowned Chinese businesses, mainly in personal services such as food services and retailing; (2) professional firms owned and operated by Chinese professionals in such fields as medicine, law and accounting, and financial and investment services that emerged after the Second World War and proliferated in more recent decades; (3) firms in Canada owned or controlled through foreign investments by corporations with headquarters in Asia and sometimes subsidiaries in Canada; and (4) capital-intensive investments of business immigrants that resulted mainly from Canada’s business immigration programme that has been put in place since 1985 (Li, 1993). Data from the 2001 Census of Canada on employment and self-employment indicate that 12.8 per cent of the Chinese were self-employed, compared with 12.3 per cent among white Canadians. Thus data on self-employment do not suggest that contemporary Chinese Canadians are more inclined toward business engagement than majority Canadians. However, Chinese Canadians tend to show a different pattern of concentration in business engagement than majority Canadians. For example, about 18 per cent of the self-employed Chinese were in wholesale and retail businesses in 2001, and another 12 per cent in accommodation and food services, compared with 11 per cent of self-employed majority Canadians in wholesale and retailing and less than 4 per cent in accommodation and food services. These differences indicate the persistence of Chinese businesses in retailing and food services which continued to provide an important source of employment and self-employment for some Chinese Canadians. However, there has been relative decline in the food service industry, where the Chinese had gained a strong foothold. For example, in 1986, about 19 per cent of the Chinese in the workforce were in the industry of accommodation and food services, compared to only 12 per cent in 2001. At the same time, there are noted changes in the Chinese-operated food service businesses. A study of business transition among Chinese immigrants in Richmond, British Columbia shows that, in the 1980–90 decade, there has been a faster increase of Chineseoperated professional-service business firms than of food retailing and other service operations (Li, 1992). At the same time, the business survival rate, defined as the proportion of firms that survived after ten years, tends to be much higher among professional businesses (77 per cent) than retailing and other business (41 per cent). The study found that small Chinese restaurants had to adjust to the more sophisticated consumer demands for fine cuisine, as the number of affluent Chinese immigrants increased (Li, 1992). Consequently, the Chinese food retailing business underwent a drastic transformation, with the smaller food service operations rapidly being replaced by larger and more upscale restaurants. Several factors explain these developments. The rapid increase in the Chinese population has broadened the clientèle for professional and entertainment services. In particular, the growth of Chinese professional service firms has been made possible by the emergence of the new Chinese middle class. At the same time, the intensification in the capital flow from Hong Kong to Canada that followed the expansion of Canada’s Business Immigration Programme in 1985 and also resulting from overseas expansions of Asia-based Chinese-owned corporations facilitated the increased capitalization in the food and entertainment establishments and real estate development in Canada (Li, 1992). The continuous growth of the Chinese middle class created an affluence market that prompted the development of businesses geared towards providing many diverse services

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to the Chinese community. Undoubtedly, the entry of Chinese to professional and technical occupations also made it possible for Chinese service providers to open up new lines of businesses. Data from the 2001 Census of Canada indicate that self-employed Chinese Canadians were more likely to be in professional services than majority Canadians. As many as 28 per cent of self-employed Chinese were in professional and technical services, including real estate, financial and insurance businesses, compared with 20 per cent of self-employed white Canadians in these types of businesses. At the same time, there has been a steady growth of Chinese in professional occupations. By 2001, as many as 52 per cent of Chinese in the labour market were in the fields of management, business, natural science and health, compared with 44 per cent in these fields in the total Canadian population (Chui, Tran and Flanders, 2005). These statistics clearly show the increase in the supply of Chinese–Canadian professionals and the demand for professional services brought about by the expansion of the Chinese middle class. Over time, these changes have stimulated the development of professional service businesses among the Chinese communities in Canada. Asia-based Chinese investments in Canada Since the mid-1980s, there has been an increase in offshore Chinese investments in Canada. For example, statistics on foreign investments in Canada indicate that there has been a substantial inflow of capital from Hong Kong. In the mid-1980s, direct investment from Hong Kong was only about $170 million per year, but it quickly increased to $426 million in 1986, and to $967 million in 1988. By 1990, direct investment in Canada from Hong Kong had risen to $1.3 billion, which made up about 15 per cent of the total foreign investments from all Pacific Rim countries. Between 1983 and 1990, investments from Pacific Rim countries quadrupled, but that from Hong Kong increased ninefold, whereas those from Japan rose only by three times (Li, 1993). Another way to assess the impact of Hong Kong capital on Canada is to consider the foreign-controlled investment in Canada, based on long-term capital investments in industries. In the early 1980s, Hong Kong-controlled investment in Canada was below $300 million per year. By 1986, it had jumped to $582 million and, by 1987, to $2.1 billion, which was only slightly behind Japan’s investment of $2.5 billion. Between 1980 and 1987, the capital investment from Hong Kong increased 17 times, whereas that from Japan only quadrupled (Li, 1993). The media had reported some of the major capital investments by Hong Kong capitalists throughout the 1980s and 1990s, such as the 1986 sale of 43 per cent of Husky Oil Limited for $473 million and of the 86 Expo site in Vancouver for $320 million to Hong Kong billionaire Li Ka-shing, who, through his control of the Hutchison Whampoa group of companies in Hong Kong, also owned 9.9 per cent of the Canadian Imperial Bank of Commerce (Financial Post, 30 November, 1987, p. s 8; May 28–30, 1988, p. 1). In 1987, Li Ka-shing made a $600 million bailout to rescue Nova Corporation, based in Calgary, and its Husky Oil Limited, in exchange for a total control of 86 per cent of Husky Oil (Globe and Mail, 24 October, 1991, p. B1). There were other less well advertised investments from Hong Kong. For example, Stanley Ho, a casino owner and financier, bought Le Méridien Hotel of Vancouver for $47 million in 1988, and paid $3 million in 1989 to acquire an interest in SemiTech Microelectronics Incorporated, which owns 51 per cent of the Hong Kong-based Semi-Tech Microelectronic (Far East) Limited, chaired by

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Stanley Ho (Globe and Mail, 8 April, 1989, p. B6). In 1992, the Techtronic International Company Limited of Hong Kong, through its branch company Telexel Holding Limited, paid $28.8 million to purchase the cellular telephone manufacturing operations of the Alberta-based Novatel Communications Limited (Globe and Mail, 22 May, 1992, pp. B1, B4). In 1993, Westcoast Petroleum, based in Calgary, was sold in a private sale to Hong Kong billionaires, Chen Yu-Tung, Stanley Ho and Lee Shau-kee, for $248 million (Globe and Mail, 18 February, 1993, pp. B1, B7). As large Hong Kong capital made its way to Canada, the structure of controlling interest becomes increasingly complex. The interlocking pattern of control and ownership is a clear indication that, since the mid-1980s, major capital investments from Hong Kong have been linked to multinational corporations based in Canada and the Far East. The ability of Hong Kong multinational companies to set up branch offices in Canada also made it difficult to separate Chinese-operated corporations in Canada from offshore investments. For example, the Pacific Place Development project on the 200 acres of the former Expo site in Vancouver has been controlled by Concord Property and Finance Group of Vancouver, whose chairman is Victor Li, a naturalized Canadian citizen and the son of Li Ka-shing (Globe and Mail, 19 October, 1991, p. B1). Fifteen per cent of the interest of the Pacific Place project has been held by another Hong Kong tycoon, Cheng Yu-tung, who, through his New World Development Company Limited of Hong Kong, also owned major hotels and properties in Toronto, Vancouver and Montreal. Another area of major Hong Kong investment is in commercial real estate, especially in the Vancouver area. One report indicated that Asian investors, not all from Hong Kong, control about 25 per cent of the 500 commercial properties in Vancouver’s West End alone in the early 1990s (The Province, 21 July, 1991, p. 38). The media have reported substantial commercial properties in other Vancouver areas either owned or controlled by Hong Kong corporate elites and their companies. For example, the Pacific Landmark office tower on West Pender Street was developed by the Great Eagle Property Development Group, controlled by the Lo family of Hong Kong. The English Bay Village in Vancouver, the Aberdeen Centre in Richmond, and the Parker Place next door are projects of Fairchild Holdings Limited, controlled by Thomas Fung, the son of Fung King-hey, the founder of Sun Hun Kai Securities of Hong Kong. Caleb and Tom Chan, whose family made its fortune in the garment industry in Hong Kong, moved to Vancouver from San Francisco and bought the Burrard Building and the Hotel Georgia in Vancouver, and some development projects in Whistler. The Lin family, which built its garment empire in Hong Kong through its company Lai Sun Garments, bought the Delta Mountain Inn at Whistler and the 1300 block West Georgia Street in the early 1990s (The Province, 21 July, 1991, p. 38). The entrenchment of Hong Kong capital in British Columbia and the growth of the Chinese immigrant population have attracted other Asian investments. For example, President Asian Enterprises of Taiwan, in a joint venture with President Canada Syndicates Incorporated, a Vancouver-based company that operated immigrant investor funds, built Asia Town of Richmond, a hotel and shopping mall complex that housed a 200-room hotel, a supermarket and a five-storey shopping and office centre. Some of the capital came from the Taiwan-based company, and some from the Vancouver immigrant investor fund (Globe and Mail, 16 November, 1992, pp. B1, B10). Many major firms whose headquarters are based in Asia have been extending their branch offices in Canada. As of 1991, there were 31 major mainland-Chinese companies

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operating out of British Columbia: 17 firms were in the import and export business, five were in real estate and investment, five were engaged in transportation and travel services, including Air China, and the remaining ones in other industries. Major companies of Hong Kong also set up subsidiaries in Canada, as with, for example, the high-profile Hong Kong Bank of Canada and Jardine Matheson Canada Limited (The Province, 21 July, 1991, pp. 41, 44). Investments of Chinese business immigrants Since 1978, Canada has amended its immigration policy to allow the admission of entrepreneurs as immigrants without being assessed on the basis of occupational demand or arranged employment. To qualify as an entrepreneur immigrant, a person had to establish or purchase a controlling interest in the ownership of a business in Canada, providing employment to at least five Canadians; the entrepreneur was also required to participate in the daily management of the business (P.C. 1978-486). But it was not until 1985 that the policy of admitting business immigrants was expanded to include entrepreneurs, investors and self-employed persons. To qualify as an investor, a person must have a successful track record in business or commercial undertakings, and accumulated net worth of at least $500 000, and have made a business investment of at least $250 000 in Canada in direct business ventures or through private investment syndicates or government-administered venture capital funds (P.C. 1985-3246). These changes in immigration policy greatly facilitate the flow of immigrant capital into Canada. Since 1985, the business immigrant programme has expanded, and Hong Kong has been the main supplier of entrepreneur and investor immigrants to Canada. In 1985, the total number of business immigrants admitted, including dependants, was 6481, or 7.7 per cent of all immigrants to Canada. It increased to 11 069 in 1987, 17 564 in 1989, and 18 445 in 1990, before tapering off at 16 948 in 1991. The business immigrants and their dependants made up over 9 per cent of all immigrants to Canada in 1989. For the period between 1985 and 1991, Canada admitted a total of 16 984 entrepreneurs, 4427 self-employed and 3093 investors, who, together with their dependants, made up about 93 137 immigrants or 8.2 per cent of all immigrants to Canada during this period (Li, 1993). A large proportion of the business immigrants to Canada have come from Hong Kong and, to a lesser degree, Taiwan. In 1983, 19 per cent of the business immigrants, including dependants, came from Hong Kong, and another 4 per cent from Taiwan. Within two years, the number of business immigrants from Hong Kong more than doubled, to 2821, which made up about 44 per cent of all business immigrants admitted in 1985. The volume of business immigration to Canada continued to increase after 1986; in 1989 alone, Canada admitted 17 564 business immigrants and their dependants, about 30 per cent coming from Hong Kong, and another 13 per cent from Taiwan. In short, in 1989, Chinese business immigrants from Hong Kong and Taiwan constituted about 43 per cent of all immigrants admitted under this category and, in 1990, they made up about 50 per cent (Li, 1993). Although the business immigrants admitted to Canada between 1985 and 1991 represented only about 8 per cent of the total volume of immigration, their economic impact in Canada has been sizable. In 1987, the 2484 approved applicants as entrepreneurial immigrants had a net worth of $2.5 billion; their investments were to create about 12 000

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jobs and to retain another 2155 jobs (Li, 1993). In total, between 1987 and 1990, the 11 000 approved applicants of entrepreneurial immigrants brought into Canada an estimated net worth of about $14.3 billion; their investment was estimated to have created 48 000 jobs. The capital invested in Canada by investor immigrants was also impressive. For example, between 1987 and 1990, the 1933 cases of approved applicants of investor immigrants were estimated to have a net worth of about $3.2 billion, of which $751 million were estimated to have directly invested in various Canadian investment funds (Li, 1993). Many entrepreneurial immigrants who obtained Canadian immigrant visas from Hong Kong chose British Columbia as the province in which to invest. Between 1987 and 1990, 1511 entrepreneur immigrants given visas in Hong Kong, or about 14 per cent of the total entrepreneurs given immigrant visas to Canada for this period, were destined for British Columbia; their total net worth was about $1.9 billion, or 13 per cent of the total net worth of all entrepreneur immigrants approved to come to Canada in this period. Hong Kong investor immigrants, too, have a strong inclination to invest in British Columbia. Between 1987 and 1990, 698 investor immigrant visas, or 36 per cent of the total visas issued under this category for the period, were given to Hong Kong investors destined for British Columbia; their total investments were $343 million, or 46 per cent of the total funds invested by all investor immigrants in Canada for this period (Li, 1993). Without doubt, the injection of large amounts of capital into Canada by Chinese business immigrants and offshore Chinese corporations has stimulated the growth of Chinese-owned large-scale and capital-intensive ethnic enterprises in Canada. At times, the distinction between the so-called ‘ethnic business’ and ‘offshore investments’ has become less clear, as many corporate investors maintain their residence in Canada and their country of origin, and as corporate headquarters in Asian countries operate through branch plants in Canada. Furthermore, business immigrant capital sometimes joins forces with offshore capital through investment syndicates that assemble capital for megaprojects. The effects of offshore capital and business immigrant capital are evident in a province such as British Columbia. A study of Chinese business in Richmond, British Columbia confirms that, between 1980 and 1990, small family-operated retail firms were gradually being replaced by Chinese corporate investments, especially in the food-retailing business; at the same time, there was an intensification of capitalization among the Chinese investment in Canada in commercial and residential construction (Li, 1992). Explaining business engagement of Chinese immigrants Thus far, theoretical debates on ethnic entrepreneurship have not paid sufficient attention to the diversity of ethnic businesses. Changes in Chinese business and investment in Canada in recent years suggest that different explanations may be needed to account for different types of Chinese business, since the conditions under which each type emerges vary. Both societal forces and cultural factors are relevant to explain why the Chinese in Canada had historically engaged in marginal businesses in food services and personal services. Between 1885 and 1923, the federal government of Canada and various provincial governments passed numerous laws to limit the civil rights of the Chinese and restrict their opportunities in the labour market (Li, 1998). Consequently, many Chinese retreated to marginal ethnic businesses as a means to create alternative opportunities of

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self-employment. The absence of immediate family members among the Chinese before the Second World War compelled them to form partnerships with other Chinese, often from the same places of origin, in order to pool capital and to economize on labour (Li, 1982). In this sense, blocked mobility in the open market and the transplanted cultural ties which the literature has identified (see Bonacich and Modell, 1980; Light, 1979; Light and Gold, 2000; Waldinger et al., 1990; Ward and Jenkins, 1984) contributed to the success of Chinese entrepreneurship in the laundry and restaurant businesses before the Second World War. The development of Chinese businesses in professional services in the decades after the Second World War was made possible by the emergence of the Chinese middle class, who began to immigrate to Canada as the changes in immigration regulations in 1967 removed racial origin as a consideration in immigration and emphasized professional and technical skills of immigrants (Hawkins, 1988). At the same time, the rapid increase in the Chinese immigrant population in major metropolitan centres such as Vancouver and Toronto and the emergence of the Chinese middle class have substantially expanded the ethnic consumer market and created additional demands for Chinese professional services (Chan and Cheung, 1985; Li, 1992). Several factors explain why, since the 1980s, there has been an intensification of large capital investments by Chinese business immigrants and offshore Chinese corporations in Canada. The changes in the immigration regulations in 1978 and 1985 expanded the admission of entrepreneurs, self-employed and investors under the business immigration programme (Employment and Immigration Canada, 1985). No doubt, in emphasizing major business investments as a condition of immigration, these amendments have facilitated the movement of offshore capital to Canada, and hastened the development of capital-intensive ethnic enterprises. The magnitude and scale of Chinese investments and business developments in Canada since the 1980s suggest that capital formation has been playing a critical role in the expansion of corporate ethnic enterprise. Undoubtedly, the culmination of several decades of intense capital accumulation in Hong Kong, Taiwan and, more recently, the coastal regions of mainland China has generated a surplus of investment capital for many Chinese corporate owners and entrepreneurs who have made their fortunes in the manufacturing industry, commercial enterprise and the real estate market of Asia. Depending on the type of Chinese business, different explanations are required to understand how each type emerges. Besides the traditional type of family-operated and individual-owned Chinese businesses mainly in personal services such as food services and retailing, the post-war decades have witnessed the emergence of Chinese-owned businesses in professional services. More recently, there has been an increase in investments by Chinese corporations based in Asia through subsidiaries in Canada, as well as a growth in corporate ethnic enterprises in Canada that result from capital-intensive investments of recent business immigrants. Historically, racial discrimination and blocked mobility in the open market compelled the Chinese to operate small businesses specializing in food and personal services, but it was the opening of the professional fields to the Chinese after the Second World War and the growth of the Chinese middle class that created both the supply and demand for professional services. Equally important is the expansion of the Chinese immigrant population in the past few decades which has created the consumer market to support Chinese-operated professional businesses.

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With the diversification of Chinese businesses in Canada, there is some indication that the traditional small-scale family-operated Chinese businesses in the service sector are giving way to corporate-style investments with large capitalization. Chinese capital has been coming into Canada in two major ways, as offshore investments in Canada, often operating through subsidiaries in Canada, and as direct investments by business immigrants with substantial assets. The preferred investments appear to be hotels, commercial and office buildings and other real estate properties, although major Chinese financiers have also made investments into banks, oil and gas companies and emergent corporate firms. The expansion of Chinese capital into Canada through offshore investments and business-class immigration is predicated on political and economic factors. The changes in immigration regulations in Canada facilitate the entry of business immigrants with large surplus capital, many from Hong Kong and Taiwan, and more recently from mainland China. At the same time, the uncertain political future of Hong Kong hastened the exodus of capital in the 1990s. The development of capital-intensive Chinese enterprises in Canada can also be understood as an expansion of Asia-based Chinese multinational companies, as their growth in scale and capitalization compels them to follow a corporate rationality to internationalize through portfolio diversification. The recent development of Chinese investment and immigrant business in Canada suggests the importance of capital in the formation of ethnic enterprise, as transplanted capital opens up new opportunities for Chinese financiers and capitalists in the corporate world of Canada. The development of business engagement of Chinese in Canada also indicates the need to separate the type and scale of business engagement from the conditions that explain such engagement. The blocked mobility thesis, that is, the argument that limited employment opportunities in the open market propel immigrants towards business ventures, certainly has merit in the historical context, when Chinese were denied access to many higher-paying jobs in the core labour market and retreated to the immigrant-based service sector. However, the period after the Second War World that brought an increase in employment opportunities for the Chinese in many new lines of work also witnessed an increase in business engagement by Chinese immigrants. But these were more diversified business ventures, in both traditional services and emerging professional services. Thus, in this historical period, the occupational mobility of Chinese, not limited employment, increased the supply of professional service-givers that in turn responded to the growth of the professional service business market. Conventional studies of immigrant businesses tend to consider such activities as mainly influenced by internal ethnic-based resources. Increasingly, the emergence of the global market and transnational business investments have suggested that external forces also play a role in changing the scale, organization and operation of immigrant businesses. These changes further suggest the need to broader the understanding of immigrant business beyond the small-scale family-run operations to include the corporate type of immigrant businesses that are linked to international capital and transnational connections. Note 1. Unless otherwise stated, statistics from the 2001 Census of Canada are compiled from the 2001 Census of Canada, Public Use Microdata File for Individuals, weighted to population size.

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References Anderson, Kay J. (1991), Vancouver’s Chinatown: Racial Discourse in Canada, 1875–1980, Montreal: McGillQueen’s University Press. Bonacich, Edna and John Modell (1980), The Economic Basis of Ethnic Solidarity, Berkeley: University of California Press. Campbell, Persia C. (1969), Chinese Coolie Emigration, New York: Negro University Press. Chan, Janet B.L. and Yuet-wah Cheung (1985), ‘Ethnic resources and business enterprise: a study of Chinese businesses in Toronto’, Human Organization, 44, 142–54. Chui, Tina, Kelly Tran and John Flanders (2005), ‘Chinese Canadians: enriching the cultural mosaic’, Canadian Social Trends (Spring), 24–32. Dominion Bureau of Statistics (1936), Census of Canada, 1931, Occupations and Industries, vol. VII, Ottawa: Department of Trade and Commerce. Employment and Immigration Canada (1985), ‘Business Immigrants’, Document WH5-085. Hawkins, Freda (1988), Canada and Immigration, 2nd edn, Kingston and Montreal: McGill-Queen’s University Press. Ip, David, Constance Lever-Tracy and Noel Tracy (2000), Chinese Business and the Asian Crisis, Vermont: Gower Publishing Limited. Lai, Chuen-Yan David (1988), Chinatowns: Towns within Cities in Canada, Vancouver: University of British Columbia Press. Lee, Tung-hai (1967), Jianada Huaqiao Shi (History of Overseas Chinese in Canada), Vancouver: Zhonghua dadian bianyinhui. Li, Peter S. (1982), ‘Chinese immigrants on the Canadian prairie, 1910–47’, Canadian Review of Sociology and Anthropology, 19, 527–40. Li, Peter S. (1990), ‘The emergence of the new middle class among the Chinese in Canada’, Asian Culture, 14, 187–94. Li, Peter S. (1992), ‘Ethnic enterprise in transition: Chinese business in Richmond, B.C., 1980–1990’, Canadian Ethnic Studies, 24, 120–38. Li, Peter S. (1993), ‘Chinese investment and business in Canada: ethnic entrepreneurship reconsidered’, Pacific Affairs, 66(2), 219–43. Li, Peter S. (1998), The Chinese in Canada, 2nd edn, Toronto: Oxford University Press. Li, Peter S. and Yahong Li (1999), ‘The consumer market of the enclave economy: a study of advertisements in a Chinese daily newspaper in Toronto’, Canadian Ethnic Studies, 31(2), 43–59. Light, Ivan (1979), ‘Disadvantaged minorities in Self-employment’, International Journal of Comparative Sociology, 20, 31–45. Light, Ivan and Steven J. Gold (2000), Ethic Economics, San Diego: Academic Press. Privy Council, Order in Council (1978-486), ‘Regulations respecting admission and removal from Canada of persons who are not Canadian citizens’, Canada Gazette, part II, vol. 112, no. 5, February, 1978. Privy Council, Order in Council (1985-3246), ‘Immigration regulations, 1978, amendment’, Canada Gazette, part II, vol. 119, no. 23, 31 October, 1985. Portes, Alejandro and Min Zhou (1996), ‘Self-employment and the earnings of immigrants’, American Sociological Review, 61, 219–30. Redding, S. Gordon (1993), The Spirit of Chinese Capitalism, New York: Walter de Gruyter. Royal Commission (1902), Report of the Royal Commission on Chinese and Japanese Immigration. Sanders, Jimy M. and Victor Nee (1987), ‘Limits of ethnic solidarity in the enclave economy’, American Sociological Review, 52, 745–73. The Financial Post (1987), ‘Investment wave from Hong Kong breaks on Canada’, 30 November, 1987, p. S8. The Globe and Mail (1989), ‘Share purchase by chairman Ho aids Semi-Tech’s Hong Kong link’, 8 April, p. B6. The Globe and Mail (1991), ‘Reichmanns join forces with Hong Kong billionaire’, 19 October, 1991, p. B1. The Globe and Mail (1991), ‘Li Ka-shing rescues Husky with $600-million bailout’, 24 October, 1991, p. B1. The Globe and Mail (1992), ‘Alberta sells off Novatel to Nortel, Hong Kong firm.’ 22 May, 1992, pp. B1, B4. The Globe and Mail (1992), ‘Asian investment floods Richmond’, 16 November, 1992, pp. B1, B10. The Globe and Mail (1993), ‘Westcoast sells oil and gas unit’, 18 February, 1993, pp. B1, B7. The Province (1991), ‘The Asia Factor, Part Two’, 21 July, 1991, pp. 38, 41, 44. Waldinger Roger, Howard Aldrich, Robin Ward and Associates (1990), Ethnic Entrepreneurs: Immigrant Business in Industrial Societies, Newbury Park, California: Sage. Ward, Robin and Richard Jenkins (eds) (1984), Ethnic Communities in Business, Cambridge: Cambridge University Press. Wilson, Kenneth L. and Alejandro Portes (1980), ‘Immigrant enclaves: an analysis of the labor market experiences of Cubans in Miami’, American Journal of Sociology, 86, 295–319.

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Wong, Lloyd L. (1993), ‘Immigration as capital accumulation: the impact of business immigration to Canada’, International Migration, 31, 171–90. Wong, Lloyd L. (1995), ‘Chinese capitalist migration to Canada: a sociological interpretation and its effect on Canada’, Asian and Pacific Migration Journal, 4(4), 465–92. Wong, Lloyd L. (1997), ‘Globalization and transnational migration: a study of recent Chinese capitalist migration from the Asian Pacific to Canada’, International Sociology, 12(3), 329–51. Wong, Siu-lun (1988), Emigrant Entrepreneurs: Shanghai Industrialists in Hong Kong, Hong Kong: Oxford University Press.

11 Toward a rethinking of race, culture and the African American entrepreneur Nicholas Maurice Young

Introduction Few ideas saturate academic and popular discourse, and are in more need of continuous social science investigation than the problems African Americans have creating and managing viable firms. Although the literature is saturated with studies that have generated answers to important social science questions about how America’s ‘white ethnics’ become entrepreneurs, surprisingly little detailed attention has been given to making sense of the process of viable venture creation among African Americans. Indeed, scholarly research on the entrepreneurial experiences of African Americans occupies a rather obscure place in the social sciences. While few would question the idea that African Americans, like other entrepreneurial actors, have difficulty creating and managing successful firms, the suggestion that they are not successful entrepreneurial actors has received much attention in scholarly and popular outlets (Frazier, 1957; Glazer and Moynihan, 1963; Foley, 1966; Light, 1972; Sowell, 1978, 1981). Surprisingly, despite these claims, research on their experiences remains problematic, and does not convey the complex, textured difficulties of their entrepreneurial process. Instead, current research echoes the old, but still relevant, themes of inadequate capitalization and discrimination that have survived with remarkably little alteration since at least the 1970s. But while there is some truth to such an analysis, the fuller story is much more complex. The purpose of the present chapter is to challenge this, and other contemporary ways of thinking about this problem. Here the focus will be on illuminating for scholarly consumption the significance of rethinking how the way we examine the African American entrepreneurial experience can help us better understand the challenges they, and perhaps other entrepreneurs, face in creating viable entrepreneurial firms. As I shall argue, the primary problem with current inquiries is that they often present an incomplete picture of the factors shaping the African American entrepreneurial experience. However, while this chapter is ultimately about the importance, or lack thereof, of more comprehensive, sociological research on African American entrepreneurs, here my task is not to argue that current research has not made a positive contribution to this debate. On the contrary, despite its inadequacies, I shall argue that this body of research has provided the necessary nourishment and growth for challenges to many arguments citing the inadequacies of African Americans engaging in entrepreneurship. There are, however, at least three problems with previous research that make this attempt seem worthwhile. First, the most fundamental problem with racial and cultural arguments is that many of them tend to assume a far too rigid causal determinism of entrepreneurial outcomes. Indeed, some race and cultural perspectives about ethnic entrepreneurs tend to be reified and treated as exhaustible and immutable. But, while most scholars will find kernels of truth in each argument, these narrowly focused perspectives 157

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bypass important realities. Although inquiries into the relevance of race and culture for engaging in viable firm creation continue to generate attention for some scholars, for reasons that I will explain below, an analysis limited solely to linking both to entrepreneurial success cannot provide deep understanding. What tends to get lost in the languages of race and culture is the efficacy of human action. First, culture, at least in some treatments, is treated as a thing unto itself, independent of other spheres of social life. Race or racial discrimination is often viewed as a reified obstacle, contributing to paralyzing discussions concerning the ability of some actors to navigate around barriers to their participation in the entrepreneurial arena. My purpose here is to demystify these ideas. Racial and cultural arguments about the emergence of ethnic entrepreneurs tend to appear in social science discourse as concomitant explanatory factors. Both are, however, very different, and any attempt to point up one over the other, or to suggest their relationship without proper examination is radically incomplete. Second, because there is sufficient reason to believe that desegregation did sharply circumscribe the ability of many African Americans to remain competitive in the labor market and the entrepreneurial arena (Massey and Denton, 1993; Massey and Fischer, 2000; Bridges and Villemez, 1986; Braddock and McPartland, 1997; Handy and Swinton, 1984; Ando, 1986; Bates, 1989a, 1989b, 1991; Butler, 1991; Chen and Cole, 1988), there is a belief among some scholars that the proximate nature of this policy is primarily responsible for the demise of what was once a prominent African American business class in some Northern and Southern cities. As we shall see, I argue that this claim is false. Indeed, although many of the problems that African Americans experience creating viable firms are unique, and while we can locate the origin(s) for some of these problems in the historic discrimination generated by white consumer and financial institutions toward the African American working and entrepreneurial class, this idea does need extensive rethinking. Indeed, there is a danger in pointing up desegregation as the most important proximate factor circumscribing the creation and successful management of African American firms. Again, many of these arguments tend to ignore the efficacy of human agency, and the individual and/or collective will of many African Americans. Third, in some circles, current inquiries have been reduced to what I call (for lack of a better phrase) a ‘problematic of capital’ (human and financial) framework: the idea that the problems African Americans experience creating and managing firms can be traced to a paucity of human and financial capital resources. Although, taken together, race and culture perspectives have much currency; ‘problematic of capital’ arguments have achieved hegemonic status in this debate. This idea, however, requires some exegesis. One of the unfortunate consequences of this dominant thinking is that we have edited out any new understandings of the factors facilitating and/or circumscribing viable firm creation amongst this group. This argument is often made despite knowing very little about the methods African Americans, and other entrepreneurial actors, use to create firms. To be sure, while human and financial capital formulations continue to take center stage in this debate, here it will be argued that such explanations can no longer be given such a rationalized foundation. In view of these problems, the general purpose of this rethinking is to seek a deeper understanding of the challenges African Americans have creating viable firms. Consequently, my point of entry into this debate will involve first an attempt to interrogate what I regard as

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the most dominant existing interpretations of race, culture, capital and the African American entrepreneurial experience: Ivan Light’s Ethnic Enterprise in America, and, at a later point in the argument, Timothy Bates’s concept of capital in Race, Self-Employment, and Upward Mobility. Second, I present argument to support a rethinking of the African American entrepreneurial experience. My purpose is to develop a more adequate understanding of the African American entrepreneurial experience by means of critique, reformulation and elaboration. The problem and promise of race and culture in ethnic entrepreneurial research As Table 11.1 shows, African Americans have the lowest self-employment rate of any major ethnic group in the United States. Explanations for this phenomenon vary, and have confounded scholars for several decades. However for some, the percentage of selfemployed Asian Americans has generated perhaps more interest, discussion and theoretical explanation among social scientists studying race, ethnicity and entrepreneurial opportunity. Perhaps the most sustained effort at pointing up the significance and intersection of race, culture and capital for entrepreneurial success was made by sociologist Ivan Light. Indeed, his seminal 1972 treatise on the business activities of African Americans, Chinese and Japanese ignited a quiet revolution in the social sciences. In Ethnic Enterprise in America, Light takes what some considered to be an important step in making sense of the reason(s) why the entrepreneurial performances and self-employment rate of African Americans has consistently lagged behind many other ethnic groups, particularly those of Asian descent. The promise of race In making sense of the self-employment rates of the three groups, Light provides a brief history into the development of Japanese and Chinese business in the United States. The picture that he paints of this process for them is one of struggle and triumph. As he suggests, Chinese immigration to the United States began in 1848; the Japanese began migrating around 1900. Light suggests that both groups began their economic careers in Table 11.1

Percentage self-employed, by ethnic group

Ethnic group

(%)

African English German Irish Hispanic Asian Jewish Italian Indian Polish

5.0 13.0 15.0 11.0 7.0 13.0 25.0 11.0 13.0 10.0

Source: Estimated and adapted from Butler and Herring (1991).

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California as wage earners, gravitating slowly into entrepreneurial careers; the Chinese secured employment as railroad laborers, while Japanese pursued positions as agricultural laborers. Although their initial economic positions generated some source of income, securing these positions did not come without a price: the economic and social positions of both groups were threatened by intermittent discrimination and violence. Much of this violence was the result of fear from white laborers who viewed both groups as competition for their jobs. Further attempts made by both groups to move into higher paying occupations were met by anti-Chinese and anti-Japanese legislation. Such sentiments prevented their full participation in local labor markets, thus sharply circumscribing their ability to generate sufficient wages to support their families. Light suggests that the discrimination, or ‘cruel disadvantages’ (1972: 5), that Asian immigrants faced served as a stimulus of sorts, propelling them into self-employment. Given the harsh discrimination, or ‘extra disadvantages’ (1972: 5), that African Americans faced in the labor market and entrepreneurial arena, the ‘fact’ that they did not respond to such treatment – at least in a more aggressive fashion – appears to confound Light. Recognizing this, he rejects the claim among some scholars and non-academicians that racial discrimination is the primary vehicle retarding the self-employment rate of African American entrepreneurs. Specifically, he was puzzled by the ways in which entrepreneurs of Asian descent monopolized the retail trade market in many urban African American communities. In his words, Light’s position on these points can be summed up in the following: It is hardly surprising that black people would like to own the retail stores located in their own neighborhoods. Retail proprietorship is, after all, a classic avenue of upward social mobility for the disadvantaged, and a ‘symbol of opportunity’ in the Horatio Alger tradition . . . Making a decent living in retail trade is certainly harder nowadays . . . Those with advantageous educational and color credentials can normally do better by working for the A&P than by working against it . . . Hence only the disadvantaged now have an economically rational motive for operating retail stores in competition with the A&P or any other retail giant. Because blacks are so disadvantaged, their want of a proprietary class is more anomalous today than it was a halfcentury ago . . . In view of the importance of the small proprietor in other American minorities, the ‘complete absence of a business class’ among blacks is especially perplexing. (Emphasis added, 1972: 4)

He continues (1972: 5–6): Of course, as many writers have noted, the comparison of blacks and foreign-born whites is often misleading because the latter experienced milder discrimination than did American blacks . . . These cruel disadvantages explain many differences between blacks and foreign-born whites, but they do not explain why the latter have been regularly active in business proprietorships (even in black neighborhoods) whereas the blacks themselves have not. On the contrary, the extra disadvantages of blacks ought, strictly speaking, to have stimulated them to more extensive self-employment than the foreign-born whites. These deductions aside, the social histories of Americans of Chinese and Japanese descent offer empirical illustration of the manner in which poverty, discrimination, and ethnic visibility stimulated business proprietorship among some disadvantaged immigrants . . . the Asian immigrants were poor and visibly non-European and were subject to racial discrimination on that account . . . But since they shared these practical disadvantages with black Americans, the logic of Asian–American business development raises questions about the absence of parallel developments among American blacks – and about a social theory whose expectations are incongruent with observations. (Emphasis added)

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The promise of culture and capital According to Light, the ‘practical disadvantages’ that Asian immigrants shared with African Americans forced many Asian immigrant entrepreneurs to pursue economic prosperity through business ownership. He argues that the absence of rotating credit associations – social structural configurations where actors rotate capital for entrepreneurial ventures – in the African American community was the organizational configuration missing from their ‘cultural repertoire’ (1972: 36) that largely prevented many African Americans from achieving similar success in the entrepreneurial arena. Using this information as the basis for his argument, he argues against the assertion that discrimination in commercial lending was the proximate reason for the circumscribed status of African American entrepreneurs. However, in Race, Self-Employment, and Upward Mobility, Bates argues against what he calls Light’s ‘Horatio Alger’ depiction of Asian self-employment patterns, suggesting that ‘its applicability to contemporary America is nil’ (Bates, 1997: 2). In contrast, Bates questions why other ethnic groups have not taken advantage of small business opportunities to the same extent as Asians. Using Census data for the years 1979–87, he appears to reject Light’s claim that a focus on capital endowments is not a significant predictor of ethnic entrepreneurial success. Citing data that compare the percentage of Asian and African Americans entrepreneurs that are college graduates and their average financial investment at business start-up (57.8 per cent of Asian entrepreneurs were college graduates and used $53 550 at start-up; compared to 30.2 per cent of African Americans entrepreneurs who were college graduates, and had an initial capital investment of $31 939 at start-up), Bates presents an alternative picture of Asian–African American self-employment patterns that emphasizes differences in an entrepreneur’s financial and human capital investments. For Bates, differences in self-employment success are directly attributed to human and financial capital gains (1997: 4–18): This study concludes that successful small businesses tend to be those created with a substantial investment of the owner’s financial capital, along with the strong educational credentials of business owners . . . Gains in higher education typify how reductions in discriminatory barriers are translated into significant progress in the minority business community . . . College enrollment among Asian Americans has grown even faster than it has among blacks . . . The bedrock of small-firm creation is the owner’s human capital, that is, the founder’s education, training, work experience, and skills . . . Those lacking such human capital have low self-employment rates . . . Human and financial capital are properly thought of as prerequisites for success in most lines of self-employment: for persons lacking the requisite skills and capital, self-employment entry rates are low; for those lacking appropriate human and financial capital who nonetheless start a small business, business failure and self-employment exit rates are high. Thus the limited ability to compete that typifies weak small businesses combines with entry barriers to keep many potential entrepreneurs on the sidelines: low human and financial-capital endowments translate into low self-employment rates. (Emphasis added)

Critique: towards a rethinking of Asian immigrant and African American self-employment patterns Interest in making sense of how ethnic groups engaged in the entrepreneurial process increased with the publication of Ethnic Enterprise in America, so much so that in the 30year period between the publication of this seminal treatise and Bates’s Race, SelfEmployment, and Upward Mobility, research in this area has caused a massive rethinking

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in the methods some ethnic groups use to create firms and establish competitive entrepreneurial advantage. But as research into the impact of ethnicity on entrepreneurialism increased, there were still unresolved issues regarding why, given a favorable situation, some individuals become entrepreneurs while others do not (Portes, 1987). To be sure, Ethnic Enterprise in America increased specific interest in the analysis of how some ethnic groups move into business enterprise and adjust to American society (Bonacich and Modell, 1980; Cobas, 1985; Portes and Bach, 1985; Butler and Herring, 1991). However, despite this increased interest, few scholars have applied similar intensity to exploring the historical and structural foundations of race, ethnicity and entrepreneurialism among African Americans. Even fewer have attempted to present argument, data and evidence that would present an alternative impression of the African American entrepreneurial experience. Exactly why remains unclear. While Light’s and Bates’s attempts to tackle this problem should be commended, their arguments about the deficiencies among African Americans suffers from serious gaps and knowledge that have yet to be put to systematic investigation. The study of ethnic enterprise: problematic comparisons To be sure, Light asks very important questions, primary among which is the issue of why African American self-employment rates remain comparatively low. Indeed, this issue confounded scholars for decades long before, and the three decades since, the publication of Ethnic Enterprise in America. However, despite the problematic nature of Light’s treatise, it has had surprising staying power. Light’s narrowly focused interpretations suffer from at least three disadvantages that make his emphasis on ethnicity problematic. First is his focus on retail firms. Light surmises that retail ownership is a classic area of entry in self-employment for many disadvantaged ethnic groups. At first glance, Light has made a very compelling argument. However, closer inspection of his analysis reveals why it is largely problematic. Light takes only one slice of the entrepreneurial picture for both groups, and makes unjustified conclusions based on this biased sample. That Asian Americans had higher self-employment rates in retail firms per capita in 1970 in California than African Americans is indisputable. However, this is largely an apples–oranges comparison precisely because it fails to recognize that, while Asian immigrant firms are largely concentrated in the retail and service sectors of the economy, African American firms are spread more evenly across the entrepreneurial arena. As Tables 11.2 and 11.3 show, in 1970 Asian American and African Americans were engaged in similar areas of similar self-employment. Indeed, given the overall size of both populations (Asian American, 1 538 721 and African American 22 580 289), Asian Americans had higher rates of self-employment in many fields. Table 11.3 also confirms that Asian Americans were operating more retail and service sector firms per capita than African Americans. However, a closer inspection of Table 11.2 reveals that greater numbers of African Americans were operating in lines of business that typically require greater amounts of start-up and operating capital to establish and maintain competitive advantage over competitors. Furthermore, many of the areas that African Americans are in, and Asians are not, take greater amounts of start-up capital to get into and operating capital to succeed and remain competitive than many small, retail oriented stores.

Race, culture and the African American entrepreneur Table 11.2

African American firm ownership, by industries, 1972 Number of firms per thousand in population

Industries

Population

Number of firms

Total Construction Manufacturing Transportation/public utility Wholesale trade Retail trade Finance, insurance and real estate (FIRE) Selected service Other industries Industries not classified

22 580 289

194 986 20 151 4 116 21 738 2 091 56 617 8 001

0.96 0.09 2.51 0.35

68 469 4 283 9 520

3.03 0.19 0.42

Table 11.3

163

8.64 0.89

Asian American firm ownership, by industries, 1972

Industries Total Construction Manufacturing Transportation/public utility Wholesale trade Retail trade Finance, insurance and real estate (FIRE) Selected service Other industries Industries not classified

Population

Number of firms

Number of firms per thousand in population

1 538 721

33 114 1 124 868 506 953 1 825 2 229

21.52 0.73 0.56 0.33 0.62 7.68 1.45

9 261 5 001 1 347

6.02 3.25 0.88

Additionally, although retail ownership is itself a very competitive space in which to operate a firm, history has shown that, because many economically prosperous, potentially-entrepreneurial African Americans have migrated away from segregated urban communities in large numbers, America’s inner cities are areas where immigrant communities are least likely to encounter competition, hence their apparent dominance and perhaps intended focus. Although scholars are unclear why this is so, what appears more controversial is the suggestion that cultural, rather than historical, factors may be the culprit. While a historic possibility is more likely, another may be that some African Americans simply ‘gave up’ control of these geographic spaces in a conscious effort to pursue more profitable areas of self-employment and labor market opportunities. Or it may be that some African Americans made a conscious decision to relinquish control over

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these environments to escape the fatigue and disgust generated by the discrimination and poverty that they experienced in that context. Whatever the reason, any analysis that limits itself to providing a cultural explanation for this phenomenon cannot provide deep understanding. The demystification of ethnicity and the ‘problematic of capital’ Continuing with this stream of thinking, the second problematic area of his analysis is in how Light deals with culture. Indeed, Ethnic Enterprise in America, and other subsequent work since its publication, made it commonplace to think of ethnicity as a phenomenon sui generis; that is, ethnicity or culture, which influences how we think, feel and act in specific social situations is a thing apart, the distinctive, motivating force behind successful venture creation and management among some ethnic Americans. Indeed, that some ethnic groups have unique cultural character can hardly be denied. However, what tends to confuse some in discussions about ethnicity and entrepreneurship is the reification of culture. Within ethnic entrepreneurial research, culture is an unexamined metaphor that tends to reduce actors to programmed automatons. For this reason, cultural interpretations of economic action lend themselves readily to explanations of how social life is shaped into consistent patterns, but not to the way these patterns are affected by historical contingencies. Culture, as least in Light’s treatment, is treated as a thing unto itself, independent of other spheres of life. The problem, however, is that culture is not fixed or unchanging. Indeed, it is part of a larger social matrix of behaviors. In particular, the reification of Asian immigrant attitudes and values about entrepreneurship has made their success appear in this milieu almost magical, as if they possess some special cultural ointment that only a select number of other ethnic groups are capable of conjuring up when the need for such a formula arises. In such instances, ethnic patterns are often taken at face value, devoid of any impact of social relations or the institutional milieu in which they are embedded. Indeed, that some ethnic groups are part of a social matrix that contains entrepreneurial role models which employ methods that encourage the importance of selfemployment can hardly be denied. As Light correctly illuminates, this appears certainly to be the case among some Asian immigrant groups. However, what is being questioned here is Light’s attempt to place so much emphasis on the primacy of culture in shaping these processes. Implicit in this suggestion is the idea that, because all groups experienced some form of discrimination in their quest for social and economic equality, those groups whose values were conducive to individual achievement experienced disproportionate economic success. This brings Light’s fleeting ‘Horatio Alger’ reference (1972, p. 4) into sharper focus. His suggestion appears to point to the idea that there are ethnic reasons for ethnic success, and that the causes are to be found within the groups themselves. In other words, success comes not just to those that believe that it is possible, but also to those that are members of ethnic groups which contain the ‘correct’ set of cultural attributes. ‘For groups with the “right” values, the existence of prejudice is not an insurmountable obstacle, and only adds to the heroic dimensions of ethnic success’ (Steinberg, 1989: 85). According to Steinberg, one way to understand the determinants of ethnic success is to make sense of a complex set of questions, many of which Light attempted to do, albeit with limited success. First, what differences in the background and circumstances of

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ethnic groups allowed some to advance further than others? Second, what was the institutional context in which ethnic mobility occurred, and did it favor certain groups more the others? Finally, if it can be shown that groups differed in their cultural values in ways that might have facilitated or impeded mobility, how are these differences to be explained? In short, making sense of these questions would help scholars understand what external circumstances made these successes possible, and why some ethnic groups may have been better equipped or better positioned than African Americans to take advantage of a given set of opportunities. Reformulation: the problem of race in ethnic entrepreneurial research The third problematic area of analysis is how Light views race. He appears to treat all three groups as if they operate as equals on the same social plane. This idea, however, requires some exegesis. Throughout the book, Light refers to entrepreneurial immigrants as ‘white ethnics’. Upon first impression, this reference is harmless. However, closer inspection of the term reveals a certain level of comfort with and social congruency from whites towards Asian immigrants that was not shared, reproduced or displayed toward African Americans. The phrase projects a level of tolerance, or acceptance in an exclusive club not enjoyed by African Americans that reflects a willingness among some whites to accept Asian and European immigrants as long as they do not ‘cross the line’; in this case, the ‘line’ refers to competing for the same jobs and establishing enterprises in the same lines of business. Yet, viewed more deeply, Light’s interpretation ignores the conflictual character of race, and the political aspect and shifting nature of racial dynamics. Specifically, this thinking neglects race as an autonomous field of social conflict, political organization and cultural/ ideological meaning (Omi and Winant, 1994). In failing to recognize this, Light reduces race to a manifestation of ethnicity, which leads to an inability to grasp the uniqueness of the concept, and measure its historical flexibility and immediacy in everyday experience and social conflict. To measure this impact adequately, one must recognize that conflicts around race must be examined, not in a vacuum, but rather as part of the social matrix in which they are embedded. Racial meanings, then, like culture, are also unfixed, and thus subject to the outcomes of struggle. They are ‘a salient feature in a general process whereby culture mediates the world of agents and the structures which are created by their social praxis’ (Gilroy, 1987: 17). Thus, in a sense, the creation and usage of the term ‘white ethnic’ requires a recognition of the existence of a distinct pattern of social and political subordination, resistance and negotiation between the dominant and minority group; a rationalizing ideology that may have informed whites that, while there were reasons to be concerned about Asian immigrants competing for their jobs and engaging in areas of self-employment that threatened their existence in the economic arena, there was a certain level of comfort that they had with Asians and other ‘white’ immigrants that superseded their attempts to compete. Thus, in failing to recognize this war of maneuver, Light’s analysis falls prey to the inevitable danger of rendering the dynamics of Asian immigrant and African American oppression as more homogeneous than they actually were. The ‘problematic of capital’ However, despite Light’s reluctance to recognize the conflictual nature of race and the African American entrepreneurial condition, the fourth and final problem of his analysis,

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what I call ‘the problematic of capital’, has achieved hegemonic status in this debate. So much so that this perspective has been pointed up with consistent force by economist Timothy Bates. Certainly, Light’s attempt to demonstrate how some Asian immigrants mobilize to acquire capital brought great value to the study of ethnic enterprise. It changed thinking about how some ethnic groups respond to discrimination, and forced a rethinking of the factors shaping why other groups remain mired in low self-employment rates. Indeed, while Light’s ideas about the importance of rotating credit associations in generating viable firm creation are important, the unfortunate result of this myopic focus is that it helped create an atmosphere that discouraged social science inquiries into other aspects of the African American entrepreneurial experience. To be sure, evidence highlighting small business owners’ historical reliance on personal savings and family members to fund their ventures is not enough evidence to conclude that all African American entrepreneurs rely on similar capital sources. In contrast, Bates’s Race, Self-Employment and Upward Mobility provides researchers with a possible blueprint for future inquiry on this subject. The picture he paints of successful self-employment is one where better educated, better trained and more skilled entrepreneurial actors have access to significant amounts of financial capital, the latter of which, he argues, is the strongest and most accurate predictor of entry into self-employment. To be sure, these elements, when taken together with other important resources, translate into successful entrepreneurial action. The main problem, however, with Bates’s analysis is the way he reduces the problem to a ‘problematic of capital’ argument: If you do not have the right human and/or financial capital, your chances of entrepreneurial success are very limited. To be sure, most scholars would agree that more educated actors with loads of entrepreneurial experience may have a better chance at succeeding at self-employment than individuals with less formal training. But education and capital are important to entrepreneurs for several, and sometimes different, reasons. Bates makes the case that African American firms have been shaped by ‘broad discontinuous social forces’ (1997: 163). He argues that an easing of discriminatory barriers has generated a growth of new African American firms and an expansion of greater entrepreneurial opportunities. Again, Bates attributes this occurrence to human capital gains: ‘Black-business progress in the 1980s and 1990s has been strongly rooted in the human capital gains of the entrepreneur: the depth of expertise and experience of black entrepreneurs has expanded substantially’ (ibid.). The primary problem with problematic of capital arguments is that they assume that the problems African Americans have securing financial capital and other entrepreneurial resources, and acquiring sufficient education, are unique. While there is sufficient reason to believe this, problematic of capital arguments often lead to paralyzing debates about other viable determinants of success. As Light correctly points out earlier in this volume, these arguments have been made for several decades without making sense of other factors that may shed light on this problem. Given this reality, I regard such scholarly arguments as largely problematic because they fail to recognize that, while entrepreneurial African Americans attempting to secure financial capital experience greater discrimination by banks and other financial institutions, this problem (acquiring capital and securing resources) is something that sharply

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circumscribes the ability of most entrepreneurs, regardless of ethnicity, to create and expand viable firms. To be sure, if the economic, social and political history of African Americans has shown anything, the type of discrimination they face has forced many of them to pursue alternative routes to economic prosperity that are radically different from the routes taken by any other American ethnic group. Elaboration: towards an explanation of African American self-employment patterns – a reconsideration of race, culture and segregation But exactly how do African Americans differ in these respects? What, then, explains their comparatively low self-employment rates? Evidently, these questions cannot be answered simply. I argue that a rethinking is necessary in our efforts to make better sense of the sociohistorical factors shaping the African American entrepreneurial experience with respect to race, culture and segregation. Thus, using the above information as a guide, I proceed with this rethinking by arguing that there are a few differences in the self-employment experiences of African Americans that differentiate them from other ethnic groups: differences that may have contributed to their comparatively lower self-employment rates. First is the problem of race. African Americans, entrepreneurship and the politics of race As the above discussion illuminates, many ethnic groups have used entrepreneurship as a means toward achieving upward mobility through wealth creation. Over the years, Light, Bates and their colleagues have argued long and hard in support of this thorny reality. The evidence is on their side: ‘Small business creation and operation have played a prominent role in the efforts of immigrant groups to achieve upward mobility’ (Bates, 1997: 1). Given such a significant empirical reality, what factors explain why many African Americans, at least in the post-Civil Rights era, have not gravitated to self-employment with the same intensity? What relevance, if any, does race have in explaining this problem? In attempting an integrated analysis of the past with regard to race, what appears to be different about the African American experience is that, in the periods in which they attempted to establish competitive advantage through viable firm creation, they were engaged in a battle with whites and other ethnics where the very idea of race was politically contested. Because of ‘race’, African American social, economic and political opportunities were sharply circumscribed by whites in ways that made viable firm construction difficult. These problems can be traced, to some extent, to an initially low social and economic position in society, one that Blauner (1972) suggests was very different from the initial position of European ethnics. Indeed, ‘the entrance of the European order involved a degree of choice and self-direction that was for the most part denied people of color. Voluntary immigration made it more likely that individual Europeans and entire groups would identify with America and see the host culture as a positive opportunity rather an alien and dominating value system . . . this element of choice . . . must have been crucial in influencing the different careers and perspectives of immigrants and colonized in America, because choice is a necessary condition for commitment to any group’ (1972: 63). In sharp contrast, African Americans and other people of color migrated to this country involuntarily. Without the benefit of first mover advantage, they were concentrated in the least advanced sectors of the economy, where the opportunity to acquire semi-skilled and skilled positions was sharply circumscribed. Indeed, almost all racial

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ethnic groups, in their search for a better life in America, started out at the back of the economic queue. In many cases, the labor market is the perfect laboratory for igniting ethnic tensions. According to Waldinger (1996: 3–6), the ethnic division of labor stands as the central division of labor in the cities of twentieth-century America. He provides an excellent description of this process: ‘The story of ethnics in America’s cities is a collective search for mobility, in which the succession of one migrant wave after another alternatively stabilizes and disrupts the labor queue . . . The instability of America’s capitalist economy subjects the labor queue’s ordering to change. Growth pulls the topmost group up the totem pole: lower-ranking groups then seize the chance to move up the pecking order; in their wake, they leave behind vacancies at the bottom . . . The structure of the labor queue goes unchallenged as long as these newest arrivals are content to work in the bottom-level jobs for which they were initially recruited. But the economic orientations of the newcomers inevitably change, and, when they do, complementarity is likely to be replaced by competition – which fans continuing ethnic strife over access to good jobs.’ Europeans worked primarily within the industrialized, modern sectors and ‘had a foot in the most dynamic centers of the economy’ (Blauner, 1972: 62). The end result of this segmentation was an early advantage in social and economic opportunity: ‘The initial position of European ethnics, while low, was therefore strategic for movement up the economic and social pyramid. The placement of nonwhite groups, however, imposed barrier upon barrier on such mobility, freezing them for long periods of time in the least favored segments of the economy’ (ibid.). Lieberson (1980: 30–31) provides support for the idea that the discrimination European immigrants faced, although similar in structure, was ‘superficial, overlooking certain key differences in the conditions faced by these groups’. Evidence for this fact, he argues, can be found in the ways in which these groups were placed on a desirability continuum: The visibility of blacks due to their skin color and other physical features, compared with the role of cultural characteristics in distinguishing European immigrant groups, is perhaps the most widely recognized factor influencing black-immigrant differences . . . Attitudinal surveys administered in the 1920s confirm the notion that the groups were implicitly ranked on a continuum of inferiority rather than simply placed into a dichotomy of ‘good’ and ‘bad.’ In a variety of surveys, the American population ranked Northeast European highest, then the South-CentralEastern Europeans, in turn the Japanese and Chinese, and finally blacks.

It is within this social context that the idea of race for African Americans was contested. The visibility of African Americans due to skin color notwithstanding, having to compete for social, economic and political resources under the badge of inferiority is crippling for anyone, not just African Americans as markers or ‘indicators of ethnic origin for the new groups are neither as sharp nor as unavoidable as those for blacks’ (ibid.: 32). Indeed, given the fact that African Americans were not that far removed from a life of servitude and exploitation in America, their legitimacy as economic actors and existence as equal humans was still being questioned at this point. Furthermore, these attitudes were, in part, created by at least another factor: differences in numerical threshold between 1880 and 1924 for each group. While 13.5 million new European immigrants were admitted during this period, the decline in the labor needs of the railroads and the gold boom led to the suspension of Chinese immigration, which kept the Chinese population in the United

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States to 100 000 two years before this repression. Similarly, the ‘Gentlemen’s Agreement’ of 1907 with the Japanese government restricted Japanese migration to the United States, and thus resulted in the Japanese population being kept to less than 150 000 in 1924. According to Lieberson (1980: 31): ‘As for blacks, there was virtually no voluntary migration from either Africa or some of the area of black settlement in the New World. The 84 000 foreign-born Negroes in the United States in 1900, primarily from the West Indies, amounted to less than half of 1 percent of the total Negro population. In short, these differences in the numerical threshold suggest that immigrants from SCE Europe were relatively more acceptable to the dominant native white population of the United States than were the various nonwhite peoples.’ The labor market, residential segregation and the circumscribing of African American entrepreneurial opportunity: 1840–1970 Even a cursory review of this history should do much to dislodge from the bosom of social science thinking the idea that the ‘bottom’ was the same for all ethnic groups. The fact that it does not speaks volumes about the differences in how race is applied to different groups and in different contexts. But, in making sense of the comparatively poor entrepreneurial performances of African Americans, two very important questions must be asked. First, given the initial differences in institutional context between the ethnic groups, how did these differences affect the ability of African Americans to engage in viable firm creation then (and now)? Second, given the fact that other ethnic groups managed to create viable firms in the midst of discrimination, why did African Americans not follow this same path? Answers to these questions may be found in a comparison of the patterns of settlement and the ways in which immigrants and African Americans faced competition in finding jobs and starting firms. As discussed above, almost all ethnic groups, in their search for a better life in America, at some point started out at the bottom of the economic queue. Waldinger (1996: 4) suggests that the mechanism for this sorting was ethnicity: employers used this marker to sort ‘groups of categorically different workers into an identifiably distinct set of jobs’. For this reason, the resulting competition, while taking place over the ethnic and economic niche, made the labor queue and ethnic division of labor unstable. This instability created the conditions for igniting ethnic tensions. Two examples document the problematic nature of this instability, and the problems that it created for African Americans. First, as Bonacich and Modell (1980: 65–70) indicate, Japanese immigrants faced harsh discrimination from whites in the labor market. Indeed, ‘Labor competition was the dominant theme in the agitation for exclusion of Japanese immigrants until about 1907–1908 . . . West Coast workers felt that Japanese labor could be used to undermine the wage gains they had painfully attained over the years . . . As the Issei moved into small business, aided by families who joined them in the years following the Gentlemen’s Agreement, the locus of antagonism shifted, and its intensity grew considerably. Not only did the immigrants compete with laboring groups, but increasing numbers of Issei now competed with established business interests. In addition, the increasing economic power of the Japanese aroused concern over the fact that they were aliens and were not integrated into the American community.’ To be sure, a similar experience happened for some other ethnic groups. Foley (1966) and Steinberg (1989) illuminate that, while Jews in particular were not immune from such

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treatment, like Asian immigrants, many had an extensive background as traders and entrepreneurs in their places of origin that prepared them for careers in entrepreneurship and the labor market. Hence, it was no mistake that they tended to focus their concentration on finding jobs and starting businesses in trade and commerce. However, I argue that, at some point in their economic journeys, Asian and Jewish immigrants may have come to recognize the potentially long-term impact this conflict could have in circumscribing their already fragile economic positions. Thus, in establishing what I call a ‘strategy of avoidance’ in the labor market and entrepreneurial arena, they may have made a conscious attempt to restrict their job searches to and entrepreneurial aspirations for positions and firms, respectively, that did not place them in direct competition with whites. In the early part of the twentieth century, both groups navigated their way around this conflict in what I believe was a purposeful attempt to reduce the veneer of their poverty and ethnic status. This somewhat conscious act consisted of pursuing labor market and entrepreneurial opportunities in fields that many whites found menial. In doing so, both groups raised their cloaks of invisibility (to the extent that this would help) and thus increased the odds of their success and autonomy in the labor market and entrepreneurial arena. In a sense, becoming a middleman was the next best thing, or closest approximation to using their economic experiences for achieving their objective of wealth creation through entrepreneurialism. Second is the problem that this instability created for African Americans. During the 1820s, the white presence in various fields declined, resulting in a ladder effect that created empty spaces for newcomers up, but mainly down, the totem pole of economic opportunity. Having secured the most attractive positions in the queue, whites relinquished control over many of these menial positions. Like the Japanese, and other ethnic groups, African Americans secured many of these positions. Three areas of concentration were catering, domestic service, and garment and hotel work. When given the opportunity, African Americans performed relatively well in these fields. Given the fact that the ethnic tensions existed because of strains in the labor queue, some may be quick to argue that this tension was only economic in nature, with no racial antecedents. This is a dangerous assumption. Indeed, the racial climate in this part of the century makes this suggestion a moot point. According to Foley (1965: 563), this decade ‘witnessed the first great confrontation of free Negroes and immigrants, a confrontation which continued with rising intensity and without abatement for the next hundred years’. This series of riots, he argues, were directed chiefly against African Americans until about 1840, and did not cease until after the Civil War. According to DuBois (1899: 26–31), ‘The new industries attracted the Irish, Germans, and other immigrants; Americans too, were fleeing to the city and soon to natural race antipathies was added a determined effort to displace Negro labor – an effort which had aroused the prejudice of many of the better classes, and the poor quality of the new black immigrants to give it aid and comfort . . . To all of this was soon added a problem of crime and poverty . . . The tide had set against the Negro strongly, and the whole period from 1820–1840 became a time of retrogression for the mass of the race, and of discountenance and repression from the whites . . . These foreigners outbid them at work, beat them on the streets, and were enabled to do this by the prejudice which Negro crime and the anti-slavery sentiment had aroused in the city.’ Despite these conflicts in the aftermath of the Civil War, limited capital to create and develop new firms, and postwar southern whites’ attempts to suppress the development

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of independent Black economic activities (Walker, 1998: 151), antebellum African Americans managed to find ways to establish independent, albeit small, enterprises. However, in this immediate post-Civil War period, Black Codes, Southern laws formulated to circumscribe African American mobility and entrepreneurial participation, and Northern conflicts with ‘white ethnics’, altered African American social and economic trajectories in ways that made establishing and sustaining economic competitive advantage difficult. Given this reality, why did African Americans not employ the strategy of avoidance discussed earlier to improve their odds for economic success? Butler (1991) suggests that African Americans did not have this luxury. His skepticism is based on the idea of ‘the economic detour’, a theory developed by M.S. Stuart (1940), which argues that, in the period following the Civil War, segregation-enforced laws were created to restrict the ability of African Americans to operate firms in the entrepreneurial milieu on equal footing with whites and other ethnic groups. In this case, equal footing came in the form of restrictions permitting the development of outside markets. These laws, Stuart argues, were grounded in the politics of southern segregation, and applied only to African Americans. In contrast to middleman minorities, whose success was partly motivated by their ability to attract an outside clientèle, Stuart suggests that African Americans were forced to develop separate enterprises and sell their products in a restricted market. According to Butler (1991: 74) this policy had the effect of decreasing the total amount of business activity among African Americans, and forced them to operate their firms in a segregated economy. For Butler, ‘This model can be applied fully to the Afro-American business person from after the Civil War to the 1960s. Although in altered form, it is still applicable today.’ The culture of segregation and the problem of African American self-employment patterns Regardless of whether or not the theory of the economic detour has great explanatory power, race did have a significant effect in circumscribing the labor market and entrepreneurial aspirations of African Americans in the late nineteenth century and early twentieth century. As I suggest above, the reason(s) for this phenomenon, although partly economic in nature, were grounded in the politics of race. This politics of race was conditioned by segregation, which concentrated hostile attitudes toward African Americans and forced them into defensive and reactive positions. As to why African Americans did not also employ a strategy of avoidance in their economic pursuits, I argue that many of them did not view this as an option. As Stuart suggests, many African Americans may have been more interested in demonstrating to whites that they could carry their own weight in the newly-created industrial economy. Or, as Kelley (1994: 4–9) suggests, working class African Americans were too preoccupied with removing their ‘masks’ of grins and lies of happiness, which enhanced their ‘invisibility and enabled them to wage a kind of underground “guerrilla” battle with their employers, the police, and other representatives of the status quo’. Instead, African Americans perhaps employed strategies of resistance and survival to preserve their agency and reject their image ‘as merely passive products of economic exploitation and dislocation’. However, in making sense of culture, the second area of rethinking, I argue that the discrimination and hostility that African Americans experienced in the labor market after the Civil War (1870) and during the Great Migration years (1920–60) sharply circumscribed

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their ability to further develop an entrepreneurial culture and establish entrepreneurial competitive advantage. These conflicts created social disruptions that may have dampened the entrepreneurial spirit among many African Americans and, for some, may have made the labor market a more attractive area of economic concentration. However that culture has relevancy in this milieu, what aspect of it helps explain low African American selfemployment patterns? Answers to this question can be found in the ways in which African Americans were segregated in northern American cities between 1920 and 1970, the third and final area of rethinking. Chicago is, perhaps, the best example of this. To make better sense of culture and the impact of residential segregation, I consult Spear’s (1967) and Massey and Denton’s (1993) socio-historical analyses of the factors shaping the construction of the African American ghetto in Chicago. Despite the fact that African Americans lived among whites, albeit in an interspersed fashion, their status as equal social actors remained largely uncertain; and, as Spear suggests, their experience was, in significant ways, different from that of any other ethnic group in Chicago’s history: ‘No other ethnic group had been legally circumscribed; no white minority had been forced to fight for legal recognition of citizenship rights’, Spear (1967: 7–8). Specifically, as African Americans began to migrate to the city in large numbers after World War I, they experienced hostility from whites. By 1915, this hostility led to increased segregation, which was followed by the creation of an ‘almost all-Negro enclave on the South Side of the city, with a similar offshoot on the West Side’ (Spear, 1967: 11). Therefore the creation of the initial African American ghetto was a product of white hostility circumscribing their attempts at having a productive life. As more African Americans migrated from the South to escape menial positions, the grip of Jim Crow laws, and the hope of a better life and job in the north, white hostility toward them increased, and the walls of what Spear called ‘the physical ghetto’ expanded. As new African American migrants attempted to compete for jobs in their new surroundings, this hostility grew even more. This phenomenon, along with tightening of the Chicago color bar through a series of riots, and the rise of a new ‘Negro elite’, which promoted the philosophy of self-help and questioned the benefits of an integrationalist philosophy, led African American leaders between 1900 and 1920 to build what Spear called ‘the institutional ghetto’ – an attempt at self-segregation, where ‘Chicago’s Negro leaders built a complex of community organizations, institutions, and enterprises that made the South Side not simply an area of Negro concentration but a city within a city . . . [and] a new economic and political leadership with its primary loyalty to a segregated Negro community’ (Spear, 1967: 91) or ‘Black Metropolis’ as it later came to be called. ‘Black Metropolis’ and the importance of segregation, reconsidered It is interesting to note that, between 1930 and 1970, more than three million African Americans migrated from the south to northern cities. If southern African American entrepreneurs had a protected market to rely on, the migration sharply disrupted this plan. As the reader may recall, Lieberson (1980) suggests that an increase in population size helped other ethnic groups gain an advantage in the labor market. However, an increase in population size for African Americans had the opposite effect: the more migrants that came, the greater the discrimination was toward them and the more forced

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segregation they experienced. As the above information suggests, the institutional context that many African Americans found themselves in was one that employed the politics of race and exclusion in their day-to-day interactions. What impact did being segregated have on the African Americans and, in turn, the African American business community? Although selling to a residentially segregated consumer class did have economic benefits for many African American entrepreneurs, I argue that the demise of the African American business class in some cities was one of the inevitable consequences of residential segregation. Extreme poverty generated by enforced residential segregation, rather than desegregation policy, may have significantly circumscribed the African American entrepreneurial class in ways that made starting, operating and maintaining viable and competitive businesses almost impossible. It may be likely that the discrimination faced by many African Americans in the wake of desegregation may have spurred many of them to develop alternative methods and pursue different channels in an attempt to reduce the impact of discriminatory practices and adjust to American society. Segregation sharply circumscribed the ability of African American entrepreneurs to create and operate viable businesses because of a few factors. First, in some northern cities, the African American ghetto came to be viewed as an independent entity that supported a parallel, protected economy and a vibrant cultural environment. In essence, the segregated ‘Black Metropolis’ ‘concentrated black demand, thereby supporting black businesses, just as it clustered black voters to enable the election of black politicians’ (Massey and Denton, 1993: 116). However, in Chicago, the African American ghetto, like other parts of the country, was profoundly affected by the Great Depression of the 1930s. Although the Depression stimulated an increase in the number of smaller business, and revived the dream of organizing the purchasing power of African Americans, it ‘liquidated the two colored banks and wiped out many of the larger enterprises’ (Drake and Cayton, 1962: 436). But while these problems did hurt African American entrepreneurs, there are other factors that contributed to their demise. For starters, African American poverty was critical in hurting many African American businesses. African American poverty was highly concentrated during the Depression years, a period when they experienced considerably less freedom of movement. This applied to all economic classes. Within the walls of the ‘Black Metropolis’, geographic poverty became a common feature. The poor were forced to live alongside middle and upper income African Americans. ‘In a racially segregated city, any increase in black poverty created by an economic downturn is necessarily confined to a small number of geographically isolated and racially homogeneous neighborhoods’ (Massey and Denton, 1993: 118). Given such a disproportionate impact, the poverty of many of the residents in the African American ghetto gave African American entrepreneurs a largely poor customer class to rely on. This had important consequences. According to Myrdal (1944: 307), the relatively low level of African American purchasing power, and the small size of the average African American store, created a competitive disadvantage for African American entrepreneurs. Although residential segregation concentrated African American consumer demand, African American entrepreneurs in this milieu did not have more than 5 or 10 per cent of the total African American customer base. Additionally, ‘Although Negro enterprises constituted almost half of the businesses in Negro neighborhoods, they received less

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than a tenth of the money spent by Negroes within these areas’ (Drake and Cayton, 1962: 438). In response to such barriers, many African American entrepreneurs were forced to extend credit to their customers to attract them to the stores. This is the idea of what was called the ‘Double-Duty Dollar’ doctrine, which was ‘preached from many Bronzeville pulpits as part of the weekly ritual’ (Drake and Cayton, 1962: 430). This had two consequences. First, the poverty of the residents, competition with white merchants, and extending credit made it difficult to generate a positive, consistent cash flow. Indeed, lack of available operating capital can cripple any business. This forced many African Americans to raise the price for their products to those that could afford to pay for them. White merchants who could afford to reduce their prices to accommodate the African American market could therefore undercut the African American entrepreneur. Second, what was believed to be a protected market was in reality a quasi-protected market because of the ability of many African Americans to purchase outside of the African American ghetto. Although African Americans were segregated, this policy largely applied to housing. Many African Americans were still able to purchase goods outside of their neighborhoods. Drake and Cayton (1962: 435) suggest that some used the higher prices as a push factor or motivation to purchase goods from the larger, whiteowned businesses. The lack of a consistent capital base made it difficult for African American entrepreneurs to compete with larger, white-owned businesses that also catered to the African American market. Furthermore, the lack of available capital, and the paucity of sustainable African American capital markets within these areas made it difficult for African American entrepreneurs to stay competitive with white-owned businesses. As Massey and Denton argue, as segregation rises, the neighborhood environment of whites steadily improves while that experienced by African Americans progressively deteriorates. Thus segregation may have acted like a vice-grip, concentrating demand, tremendous poverty and a large number of people in a very small space. Therefore, if one can view these environments as an island, then everything on the island develops at a much slower pace than environments outside of the physical space. In short, although segregation led to the development of an African American entrepreneurial class, because of the factors discussed above, its demise was inevitable. Despite these problems, African Americans did find ways to create viable firms. Perspectives that suggest that they did not, tend to ignore the efficacy of human agency, and the individual and/or collective will of many African Americans to navigate around barriers circumscribing their participation in the entrepreneurial arena. Conclusion: towards a more comprehensive understanding of African American entrepreneurial opportunity To argue, as I have in this chapter, that contemporary research on African American entrepreneurs is problematic is to go against much of social science and popular thinking. Indeed, much of what I have had to say in this chapter will, no doubt, be viewed as an attempt to ignore the value created by these perspectives. On the contrary, my purpose in conducting this research has been to illuminate the strengths and inadequacies of race, cultural, ‘problematic of capital’ perspectives and segregation arguments for explaining the paucity of successful African American entrepreneurs. Replacing these perspectives was never my objective. To be sure, we have learned much from these studies. However,

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our preoccupation with culture and inadequate capitalization/access to resources arguments as the most proximate factors circumscribing the creation and performance of African American firms, without properly considering the significance of other sociological factors influencing this result, is a grievous misunderstanding. In other words, if we continue to frame the current problem this way, without investigating the factors inhibiting or facilitating access to entrepreneurial resources, such misunderstandings will persist. Standing alone, race, culture, ‘problematic of capital’ and segregation arguments are not ultimate explanations, but rather proximate factors that stagger under impossible difficulties. Indeed, there are kernels of truth in each perspective. However, taken together, and used along with other explanations, they have great explanatory power. Although the findings produced by this confederacy of researchers enrich our knowledge of the firm creation process among African Americans, there is a common tendency to confuse an explanation of causes with a justification or acceptance of results. Again, this misstep results in part from a failure of scholars to investigate other factors that may expand our understanding of and thinking about these issues. There are few examples of fresh research pointing up new ways of measuring such problems. With such an obvious void, current inquiries continue to focus on what we already know, and reflect much of what has yet to be analyzed. It would be helpful to know how African Americans go about the process of creating viable, competitive firms. Try as they might, however, researchers have neglected to point up new ways to view and analyze this problem, and thus dislodge culture and problematic of capital arguments from their privileged positions. That there is some truth to the above statements, I argue that the creation of what I call ‘capital information networks’ may be an important addition to the African American entrepreneurial repertoire to establish competitive opportunity structures and assist in mobilizing the intellectual, social and financial capital to create, manage and sustain viable African American firms. Because successful entrepreneurship occurs under great uncertainty, ‘Mobilizing resources to pursue opportunities requires entrepreneurial contacts, knowledge, and confidence [and] . . . asking others to raise money, labor, and effort for a venture with an uncertain future’ (Dubini and Aldrich, 1991: 305–6). Thus Dubini and Aldrich appear on the right track: since entrepreneurship is inherently a networking activity, and therefore central to the entrepreneurial process, adding it to the entrepreneurial equation ‘compels theorists to include process in their framework, as entrepreneurs and firms pursue opportunities opened to them, or withheld, because of their network positions’ (ibid.: 306). In short, a focus on how entrepreneurial opportunity is affected by positions in networks may be an important area of research to change the way we think about African Americans and their entrepreneurial pursuits. I, for one, look forward to conducting this research. Acknowledgement I offer many thanks to Douglas Massey, Robert Baron, Christopher S. Parker, David Deeds, Jerome Katz, Ben Oviatt, Durene I. Wheeler and Jefferey Wilhelm for helpful comments on an earlier draft. All remaining errors and omissions are entirely my own. References Ando, Faith (1986), ‘An analysis of the formation and failure rates of minority-owned firms’, The Review of Black Political Economy, 14, 51–71.

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Bates, Timothy (1989a), ‘The changing nature of minority business: a comparative analysis of Asian, nonminority and black-owned businesses’, The Review of Black Political Economy, 15, 25–42. Bates, Timothy (1989b), ‘Small business viability in the urban ghetto’, Journal of Regional Science, 29(4), 625–43. Bates, Timothy (1991), ‘Commercial bank financing of white and black-owned small business startups’, Quarterly Review of Economics and Business, 31(1), 64–80. Blauner, Robert (1972), Racial Oppression in America, New York: Harper and Row. Bonacich, Edna and John Modell (1980), The Economic Basis of Ethnic Solidarity, Berkeley: University of California Press. Braddock, J. and James McPartland (1997), ‘How minorities continue to be excluded from equal employment opportunities: research in labor market and institutional barriers’, Journal of Social Issues, 43, 5–39. Bridges, William P. and Wayne J. Villemez (1986), ‘Informal hiring and income in the labor market’, American Sociological Review, 51, 574–82. Butler, John S. (1991), Entrepreneurship and Self-Help Among Black Americans, New York: SUNY Press. Butler, John S. and Cedric Herring (1991), ‘Ethnicity and entrepreneurship in America: toward an explanation of racial and ethnic group variations in self-employment’, Sociological Perspectives, 34(1), 79–94. Chen, Gavin and John Cole (1988), ‘The myths, facts, and theories of ethnic, small-scale enterprise financing’, The Review of Black Political Economy, 16(4), 111–23. Cobas, Jose (1985), ‘On the study of ethnic enterprise: unresolved issues’, Sociological Perspectives, 30, 467–72. Drake, St. Clair and Horace Cayton (1962 [1945]), Black Metropolis: A Study of Negro Life in a Northern City, New York: Harper. Dubini, Paola and Howard Aldrich (1991), ‘Personal and extended networks are central to the entrepreneurial process’, Journal of Business Venturing, 6, 305–13. DuBois W.E.B. (1899), The Philadelphia Negro: A Social Study, New York: Lippincott. Foley, Eugene (1966), ‘The negro businessman: in search of a tradition’, in Talcott Parsons and Kenneth B. Clark (eds), The Negro American, Boston: Beacon Press. Frazier, E. Franklin (1957), Black Bourgeoisie: The Rise of a New Middle Class, New York: Macmillan. Gilroy, Paul (1987), There Ain’t No Black in the Union Jack, New Haven: Yale University Press. Glazer, Nathan and Daniel Patrick Moynihan (1963), Beyond the Melting Pot: The Negroes, Puerto Ricans, Jews, Italians and Irish of New York City, Cambridge: MIT Press. Handy, John and David Swinton (1984), ‘The determinants of the rate of growth of black-owned businesses: a preliminary analysis’, The Review of Black Political Economy, 5(3), Spring, 85–110. Kelley, Robin D.G. (1994), Race Rebels: Culture, Politics, and the Black Working Class, New York: Free Press. Lieberson, Stanley (1980), A Piece of the Pie, Cambridge: Harvard University Press. Light, Ivan (1972), Ethnic Enterprise in America, Berkeley: University of California Press. Massey, Douglas and Nancy Denton (1993), American Apartheid: Segregation and the Making of the Underclass, Cambridge, MA: Harvard University Press. Massey, Douglas S. and Mary J. Fischer (2000), ‘Residential segregation and ethnic enterprise in U.S. metropolitan areas’, Social Problems, 47(3), 408–24. Myrdal, Gunnar (1944), An American Dilemma, New York: Harper and Row. Omi, Michael and Howard Winant (1994), Racial Formation in the United States, New York: Routledge. Portes, Alejandro (1987), ‘The social origins of the Cuban enclave of Miami’, Sociological Perspectives, 30(4), October, 340–72. Portes, Alejandro and Robert L. Bach (1985), Latin Journey, Berkeley: University of California Press. Sowell, Thomas (1978), American Ethnic Groups, Washington, DC: The Urban Institute. Sowell, Thomas (1981), Ethnic America, New York: Basic Books. Spear, Allan H. (1967), Black Chicago: The Making of a Negro Ghetto, Chicago: University of Chicago Press. Steinberg, Stephen (1989 [1981]), The Ethnic Myth, Boston: Beacon Press. Stuart, M.S. (1940), An Economic Detour: A History of Insurance in the Lives of American Negroes, New York: Wendell Malliett and Company. Waldinger, Roger (1996), Still the Promised City?, Cambridge: Harvard University Press. Walker, Juliet E.K. (1998), The History of Black Business in America: Capitalism, Race, and Entrepreneurship, New York: Macmillan.

12 Hispanic entrepreneurship in the United States Frank Hoy

I Introduction The United States had its genesis in business and immigration. Whether it is the precursors of Native Americans coming across the Bering ice bridge from Asia or Europeans in search of more profitable nautical trade routes, people have come to the New World in search of opportunities. Consequently, the United States is, and always has been, a nation of immigrants and business. The history of immigration and business in the US has evolved from wide-spread discrimination to concern for, and now, pro-active programs directed at assisting the creation and growth of minority-owned businesses. This is due in large part to the fact that the United States is today a large and varied country with many ethnic and racial groups. Hispanic Americans are the largest such group according to a Census Bureau report (United States Census Bureau, 2002). However, this begs the question, ‘Who are Hispanic Americans?’ According to the Encarta encyclopedia, Hispanic Americans, also known as Latinos, are ‘residents of the United States who trace their ancestry to countries in the western hemisphere where the Spanish language is spoken’ (Stavans, 2004). However, there are multiple definitions. This lack of consensus is due to the wide range of backgrounds found among Hispanics. Hispanic Americans are not part of a single subgroup. Rather, Hispanics are part of a community which ‘is a mix of subgroups with roots in various countries of Latin America such as Mexico, Cuba, Puerto Rico, the Dominican Republic, El Salvador, Nicaragua, Colombia, Ecuador, Peru, and Panama’ (Stavans, 2004). II

Brief history of Hispanics in the US1

A Early colonization The history of Americans with Latin heritage predates the founding of the United States. Spanish conquistadores explored the Southern and Southwestern parts of the United States and established colonies long before the first English settlements at Jamestown and Plymouth. As a result, Hispanics have lived in what is now the United States since the seventeenth century. In the years after Christopher Columbus’s voyages of discovery, Europeans conquered and colonized vast areas of the New World. The region encompassing all of South America as well as North America, south of the present-day United States, that was colonized primarily by Spain, Portugal and, to a lesser extent, France, has come to be known as Latin America. As a result, the nations of Latin America developed from the New World colonies of Spain, Portugal and France. These colonial powers used languages derived from Latin and hence the area in the Americas came to be known as Latin America. The Spanish claimed Mexico, Central America and large parts of South America, while the Portuguese settled the area now known as Brazil. Along with their languages, the 177

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Europeans brought with them Roman concepts of law, administration and justice. They also imposed their language, culture and institutions on the indigenous peoples. One institution, the Roman Catholic Church, became the great unifying factor. The Catholic clergy became the principal educators in the colonies. In addition to building hospitals and other institutions, the Church was an important economic force as well as being the second largest landholder after the royal governments. The early European conquerors created centralized mercantile systems designed to exclude foreigners. Specifically, Spaniards founded settlements and missions in what are now California, Arizona, New Mexico and Texas. In Florida, for example, Spain established the first permanent European settlement in what is now the United States at San Agustin (Saint Augustine) in 1565. Initially, these early settlements were based on agriculture and mining. Later, more products and metals were sold abroad. These first Spanish Americans exported animal hides, sugar, tobacco, cocoa beans, cotton and indigo, a blue–purple dye. Further west from Florida, in lands that are now Texas and New Mexico, Spain had established a large colony known as Nuevo Mexico. The capital of Nuevo Mexico, Santa Fe, was linked to Mexico City by a route known as the Camino Real, or Royal Road. Despite the fact that the Camino Real crossed treacherous sand dunes and lava fields, it became the sole artery to the small, far-flung settlements of Nuevo Mexico. Household and religious goods, colonists and traders, and news could only reach Nuevo Mexico via the Camino Real. Similarly, California had developed its own Royal Road. California’s Camino Real stretched from what is now San Diego in the south to Sonoma in the north. Serving the same purpose as its counterpart in Texas and New Mexico, the ‘King’s Highway’, a third moniker, linked the people and trade of the early Spanish settlements in California. However, the lure of New World land, gold and silver, all of which were found in abundance in the Americas, soon brought explorers and settlers from Britain, France and the Netherlands. These nations established commercial bases around the existing colonies and, in so doing, influenced the evolution of the Spanish and Portuguese colonies. For example, ‘inevitable conflicts with the English colonies finally led to wars in which the Spanish lost the Carolinas and Georgia’ (Hispanic Business, 2004). Spain also had conflicts with the French after France established communities from Canada to Louisiana. However, conflicts were not limited to Spanish involvement. France and Britain fought the French and Indian War (also known as the Seven Years’ War) from 1756 to 1763. After their defeat, the French gave their former Louisiana territory to the Spanish rather than to their hated British enemy. B US acquisition of Hispanic territory Spain thus controlled all the land from New Orleans to St. Louis, as well as Alabama, Mississippi and Florida. This is in addition to all the land from Mexico to the southern tip of South America, with the exception of Portuguese controlled Brazil. Spanish and Portuguese control over their North and South American colonies lasted until the nineteenth century. This coincided with the beginning of the long history of Anglo encroachment on these lands. In what would later become the Southeast United States, Anglo traders and merchants, first from England’s colonies and later from the new United States, came into contact with Spain’s colonies (Gonzalez, 2000). After the traders and merchants

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came Anglo settlers. The desire for trade opportunities and land were the primary attractions for Anglos. Spain encouraged the trade and settlement as a way of fostering the development of, and control over, their huge empire. Most US residents supported the taking of Latin American land. Land was the primary resource for economic development, influencing agriculture and trade, and providing natural resources such as mineral wealth. ‘The main proponents and beneficiaries of empire building were speculators, plantation owners, bankers and merchants’ (Gonzalez, 2000, p. 28). Furthermore, according to Gonzalez, presidents from Thomas Jefferson to Andrew Jackson and Theodore Roosevelt all regarded the United States’ domination of the region as ordained by heaven. To justify it, the leaders popularized notions such as ‘America for the Americans’ and ‘Manifest Destiny’, beliefs that territorial expansion by the United States was both inevitable and divinely ordained. In time, conflicts between Spain and the new United States of America led to the Spanish loss of Alabama, Mississippi and Florida. Similarly, the Napoleonic wars cost Spain its Louisiana territory, which was later purchased by the United States from France. Despite these losses, Spain continued to hold on to the territory south and west of the Louisiana Purchase. When Mexico successfully revolted against Spain and won its independence in 1821, all of the area that would later become the Southwestern United States became part of Mexico. Mexican control over this land was short-lived. Texas successfully gained its independence from Mexico in 1836, setting the stage for future conflict between the United States and its southern neighbor. Continuing border disputes with Mexico caused the young Republic of Texas to request American assistance and protection. The United States was eager to comply. This eagerness was due, in part, to the popular belief in Manifest Destiny. In the United States, westward expansion was encouraged by the belief that expansion of the nation was inevitable. This view was due to the belief that the culture of the United States was superior to other cultures and republican forms of government and democracy should be expanded to other peoples. In 1845, the United States annexed Texas by a joint resolution of Congress. Mexico considered this an act of aggression and broke off relations with its northern neighbor. Both nations sent armies to the disputed region between the Rio Grande and Nueces rivers. The Mexican–American War broke out in 1846 along the disputed area. In 1848, the war was ended by the signing of the Treaty of Guadalupe Hidalgo. Mexico ceded the northern half of its territory including California, New Mexico and Arizona to the United States and set the southern border of Texas at the Rio Grande. Not counting Texas, the victory increased the territory of the United States at that time by 66 per cent. A further consequence and benefit of the war was that large numbers of Hispanics, as they were later to be known, became citizens of the United States. Although the Mexican population of the ceded territories was only 116 000, not including Native Americans, in 1848, that number grew steadily after the war as hundreds of thousands more came and went between the US and Mexico as migrant laborers. As a result, Mexican influence on the region was far greater than the early population figures might suggest (Gonzalez, 2000). The Mexican–American war was not to be the last time the United States gained territory and Hispanic citizens as a result of conflict. While Spain had lost most of its New World possessions by the late nineteenth century, the Spanish flag continued to fly over

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the islands of Cuba and Puerto Rico. Spanish brutality in crushing Cuban demands for autonomy and liberty aroused sympathy and anger in the US. The hostile feelings were further fueled by newspaper sensationalism about Spanish atrocities against the Cuban people. In addition, the belief in Manifest Destiny had continued and contributed to growing imperialism by the United States. In January of 1898, the US consul general in Havana, Cuba, requested that a US warship be sent to the harbor to protect US citizens and property during a serious civic disorder. In response, the battleship Maine was sent to Havana harbor. While at anchor in the harbor, the ship was destroyed by an underwater explosion in which 266 officers and men were killed. While the cause of the explosion has never been conclusively identified, the belief that Spain was responsible became widespread. A national cry of ‘Remember the Maine!’ swept the United States into war with Spain. The Spanish–American war only lasted a few months. The peace treaty signed in Paris in December 1898 required Spain to withdraw from Cuba and ceded Puerto Rico, Guam and the Philippines to the United States. US control of Puerto Rico set the stage for Puerto Ricans to later become citizens of the United States. Today Cubans and Puerto Ricans form two of the largest groups of Hispanics in the US. C Countries of origin for Hispanic migration Hispanic Americans trace their origins to all the nations of the huge and diverse region known as Latin America. As a result of this diversity, according to the website Hispano Mundo (1998), ‘The fastest-growing U.S. ethnic group isn’t an ethnic group at all. It’s a mishmash of many different groups.’ According to the Census Bureau (United States Census Bureau, 2002), in terms of origin, the largest proportion, comprising 66.9 per cent, is Mexican. Mexicans are followed by Central and South Americans (14.3 per cent), Puerto Ricans (8.6 per cent), Cubans (3.7 per cent) and other Hispanics make up the remaining 6.5 per cent (United States Census Bureau, 2002). (See Figure 12.1.) Hispanics can also be divided into subcultures. For example, Hispano Mundo identifies 17 major Latino subcultures. These subcultures reflect not only where in the United States each of the subcultures lives, but also where they trace their roots. The first large Hispanic group to consider is the ‘Tejanos’. Texas Mexicans’ dispute with their California

Mexico Central & South American Puerto Rico Cuba Other Hispanic

Source: US Census Bureau (2002).

Figure 12.1

Hispanics by type of origin (2002)

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counterparts over whose culture is more authentically Mexican–American. For example, in contrast to the majority of ‘Californios’ who are recent arrivals, many Tejanos have been in Texas for generations, dating back to when the land was part of Mexico. As a result, a sort of ‘cowboy culture’ with equal parts Texas and Mexico has developed. ‘Tex–Mex’ conservatism on issues from abortion to immigration is shocking to many California Mexicans, according to Hispano Mundo. Tejanos can themselves be broken into three distinct groups. South Texans live in the Rio Grande Valley, the most ‘Mexican’ part of the United States. For example, in cities like Brownsville and Laredo, Mexican–Americans constitute 80 to 95 per cent of the population. Many Hispanics in this area can trace their roots to the 1700s. The next group, Houston Mexicans, have grown from 18 to 28 per cent of the population since 1980. While still a minority, their population growth is increasing their political and economic power. The final group of Tejanos is Texas Central Americans, concentrated mainly in the large cities of Texas. A second major group of Hispanics can be found in California. Hispanics represent 30 per cent of California’s population and many are recent arrivals. For example, more than 80 per cent of Southern California’s Hispanics arrived after 1970. California Hispanics can be classified into four subcultures. Immigrant Mexicans are newcomers who settle in traditional enclaves like East Los Angeles but are also increasingly moving into areas not traditionally Hispanic, such as South Central and Compton. Middle-class Mexicans have moved up the socioeconomic ladder, often in a single generation. For example, half of Southern California’s native Hispanic families are middle-class, along with one-third of immigrant families. These Hispanics are increasingly moving to suburbs such as San Gabriel and Montebello. The next subculture comprises the inner-city Mexicans. While many Mexicans move up and out of the ghettos, large numbers of second- and thirdgeneration Hispanics are essentially trapped in the ‘barrios’ as the ghetto neighborhoods are known. The fourth subculture of California Hispanics is the Central Americans, most of whom live in Southern California. To illustrate, half of all Salvadorans and Guatemalans in the United States live in the Greater Los Angeles area. The next large group of subcultures can be found in the Chicago, Illinois, area. In the US, only Los Angeles, New York and Miami have larger Hispanic populations than Chicago. The two major subcultures are Chicago Mexicans and Chicago Puerto Ricans. Puerto Ricans are also one of the subcultures found among the New York Hispanics. The other subcultures found in the New York area are Dominicans and Colombians. The last major concentration of Hispanics can be found in Miami, Florida. ‘Miami is the one major city in the United States where Hispanics dominate numerically, politically, and economically’ (Hispano Mundo, 1998). The three subcultures of Hispanics in Florida are Cubans, Nicaraguans and South Americans. Finally, there are two other subcultures in the United States. The first is New Mexico’s Hispanos. They have very deep roots, being descended from the original Spanish conquistadors. And the remaining subculture is the migrant farm workers. Discussing the various subcultures illustrates the wide variety of countries of origin, as well as the overall diversity, of Hispanics in the United States. Obviously, as the number of Hispanics in the United States continues to grow, the diversity and importance of Hispanics will grow as well. And, by every indication, the number of Hispanics in the United States is growing at a rapid pace. As their numbers grow, Hispanics of all

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backgrounds are embarking on entrepreneurship and starting businesses at an astounding pace. For example, in her book on Hispanic entrepreneurs, Mabel Tinjacá (2001) reported that Hispanics are creating businesses at three times the rate of the rest of the population and, for Latinas specifically, the figure is four times the rate of the United States population in general. In Southern California, for example, Mexican–American businesses are transforming formerly Anglo and African-American areas such as Huntington Park, South Central and Compton. In these areas, and many others, Hispanic-owned car dealerships, shoe stores, bridal shops, and supermarkets stretch for blocks. Furthermore, these entrepreneurial trends hold in even the poorest and grimmest of neighborhoods. As an example, in the Pico-Union section of L.A., incomes commonly range from $5000 to $10 000 annually. Despite the conditions, Central Americans, the fastest growing segment of L.A.’s population, manage to keep two-thirds of their families above the poverty line by running little markets and shops throughout the area. In Chicago, only one-third of Hispanics have high school diplomas, yet only 25 per cent are poor compared to the national average of 31 per cent. The commercial heart of Mexican Chicago, 26th Street, generates more tax revenue than any other retail strip except upscale Michigan Avenue. ‘It is lined with hundreds of stores like La Villita Dry Cleaner, a pinata shop, Nuevo Leon restaurant, but just one Walgreen’s’ (Hispano Mundo, 1998, p. 7). D Demographic trends According to the United States Census Bureau in 2002, the Hispanic population in the United States numbered 42.6 million people, including 3.9 million in Puerto Rico. This represented almost 14 per cent of the total US population. According to the Hispanic Association on Corporate Responsibility (2002), ‘The Hispanic population grew at a staggering average annual growth rate of 4.65% between 1990 and 2000.’ The US Census Bureau estimated this number to be an increase of 1.7 million each year. In fact, Hispanics accounted for 40 per cent of the country’s total population growth from 1990 to 2000. This trend is projected to continue into the foreseeable future. According to the University of Georgia’s Selig Center for Economic Growth, ‘Between 1990 and 2008, the Hispanic population will increase by 137 percent compared to 13.7 percent (a ten-fold difference) for the non-Hispanic population and the 24.8 percent gain for the total population’ (Humphreys, 2003, p. 6). Because of this growth, Hispanics became the largest minority group in the United States as of 2003. In addition, they have been one of the fastest growing consumer segments. As a comparison, the Hispanic population in the US is larger than the entire population of countries such as Canada, Spain or Argentina. Furthermore, according to the Census Bureau, by 2050, Hispanics are forecast to account for one out of four residents in the US. By 2100, they could represent one-third of the total US population. Moreover, the Hispanic population is extremely concentrated. Just five states were home to more than 70 per cent of the population according to the 2000 census (see Table 12.1). California, for example, had more than 11 million Hispanics. The top five states from Table 12.1 are also the five largest US states in population. This concentration in the largest states could potentially give Hispanics a disproportionate amount of economic, political and cultural influence, not only in these states, but in the nation as a whole thanks to the influence of these large states.

Hispanic entrepreneurship in the United States Table 12.1

183

Top ten states by Hispanic population (2000)

State

(1000s)

% of total population

California Texas New York Florida Illinois Arizona New Jersey New Mexico Colorado Washington

10 967 6 670 2 868 2 683 1 530 1 296 1 117 765 736 442

32.4 32.0 15.1 16.8 12.3 25.3 13.3 42.1 17.1 7.5

Source: US Census Bureau (2000).

Table 12.2

Top ten states represented by the HB 500 (2004)

State

Number of companies

Revenue, in millions ($)

California Florida Texas New Mexico New York Virginia New Jersey Illinois Arizona Georgia

121 120 65 25 19 19 18 17 11 10

3 936.83 8 872.25 2 612.77 522.40 1 363.81 800.19 659.49 447.43 112.07 1 072.88

Total

425

20 400.12

Source:

Hispanic Business (2004).

This concentration in few states can also be seen by looking at the location of the businesses from the Hispanic Business 500, a list of the 500 largest Hispanic businesses in the United States as reported by Hispanic Business magazine in 2004. (See Table 12.2.) While the Hispanic population was highly concentrated, many other states experienced tremendous growth as well. For example, there were 21 states in which the Hispanic population more than doubled between 1990 and 2000. The top ten states in terms of percentage of Hispanic population growth are listed in Table 12.3. In addition, Hispanic growth will continue at a higher rate than the growth rate for the US population as a whole. One factor in this continued rapid growth is the age distribution of the Hispanic community. In 2000, the median age for Hispanics was 25.8 years. This was ten years younger than the median age for the United States as a whole. Although 27.6 per cent of the non-Hispanic white population was nine years old and

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Table 12.3

Top ten states by Hispanic population, percentage increase (1990–2000)

State North Carolina Arkansas Georgia Tennessee Nevada South Carolina Alabama Kentucky Minnesota Nebraska

1990 pop

2000 pop

% growth

76 713 19 878 108 807 32 761 124 281 30 571 24 620 21 956 53 903 37 029

378 963 86 866 435 227 123 838 393 970 95 076 75 830 59 939 143 382 94 425

394 337 300 278 217 211 208 173 166 155

Source: Hispanic Association on Corporate Responsibility (2002).

younger, 44.7 per cent of the Hispanic population was less than ten years old. Conversely, 10.8 per cent of Hispanics were 65 or older. III Economic evolution of Hispanic populations The history of Hispanics in the United States is intertwined with entrepreneurship and enterprise. In establishing the mercantile system in their colonies, the Spanish conquerors of the New World established vast cattle ranches as a result of huge royal land grants. According to Tinjacá (2001, p. 8), ‘from the beginning Hispanic entrepreneurs have helped shape the economic, cultural and social milieu of the United States’. Trade with the mother country was a primary reason for the establishment and existence of Spain’s American colonies. When the Treaty of Guadalupe Hidalgo brought the residents of the former colonies into the United States as new citizens, they had established entrepreneurial communities based on ranching (Tinjacá, 2001). With time, more and more Hispanic immigrants joined those already in the United States. Some came to escape war or persecution, but most came in search of greater opportunity. As a result of immigration and indigenous population growth, Hispanics in the United States have become a powerful economic force. Several factors affect economic influence and one such factor is income. A Income, poverty and buying power Income, poverty and buying power, in addition to being highly correlated, are important factors in Hispanic entrepreneurship for several reasons. Income and poverty levels affect the availability of capital necessary for business creation and sustainability in the early stages. Buying power, which is directly influenced by income, strongly influences the size and types of markets which Hispanic entrepreneurs are most likely to target and rely upon. Several trends involving Hispanic income in the US could be identified. For example, according to the US Census Bureau, the median Hispanic household income in 1999 was $30 735. This figure represented the highest income for Hispanic households ever recorded. In addition, from 1991 to 2001, Hispanic household income kept pace with the

Hispanic entrepreneurship in the United States Table 12.4

185

Average household income

Year

Hispanics

African American

White

All Races

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001

$28 872 $28 822 $30 291 $31 582 $31 201 $34 005 $35 883 $38 280 $40 390 $43 978 $44 383

$25 043 $25 450 $27 229 $29 259 $30 400 $32 460 $32 963 $34 139 $38 462 $39 178 $39 248

$39 523 $40 594 $43 285 $45 034 $46 729 $48 994 $51 902 $54 207 $56 726 $59 254 $60 512

$37 922 $38 840 $41 428 $43 133 $44 938 $47 123 $49 692 $51 855 $54 737 $57 135 $58 208

35%

36%

35%

35%

% Change

Source: US Census Bureau (2002).

Table 12.5

Hispanic income as percentage of other groups’ income

Year

African American (%)

White (%)

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001

94 96 96 87 91 91 93 90 85 83 87

55 56 56 53 55 56 56 54 55 54 54

Source: US Census Bureau (2002).

average household income for other groups. (See Table 12.4.) However, as a percentage of other groups’ income, Hispanic household income was still lagging as of 2001. For example, from 1991 to 2001, the gap between African American and Hispanic household income fluctuated, but increased again toward the end of the decade. In contrast, Hispanic household income as a percentage of white income remained consistent. (See Table 12.5.) In contrast, the poverty rate among Hispanics in 1999, 22.8 per cent, equaled the all time low recorded in 1979. Furthermore, despite the growing Hispanic population, the number of Hispanics in poverty declined by 600 000 between 1998 and 1999, to 7.4 million people. This number represents 1.5 million Hispanic families making up 20.2 per cent of

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Per cent 60 55 Black 50 45 40 35 30 25 20 15 White 10 5 0 1959 1964

Recession

Hispanic

22.0 per cent 21.2 per cent

Asian and Pacific Islander

10.7 per cent 9.4 per cent 7.5 per cent

White non-Hispanic 1969

1974

1979

1984

1989

1994

2000

Note: The data points represent the midpoints of the respective years. The latest recession began in July 1990 and ended in March 1991. Data for Blacks are not available from 1960 to 1965. Data for the other race and Hispanic origin groups are shown from the first year available. Hispanics may be of any race. Source: US Census Bureau, Current Population Survey, March, 1960–2001; based on November 2001 weighting correction.

Figure 12.2

Poverty rates by race and Hispanic origin (1959–2000)

all Hispanic families. This was the lowest percentage of Hispanic families living in poverty in 20 years. Figure 12.2 illustrates the poverty level trend for Hispanics in the US from 1959 to 1999. Despite these positive trends, some negative patterns remained. For example, on average, Hispanic household income was considerably lower than the average for all US households. Specifically, in 2000, the average annual income for a Hispanic household was $34 891, compared to $44 649 for all households. While the Hispanic household income is higher than the $32 657 for black households, it is significantly lower than the $46 260 income for white households. On a per capita basis, although Hispanic income did increase from 1991 to 2001, the increase was lower than the increase for Whites or African Americans. (See Table 12.6.) The most significant aspect of this income analysis is its direct influence on buying power. Population growth coupled with increased education leads to growing buying power. According to the Selig Center for Economic Growth at the University of Georgia, Hispanics possessed $653 billion in purchasing power in 2003 (Humphreys, 2003). Thus, the buying power of US Hispanics ranked it among the ten largest economies of the world. Hispanic purchasing power was greater than the Gross National Income (GNI) of Brazil, Mexico or Spain and was roughly equivalent to that of Canada. (See Table 12.7.) This is an increase of 357 per cent over the 1990 level. Compared to the non-Hispanic buying power increase of 136 per cent, Hispanic purchasing power increased at a much greater rate from 1990 to 2000. In fact, from 1990 to 2008, Hispanic buying power was projected to increase at a significantly greater rate (357 per cent) than the rate of increase in non-Hispanic buying power (136 per cent). In addition, the Selig

Hispanic entrepreneurship in the United States Table 12.6

187

Per capita income

Year

Hispanics

African American

White

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001

$8 591 $8 830 $9 435 $9 300 $10 048 $10 772 $11 434 $11 621 $12 307 $12 651 $13 003

$9 170 $9 239 $9 863 $10 650 $10 982 $11 899 $12 351 $12 957 $14 397 $15 198 $14 953

$15 510 $15 785 $16 800 $17 611 $18 304 $19 181 $20 425 $21 394 $22 375 $23 415 $24 127

34%

39%

36%

% Change

Source: US Census Bureau (2002).

Table 12.7

Gross GNI and US Hispanic purchasing power (2000)

Ranking 1 2 3 4 5 6 7 8 9 10 11

Economy United States Japan Germany United Kingdom France Italy China Canada US Hispanics Brazil Spain Mexico

(millions US dollars) $9 601 505 $4 519 067 $2 063 734 $1 459 500 $1 438 293 $1 163 211 $1 062 919 $649 829 $630 000 $610 058 $595 255 $497 025

Source: World Bank (2000).

Center estimated that, ‘Over the eighteen-year period, 1990–2008, the nation’s Hispanic buying power will grow at a compound annual rate of 8.8 percent’ (Humphreys, 2003, p. 6). In contrast, the comparable rate of growth for non-Hispanics will be 4.9 per cent. Thus, by the end of this eighteen-year period, 9.6 per cent of cumulative buying power in the United States will be Hispanic. B Education Employment, income, purchasing power and the cumulative economic power of these factors are also inextricably linked to education. Historically, Hispanics have trailed other

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Table 12.8

Preparation for 4-year college of high school graduates (%)

Hispanic Black non-Hispanic White non-Hispanic

Not college qualified

Minimally qualified

Somewhat qualified

Highly qualified

Very highly qualified

47 53 32

21 17 16

14 14 17

11 10 20

8 6 15

Source: US Department of Education.

groups and national averages in every aspect of education. For example, the US Census Bureau reported that, as of 2000, 88.75 per cent of whites had completed high school compared with only 57 per cent of Hispanics over the age of 24. Furthermore, according to the Pew Hispanic Center, ‘Among students who graduate from high school on time, Hispanics are much less qualified for college’ (Pew, 2004). The Pew Center’s report found that only 53 per cent of Hispanic high school graduates are at least ‘minimally qualified’ for admission to a four-year college. This figure pales in comparison with the nearly 70 per cent of white high school graduates meeting the same standard. (See Table 12.8.) Furthermore, only one-quarter of Hispanics had more than a ninth grade education and 10.6 per cent possessed a bachelor’s degree. In contrast, 28 per cent of non-Hispanic whites had completed four years of college or more. According to the Pew Center, the US Department of Education identifies seven undergraduate attributes negatively associated with postsecondary degree attainment. The risk characteristics are delayed college entry, part-time attendance, financially independent status, single parent status, having dependants, not having a regular high school diploma, and working full-time. The average number of risk attributes for Hispanic undergraduates is 2.4, in comparison to 2.0 for white undergraduates and 2.7 for African American undergraduates. In addition, rising costs of tuition, increased competition for federal financial aid together with reduced availability of government grants are examples of increasing obstacles for Hispanics interested in earning college degrees. According to a study commissioned by the Student Loan Marketing Association and conducted by the Thomas Rivera Policy Institute, more than half of Hispanic parents and 43 per cent of Hispanic young adults could not identify a single source of college financial aid (Russell, 2004). These obstacles tended to affect Hispanics to a greater degree than other groups owing to their lower levels of income. From an employment standpoint, such barriers to education were extremely significant because of the importance placed upon a college education by American society. Employability, then, has a direct impact on income, disposable income and purchasing power and, as has been pointed out, these affect potential markets for Hispanic entrepreneurs seeking to cater to these markets. While improvements were being made, the rate of improvement was relatively slow. For example, in the 17 years from 1980 to 1997, college enrollment for Hispanics aged 18 to 24 increased only slightly, from 16 to 22 per cent. Again, this is far behind white nonHispanic college enrollment, which increased from 25 to 41 per cent over the same period.

Hispanic entrepreneurship in the United States

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As a result, while college enrollment for Hispanics increased during this period, the gap with white non-Hispanics actually increased from nine to 19 per cent. Moreover, there are distinctions in educational attainment between native-born Hispanic Americans and Hispanic immigrants from Latin America. According to the Pew Hispanic Center, even though the percentage of Hispanic immigrants who had completed high school in 2000 had more than doubled since 1970, to 41 per cent, this still trailed the 53 per cent of native-born Hispanic Americans who had a high school diploma. Similarly, the percentage of foreign-born Hispanics that went on to college nearly doubled to 18 per cent, but again well below the 35 per cent of native-born Hispanics that had gone to college. Additionally, the educational achievement of immigrant Hispanics, particularly Mexicans, trails the achievement of other groups of foreign-born immigrants. Specifically, Mexicans have the lowest levels of high school education or higher among the five largest groups of immigrants. (See Table 12.9.) Furthermore, in addition to its role in employment and income, education is an important factor in entrepreneurship and venture creation. For example, Tienda and Raijman (2004, p. 2) asserted that ‘Hispanics’ growing share of small businesses coupled with their shrinking income share raises questions about the circumstances that drive these trends.’ Specifically, ‘formal schooling and prior business ownership represent general and specific human capital that enables individuals to organize and establish a business. That ethnic groups differ appreciably in these crucial resources is important for understanding race and ethnic differences in rates of business ownership (Tienda and Raijman, 2004, p. 8). In this study, the researchers found that Hispanic immigrant business owners averaged nine years of formal schooling, while foreign-born owners from Korea, the Middle-East and South-Asia averaged at least two years of college. In addition, the education levels for the foreign-born non-Hispanic business owners exceeded the US-born Hispanic business owners, who averaged 12 years of formal school. These statistics concerning education levels among Hispanics are significant considering that Reynolds, Carter, Gartner, Greene and Cox (2002), found that education is the deciding factor; the more education a person had, the more likely he or she was to start a business. In addition, as previously noted, education has a significant impact on income. Income, in turn, affects disposable income, purchasing power and, therefore, business opportunities within the Hispanic market. For example, Dadzie and Cho (1989) noted that the clientèle of most majority businesses is primarily minorities. Furthermore, Fairlie (2004) reported that previous research has found that asset levels play an important role in determining who enters or exits from self-employment. According to the Pew Center, the failure to earn degrees has life-long impact since the wage gap between those with a degree and those with some college but no degree, has greatly widened. Therefore the lower educational attainment of Hispanics will have a lasting generational effect on Hispanic entrepreneurship. Furthermore, the increasing levels of business ownership were not due to improving markets and conditions for minority businesses. Low levels of income and resulting low levels of discretionary income had caused market conditions to remain unchanged. Fairlie (2004) found that the increases in minority business ownership from 1979 to 1998 were due primarily to expansions in the labor force for minority groups which resulted from the growing populations of these groups.

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C Business ownership While the education gap between Hispanics and non-Hispanics has been increasing, this is not the case in business ownership. Hispanics are creating businesses at a much faster rate than any other group in the United States. In fact, in her seminal work on Hispanic entrepreneurship, Vision!, Tinjacá (2001) asserted, ‘no other area of economic life in the United States compares to the 305% growth in Hispanic businesses’. In contrast, the growth rate of all other businesses is 26 per cent. Furthermore, the 1997 US Economic Census showed that Hispanics owned 1.2 million businesses, accounting for almost 6 per cent of all US firms. These businesses had gross receipts of more than $186 billion and employed over 1.3 million people. (See Tables 12.9, 12.10 and 12.11.) Furthermore, according to Hispanic Business and the Census Bureau, the number of Hispanic businesses exceeded 2 million in 2004 and generated $273.81 billion of revenue. Following the pattern seen in population distribution, Hispanic businesses are extremely concentrated in a few states. (See Figure 12.3.) Specifically, in 2004, the United States Hispanic Chamber of Commerce reported that just four states, California (336 400), Texas (240 400), Florida (193 900) and New York (104 200), accounted for 73 per cent of Hispanic firms (Statistics, 2004). This concentration of Hispanic businesses in the most populous states of the United States (California, Texas and Florida rank first, second and fourth, respectively) has given Hispanic entrepreneurs access to large markets in addition to a disproportionate amount of political influence over policy making. Table 12.9

Hispanic-owned businesses (1987–97)

No. of businesses Gross receipts ($1000) Number of employees

1987

1992

1997

Change (%) 1987–97

422 373 $24 731 600 264 846

771 708 $72 824 270 691 056

1 199 896 $186 275 000 1 388 746

184.1 653.2 424.4

Source: US Census Bureau (2002).

Table 12.10

Comparison of business ownership by minority group (1997)

All firms Minority group All minority firms Black Hispanic American Indian and Alaska native Asian and Pacific Islander

Percent of minorityowned firms

Firms (number)

Sales & receipts ($ million)

Firms (number)

Sales & receipts ($ million)

3 039 033 823 499 1 199 896 197 300

591 259 71 215 186 275 34 344

N/A 27.1% 39.5% 6.5%

N/A 12.0% 31.5% 5.8%

912 960

306 933

30.0%

51.9%

Source: US Census Bureau, Economic Census (1997).

191

Source:

306 932 982

912 690

US Census Bureau, Economic Census (1997).

18 553 243 047 591 259 123 71 214 662 186 274 582 26 492 208 73 706 753 7 461 069 16 922 913 40 997 923 20 693 715 34 343 907

Sales and Receipts ($1000s)

20 821 935 3 039 033 823 499 1 199 896 125 273 472 033 69 658 57 160 287 314 188 458 197 300

Firms (Number)

All Firms

Minority firm ownership

Universe (all firms) Total minorities Black Hispanic Cuban Mexican American Puerto Rican Spaniard Latin American Other American Indian and Alaska Natives Asian and Pacific Islander

Group

Table 12.11

289 999

5 295 152 615 222 93 235 211 884 30 203 90 755 10 976 12 590 42 916 24 445 33 277

Firms (Number)

278 294 345

17 907 940 321 516 979 920 56 377 860 157 674 537 23 873 193 62 270 808 5 814 069 15 263 807 34 798 421 16 654 239 29 226 260

Sales and Receipts ($1000s)

2 203 079

103 359 815 4 514 699 718 341 1 388 746 176 428 695 372 61 509 76 338 238 612 140 487 298 661

Employees

Firms with Employees

46 179 519

2 936 492 940 95 528 782 14 322 312 29 830 028 4 162 640 13 014 996 1 496 894 2 045 675 5 862 668 3 247 154 6 624 235

Payroll

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AK

WA

Percent of total 10.0 to 25.0 5.0 to 9.9 1.0 to 4.9 0.0 to 0.9

ND

MT

MN WI

SD

OR

ID

MI

WY IL UT

CO

KS

IN

MO

AZ

OK NM TX

HI

AR

WV

KY

CA

PA

OH

VA

TN MS AL

NC

ME MA

NY

IA

NE NV

NH VT

NJ DE MD DC

RI CT

SC GA

LA FL

Source: US Census Bureau, Economic Census (1997).

Figure 12.3

Hispanic-owned firms as percentage of total firms in state (1997)

IV Summary The United States began with immigration and business and various segments of the population have been able to carve out niches. Two such groups are entrepreneurs and Hispanics. This is true despite the argument that there is no single definition for who exactly is a Hispanic American or who exactly is an entrepreneur. Differences on definitions aside, the history of Americans with Latin heritage predates the founding of the United States, with conflicts such as the Mexican–American war paving the way for the United States to gain territory as well as citizens that would later contribute to the term ‘Hispanics’. Hispanic Americans trace their origins to Latin America and their origins are diverse. Added to this point is that this segment of the US is not only the fastest growing US ethnic group, but, some would argue, it is not one ethnic group at all, but a wide mixture of different groups, from various regions of Mexico and all parts of Latin America. According to the US Census Bureau in 2002, the Hispanic population in the United States numbered 42.6 million people, representing almost 14 per cent of the total US population, and is growing at an average annual growth rate of 4.65 per cent for the decade between 1990 and 2000. Because of this growth, Hispanics became the largest minority group in the United States as of 2003. Interestingly, the Hispanic population has been extremely concentrated, with just five states containing 70 per cent of the 2000 population. Hispanic growth should continue to grow at a higher rate than the overall US growth rate as well and the poverty rate among Hispanics of 22 per cent in 1999 equaled the all-time low. Income, poverty and buying

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power are obviously highly correlated and are important factors in the consideration of the Hispanic entrepreneurship landscape in the future. V Conclusion What conclusions could be drawn about Hispanic background and trends in the United States and possible impact on entrepreneurship? The clearest trend to foresee is the increasing size, and therefore importance, of the Hispanic population in the US. Not only were Hispanics the largest minority as of 2003, their growth rates were projected to outpace the growth rates of all other groups. As a result, Hispanics were estimated to comprise an increasing share of the US population for the foreseeable future. With increased size comes increased influence on the business community, along with increased business opportunities. For example, ever larger numbers of Hispanics in the US will translate into ever larger markets in terms of Hispanic discretionary income and purchasing power. More and more Hispanics will enter the labor force and obtain the skills, experience and network connections to enable them to become entrepreneurs. Questions remain, such as how many Hispanics will recognize their natural advantages in serving the growing Hispanic markets and will be drawn to new venture creation and growth. Along with increasing opportunities there were obstacles for Hispanic entrepreneurs in the United States to overcome. Most important among these was the continuing education gap among Hispanics, especially immigrant Hispanics, and other groups. Since education has a direct impact on employability, income, discretionary income and purchasing power, lower levels of education among Hispanics present obstacles for Hispanic entrepreneurs. First, lower than average levels of discretionary income and purchasing power limits the potential of the markets which Hispanic entrepreneurs are most likely to seek to serve. Furthermore, lower levels of discretionary income translate into lower levels of private equity investment capital being available to finance Hispanic start-ups. This lack of equity capital, coupled with Hispanic entrepreneurs’ well-documented reluctance to seek financing from traditional sources such as banks and venture capital firms, contribute to the overall problem of access to capital. Access to capital is important for both new venture creation and existing business growth. Immigrant Hispanics present a dichotomy for Hispanic entrepreneurship in the United States by representing both advantages and challenges. While immigrant Hispanics have been found to have higher levels of entrepreneurship than native born populations, their new ventures are typically more precarious than ventures started by other groups. This is due to the fact that many immigrants undertake business formation after experiencing ‘negative pushes’ as opposed to opportunity seeking. As a result, immigrant Hispanic entrepreneurs are typically less educated, capitalized and networked than other entrepreneurs. While this shortcoming should be addressed, the growing size of the influence of Hispanics on the business climate in the US has prompted non-Hispanics in various industries as well as various government agencies to become involved in fostering Hispanic, both immigrant and native US born, venture creation and growth. The growing size and influence of the Hispanic community in the United States has also led to a dichotomy for US society. Socially, minorities are being accepted as never before, as evidenced by the growing popularity of all things Hispanic. There are, however, some signs of a backlash, in particular against the large number of Hispanic immigrants entering the

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United States every year. Signs include growing calls for greater restrictions on immigration, opposition to bilingual (English and Spanish) public education and sentiment to withhold public assistance to immigrants, particularly those which entered the US in an undocumented status. As has always been the case in the New World and with business, Hispanic entrepreneurship in the United States offers tremendous opportunities tempered by significant challenges. By definition, these are the conditions in which entrepreneurs have always thrived. Note 1. ‘Latin America’, Microsoft Encarta Online Encyclopedia (2004) http://encarta.msn.com, 1997–2004 Microsoft Corporation.

References Dadzie, K.Q. and Y. Cho (1989), ‘Determinants of minority business formation and survival: an empirical assessment’, Journal of Small Business Management, July, 56–61. Fairlie, R.W. (2004), ‘Recent trends in ethnic and racial business ownership’, Small Business Economics, 23, 203–18. Gonzalez, J. (2000), Harvest of Empire, New York: Penguin Putnam, Inc. Hispanic Association on Corporate Responsibility (2002), ‘Hispanics today’ (available online from http://www. hacr.org). Hispanic Business (2004), ‘Number of Hispanic-owned firms to reach 2 million in 2004’ (available online from http://www.hispanicbusiness.com/news). Hispano Mundo (1998), ‘Hispanics don’t exist’ (available online from http://www.hispanomundo.com). Hispano Mundo (2004), ‘Hispanic heritage’ (available online from http://www.hispanomundo.com). Humphreys, J.M. (2003), ‘The multicultural economy: America’s minority buying power’, Georgia Business and Economic Conditions, 62(2). Pew Hispanic Center (2004), ‘Hispanic school achievement: catching up requires running faster than white youth’, Pew Hispanic Center Fact Sheet (available online from http://www.pewhispanic.org). Reynolds, P.D., N.M. Carter, W.B. Gartner, P.G. Greene and L.W. Cox (2002), ‘The entrepreneur next door’, Kansas City, MO: Ewing Marion Kauffman Foundation. Russell, J. (2004), ‘Past, present, future’, Hispanic Business (available online at http://www.hispanicbusiness.com/ news/news_print.asp?id=16372). Stavans, I. (2004), ‘Hispanic Americans’, Microsoft Encarta Online Encyclopedia (available online at http:// encarta.msn.comC1997-2004) Microsoft Corporation. Tienda, M. and R. Raijman (2004), ‘Promoting Hispanic entrepreneurship in Chicago’, Journal of Developmental Entrepreneurship, 9(1), 1–21. Tinjacá, M. (2001), Vision! Hispanic Entrepreneurs in the United States, Pleasant Hill, MO: Heritage Publishing Company. United States Census Bureau (1997), ‘Economic census’. United States Census Bureau (2002), ‘The Hispanic population in the United States’ (available online from http://www.census.gov). United States Hispanic Chamber of Commerce (2004), ‘Statistics’ (available online at http://www.ushcc.com/ res-statistics.html). World Bank (2000), ‘World Development Indicators: 2000’ (available online from http://www.worldbank.org).

13 Challenges and opportunities for Hispanic entrepreneurs in the United States Juan Holguin, Ernesto Gamboa and Frank Hoy

I Introduction Vast research has focused on what ‘makes an entrepreneur an entrepreneur’ and what, if anything, differentiates an entrepreneurial individual from other workers and laborers. According to Thomas and Mueller (2000, p. 291), ‘an entrepreneur’ implies a configuration of psychological traits, attributes, attitudes, and values of an individual motivated to initiate a business venture’. In differentiating entrepreneurs from small business owners, Carland et al. (1984, p. 358) stated that ‘the entrepreneur is characterized principally by innovative behavior’. These characterizations, however, refer to all entrepreneurs. For example, McGrath and MacMillan (1992) showed that entrepreneurs from various countries and cultures tended to be individualists and were likely to be more like each other in various traits and characteristics than they were to non-entrepreneurs in their own countries. The question then is how Hispanic entrepreneurs differ, if at all, from other entrepreneurs. A Education While there is a relative paucity of academic research on Hispanic entrepreneurs, studies have been conducted in various areas. Unfortunately, mixed results are commonplace. In 1992, the last widespread study regarding the characteristics of business owners conducted by the United States Census Bureau reported that 41.9 per cent of Hispanic American business owners had at least some college education. This included 11.9 per cent with a Bachelor’s degree, 3.9 per cent with a Master’s degree, and another 5.4 per cent having earned a professional degree or doctorate (US Census Bureau, 1992). For example, Shim and Eastlick (1998) found that, among Hispanic American business owners, 51 per cent had a bachelor’s or higher. This figure is significantly higher than the 10.6 per cent of all Hispanics with at least a bachelor’s degree. An additional 34 per cent of Hispanic entrepreneurs had completed at least some college (Shim and Eastlick, 1998) but this research found no gender differences among Hispanic entrepreneurs for education levels. While this was a large study drawn from members of the United States Hispanic Chamber of Commerce, another larger study by the Ewing Marion Kauffman Foundation, the largest foundation for the promotion of Entrepreneurship, found much lower levels of education for Hispanic entrepreneurs (see Figure 13.1). According to one of the authors, education was the deciding factor in entrepreneurship, meaning that the more education a person had, the more likely he or she was to start a business (Reynolds et al., 2002). In addition to being a predictor of entrepreneurship, education also influences new venture performance. For example, Sapienza and Grimm (1997) found that the general education level of the entrepreneur was positively correlated with goal attainment and performance in new 195

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Number per 100 Persons

30 25 20 15 10 5 0 No HS HS Degree Degree

Post HS

College Grad Degree School

No HS Hs Degree Degree

Male: Education

Post HS

College Grad Degree School

Female: Education White

Black

Hispanic

Source: Ewing Marion Kauffman Foundation.

Figure 13.1 Nascent entrepreneur prevalence rates, by education, gender and ethnic identity (18–54 years old) businesses. In an aberration, however, the study found that education seems to have little influence among Hispanic women. B Age and experience According to the Global Entrepreneurship Monitor in an assessment of the state of entrepreneurship in 2002, men aged 18 to 24 had a 15 per cent entrepreneurship rate, men aged 25 to 34 had a 14 per cent rate, while women aged 18 to 24 had a 5 per cent rate and women aged 25–34 had a 10 per cent rate. Furthermore, according to the Ewing Marion Kauffman Foundation, a Gallup study reported that 27 per cent of high school students had taken an entrepreneurial course and another 35 per cent had taken an economics course. The study reported that seven out of ten Hispanic students would like to start a business. Other differences exist between Latino and Latina business owners. For example, Hispanic female business owners tended to be younger than their male counterparts, with 65 per cent of female business owners under the age of 44 as compared with 39 per cent of males (Shim and Eastlick, 1998). Similarly, these researchers found that, while 45 per cent of Hispanic male entrepreneurs had ten years or less of business experience, the figure for females was 71 per cent. In addition, Hispanic female business owners were less likely to be married (65 per cent) than males (83 per cent). Shim and Eastlick (1998) did find several common characteristics among Hispanic entrepreneurs. For example, the majority of all Hispanic business owners, 68 per cent, were in the 35 to 54 age category. C Path to ownership and industry entered In researching differences in paths to business ownership for minorities and non-minorities, Feldman et al. (1991) found that 30 per cent of minority business owners were motivated to become entrepreneurs thanks to ‘negative pushes’ or ‘displacements’ (job discontinuation,

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being fired and so on). In terms of business development, 83 per cent of Hispanic business owners had started their business, while 10 per cent had purchased their business from a non-family source, and only 7 per cent had inherited their business. The inheritance of a business is one area of disparity among male and female Hispanic entrepreneurs, with only 1 per cent of Latinas following this path to business ownership as compared to 9 per cent of male Hispanics, although, overall, 32 per cent of Hispanic entrepreneurs reported that their parents had been business owners. In terms of industry and business sectors, more Hispanics have chosen to enter service industries than any other type of business (45 per cent), and the corporation was the preferred choice of the legal form of organization (Shim and Eastlick, 1998) with over 59 per cent of all Hispanic businesses having operated in this fashion. An important difference between Hispanic entrepreneurs and white or black entrepreneurs was that the number of Hispanics who entered the retail trade industry showed a large increase while the other groups had declining figures (Fairlie, 2004). D Outlook and attitude In the area of outlook and attitude, Hispanic entrepreneurs shared some characteristics with non-Hispanic entrepreneurs while differing in other respects. For example, some similarity in the decision to become an entrepreneur has been found. ‘The hypothesis is confirmed that aspiring Black and Hispanic entrepreneurs have the same motivations and personal goals for initiating a business venture as non-minority business owners did when they began their ventures’ (Lee et al., 1998, p. 11). Interestingly however, differences in outlook have been found as well. As an example of motivational differences, contributing to society was a strong influence for both Blacks and Hispanics, and very weak among the non-minority respondents (Lee et al., 1998). Furthermore, these authors found that Hispanic entrepreneurs saw themselves as role models in their communities as well as providers of goods and services within their communities that were otherwise not offered or offered in insufficient quantities. Similarly, Dadzie and Cho (1989) found the presence of successful minority entrepreneurs to be a very important consideration for potential new owners in minority business formation. Finally, these business owners saw their anticipated success as a way to keep economic gains within their communities. Overall, it was evident that, as of 2004, the knowledge of the characteristics of Hispanic entrepreneurs in the United States was limited. While anecdotal information abounded, there was a relative lack of generalizable empirical research in this area. II Barriers to Hispanic entrepreneurship In addition to the myriad of barriers that face entrepreneurs in general, there are several significant barriers that specifically face Hispanic entrepreneurs in the United States. Issues such as access to financial capital, access to mentors and networks, access to labor pools, and barriers to the marketplace are important and can discourage entrepreneurial development as well as lead to the ultimate demise of some business formations. Barriers have the effect of severely limiting firms’ abilities to borrow, enter new markets, promote their products and services, and develop relationships with potential customers and suppliers. Additionally, even though these limitations may not prove to be fatal in and of themselves, these confines will contribute to the firms’ inability to achieve optimal efficiency which is a requisite in a competitive marketplace. As previously discussed,

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Hispanics are disproportionately entrepreneurial, so barriers such as these hamper the abilities of new firms to compete effectively in the marketplace. In a worst case scenario, entrepreneurs who view these obstacles as being too imposing will forgo the business opportunity and enter the workforce (Boyd, 1991). A Limited financial capital Barriers such as limited access to financial capital, the lack of sufficient income, wealth or assets, and limited access to financial markets or loans certainly restrict new business development in the Hispanic community. As previously noted, while Shim and Eastlick found that 10 per cent of Hispanic entrepreneurs had purchased their businesses from a non-family source, Tienda and Raijman (2004) found the related percentages to be 26 per cent for native-born Hispanics and 21 per cent for foreign-born Hispanics. Examining their finding that over half of businesses owned and operated by non-Hispanic whites were purchased outright, this figure could imply a stronger capital position for whites. In addition, their study found that over one-in-four Hispanic businesses began informally, which is to say that they were begun outside of the normal state-regulated and recorded business activity, with lack of capital being the primary reason for the informal business start-up. In addition, Feldman et al. (1991), in summarizing prior research on minority entrepreneurs, noted that the most important problem facing new businesses was an inability to obtain a line of credit necessary for start-up. In short, lack of capital was a major obstacle for Hispanics seeking business ownership. While most businesses are started with little capital or through the use of personal savings on behalf of the owner, historically the vast majority of minority-owned firms were started without the benefit of any borrowed capital (see Table 13.1). This is an important consideration given that, as we have seen, Hispanic American levels of income and Table 13.1 Financial and social capital characteristics of 1987 business owners, by minority status African Non-minority American (%) Latino (%) Asian (%) Female (%) Female (%) Source of borrowed capital None (no capital or did not borrow) Family or friends Commercial bank loan Other Family networks Those who had close relative who owned a business Those who worked for close relatives who owned a business

77.2

7.6

6.3

78.7

70.6

7.5 10.5 9.9

11.3 9.4 8.8

24.4 13.0 14.4

7.9 11.2 7.2

10.4 16.9 8.7

29.7

32.5

37.6

49.3

50.1

10.8

12.9

14.2

18.1

25.1

Source: US Census Bureau, Economic Census (1987).

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wealth have been well below those of their non-minority counterparts, with almost onethird of Hispanics living below the poverty level. In discussing the accumulation of wealth, Hispanics are less likely than whites to own their homes or cars, or to receive investment income. Because of this lack of generational wealth, Hispanic parents are less likely to leave extensive cash, investments or other assets to their children. While it can be argued that wealth may not serve as an absolute indicator of the success of new business formations, given that many firms start with little or no capital (Meyer, 1990), having limited wealth does serve as a barrier. This is evident in that the ability of a firm to sustain itself during a lull in sales over an extended period of time or its ability to survive an unexpected expense will be severely limited. Additionally, in terms of start-up capital, another historical source of funds for many entrepreneurs has been loans or investments from friends and family. Therefore, having lower levels of overall family wealth can serve as a crucial obstacle to the formation of many new businesses. B Limited social and human capital Social capital can be defined as the network of business associates, family members, customers and employees that can be extremely important in the formation and development of new businesses (Fratoe, 1988). A difficulty for minorities in this regard is that these networks and affiliations have often been more poorly organized than in non-minority cultures, and the partnerships and organizations are often limited or fragmented. A further problem, according to Anderson and Miller (2003, p. 17), is that ‘little research has been conducted on the specific area of entrepreneurial social capital, in spite of insights gained from social capital in other disciplines’. They found that an entrepreneur’s human and social capital assets had a major influence on the choice of industry and type of new business as well as its future potential for profitability. Specifically, an entrepreneur’s ability to recognize and pursue opportunities was affected by these forms of capital. Furthermore, the most important indicators of the extent of an entrepreneur’s social and human capital assets were related to the socio-economic position into which the entrepreneur was born. The implications for Hispanic new venture creation are clear. Owing to the lower relative socio-economic status of many Hispanics, a lack of human and social capital is a significant obstacle. Business networks, such as a membership in formal trade or business organizations (Rotary Clubs, chambers of commerce, restaurant owners’ associations and so on) can provide an entrepreneur with a linkage to new clients or suppliers, information on upcoming events, news on projects and opportunities, as well as information on new business developments. Networks can be important for minority business owners that are in need of cash or capital to develop their businesses or to enable future growth in the marketplace (Fratoe, 1988). Because these networks and affiliations are important, the inability of an entrepreneur to access or utilize these associations can be a barrier, although possibly less so than access to capital or markets. Being isolated from this environment, Hispanic businessmen can be restricted from acquiring one of the most important and vital items needed to run successful and growing enterprises: information. A lack of information about the marketplace, suppliers, interest rates, contracts, events or opportunities can significantly limit a firm’s growth or even its ability to survive in the marketplace. As discussed in the previous chapter, past research has indicated that education plays a large role in the entrepreneurship process in the US. In terms of human capital,

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Hispanics in the United States have historically had less education than their white counterparts, and have also been less likely to have past experience as business owners or experience in the workplace in general. Furthermore, Hispanics have had fewer opportunities to participate in an apprenticeship or other types of training programs (Wilson et al., 2004). While education is not a requisite for business origination, it is extremely important in that individuals may have specific training or specific knowledge that is easily convertible into a start-up business. Good examples could be attorneys, physicians and professionals in the financial arena because their work is already conducive to the formation of a new business venture. Furthermore, while education alone will not ensure that a business survives in the marketplace, individuals with better training and education are likely better equipped to overcome the many obstacles that face new business owners in the competitive environment. Additionally, while an individual may have very specific knowledge about a field, or expertise with a given product or service, it is also probable that an individual with more education will be more well-rounded in terms of being able to negotiate with suppliers, vendors and professionals, as well as with customers and other business owners. This is an important aspect owing to the fact that Hispanic business owners, while entrepreneurial, have the lowest educational level among entrepreneurs (see Table 13.2). In fact, almost one-third of Hispanic entrepreneurs have not yet attained a high school Table 13.2

Human capital characteristics of 1987 business owners, by minority status African Nonminority American (%) Latino (%) Asian1 (%) Female2 (%) Male (%)

Educational attainment Elementary/some high school High school degree/some college College degree or more Total Self-employment experience Percent previously owned a business Work experience Less than 2 years 2 to 9 years 10 to 19 years 20 years or more Total

23.1

32.2

12.5

9.0

13.2

48.1

45.0

35.1

54.6

49.3

28.8 100.0

22.6 100.0

52.3 100.0

36.4 100.0

37.4 100.0

9.8

11.0

15.6

13.9

21.7

21.5 27.2 26.6 24.8 100.0

27.4 31.7 23.0 18.0 100.0

31.2 35.7 21.1 12.0 100.0

20.7 31.4 27.1 20.7 100.0

16.7 28.1 26.5 28.7 100.0

Notes: Percents are based on the number of owners reporting. 1 Other minorities (Native Americans, Pacific Islanders, Eskimos and Aleuts) are also included in this category, although the vast majority of business owners in this category are Asian. 2 Includes both minority and white female business owners. Source: US Bureau of the Census Economic Censuses (1987), characteristics of business owners.

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diploma, and less than 30 per cent have earned a college degree. A final issue in regard to human capital is that English is a second language for many Hispanics and the inability to speak English fluently in the United States poses many threats and challenges in the business world. C Access to financial markets Despite Hispanics’ lower income and wealth levels that would seemingly necessitate the need for commercial or private market loans, Hispanic Americans are less likely to borrow from banks when starting or expanding businesses than whites (see Table 13.1). These business owners borrow from a bank only about 9 per cent of the time as opposed to 11 per cent for African-Americans and 13 per cent for Asian-Americans. One factor that affected these figures was the fact that many Hispanics had no credit history and were unable to demonstrate creditworthiness. Furthermore, low income rates, low home ownership rates and poorly capitalized businesses make it difficult for Hispanic entrepreneurs to obtain bank loans or lines of credit. In a report published in 2004, the Minority Business Development Agency of the US Department of Commerce highlighted a lack of access to financing as a pervasive obstacle throughout all minority business sectors. Specifically, the report states: ‘Minority entrepreneurs continue to have difficulty obtaining the capital needed, whether debt or equity, to start and grow their businesses’ (US Department of Commerce, 2004, p. 2). Furthermore, the report asserted that minority businesses continue to face systemic barriers to accessing capital markets, barriers that impede the efficient and productive flow of capital to such firms. Also reflected in the paper was that some of these barriers seemed to be attitudinal and may have been indicative of discrimination. As an example, research published in 2004 seemed to indicate that banks in the US denied financing to African-American and Hispanic borrowers more often than to other entrepreneurs, even when differences between firms were controlled for in the study. ‘With respect to loans, banks make smaller loans to start-ups in minority areas than in non-minority communities and to minority-owned firms than non-minority owned firms, even when controlling for equity capitalization, owner education, race, age, and experience’ (US Department of Commerce, 2004, p. 11). Similarly, in a study of credit markets for small business operators, Cavalluzzo and Cavalluzzo (1998, p. 789) found ‘large differentials in loan denial rates for black and Hispanic minority groups’. The authors further asserted that their results provided clear inferential evidence of prejudicial discriminations toward Hispanics, with weaker evidence of discrimination toward Asians. D Experience and limited market access As discussed, prior business experience is valuable to the potential entrepreneur. Experience, training, and specific knowledge may assist the individual in deciding to enter the market as an entrepreneur as well as serve to increase the probability that a given venture will succeed. Additionally, having access to other business owners and entrepreneurs, in and of itself, may also increase the likelihood that an individual will enter the marketplace. This is an important concept because minority business owners are less likely to have previously owned a business than white business owners (see Table 13.1). In regard to work experience, the relationship between experience and

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entrepreneurial spirit may go even further since Hispanic business owners typically are less seasoned than other business owners. In the cases of recent immigration, almost a third of all persons seeking work have less than two years of actual work experience (Enchautegui et al., 1997). Similar to the situation in the professional fields of law, medicine and finance, an individual with experience in any type of managerial capacity may also have the necessary background to become self-employed (Ando, 1988). However, this relationship is interesting because minorities have generally encountered obstacles in trying to obtain these higher levels of managerial positions. Furthermore, if managerial-type positions within the government sector do not provide workers with the type of experience that is commensurate with managers in the private sector, then these positions may be less effective in preparing individuals for promotions or for developing workers into the type of people who will become entrepreneurial. Table 13.3 and Figure 13.2 illustrate the industry distribution of minority and Hispanic owned businesses. As can be seen, the preponderance of minority-owned firms in the US are in the services and retail trade industries. As a percentage of all US firms, minorities own a disproportionate share of firms in the transportation, communications and utilities industry in addition to the high levels in services and retail trade. E Culture and preferences Culture and preferences represent an interesting dichotomy for Hispanic American entrepreneurs, as they represent both potential barriers and potential opportunities and advantages. For example, while culture should provide interesting insights into the mindsets of entrepreneurs, it is very difficult to come to any valid conclusions for a couple of reasons. First, it is difficult to collect data that accurately reflect the true entrepreneurial landscape because many of the firms are quite small and are not required to provide many of the statistics, reports, figures and sales data that larger firms must. In many cases, even though raw statistics may help to determine the number of small firms currently operating, there are a number of micro enterprises that may not have even filed the required paperwork with the local governing authority. A study completed by Tienda and Raijman (1996) documented the prevalence of this type of self-employment activity among Mexican Americans in Chicago. Furthermore, according to Scott (1983, p. 43), one cultural difference is that ‘business in the minority community often reflects the customs and value systems which are unique to it’. As a result, many ethnic firms have operated under these special cultural patterns by providing ethnic goods and services within ethnic neighborhoods. In addition, minority-owned firms exhibited different operating and financial patterns. One such example, also addressed in the section on limited access to financial capital, is a greater reluctance to seek traditional sources of financing, such as bank loans and lines of credit. In contrast, one cultural difference that could represent an advantage is the Hispanic culture’s collectivistic tendencies. Much research on entrepreneurship has focused on individual entrepreneurial efforts, but collectivism may play an important role as well. Chrisman et al. (2002) asserted that it may be an ethnic group’s propensity to embrace family-based organizational structures which affects firm performance and entrepreneurial success. Specifically, their research suggested that the impact of collaborative activity, which occurs in many Hispanic families, should be researched further.

203

Ownership by industry

Source:

176 609 944 155 4 021 515 1 183 669 4 270 041 2 649 085 2 567 560 2 614 965 61 611

797 856 2 889 041 2 237 675 8 891 023 1 480 003

18 553 243 64 033

126 809 2 333 424 688 782 919 570

20 821 934 496 164

Sales and receipts (million dollars)

All US firms Firms (number)

US Census Bureau, Economic Census (1997).

All Industries Agricultural services, forestry and fishing Mining Construction Manufacturing Transportation, communications and utilities Wholesale trade Retail trade Finance, insurance and real estate Services Industries not classified

Industry division

Table 13.3

92 727 439 450 164 043 1 339 486 419 522

3 578 255 251 63 640 190 564

3 039 033 71 921

Firms (number)

153 874 116 261 22 105 135 876 31 906

916 41 884 63 048 21 274

591 259 4 116

Sales and receipts (million dollars)

Minority-owned firms

11.6 15.2 7.3 15.1 28.3

2.8 10.9 9.2 20.7

14.6 14.5

Firms

3.6 4.4 0.9 5.2 51.8

0.5 4.4 1.6 1.8

3.2 6.4

Sales and receipts

Minority-owned as a percent of all US firms

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Table 13.4

Top barriers to growth

Barrier

(%)

Market conditions Competition Lack of capital Labor shortage Other Did not respond

37.2 19.2 10.2 07.4 10.4 15.6

Source:

Hispanic Business, Hispanic Business 500 (2003).

100% Industries not classified Services Finance, insurance and real estate Retail trade Wholesale trade Transportation, communications and utilities Manufacturing Construction Mining Agricultural services, forestry and fishing

80%

60%

40%

20%

0% Black

Hispanic

American Indian Asian and and Alaska Native Pacific Islander

Source: US Census Bureau, Economic Census (1997).

Figure 13.2 Percentage of total firms by industry division, by race and Hispanic origin (1997) F Hispanic entrepreneurs’ perceptions of barriers Despite the research into the various barriers faced by Hispanic entrepreneurs, Hispanic business owners held their own views of the barriers they faced. A 2003 poll of CEOs from Hispanic Magazine’s ‘Hispanic Business 500’, an annual listing of the 500 largest Hispanic firms in the United States, revealed that 37.2 per cent still viewed market conditions as the biggest obstacle facing their businesses (see Table 13.4). While this percentage was down from 45 per cent in the previous year, challenges such as increased competition, lack of capital and labor shortages gained importance in the eyes of upper management. III

Opportunities for Hispanic entrepreneurs

A Increasing international trade due to reduced trade barriers While many barriers remain, opportunities for Hispanic entrepreneurs are increasing, thanks to various trends. The explosive growth of the Hispanic population in the

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United States, the accompanying policy implications, as well as the falling trade barriers with Latin America, are rapidly expanding potential markets for Hispanic businesses. As Tinjacá (2001) found, international trade is a growth area for many Hispanic entrepreneurs. One of the primary drivers of new opportunities for Hispanic entrepreneurs in the United States has been the North American Free Trade Agreement (NAFTA) signed with Canada and Mexico in 1993, that took effect on 1 January 1994. ‘Ten years after Canada, Mexico and the United States pledged to eliminate trade barriers, most financial gurus and business experts are singing the same song: U.S. Hispanic small business owners are in a prime position for profitability south of the border’ (LeClaire, 2003, p. 1). This is due to factors such as ethnic, language, cultural, social and religious affinities that breed a basis for trust between US Hispanic business owners and their Mexican counterparts. As a result, large US corporations have been looking to the growing ranks of Hispanic firms to fill the void of suppliers and distributors for their Mexican operations. As noted by Tinjacá (2001, p. 52), ‘language and awareness of culture appear to be natural and unique competitive advantages for Hispanic entrepreneurs’. The opportunity presented to Hispanic entrepreneurs in the area of international trade stems from several factors. Tinjacá (2001) identified several key factors encouraging increased international trade between the United States and Latin America: ‘These include increasing economic strength in Latin America, and a growing market; availability of quality products in the U.S.; an increase in privatization of state owned companies; an increase in trade agreements with Latin American governments, and with European and Asian companies’ (Tinjacá, 2001, p. 53). The US Hispanic community is the natural starting point for international trade and investment (LeClaire, 2003). For example, while the first decade of NAFTA had little impact on small businesses as a result of owners’ lower levels of risk tolerance and capital, the impact upon small business owners had been largely concentrated in the border regions of the United States (LeClaire, 2003). Furthermore, NAFTA resulted in large trade increases between the US and Mexico. From 1993 to 2002, the value of two-way US trade with Mexico almost tripled, reaching $232 billion, and is projected to continue to grow twice as fast as US trade with the rest of the world. As trade increases, so do the opportunities for entrepreneurs. Hispanic small business owners are uniquely positioned to fill the growing needs of increased trade with Latin America thanks to a common language and similar culture. For example, Mexican– American entrepreneurs can position themselves as suppliers and distributors to larger corporations with operations in Mexico. In addition, there are also enormous opportunities for US Hispanic entrepreneurs to market products that are well known in Latin America to the growing number of Hispanics in the United States (LeClaire, 2003). According to Hispanic Business magazine, many Latinos in the United States long for food, music and consumer goods that remind them of home (Mendosa, 1993). In addition, prominent Hispanic business leaders viewed NAFTA as a great opportunity for US Hispanics because of their willingness to deal with people who have similar cultural identities (ibid.). The increase in opportunities can be clearly seen through 2004 reports from the US Census in which there were approximately 1.5 million US companies that were run by Hispanics or catered to Hispanics.

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B Expanding markets As the size of the Hispanic community in the US increases, it will exert a greater influence on the way business is conducted. Markets will expand and diversify. According to HispanicBusiness.com, ‘this market’s growth has been dramatic – fueled by demographic expansion, as well as by rising demand and opportunity in the U.S. labor and entrepreneurial markets’ (Russell, 2004, p. 1). For example, the World Bank projects growth opportunities for media, financial services and higher education in the US Hispanic market (Russell, 2004). Furthermore, population growth means Hispanics will also exert more impact on future labor markets. According to Russell, occupational structure will shift toward managerial, professional and service jobs. In addition, according to Fariborz Ghandar, director of the Center for Global Business Studies at Pennsylvania State University, the Hispanic community exerts a significant influence on the way business is conducted, in addition to being large in size (ibid.). These changes will contribute to greater opportunities for Hispanic entrepreneurs. Two such advantages for Hispanic entrepreneurs are language and culture. For example, ethnic groups’ tendency to concentrate residentially provides one advantage. According to Tienda and Raijman (2004, p. 2), ‘for economically disadvantaged groups such as Blacks and Mexicans, the availability of a dense ethnic market encourages the proliferation of firms that cater to ethnic concerns’. High residential concentration provides a favorable environment for entrepreneurial activity owing to the increased demand for ethnic goods. Furthermore, Light and Gold (2000) found that the expansion of ethnic neighborhoods often stimulates growth of ethnic economies. This is due to residential concentration permitting scale effects in both consumption and production (Rosenfeld and Tienda, 1997). Therefore, there is reason to believe that ethnic business ownership can grow even among immigrants with low stocks of human capital (Tienda and Raijman, 2004). Hispanic Business reported in 2004 that language-use trends would have significant implications for the future of Hispanic media. Davila (2001) asserted that there are basic differences between Latinos and other consumers that need to be addressed through culture and language-specific marketing. In addition, the continuous influx of Spanishspeaking populations to the United States would likely not be reached by advertising were it not for various forms of Spanish language marketing (ibid.). C Family networks Family is another important element of social capital that can promote business formation and firm growth. From the family, a fledgling entrepreneur can find a source of labor and a source of support, with spouses and children sometimes taking on the roles of both paid and unpaid help with the family business (Sanders and Nee, 1996; Fratoe, 1988). Citing Census Bureau data, Tinjacá (2001) pointed out that Hispanic families tend to be larger than the average American family. This is significant in light of the fact that family has a significant impact on new venture formation and performance. Specifically, Chrisman et al. (2002, p. 125) found that ‘at the time of new venture start-up, family represents a critical and oftenused resource in a substantial number of cases’. These researchers also found family involvement to be a good predictor of entrepreneurial perceptions and firm performance. This suggests that there are greater family resources available for pooling efforts. Additionally, a strong family tie can help facilitate the transfer of wealth between generations and will contribute to the creation of business traditions and heritage. For example,

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many Hispanic American entrepreneurs are reluctant to seek help from government minority business programs. A survey by the United States Small Business Administration in 1989 indicated that, although many new business programs were created to help minority entrepreneurs, most of these programs were not used by the Hispanic population at large. This reluctance to seek out governmental assistance by the Hispanic community has been attributed mostly to cultural attitudes, including a desire for independence and reliance upon the family for business support (Torres, 1997). Family also has other influences on entrepreneurship. Dyer and Handler (1994, p. 72) write that new figures have ‘indicated that entrepreneurs often come from homes where the father or mother was self-employed’. Specifically, there is a correlation between one family member who is a business owner and the occurrence of another member being entrepreneurial. Other researchers such as Roberts and Wainer (1968) and Ronstadt (1984) also found this relationship. Therefore, the large numbers of Hispanics starting businesses should lead to future high levels of entrepreneurial activity within Hispanic communities in succeeding generations. D Government policies While there are various measures that can affect policy pertaining to entrepreneurship, government procurement in the United States plays a large and important role in the promotion of minority business opportunities. In 2002, only 2.4 per cent of contracts were awarded to small and medium-size enterprises owned by minorities, including Hispanics. This translated into $1.5 billion in lost opportunities (Utt, 2003). Rectifying this historical underutilization would thus represent a great opportunity for Hispanic and other minority entrepreneurs, and government assistance programs seek to do just that. Various US government programs give preferential treatment to firms that have historically been discriminated against or disadvantaged in the United States. In general, the various programs can be placed into two broad categories. In the first group, the race, gender or ethnicity of a firm’s owner can be used as a factor in the awarding of contracts. The aim for these programs is to directly increase the number of US federal, state and local government contracts awarded to minority firms such as Hispanic-owned businesses. The second category of United States government assistance policies aims to assist Hispanic and other minority-owned firms to overcome limitations in their financial, social or human capital, thereby making the firms more attractive and efficient in the market and making them more proficient in obtaining government contracts. Examples of assistance include lending and bonding help and technical assistance, as well as requiring prompt payments by government agencies which do business with minority-owned entrepreneurial firms. In September 2004, the US Small Business Administration joined the US Hispanic Chamber of Commerce in a strategic alliance aimed at Hispanic entrepreneurs. The agreement is an effort to make more resources, education and training available for the long-term success of Hispanic small businesses across the country (United States Small Business Administration, 2004). E Current trends in the Hispanic marketplace In analyzing growth rates among Hispanic business owners, Fairlie (2004) found that the number of Hispanic business owners had increased by over 435 000 from 1979 to 1998: ‘This growth rate far surpasses the growth rates in the number of white and black

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business owners’ (ibid.: p. 205). The growing number and size of Hispanic businesses in the United States has led to the business community in the US looking upon Hispanics with greater importance. For example, in the financial industry, Samuel A. Ramirez & Co. launched a stock index to track the status of Hispanic companies in the United States and Puerto Rico. This was the first such index for Hispanic businesses, and tracked the ten largest and most influential Hispanic firms. Ramirez & Co. further planned to launch investment products to track the index. Similarly, in March 2003, HispanTelligence, the research unit of Hispanic Business Inc., developed the Hispanic Business Stock Index (HBSI). Thirteen firms comprised this index at its establishment and the total market capitalization for the firms was over $15 billion as of December 2002, with total annual revenues of over $8 billion for the same year. Together, the creation of indexes to track the status of firms that are either majority Hispanic-owned or whose main focus is the Hispanic market, was a clear sign that these firms are becoming more influential in the world economy. Additionally, the performance of the HBSI index in 2002 illustrated the strength and robustness of the Hispanic market. In 1999, the US Small Business Administration announced that it was starting a venture capital company with an initial investment pool of $20 million. The purpose of the SBA venture capital firm was to help small, unproven companies that are in the early stages of formation and growth. These firms often need assistance with credit establishment with various lenders and suppliers as well as product establishment in the marketplace and the community. In the 40-year history of the Small Business Investment Company (SBIC) program, this was the first SBIC to base its investment strategy specifically on Hispanicowned small companies. SBICs are privately owned and managed investment firms that use their own capital as well as commitments from the SBA to make investments in small firms. According to the SBA, the SBIC program has 325 licensees totaling almost $10 billion in possible investments and has invested over $20 billion in more than 116 000 small businesses since the program’s inception in 1958. Companies that have benefited from early SBIC investing include Intel, Federal Express, Apple and Compaq. These trends of growth and importance can be seen in other places as well. Hispanic Business magazine, which maintains an annual list of the 100 fastest growing Hispanic businesses, reported that revenue for this group in 2003 surpassed $7 billion and maintained an average growth rate of more than 500 per cent from 1999 to 2003. This represents a compounded growth rate of over 67 per cent. This growth is dramatic given the fact that the US economy grew at a 2.8 per cent annual rate for that period. Businesses in this category have continued to grow over the last few years in a period when the economy and financial markets slumped. IV Conclusion On average, Hispanic household income is considerably lower than the average for other US households. Employment, income, purchasing power and the cumulative economic power of these factors are inextricably linked to education. Improvements have been made but have been slow and the education gap between Hispanics and non-Hispanics has been increasing. This is not the case in business ownership, however. Hispanics are creating businesses at a much faster rate than other groups. Mixed results are common in answering the question of how Hispanic entrepreneurs differ from other entrepreneurs. Results currently conflict in various aspects, including

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education, success rates and economic impact, although the impacts cannot be disputed. Interestingly, differences can also be found within the Hispanic group and can be seen between Latino and Latina business owners in which female business owners tend to be younger than their male counterparts. Experience also varies by gender, with women typically having far less experience than males, and Hispanic women are also less likely to be married. Of course, there are several common characteristics among Hispanic entrepreneurs. These business people are typically young and are found in the service industries, with the corporation being the preferred choice of legal structure. Many Hispanic entrepreneurs report that their parents were business owners. Concerning attitudes, Hispanic entrepreneurs are both similar to and different from non-Hispanic entrepreneurs. AfricanAmerican and Hispanic entrepreneurs typically have the same motivations and personal goals for initiating a business and are also similar in nature to non-minority business owners in this regard, although one difference is that a desire to contribute to society was a more prevalent factor among the minority groups. Hispanic entrepreneurs typically see themselves as role models in their communities, providers of goods and services within their communities, and through anticipated success, as keepers of the development of economies within their communities. From a negative aspect, however, in addition to the numerous barriers that face entrepreneurs in general, there are several significant barriers that face Hispanic entrepreneurs in the US. Access to financial capital, mentors and networks, labor pools, and barriers to the marketplace are significant and can discourage entrepreneurial development and ultimately lead to the demise of business formations. Because of many of the obstacles faced by minority entrepreneurs however, US government officials have made various attempts to correct the business climate. Various federal, state and local governments have designed and implemented a wide range of action programs. The aims for these programs are to directly increase the number of US federal, state and local government contracts awarded to minority firms such as Hispanic-owned businesses, and to help Hispanic and other minority-owned firms to overcome limitations in their financial, social or human capital. Culture and preferences represent an interesting dichotomy for Hispanic American entrepreneurs, representing both potential barriers and potential opportunities. While many barriers remain, opportunities are increasing, thanks to various trends. The tremendous growth of the Hispanic population in the US and the collapse or removal of trade barriers with Latin America have expanded the markets for Hispanic businesses. The opportunities presented in international trade stem from several factors, and include the increasing economic strength in Latin America, growing markets, the availability of quality products in the US, and an increase in trade agreements with Latin American governments as well as with European and Asian companies. As the Hispanic community increases, the marketplace will be more influenced to meet changing demands, including the development of new financial products that help the Hispanic business community. Other trends of growth and importance are exemplified by the 100 fastest growing Hispanic businesses which, as a group, maintained an incredible growth rate. Hispanic businesses outstripped the 2.8 per cent growth rate of the American economy at the turn of the century. With a growing population, rising income levels and an increase in business formations, the market has never been better for Hispanic entrepreneurs. However, while the future

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may appear limitless, there are important issues that help make the entrepreneurship environment even more challenging. References Anderson, A.R. and C.J. Miller (2003), ‘Class matters: human and social capital in the entrepreneurial process’, Journal of Socio-Economics, 32, 17–36. Ando, F. (1988), ‘Capital issues and the minority-owned business’, The Review of Black Political Economy, 16. Boyd, R.L. (1991), ‘A contextual analysis of Black self-employment in large metropolitan areas, 1970–1980’, Social Forces, 70(2), 409–29. Carland, J.W., F. Hoy, W.R. Boulton and J.C. Carland (1984), ‘Differentiating entrepreneurs from business owners: a conceptualization’, Academy of Management Review, 9(2), 354–9. Cavalluzzo, K. and L. Cavalluzzo (1998), ‘Market structure and discrimination: the case of small business’, Journal of Money, Credit and Banking, 30(4), 771–93. Chrisman, J.J., J.H. Chua and L.P. Steir (2002), ‘The influence of national culture and family involvement on entrepreneurial perceptions and performance at the state level’, Entrepreneurship Theory & Practice, Summer, 113–30. Dadzie, K.Q. and Y. Cho (1989), ‘Determinants of minority business formation and survival: an empirical assessment’, Journal of Small Business Management, July, 56–61. Davila, A. (2001), Latinos, Inc.: The Marketing and Making of a People, Los Angeles, CA: University of California Press. Dyer, Jr., W.G. and W. Handler (1994), ‘Entrepreneurship and family business: exploring the connections’, Entrepreneurship: Theory & Practice, 19(1), 71–83. Enchautegui, M.E., M. Fix, P. Loprest, S.C. von der Lippe and D. Wissoker (1997), Do Minority-owned Businesses get a Fair Share of Government Contracts?, Washington DC: Urban Institute Press. Fairlie, R.W. (2004), ‘Recent trends in ethnic and racial business ownership’, Small Business Economics, 23, 203–18. Feldman, H.D., C.S. Koberg and T.J. Dean (1991), ‘Minority small business owners and their paths to ownership’, Journal of Small Business Management, October, 12–27. Fratoe, F. (1988), ‘Social capital of black owners’, Review of Black Political Economy, 16 (Spring), 33–50. Hispanic Business (2003), ‘Taking root in rocky soil’ (available online from http://www.hispanicbusiness.com/ news). Hispanic Business (2004), ‘Number of Hispanic-owned firms to reach 2 million in 2004’ (available online from http://www.hispanicbusiness.com/news). LeClaire, J. (2003), ‘NAFTA: 10 years later; Hispanic entrepreneurs are poised to leverage the benefits of NAFTA south of the border’, HispanicOnline.com. (available online at http://www.hispaniconline.com/ trends/2003/summer/politics/index.html). Lee, M.S., E.G. Rogoff and A.N. Puryear (1998), ‘Differences between aspiring minority and established, nonminority business owners: is there a goal gap?’, USASBE Proceedings (available online from http://www. usasbe.org/knowledge/proceedings/1998/01-lee.pdf). Light, I. and S. Gold (2000), Ethnic Economies, San Diego: Academic Press. McGrath, R.G. and I.C. MacMillan (1992), ‘More like each other than anyone else? A cross-cultural study of entrepreneurial perceptions’, Journal of Business Venturing, 7(5), 419–29. Mendosa, R. (1993), ‘Natural bridges of opportunity: small businesses aren’t wasting time in seizing the NAFTA initiative’, Hispanic Business, 13(3), 18–22. Meyer, B. (1990), ‘Why are there so few Black entrepreneurs?’, National Bureau of Economic Research, Working Paper No. 3537. Reynolds, P.D., N.M. Carter, W.B. Gartner, P.G. Greene and L.W. Cox (2002), ‘The entrepreneur next door’, Kansas City, MO: Ewing Marion Kauffman Foundation. Roberts, E.B. and H. Wainer (1968), ‘New enterprises on Route 128’, Science Journal (December). Ronstadt, R.C. (1984), Entrepreneurship: Text, Cases and Notes, Dover, MA: Lord Publishing. Rosenfeld, M. and M. Tienda (1997), ‘Labor market implications of Mexican migration: economies of scale, innovation, and entrepreneurship’, in F. Bean, R. de la Garza, B. Roberts and S. Wientraub (eds), At the Crossroads: Mexico and U.S. Immigration Policy, New York: Rowmann & Littlefield, pp. 177–99. Russell, J. (2004), ‘Past, present, future’, Hispanic Business (available online at http://www.hispanicbusiness. com/news/news_print.asp?id=16372). Sanders, J. and V. Nee (1996), ‘Social capital, human capital, and immigrant self-employment’, American Journal of Sociology, 61 (April), 231–49. Sapienza, H.J. and C.M. Grimm (1997), ‘Founder characteristics, start-up process and strategy/structure variables as predictors of shortline railroad performance’, Entrepreneurship Theory & Practice, 22(1), 5–25.

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Scott, W.L. (1983), ‘Financial performance of minority versus non-minority owned businesses’, Journal of Small Business Management, 21(January), 42–8. Shim, S. and M.A. Eastlick (1998), ‘Characteristics of Hispanic female business owners: an exploratory study’, Journal of Small Business Management, 36(3), 18–35. Thomas, A.S. and S.L. Mueller (2000), ‘A case for comparative entrepreneurship: assessing the relevance of culture’, Journal of International Business Studies, 31(2), 287–301. Tienda, M. and R. Raijman (2004), ‘Promoting Hispanic entrepreneurship in Chicago’, Journal of Developmental Entrepreneurship, 9(1), 1–21. Tinjacá, M. (2001), Vision! Hispanic Entrepreneurs in the United States, Pleasant Hill, MO: Heritage Publishing Company. Torres, J. (1997), ‘The rise of Hispanic business from 1980 to 1994’, CELCEE Kauffmann Center Digest 97(3) (available online at http://www.celcee.edu). United States Census Bureau (1987), ‘Summary characteristics of business owners: 1987’ (available online at http://www.census.gov). United States Census Bureau, (1992), ‘Summary characteristics of business owners and their businesses: 1992’, (available online at http://www.census.gov). United States Department of Commerce (2004), ‘Expanding financing opportunities for minority businesses’ (available online at http://www.mbda.gov). United States Hispanic Chamber of Commerce (2004), ‘Statistics’ (available online at http://www.ushcc.com/ res-statistics.html). United States Small Business Administration (2004), ‘SBA and U.S. Hispanic chamber of commerce join forces to help hispanic small businesses’, Press Release (available online from http://www.sba.gov/news). Utt, R. (2003), ‘A contracting conundrum’, HispanicBusiness.com (available online at http://hispanicbusiness. com/news). Wilson, F., D. Marlino and J. Kickul (2004), ‘Our entrepreneurial future: examining the diverse attitudes and motivations of teens across gender and ethnic identity’, Journal of Developmental Entrepreneurship, 9(3), 177–97.

14 Korean immigrants in the United States Pyong Gap Min

Although the Korean community in the United States has a history of over 100 years, its population remained insignificant until the early 1960s. But, with a full enforcement of the Immigration Act of 1965 in 1968, a large number of Koreans have immigrated annually to the United States. Between 1965 and 2002, more than 850 000 Koreans immigrated to the United States. As a result, the Korean population increased to close to 1.2 million in 2000. Post-1965, Korean immigrants are of interest to the mainstream media and social scientists partly because of their unique mode of economic adjustment. It is a widely known fact that Korean immigrants are highly concentrated in small businesses. However, Korean merchants have received a great deal of media and scholarly attention mainly because they have encountered severe conflicts with black customers. Several books and a dozen articles that focus on Korean–black conflicts have been published since the mid-1990s (Abelmann and Lie, 1995; Asante and Min, 2000; Joyce, 2003; C. Kim, 2000; K. Kim, 1999; Light and Bonacich, 1988; Min, 1996; Yoon, 1997; Yu, 1994). Even more interesting is how Korean merchants’ business-related inter-group conflicts have enhanced Korean ethnic solidarity. In a number of studies, I have tried to examine the effects of Korean immigrants’ business-related inter-group conflicts on Korean ethnic solidarity (Min, 1991, 1995, 1996; Min and Bozorgmehr, 2000). This chapter briefly examines Korean immigrants’ concentration in small businesses, their business-related intergroup conflicts, and the effects of inter-group conflicts on ethnic solidarity by reviewing previous studies by this author and other researchers. As clarified elsewhere (Min, 1996: 5; Min and Bozorgmehr, 2000), in examining the effects of ethnic business on ethnicity it is important to make a distinction between ‘ethnic attachment’ as the cultural, social, and psychological integration of members of a group into the ethnic community and ‘ethnic solidarity’ as their use of ethnic collective action. Although ethnic businesses usually increase ethnic attachment, only ethnic businesses involving inter-group conflicts enhance ethnic solidarity. As will be shown shortly, Korean merchants have encountered multifaceted conflicts with different groups (black customers, white suppliers, Latino employees, and white landlords) and government agencies. As conflict theorists indicated (Coser, 1964; Simmel, 1955), inter-group conflicts strengthen ethnic solidarity as well as other forms of group solidarity. In this chapter, I intend to show how Korean immigrants’ business-related inter-group conflicts have concentrated not only Korean merchants but also the Korean community as a whole. Korea immigrants’ concentration in small businesses A high self-employment rate The visibility of Korean-owned stores in Los Angeles, New York, and other cities, along with the mainstream media’s coverage of Korean immigrants’ commercial activities, creates the impression that Korean immigrants are a business-oriented trading minority. Census 212

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Table 14.1 Self-employment rates of top nine most entrepreneurial immigrant groups in 1980, 1990, 2000 (%)

Ancestry Greece Iran Israel Hungary Italy Korea Netherlands Pakistan Taiwan

1980

1990

2000

Number of workers in 2000

15 18 22 16 14 17 14 10 10

26 20 22 18 16 25 17 15 14

26 21 23 18 17 22 16 15 14

99 901 185 508 74 645 41 627 252 203 516 023 57 614 128 386 216 646

Sources: US Bureau of the Census, 1980, 1990, 2000 Census of Population, 5 per cent Public Use Microfiche Sample Data.

and survey data support the validity of this general perception. Table 14.1 shows the top nine most entrepreneurial immigrant groups based on 1980, 1990 and 2000 census data. In 1980, 17 per cent of Korean immigrants in the labor force were self-employed. Korean immigrants had the third highest self-employment rate among all immigrant groups, next to Israelis and Iranians in that year. The self-employment rate of Korean immigrants increased in 1990 to 25 per cent. Greek and Korean immigrants recorded the highest selfemployment rates in 1990 with 26 per cent and 25 per cent. In 2000, the self-employment rate of Korean immigrants slightly fell to 22 per cent. This may be due to the increase in the proportion of Korean professional immigrants since 1990. The Immigration Act of 1990 increased both annual immigrant visas by 40 per cent and occupational visas to 145 000, about threefold. Korean immigrants comprise the largest group among the top nine most entrepreneurial immigrant groups included in Table 14.1. In fact, the Korean immigrant population is much larger than any of the other immigrant populations. This shows the significance of Korean immigrants as a trading minority in the United States. This means that Korean-owned businesses are more visible to the American public than, for example, Greek- or Pakistani-owned businesses (both groups in New York City are heavily concentrated). Chinese, Filipino, and Indian populations (the other three major Asian groups) are much larger than the Korean population, but these three groups have much lower self-employment rates (10 per cent for Chinese, 5 per cent for Filipinos, and 11 per cent for Indians in 2000) than Korean immigrants. The self-employment rate of Korean immigrants is highly correlated with the size of the Korean community partly because Korean immigrants in a large Korean community can establish many businesses catering to Korean customers and partly because Korean immigrants in a very small Korean community include a higher proportion of professionals who work in the mainstream economy.1 Thus 35 per cent of Korean immigrants in Los Angeles, the largest Korean community in the United States, were self-employed in 1990, achieving the highest self-employment rate among all immigrant groups in the city.

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Table 14.2 Self-employment and employment patterns of Korean immigrants in Los Angeles and Orange Counties who participate in the labor force, by sex (1986) Job type Self-employed Employed in Korean firms Employed in non-Korean firms Total

Men

Women

Total

179(53%) 88(26%)

57(36%) 49(31%)

236(47%) 137(28%)

71(21%)

53(33%)

124(25%)

338(100%)

159(100%)

497(100%)

Source: The 1986 Survey of Korean Immigrants in Los Angeles and Orange Counties.

Census surveys, based on the respondents’ self-reports, underestimate the selfemployment rate of the population for a number of reasons (Light and Rosenstein, 1995: 33–55). A survey conducted in Los Angeles and Orange Counties in 1986 by this author reveals a much higher self-employment rate of Korean immigrants than the 1990 census data shows (35 per cent). As shown in Table 14.2, the majority of Korean male respondents and more than one-third of female respondents in the two Southern California counties were self-employed. Forty-five per cent of Korean workers in Southern California (the respondents, their spouses and other working family members) were self-employed. The 1986 survey revealed that 53 per cent of the represented households owned at least one business. Few Korean immigrants who entered the United States in the late 1960s and the early 1970s intended to open their own businesses here. They expected to obtain white-collar and professional positions in fields they were originally trained for. However, because of the language barrier and other disadvantages for employment, most of these immigrants had to switch to low-level, blue-collar occupations, such as gas pumping, maintenance, and garment manufacturing (Min, 1988). They reluctantly turned to small businesses as an alternative to these undesirable jobs. They were unprepared to establish their own businesses and, accordingly, it took a long period of time for them to accumulate start-up capital and to train themselves in how to start a business. Recent Korean immigrants are better prepared to start their own businesses than those who came in the 1970s, since they are informed in Korea that self-employment is the only option for most of them. Thus, they usually expect to run businesses in the United States. For example, in one pre-departure survey study conducted in Seoul in 1986, 71 of the male respondents reported that they would go into business when they came to the United States (Park et al., 1990: 86). In the early 1970s, many Korean immigrants attended language and vocational schools in Korea to improve their qualifications for employment in the American labor market. By contrast, most prospective Korean immigrants these days try to bring enough money with them to establish their own businesses as quickly as possible. Once they arrive here, Korean immigrants easily acquire business information and training through their employment in Korean-owned businesses. As a result, they can start their own businesses much more quickly than the Korean immigrants of the 1970s.

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The 1986 Los Angeles survey showed that it took earlier immigrants (those who immigrated prior to 1979) longer than recent immigrants (those who immigrated after 1979) to establish their first businesses. Forty-seven percent of recently arrived immigrants started their first business during their first year in the US, whereas only 31 per cent of their predecessors were able to do so. Types of major Korean businesses When minority/immigrant groups are over-represented in small businesses, they tend to be concentrated in a few or several types of businesses. Korean immigrants are heavily concentrated in several labor-intensive small businesses, such as the grocery/green grocery retail, fish retail, retail of manufactured goods imported from South Korea and other Asian countries, dry cleaning, and garment manufacturing. The retail grocery/liquor is the most popular Korean business common to all major Korean communities in the United States. Yang Il Kim, the president of the Korean American Grocers Association (the national organization established in 1989), estimated that there were approximately 25 000 Korean-owned grocery stores in the United States and Canada as of December 1991. He told me there were some 2800 Korean-owned grocery/liquor stores in Southern California in 1991, which accounted for about 25 per cent of independent grocery/liquor stores in that area. Korean immigrants in Atlanta, Philadelphia, Washington, and Seattle are also heavily concentrated in the retail grocery business. In the New York–New Jersey area, produce retail is probably the best-known Korean business, numbering about 1800 in 1994. Another type of Korean-owned businesses common to major Korean communities is the retail of manufactured goods imported from South Korea and other Asian countries. These items include wigs, handbags, clothing, costume jewelry, hats, and shoes. This type of business has been made possible mainly because of the radical increase in Korean exports to the United States since the late 1960s. Taking advantage of their native language and connections with South Korea, many Korean immigrants established import and wholesale businesses dealing with Korean-imported fashion items in the 1960s and 1970s. There were approximately 600 Korean-owned import businesses in the Los Angeles–Long Beach area and 500 in the New York–New Jersey metropolitan area in the early 1990s. Korean importers in Los Angeles and New York supply Korean and Asianmade goods to other Korean wholesalers, who in turn distribute mainly to Korean retailers all over the country. Thus, this is the only Korean retailer business in which Korean merchants have advantages in terms of prices, selection of hot items, and purchases on credit by virtue of their linkages with Korean wholesalers. Another popular Korean business line in the United States is the dry cleaning service. The dry cleaning business is attractive to Korean immigrants partly because it is very suitable for a family business involving husband–wife coordination and partly because it involves shorter hours of work (usually 7 to 7) and a lower level of physical strength than other types of retail businesses. There are approximately 1500 Korean-owned nail care shops and 700 fish retail stores in New York, but these two businesses, along with produce retail, are not popular Korean businesses in other major Korean communities. In addition, there were approximately 600 Korean-owned garment-manufacturing businesses in Los Angeles and 350 in New York in the early 1990s. More than 95 per cent of Korean garment manufacturers subcontract work from white, mainly Jewish, manufacturers.

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Large numbers of Chinese and Latino immigrants in Los Angeles and New York also engage in garment subcontracting (Bonacich et al., 1994; Waldinger, 1986). Concentration in minority neighborhoods and other business-related inter-group contacts A ‘middleman minority’ bridges two groups in a stratified – often a racially stratified – society by distributing the products made by the ruling group to minority customers (Blalock, 1967: 79–84; Bonacich, 1973; Rinder, 1958–59). Chinese in Asian countries, Asian Indians in African countries, and Jews in Medieval Europe were considered typical middleman minorities. Korean merchants in the United States draw customers from three groups: white, black/Latino, and Korean, yet they depend upon low-income minority customers, especially blacks, to a greater extent than would be expected by chance. Since there are some structural factors that encourage Korean immigrants to enter small businesses in minority neighborhoods, Korean immigrant merchants can be considered to play a middleman minority role in the United States. The concentration of Korean businesses in black neighborhoods is clear when we observe the three cities where this author conducted research. Although blacks constituted 24 per cent of the population in the four Atlanta counties where most Korean businesses were located, black customers comprised 44 per cent of the total customers for Korean-owned businesses in Atlanta in the early 1980s (Min, 1988: 69). Only 9 per cent of Koreans lived in Brooklyn in 1990, yet more than 25 per cent of the New York City’s Korean businesses were located in this borough, which was heavily populated by blacks (Min, 1996: 66). More important, at least one-third of small businesses in many black neighborhoods in Brooklyn were owned by Korean business owners in the early 1990s. For example, in April 1990, when the Brooklyn Church Avenue boycott was in progress, 23 of 67 businesses within five blocks of Church Avenue were owned by Koreans (Lee, 1993: 64). Korean immigrants also owned the majority of businesses in South Central Los Angeles (heavily black and Latino neighborhoods) in the early 1990s. For example, at the end of 1991, when the death of two blacks in Korean stores heightened Korean–African American tensions in Los Angeles, Korea Times Los Angeles reported that in addition to about 1000 Korean-owned swap meet stores there were approximately 600 Korean grocery and liquor stores, gas stations, and other Korean-owned stores in South Central Los Angeles, which accounted for about 80 per cent of all businesses there (Korea Times Los Angeles, 1992). There are two types of Korean businesses in minority neighborhoods, and some structural factors encourage Korean immigrants to operate both types of businesses in black neighborhoods. One type of businesses heavily concentrated in black neighborhoods is the grocery/liquor business. Predominantly white neighborhoods have major grocery chains and therefore do not need Korean-owned small grocery stores. There are, however, few grocery chains in low-income black neighborhoods. Because of the low spending capacity of the residents, high crime rates, and vandalism, big grocery chains are unwilling to invest in these areas (Light and Bonacich, 1988; Min, 1988: 73). Moreover, many people in black neighborhoods do not have their own cars, and thus they depend upon small grocery stores in their neighborhood for major grocery shopping. Accordingly, independent Korean grocers in low-income black neighborhoods do not encounter as much competition as those in predominant white areas.2 This suggests that racial segregation in urban residential patterns has created small business niches in

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low-income minority neighborhoods, which have been filled by Korean and other immigrant merchants. The other major Korean business in minority areas is the fashion business. Koreanowned fashion stores deal largely in Korean- and other Asian-imported merchandise, such as wigs, handbags, hats, clothing and shoes. Korean storeowners have the advantage of easy access to Korean suppliers and importers. Whereas American buyers distribute these Asian-imported manufactured goods to department stores in white neighborhoods, Korean importers provide them directly to Korean retailers (Chin et al., 1996). A large number of Korean merchants, particularly Korean swap meet owners in Southern California and Korean flea market owners in New York, sell fashion items directly to African American and Hispanic customers. Korean owners of fashion stores in minority neighborhoods, like Korean small grocers, have a competitive advantage because there is no department store in low-income black neighborhoods. Korean grocery and liquor storeowners in black neighborhoods play a typical middleman minority role because they distribute products made by large white-owned corporations to minority customers. Korean produce owners in black neighborhoods in New York also play a middleman minority role because they get fruit and vegetables from white, predominantly Jewish, suppliers. As will be shown later, Korean grocery/liquor storeowners and produce storeowners have had a lot of conflicts with both black customers and white suppliers. Moreover, Korean business owners, regardless of their business type, depend largely on Mexicans and other Latinos for operation of their businesses. For example, in the 1986 survey, Mexican workers were found to comprise 48 per cent of employees in Korean-owned businesses in Los Angeles and Orange Counties, outnumbering Korean employees (40 per cent) (Min, 1996: 114). In a survey of Korean businesses in black neighborhoods in New York City conducted in 1992, Latino employees were found to be the largest category of employees with 42 per cent, followed by blacks (31 per cent) and Koreans (23 per cent) (ibid.). In addition, Korean merchants heavily depend upon white landlords, especially Jewish landlords. For example, the Korean Small Business Service Center estimated that less than 10 per cent of Korean merchants in New York City own the buildings where their businesses operate; the others usually depend upon white landlords, who are mostly Jewish (Min, 1996: 177). As a result, Korean merchants have had conflicts with Latino employees and white landlords, as well as with black customers. The following section focuses on Korean immigrants’ business-related conflicts with these outside groups. Korean immigrants’ business-related inter-group conflicts Conflicts with and rejection by black customers Like middleman merchants in other societies, Korean merchants in black neighborhoods have been subjected to all forms of hostility, rejection, and violent reactions. Korean ghetto merchants in Los Angeles, New York, Philadelphia, Chicago, and other cities have experienced blacks’ rejection and hostility in different forms: verbal and physical assaults, press attacks, murder, arson, boycotts, and looting. Black hostility towards Korean merchants has been most severe in New York. Five long-term (lasting at least five weeks) black boycotts of Korean stores have occurred since 1981. The boycott of two Korean produce stores in Brooklyn, New York City, in January 1990 drew national media headlines. It

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started after a scuffle between a Haitian immigrant woman, who paid only two dollars for a three-dollar item, and the Korean manager of the store, who allegedly beat the customer (Min, 1996; C. Kim, 2000). When there was a rumor that the Haitian woman had died from the beating, local residents began to picket in front of the store. The next day, another Korean produce store across the street also became the target of the boycott. The Haitian Economic Development Association, a local black community organization, originally organized the boycott. Later, Sony Carson, president of the December 12th Movement, a Black Nationalist organization, made it a long-term boycott by guaranteeing that a dozen demonstrators were on duty almost every day. The boycott ended in May 1991, after the owner of the originally boycotted store sold his business to another Korean. In the 1980s and the early 1990s, several Korean merchants in black neighborhoods in New York City were also subjected to physical violence. In addition, arsonists have destroyed several Korean stores in black neighborhoods in New York City (Min, 1996: 79). In the 1980s, Korean immigrants in Los Angeles had maintained better relations with blacks than those in New York. However, black–Korean tensions were heightened there in the spring of 1991 when a 14-year-old black girl was shot to death in a Korean-owned grocery store while struggling over an unpaid bottle of orange juice with the female owner. Blacks were angrier about the court decision than about the incident when Du Soon Ja, who shot the girl, was given a five-year probation in November 1991. Unfortunately, five months later, the jury verdict of innocence in the case of four white police officers accused of beating a black motorist, Rodney King, sparked the riots in Los Angeles. Approximately 2300 Korean stores in South Central Los Angeles and Koreatown became targets of destruction and looting in the 1992 Los Angeles riots. Korean merchants suffered property damages of more than 350 million dollars, about 45 per cent of total damages incurred by the Los Angeles riots. Many Korean stores were targets of arson and looting in the Los Angeles riots mainly because a disproportionately large number of Korean stores were located in South Central Los Angeles’s black and Hispanic neighborhoods. Yet there is evidence that black rioters selectively targeted Korean-owned stores. A post-riot investigation by the FBI indicated that black gangs, who were responsible for planning the Los Angeles riots, consciously targeted Korean-owned stores for arson and looting (Min, 1996: 90–91). Korean–black conflicts commonly start with an altercation between Korean merchants/employees and black customers in Korean-owned stores. Korean merchants’ language barrier, their cultural differences from black customers, and mutual prejudice have all contributed to the interracial tensions felt in business transactions between Korean merchants and black customers. However, these socio-psychological variables cannot explain blacks’ long-term boycotts of Korean stores and their targeting of Korean stores for arson and looting. Black Nationalists, such as Sonny Carson, usually organized boycotts of Korean stores because they consider outsiders’ commercial activities in black neighborhoods as economic exploitation (H. Lee, 1993; Min, 1996: 109–17). Thus, the Black Nationalist ideology emphasizing the economic autonomy of the black community and the perception of Korean merchants as economically exploiting blacks are also important contributing factors to blacks’ hostility toward Korean merchants. In addition, the exaggerated, unbalanced, and even biased media coverage of Korean–black conflict has deteriorated the already strained relations between the two communities. Finally, economic problems in inner-city black neighborhoods and Korean immigrants’ disadvantages for

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economic adjustment have provided structural conditions for blacks’ hostility toward Korean merchants. Although the larger system is responsible for black economic problems, Korean immigrants trapped in small businesses in low-income black neighborhoods bear the brunt of blacks’ economic frustrations because they are easy targets. Korean merchants’ conflicts with other groups As previously noted, only Korean retailers selling fashion items such as wigs, clothing, shoes and costume jewelry depend upon Korean suppliers. The other Korean merchants (produce, grocery, liquor, and fish retailers) depend mainly upon white suppliers. Korean merchants’ relationships with white suppliers also involve inherent tensions as both groups intend to maximize their economic interests. Korean merchants have encountered discrimination by white suppliers in terms of prices, quality of merchandise, item selection, speed of delivery, parking allocations, and overall service. For example, Korean produce retailers and produce delivery truck drivers in New York buy fruit and vegetables at Hunts Point Market, probably the largest produce wholesaler market in the United States. Korean produce retailers visiting Hunts Point Market have had altercations with employees of wholesalers; some Korean merchants have been severely beaten (Kim, 1981; Min, 1996). Also, white wholesalers have discriminated against Korean merchants in different ways (Kim, 1981: 118–19; Min, 1990; 1996: 170–71). Many times Korean produce retailers have not been allowed to exchange merchandise. They have often been forced to buy items they did not want. They have had to wait longer than white retailers to get their purchases loaded in their cars. These disputes and discrimination in business transactions have been caused partly by white owners and employees’ prejudice against and stereotyping of Koreans, although Korean merchants’ language problems and cultural differences have played a role. Korean grocery and liquor storeowners have encountered similar forms of discrimination by white manufacturers and wholesalers. As noted above, more than 90 per cent of Korean garment factory owners subcontract work from white manufacturers. Their dependence upon white manufacturers involves a higher level of exploitation than Korean grocers’ dependence upon white suppliers because Korean and other immigrant garment subcontractors are involved in cutthroat competition to get subcontracting from white manufacturers, whereas Korean grocers choose white suppliers who are in less fierce competition. A number of studies have analyzed the exploitation of immigrant garment owners, including Korean immigrants, by white manufacturers (Bonacich et al., 1994; Light and Bonacich, 1988: 382–91). We previously noted that Korean merchants depend heavily upon Mexican and other Latino employees. Their dependence upon Latino employees also leads to another form of inter-group conflicts. New Latino immigrants and illegal residents find the employment they need in Korean-owned stores because they are severely disadvantaged for employment in the general labor market in terms of language, educational level, and legal status. Korean merchants prefer Latino employees to black employees mainly because they are ‘hardworking, cheap, and docile’ (Min, 1996: 114).3 In this sense, Korean immigrant merchants and Latino immigrant workers help each other. However, approached from another angle, the relationship between Korean merchants and Latino employees is problematic. Korean merchants prefer Latino workers mainly because the latter are cheap and docile, but for the very same reasons Koreans can be charged with exploiting Latino employees.

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The strained relations between Korean merchants and Latino employees in Los Angeles4 are most conspicuous in garment subcontracting, an industry that is notorious for exploiting its workers (Bonacich et al., 1994). In the late 1980s and the early 1990s, 700 Korean garment factories depended largely on Mexican employees. As Light and Bonacich (1988: 305–8) indicated, Korean garment subcontractors frequently violated labor regulations. My 1986 survey of Korean immigrants in Los Angeles and Orange Counties suggested that Korean garment subcontractors exploited Mexican employees.5 But, as noted above, the ultimate exploiters of Latino workers are white manufacturers who give Korean and other immigrant garment factory owners subcontracts with low margins. Mexican workers employed in Korean produce stores in New York City have picketed in front of Korean stores several times. The most recent picketing occurred in 2002, in which several Korean produce stores were targeted and one of them was forced to close. We previously noted that Korean merchants depend largely upon white landlords for their commercial buildings. The conflict between landlords and renters is inevitable because their goals are in sharp conflict. When landlords and renters are racially divided, their conflict of interest easily leads to racial conflict. Korean merchants can generally change suppliers if they do not like their prices and/or services, although it is not always possible. But they cannot change landlords as easily as they change suppliers. Thus, the dependence upon white landlords has the potential to involve a higher level of exploitation. Many Korean immigrants buy a failing business or open a new one and then turn it into a thriving business within a few years (Min, 1988). As Korean-owned businesses become more successful, some landlords raise rents by a significant margin over a short period of time.6 This escalating rent problem is most serious in New York. A large number of Korean immigrants operate general merchandise shops, deli stores, produce retail shops, restaurants, and wholesale stores along Broadway in Manhattan. In the 1980s, Korean merchants there experienced rent hikes two or even three times over a period of three to five years. Korean merchants in Manhattan felt that ‘the money earned by our hard work goes more to white landlords than to ourselves’ (Min, 1990: 443). To operate their businesses, Korean merchants have to deal not only with the abovementioned outside interest groups, but also with various government agencies that regulate small business activities. For example, city, state and federal governments have many laws and administrative orders pertaining to business licensing, commercial parking, disposal of commercial wastes, sidewalk obstruction, sanitary conditions of stores, and other aspects of operating businesses. These regulations have not been made specifically to hurt Korean merchants; they have negative effects on all small business owners. However, since the majority of Korean immigrants engage in small businesses, they have a common concern about ‘too tough governmental regulations’. Thus, as will be shown later, Korean merchants have also responded collectively to moderate governmental regulations. Korean merchants’ reactive solidarity I have thus far examined how Korean merchants have encountered conflicts with different external groups and government agencies over their economic interests. In this section, I will show how Korean merchants’ business-related conflicts with outside groups and governmental agencies have contributed not only to Korean merchants’ solidarity but also to community-wide ethnic solidarity. I will examine the effects of conflicts with (1) black

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customers, (2) white suppliers, and (3) government agencies separately. Korean merchants have made collective responses to Latino employees and white landlords as well, but, owing to space limitation, I will not cover the effects of these two forms of inter-group conflicts on Korean ethnic solidarity in this chapter. The effects of black hostility on ethnic solidarity Of all forms of business-related inter-group conflicts, black hostility in the form of armed robbery, physical violence, murder, arson, boycotts, and riots has undoubtedly been the most serious type of threat Korean merchants have encountered. Therefore, Korean–black conflicts have had the most pronounced effects on Korean internal solidarity. A series of conflicts with blacks made Korean merchants more aware of the potential collective threat in this country from blacks and have thus contributed to the fostering of solidarity among Korean merchants. By establishing local business associations, Korean merchants in black neighborhoods have tried to solve the problems with black customers and residents collectively. While a number of minor and major incidents of business-related conflict with blacks have enhanced Koreans’ solidarity, two events, the 1990 boycott of two Korean stores in New York City and the destruction of many Korean stores in the 1992 Los Angeles race riots, have most significantly affected the Korean community in terms of their ethnic solidarity and political consciousness. I analyze here only the effects of the 1990 Brooklyn boycott on Korean ethnic solidarity.7 The 1990 Brooklyn boycott of two Korean stores occurred about one year after another black boycott, led by the same black nationalists, had successfully forced a Korean store in Brooklyn to close. Korean community and business leaders agreed that, if the two boycotted stores were coerced into closing, another Korean store would soon be targeted. Therefore, they made all efforts to support the two produce stores financially until the boycott retreated. In the early stage of the boycott, the Korean Produce Association of New York and the local business association in Brooklyn raised funds, mostly from their members, to help their fellow storeowners. The Korean Association of New York and other Korean business associations quickly followed them in raising funds from the Korean community. A fund of approximately $150 000 was raised during the first year of the boycott, providing each boycotted storeowner with about $7000 per month. Although the sales volume of each store was reduced to almost nothing during that year, each was able to stay open, mainly because of the community contributions. The two storeowners received not only financial, but also strong moral support from Koreans all over the country throughout the boycott period. They received many letters from Koreans, including second-generation elementary school children, encouraging them not to close their stores. They were interviewed by the ethnic media numerous times and invited to give talks at many important ethnic meetings. Even the Korean Lions Club in Los Angeles invited one of the storeowners for an interview. In an interview with the Korean ethnic media in Los Angeles, Jang Bong Jae promised that he would never close his store. Suddenly, the two storeowners became heroes in the Korean community. A number of Korean churches in New York showed their support by taking their church members to shop at the stores on Sundays. Several Korean produce storeowners took turns working at the stores at night to encourage the dejected storeowners. One Korean lawyer volunteered to provide free legal services for them for a six million-dollar lawsuit against the picketer who beat the wife of one of the boycotted storeowners.

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Koreans also used political means to terminate the boycott. Korean community and business leaders in New York visited the Brooklyn Borough president, the New York City mayor, the New York State Legislature, and even the US president. They pressured them to take effective measures to break the boycott. In particular, Korean community leaders asked Mayor David Dinkins to enforce the court order that picketers stay 50 feet away from the boycotted stores. When the black mayor did not actively intervene to terminate the boycott, the Korean Association of New York planned to hold a mass demonstration in front of the City Hall to show Koreans’ dissatisfaction with the black mayor’s lukewarm effort to terminate the boycott. The demonstration was held in front of City Hall on 18 September 1990. About 7000 Koreans, approximately 15 per cent of the adult Koreans in New York City, participated. In order to bring as many Koreans to the rally as possible, most Korean taxicab companies in the city provided free transportation, using more than 100 taxicabs. The Korean American Senior Citizens Center mobilized its members, many of whom came in traditional Korean dress. The Council of Korean Churches of Greater New York encouraged all Korean churches to mobilize as many members as possible, and many churches came to the rally in church vans. Koreans achieved their objectives through the rally. They told the media, politicians, and the public that they would not keep quiet if they were treated unfairly. All major US media and many foreign media covered the demonstration. Moreover, the rally prompted the mayor to act. The next day, he enforced the court order to keep picketing 50 feet from the stores. As a result, the police arrested many picketers, thereby weakening the boycott. On 21 September, three days after the rally, Mayor Dinkins also made a symbolic gesture by visiting the boycotted stores and purchasing merchandise, thus encouraging black residents to shop at the targeted stores. Korean merchants’ collective responses to white suppliers Whereas Korean merchants’ conflicts with black customers and residents have contributed to solidarity among all Koreans, their conflicts with white suppliers enhanced solidarity and political skills among themselves. By establishing business associations, Korean merchants acted together to protect their economic interests against white suppliers. They have used demonstrations, boycotts, group purchase, and other collective actions. I previously pointed out that Korean produce retailers in New York have encountered unfair treatment by white suppliers. The Korean Produce Association of New York, established in 1974, has used more ethnic collective actions in the forms of demonstrations and boycott against white suppliers than any other Korean business association in New York. Its office is located at Hunts Point Market, where Korean produce retailers purchase fruits and vegetables every day. Whenever a Korean produce retailer is treated unfairly by a supplier, he or she is supposed to report the incident to the KPANY, which immediately sends a ‘troubleshooter’ to the scene to resolve the conflict. The organization also has funds ready for legal actions against suppliers. Since Korean produce retailers comprise the majority of customers for the wholesalers, the KPANY has used boycotts as the most effective strategy to defend Korean merchants against suppliers. Between 1977 and 1991, the KPANY organized five demonstrations, four against suppliers and one against the New York Daily News, as well as five boycotts of suppliers (Min, 1996: 195–7).

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Let me introduce one such demonstration and a boycott organized by the KPANY (ibid.: 172). In May 1985, 250 Korean merchants participated in a demonstration, organized by the KPANY against a white supplier. The wholesaler’s employee falsely accused two Korean merchants of stealing merchandise when the Koreans could not find their receipts; the merchants’ trucks were searched and they were detained for two hours until they found their receipts. Furious about the abuse and humiliation that the Korean employees had suffered, Korean produce retailers decided to retaliate against the wholesale store with a demonstration and a boycott. They started with a rally and then began a boycott of the wholesaler that lasted one week. Severely damaged by the loss of business, the wholesaler arranged a meeting with the KPANY’s leaders to negotiate a settlement. At the meeting, the Korean representatives demanded that the wholesale company formally apologize to Korean merchants for the incident, that employees of the company be more polite to Korean customers in the future, that the company educate its employees on how to serve Korean customers more politely, and that the company compensate the produce retailers for the monetary loss and psychological damage caused by the twohour detention. The company accepted the first three demands and made a formal apology in front of 60 Korean merchants. Wholesalers at Hunts Point Market are now well aware that they will be the targets of boycotts if they do not treat Korean merchants properly. Therefore, they try to satisfy Korean retailers. The secretary of the KPANY told me that they no longer needed to use boycotts because wholesalers responded quickly to their complaints and requests. The simple threat of boycotting is effective because Korean immigrants in New York monopolize the produce retail business. Since Korean merchants make up the majority of customers for most wholesalers at Hunts Point Market, their boycott can seriously hurt wholesale stores. Korean grocers in New York have also taken collective actions to protect their economic interests from suppliers (Min, 1996: 172–4). Unlike produce retailers who visit Hunts Point Market, Korean grocers usually purchase grocery items delivered to their stores by wholesale trucks. Therefore, Korean grocers have not experienced frequent confrontations with employees of wholesalers, and the Korean–American Grocers Association of New York (KAGRONY) usually does not need to resort to boycotts. Instead, it has used price bargaining and collective purchasing to protect its members’ interests against suppliers and manufacturers. The president and staff members of the KAGRONY regularly visit vendors and manufacturers, present them with data on Korean grocers in the New York metropolitan area, and explain how important Korean grocers in New York are to them as customers. They then ask manufacturers and wholesalers to lower prices of major grocery items for Korean retailers, threatening to endorse other competing companies if they do not comply. The KAGRONY has successfully negotiated with many wholesale companies for price reductions for Korean grocers. My interviews show Korean garment subcontractors, unlike Korean produce and grocery retailers, have been unable to use their collective actions effectively to protect their interests against white garment manufacturers, mainly because they are in excessive competition with both Korean and non-Korean immigrant garment subcontractors. Since Korean garment subcontractors approach white manufacturers individually and offer prices to get work, the Korean Apparel Contractors Association of New York can do little collectively to protect the interests of its members. The president of the KACA told me

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that, if Korean subcontractors were to take concerted action, they would have to compete with other immigrant manufacturers (mostly Chinese and Latino) who are willing to do anything to get work from manufacturers. Korean merchants’ collective responses to government agencies Korean merchants in New York also have responded collectively to government regulations on small business activities (Min, 1996: 183–91). The Korean Small Business Service Center, established in 1986, serves as the representative for all Korean trade associations in dealing with government agencies. Two of the major functions of the KSBSC are to negotiate with city and other governmental officials to help Korean merchants who have violated business regulations and to lobby lawmakers and government agencies to make business regulations less strict. Staff members of the KSBSC visit City Hall at least three times a week, meeting government officials to protect Korean merchants both individually and collectively. For example, at the end of 1990, the New York City Environment Control Department increased the fine for violating sidewalk litter law (which requires each store owner to clean the store area) from $25 for a regular violation, and $50 for a repeat violation, to $125 and $250. In 1991, when the increased rates went into effect, some Korean produce owners were charged with repeat violations and found themselves owing large amounts of money, with about 30 Koreans receiving tickets amounting to $10 000 or more. Staff members of the KSBSC helped many Korean merchants reduce fines significantly by negotiating with government officials. The KSBSC has also actively lobbied government officials and politicians to change business regulations. For example, the center successfully lobbied the New York City Consumer Affairs Department to make the Trade Waste Association lower the commercial waste disposal fee by 7.5 per cent, helping nearly 10 000 Korean merchants to save considerable amounts of money. Another instance involved the regulation of sidewalk stands. New York City had stipulated that stores located on streets 16 feet wide or wider could have stands displayed on the sidewalk up to four feet wide and ten feet long. Many Korean produce retailers paid heavy penalties for extending their sidewalk stands beyond these limits. Sing Soo Kim, director of the KSBSC, lobbied the city government administrators and the city council relentlessly, arguing that such a strict rule made it difficult for small produce and flower retailers to survive in New York City. The New York City Council passed a bill effective as of July 1993 that increased the allowable width from four feet to five feet. Kim’s lobbying activities were instrumental in the bill’s passage. He estimated that the extension of sidewalk stands would result in a $25 million increase in annual sales for New York City’s Korean-owned businesses. In addition to the KSBSC, several Korean trade associations have individually lobbied the city or state governments to change regulations in their favor. Let me give an example here (Min, 1996: 189). In 1991, the New York State Legislature proposed a bill that would require anyone operating or working in a nail care salon to have a nail care specialty license and would levy heavy penalties on those who violated sanitary regulations. According to the original bill, the nail care specialty license would have required 600 hours of education followed by a qualification examination. The Korean Nail Salon Association of New York actively lobbied New York State government officials and members of the state legislature to get their alternative bill accepted. Leaders of the KNSANY recommended that those with one or more years of work experience with nail care in New York

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State be given a license without any mandatory instruction or examination. Although the Association of Nail Schools strongly opposed this recommendation, the final bill contained a grandfather clause to accommodate KNSANY’s request. This helped many Korean nail care owners and workers to save thousands of dollars. Furthermore, in enforcing the law, the New York State Division of Licensing Services initially stipulated that only official documents such as Social Security cards, work permits and W-2 or tax return forms would be accepted as evidence of job experiences. The KNSANY successfully negotiated with the Division of Licensing Services to eliminate this requirement, thus enabling many Korean women with no work permits, such as students’ wives, to keep their jobs in Korean nail salons. Conclusion To sum up the foregoing analyses, black hostility toward Korean merchants in black neighborhoods, as the most serious threat to their economic survival, has contributed to Korean ethnic solidarity to a greater extent than any other type of Korean merchants’ business-related inter-group conflicts. Black boycotts of Korean businesses and the destruction of so many Korean stores in the 1992 Los Angeles race riots, in particular, have solidified the Korean community as a whole and awakened Koreans’ political consciousness. Korean merchants’ conflicts with white suppliers, Latino employees, white landlords, and government agencies over business interests have also forced them to use ethnic collective actions. As a result, Korean merchants have not only protected their business interests, but also improved their political skills. Although Korean immigrants have a language barrier, they know how to lobby government officials and politicians better than Indian immigrants who are fluent in English. Korean merchants engaged in typical middleman business such as grocery, liquor and produce retail owners have used ethnic collective actions more frequently because they have had conflicts with both minority customers and white suppliers. Korean merchants engaged in service businesses such as nail care and dry cleaning depend neither on minority customers nor on white suppliers. Accordingly, they have not had frequent recourse to collective action. But all Korean merchant groups, including nail salon owners and dry cleaners, have used collective strategies to protect their economic interests against white landlords and government agencies. The above discussion indicates that Koreans’ business-related inter-group conflicts rather than their concentration in small business itself have generated ethnic solidarity. From this, we can make references about other Asian minority groups active in small businesses. For example, Chinese immigrants in New York are heavily concentrated in Chinese restaurants and garment subcontracting (Kwong, 1987). The Chinese restaurant business is not heavily dependent upon minority customers or white suppliers, so we can infer that Chinese restaurant owners in New York have encountered far fewer business-related intergroup conflicts and have therefore used ethnic collective actions far less frequently than Korean produce or grocery retailers. In fact, the heavy dependence of Chinese businesses on co-ethnic employees has contributed to class conflicts among Chinese immigrants, severely weakening their ethnic solidarity (Kwong, 1987). This suggests that a particular pattern of immigrant entrepreneurship can enhance and weaken ethnic solidarity. This study is important because researchers of immigrant entrepreneurship have not paid much attention to the effects of business patterns on group solidarity.

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Notes 1. Unless Korean immigrants have professional occupations in the mainstream economy, they do not want to live in a small city with a small Korean population. 2. According to my study of Korean businesses in Atlanta, Korean grocery stores located in black neighborhoods were found to be more successful than those in white neighborhoods. See Min (1988: 118). 3. The preference for Latinos is not limited to Korean merchants. As Waldinger and Lichter (2003) have demonstrated, all business owners and managers, regardless of industry, prefer Latino employees for similar reasons. But the relationship between Korean merchants and Latino employees is problematic because proportionally more Korean merchants hire Latino employees. Chinese garment subcontractors in New York City depend heavily upon Chinese immigrants and illegal residents. 4. At least in Koreatown in Los Angeles, where Mexicans comprise the majority of the population, the two groups are involved in two other types of economic conflict: as landlords and renters, and as storeowners and customers. According to Oliver and his associates (Oliver et al., 1993), these three dimensions of conflict explain why a large number of Mexican residents participated in looting Korean stores in Koreatown during the Los Angeles riots. 5. A few Korean female respondents reported that they were unwilling to work in Korean-owned garment factories with many Mexican employees because ‘those garment factories would treat us more like Mexican workers and thus exploit us more’. 6. Korean immigrants’ strong competition to acquire business premises is partly responsible for this rent hike. It is not uncommon, when a Korean immigrant leases a building for business operation, for another Korean to offer a higher rent to the landlord. 7. This description of the effects of the 1990 Brooklyn boycott of two Korean stores on Korean ethnic solidarity is based on the subsection, focusing on the topic, of my 1996 book, Caught in the Middle, pp. 148–54.

References Abelmann, Nancy and John Lie (1993), Blue Dreams: Korean Americans and the Los Angeles Riots, Cambridge: Harvard University Press. Asante, M.K. and E.J. Min (eds) (2000), Socio-cultural Conflict between African Americans and Korean Americans, Lanham, MD: University Press of America. Blalock, Hubert M., Jr (1967), Toward a Theory of Minority-group Relations, New York: John Wiley. Bonacich, Edna (1973), ‘A theory of middleman minorities’, American Sociological Review, 35, 583–94. Bonacich, Edna, Lucie Cheng, Norma Chinchilla, Nora Hamilton and Paul Ong (1994), Global Production: The Apparel Industry in the Pacific Rim, Philadelphia: Temple University Press. Chin, Ku-Sup, In-Jin Yoon and David Smith (1996), ‘Immigrant small business and international economic linkage: a case study of the Korean wig industry in Los Angeles, 1968–1977’, International Migration Review, 30, 485–510. Coser, Lewis (1964), The Functions of Social Conflict, 2nd edn, Glencoe, IL: Free Press. Joyce, Patrick D. (2003), No Fire Next Time: Black–Korean Conflicts and the Future of American Cities, Ithaca: Cornell University Press. Kim, Claire Jean (2000), Bitter Fruits: The Politics of Black–Korean Conflict in New York City, New Haven: Yale University Press. Kim, Illsoo (1981), New Urban Immigrants: The Korean Community in New York, Princeton, NJ: Princeton University Press. Kim, Kwang Chung (ed.) (1999), Koreans in the Hood: Conflicts with African Americans, Baltimore: Johns Hopkins University Press. Korea Times Los Angeles (1992), ‘Korean businesses in South Central Los Angeles’, 1 January. Kwong, Peter (1987), The New Chinatown, New York: Noonsday Press. Lee, Heon-Cheol (1993), ‘Korean–Black conflict in New York City: a sociological analysis’, PhD dissertation, Columbia University. Light, Ivan and Edna Bonacich (1988), Immigrant Entrepreneurs: Koreans in Los Angeles, Berkeley: University of California Press. Light, Ivan and Carolyn Rosenstein (1995), Race, Ethnicity, and Entrepreneurship in Urban America, New York: Aldine de Gruyter. Min, Pyong Gap (1988), Ethnic Business Enterprise: Korean Small Business in Atlanta, Staten Island: Center for Migration Studies. Min, Pyong Gap (1990), ‘Problems of Korean immigrant entrepreneurs’, International Migration Review, 24, 436–55. Min, Pyong Gap (1991), ‘Cultural and economic boundaries of Korean ethnicity: a comparative analysis’, Ethnic and Racial Studies, 14, 225–41. Min, Pyong Gap (1995), ‘The entrepreneurial adaptation of Korean immigrants’, in Silvia Pedraza and Ruben

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Rumbaut (eds), Origins and Destinies: Immigration, Race, and Ethnicity in America, Belmont, CA: Wadsworth Publishing Company, pp. 302–14. Min, Pyong Gap (1996), Caught in the Middle: Korean Communities in New York and Los Angeles, Berkeley: University of California Press. Min, Pyong Gap and Mehdi Bozorgmehr (2000), ‘Immigrant entrepreneurship and business patterns: a comparison of Koreans and Iranians in Los Angeles’, International Migration Review, 34, 707–38. Oliver, Melvin, James H. Johnson and Walter C. Farrell (1993), ‘Anatomy of rebellion: a political–economic analysis’, in Robert Gooding-Williams (ed.), Reading Rodney King/Reading Urban Uprising, New York: Routledge, pp. 117–41. Park, In-Sook, James Fawcett, Fred Arnold and Robert Gardner (1990), ‘Korean immigrants to the United States: a pre-departure analysis’, Papers of the East–West Population Institute, no.114, Hawaii: Population Institute, East-West Center. Rinder, Irwin (1958–59), ‘Stranger in the land: social relations in the status gap’, Social Problems, 6, 253–60. Simmel, Georg (1955), Conflict and the Web of Group Affiliations, Glencoe, IL: Free Press. Waldinger, Roger (1986), Through the Eye of the Needle: Immigrants and Enterprise in New York’s Garment Trades, New York: New York University Press. Waldinger, Roger and Michael I. Lichter (2003), How The Other Half Works: Immigration and the Social Organization of Labor, Berkeley: University of California Press. Yoon, In-Jin (1997), On My Own: Korean Businesses and Race Relations in America, Chicago: University of Chicago Press. Yu, Eui-Young (ed.) (1994), Black–Korean Encounter: Toward Understanding and Alliance, Los Angeles: Institute for Asian American and Pacific Asian Studies, California State University.

15 The Iranian ethnic economy in the United States Mohsen Mobasher

Introduction The large volume of studies on the ethnic economy is a consequence of the recent growth of new ethnic populations and of the impact of fundamental economic and technological restructuring of American society on the economic activities of immigrants and ethnic minority groups (Eitzen and Baca Zinn, 1989; Waldinger, 1986; Waldinger et al., 1990). Some immigrants and ethnic groups have responded by establishing their own businesses and creating their own economy, whereas others have been relegated to jobs with low wages, harsh working conditions, and little or no opportunity for job mobility in the secondary sector (Waldinger et al., 1990). There is growing evidence that self-employment has played an important role in the economic adaptation of the newly arrived Iranian immigrants in the United States (Bozorgmehr, 1992; Dallalfar, 1989, 1994; Light et al., 1993, 1994; Light and Karageorgis, 1993; Moallem, 1991; Mobasher, 1996; Min and Bozorgmehr, 2000; Sabagh and Bozorgmehr, 1987; Waldinger, 1990). Like several earlier immigrant groups in the United States, such as Jews, Chinese, Italians, Greeks and others, Iranian’s proportionately higher involvement in entrepreneurial activities differentiates them from much of the native population. Given their short history of immigration, the rapid spread of an ethnic economy among Iranian immigrants in major US metropolitan areas such as Los Angeles, New York, Dallas, Houston and Washington DC is striking. This chapter highlights the major characteristics of Iranian ethnic economy and focuses on issues of internal ethnicity, class and ethnic resources, market orientation and intra-ethnic competition among Iranian entrepreneurs, and the role of ethnic media in providing a link between Iranian ethnic economy and Iranian community. I review the major studies on Iranian entrepreneurship in the United States and relate their findings to my own research on Iranian ethnic economy in the Dallas–Fort Worth metropolitan area conducted in three consecutive stages between 1993 and 1995.1 Other data sources used in this study include the US Census reports for 1990 and 2000, the Iranian Yellow Page Directory for California, New York and Texas for 2002, immigration data collected from the Statistical Yearbook of Immigration and Naturalization for the last 35 years, and the data collected and published by scholars on Iranian immigrants and ethnic economy in America. History of Iranian immigration to the United States There is a demographic prerequisite for the emergence and the operation of an ethnic economy. This demographic requirement is generally met through immigration. Without immigration, no ethnic economy develops. Therefore, a complete explanation of the emergence, growth, and operation of the ethnic economy requires an analysis of the causes of emigration of a particular ethnic group as well as the demographic characteristics of the immigrant population. 228

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Examining the history and the patterns of Iranian migration to the United States for the past 50 years indicates that Iranians did not appear in the United States abruptly. Rather, the presence of Iranian immigrants in major US cities has been related to such economic, political, and social pull factors as educational and occupational opportunities in the United States and the push factors of political and religious repression in the homeland. Although the earliest data reported for Iranian immigrants by the Immigration and Naturalization Service (INS) are for the fiscal years 1921–30, all available published reports from the INS indicate that Iranian immigration to the United States before 1950 was negligible.2 As indicated in Table 15.1, between 1921 and 1950 a total of 1816 Iranians migrated to the United States as permanent residents. This number increased to 13 727 between 1951 and 1970. Between 1971 and 1979, the number of Iranian immigrants admitted to the United States averaged 3563 per year. In 1980 alone 10 410 Iranian immigrants were admitted to the United States. During the fiscal years 1981–90, the average annual number of Iranian immigrants doubled in size, reaching 12 624 per year. The average annual number of Iranians during 1991–2000 was 11 259 per year. As the Immigration and Naturalization Service’s statistics presented in Table 15.2 indicate, the Iranian Revolution in 1978 was the great divider in the migration history of Iranians to the United States both quantitatively and qualitatively. Before the revolution, the immigration pattern of Iranians to the United States was mainly characterized by a heavy concentration of Iranian professionals and students. This was followed successively by a rise of religious minorities and high ranking officers during the revolutionary period and by refugees and immediate family members of the naturalized citizens in the postrevolutionary period. As indicated in Table 15.2, during the 1978–79 revolutionary period, nearly 200 000 non-immigrants and 14 317 immigrants from Iran entered the US. The number of Iranian refugees and people seeking asylum in America before the revolution was negligible. After the revolution, however, the number of Iranian refugees increased significantly. Overall, compared to the pre-Revolutionary and the Revolutionary immigrant, postRevolutionary Iranian immigrants who entered the United States were a more heterogeneous group with diverse socio-cultural backgrounds, religious affiliations, political orientations, family situations and age distributions. As a result the Iranian community in the US changed from a population composed of dispersed sojourners and temporary Table 15.1

Iranian immigrants admitted, fiscal years 1921–2000

Year

Number

1921–1930 1931–1940 1941–1950 1951–1960 1961–1970 1971–1980 1981–1990 1991–2000

241 195 1 380 3 388 10 339 45 136 126 244 112 597

Source:

Statistical Yearbook of the Immigration and Naturalization (2003).

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Table 15.2 Iranian immigrants, non-immigrants, and refugees and asylees admitted to the United States, fiscal years 1970–2003 Year

Immigrants

Non-immigrants

Refugees & asylees

2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985 1984 1983 1982 1981 1980 1979 1978 1977 1976 1975 1974 1973 1972 1971 1970

7 251 13 029 10 497 8 519 7 203 7 883 9 642 11 084 9 201 11 422 14 841 13 233 19 569 24 977 21 243 15 246 14 426 16 505 16 071 13 807 11 163 10 314 11 105 10 410 8 476 5 861 4 261 3 731 2 337 2 608 2 998 3 059 2 411 1 825

6 448 12 316 20 268 21 787 20 117 19 753 20 461 20 461 22 333 24 555 27 767 27 719 27 387 30 302 26 859 23 882 29 950 42 561 57 831 44 629 36 506 22 955 16 926 13 332 63 813 130 545 98 018 72 549 35 088 30 164 22 561 18 238 14 927 14 475

2 030 4 806 1 364 956 1 030 754 1 447 1 212 1 245 2 186 3 875 3 093 8 515 8 649 8 167 6 895 5 559 6 022 5 420 3 544 1 450 701 366 124 13 15 78 52 36 6 7 NA NA NA

Sources: US Immigration and Naturalization Service, Statistical Yearbook (2003) and Bozorgmehr and Sabagh, ‘High status immigrants: a profile of Iranians in the United States’ (1988).

migrants (students, interns) to a community of non-returnee middle and upper class professionals and entrepreneurs. This major demographic growth and change set the stage for the gradual emergence of a number of ethnic institutions such as the ethnic media, ethnic language classes for the second generation, and professional associations. The emergence of the Iranian ethnic community, ethnic institutions, and networks generated the infrastructure and resources for ethnic businesses.

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The Iranian ethnic economy in the United States Table 15.3 Ranked geographical distribution of the total foreign born Iranians for the top ten largest Iranian concentrations (1990 and 2000) Rank

State

1 2 3 4 5 6 7 8 9 10

California New York Texas Virginia Maryland Illinois Florida New Jersey Massachusetts Washington

1990

2000

115 415 15 204 10 412 7 957 7 924 5 189 4 753 4 053 3 895 2 742

159 016 22 856 22 545 14 970 12 935 8 184 9 625 4 790 5 764 6 351

Source: Census (1990 and 2000).

Demographic characteristics of Iranian immigrants Before examining characteristics of the Iranian ethnic economy and the extent of strategies that Iranian entrepreneurs employ in making use of class and ethnic resources available to them, it is important to review the demographic characteristics of Iranians in the United States. Considering the short immigration history of Iranians to the United States and the scarcity of relevant statistics and research, it is hard to give an accurate and reliable figure regarding the size and distribution of the Iranian ethnic group in the United States. The only available official data sources are the 2000 US censuses, and the Immigration and Naturalization Service reports which give an imprecise picture. Table 15.3 shows the number, regional distribution, and the growth of the Iranian ethnic group since 1990. The 2000 US Census estimated the total number of persons with an Iranian ancestry at about 338 266. Although this number indicates a 53.2 per cent growth rate since the 1990 US Census, the actual number of Iranians in the US is believed to be larger. The Iranian Interest Section in Washington, DC claims to hold passport information for as many as 900 000 Iranians in the United States (Iran Census Report, 2003). The errors associated with estimating the total number and distribution of Iranians in the US are many. First, since the census form does not offer a designation for individuals of Iranian descent, only a small per centage of Iranians choose to write in ‘Iranian’ as their ancestry. Second, given that Iran has a relatively large number of minorities with Armenian, Assyrian, and Turkish ancestry, another possible source of error in underestimating the number of Iranians is the identification of members of these minority groups with their ancestry rather than with their Iranian nationality (Bozorgmehr, 1992). According to the 2000 Census, there are 385 488 persons of Armenian ancestry, 82 355 persons of Assyrian ancestry, and 117 575 persons of Turkish ancestry residing in the United State. Irrespective of the accuracy of the 2000 census data, after the Lebanese and Armenian groups with a population of 440 279 and 385 488 respectively, Iranians are the third largest ethnic group in the United States within the North African and Middle Eastern categories. Geographically, Iranians in the United States are concentrated in a few states and

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metropolitan areas. As was the case in the 1990 Census report, close to half (47 per cent) of Iranians in the United States reside in California. After California, the second and the third largest concentrations of Iranians are in New York (22 856) and Texas (22 545), respectively. Although California, New York and Texas contain the majority, Iranians tend to be dispersed throughout many states. Virginia (14 970), Maryland (12 935), Florida (9625), Illinois (8184), New Jersey (4790), Massachusetts (5764), and Washington (6351) ranked fourth to tenth, respectively in 2000. Iranian immigrants in America come from all parts of Iran. Most of them, however, lived in such large urban centers as Tehran, Abadan, Mashad, Esfahan, and Shiraz prior to emigrating. Before their arrival, many of them lived in other countries. This is mostly the case for the post-revolutionary refugees and non-immigrant Iranians who had to wait in another country to obtain a visa or asylum status before entering the United States. Iranian immigrants are extremely diverse. Religiously, contrary to expectation, Iranians are composed of Muslims, Christians, Bahais, Jews, Zoroastrians, and many individuals with no preference for any particular religion. Ethnically, they include Turks and Persians as well as smaller numbers of Lors, Kurds, and Ghashgha’is. Differences also appear with regard to the time and purpose of entrance, and to socioeconomic status. Based on the 2000 US Census report, close to 27 per cent (61 534) of the total foreign born population of Iranians (231 138), entered the United States between 1990 and March 2000. Another 33 per cent (75 876) came to America in the 1980s. The remaining 40 per cent (93 728) of Iranian foreign born population in the United States are pre-revolutionary migrants who entered prior to 1979. Young people are disproportionately over-represented in the Iranian population of the United States. Close to 30 per cent are under the age of 20. Another 59 per cent are between the ages of 20 and 59. Young individuals between ages 35 and 44 constitute the largest (21 per cent) age segment of the Iranian population, while the proportion of elderly Iranians is very small. As indicated by the 2000 Census, the median age for Iranian men and women in America is 37.9 and 33.8, respectively. This type of age structure not only accounts for the very low mortality rate, but the relatively high rate of natural increase for the Iranian population. As indicated in the census, about 73 per cent of the Iranians in the United States live in family households. Married couple families constitute 81 per cent of the Iranian households. The rate of Iranians becoming US citizens has accelerated. This is in part related to the Immigration Reform and Control Act of 1986 which made thousands of Iranian immigrants eligible for permanent residency. Of the 231 138 foreign born Iranians living in the United States, approximately 60 per cent have become US citizens. One distinct quality of the Iranian immigrants in America is their unusually high level of educational attainment. According to census data, 57.2 per cent of Iranians in the United States have a bachelor’s degree or higher. This exceptionally high level of education among Iranians, which was largely a result of the heavy influx of Iranian immigrants in the late 1970s and early 1980s for the purpose of education has had a major impact on their annual incomes. According to US Census data, the median family income of Iranians in 1999 was $69 590. Another remarkable characteristic of the Iranians in America is their high rate of economic activity, particularly for women. As indicated in the 2000 census report, 65 per cent of Iranians who are at the working age (16 years and older) are in the labor force. The

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total unemployment rate for Iranians in the United States is only 3 per cent. One of the most conspicuous characteristics of the Iranian immigrants is the relatively high rate of self-employment. One out of every five employed in the Iranian labor force is selfemployed. This does not include those who are unpaid family workers. Participation of the Iranian women either as self-employed or as wage earner is relatively high. Nearly 50 per cent of Iranian immigrant women are economically active. Only 2.8 per cent in the labor force in 2000 were unemployed. Surprisingly, almost 12 per cent of these working women are self-employed. Iranian immigrants are employed in all occupational categories. While 53 per cent work in managerial, professional, and related occupations, 28 per cent are employed in sales and office occupations. Another 10 per cent work in service occupations such as personal care, food preparation, and healthcare support occupations. The relatively high occupational ranking of many Iranian immigrants is closely associated with their high level of education. After the management and professional, sales and office occupations, service occupation, production, and transportation ranks the fourth largest occupational category. Iranian ethnic economy In the last two decades, there has been a substantial amount of research on Iranian immigrants in the United States (Ansari, 1977, 1988, 1992; BiParva, 1994; Bozorgmehr and Sabagh, 1988; Fathi, 1991; Hanssab, 1991; Hoffman, 1989; Kelley et al., 1993; Modarres, 1992; Momeni, 1984; Naficy, 1991, 1993; Niknia, 2001; Sabagh et al., 1986; Sabagh and Bozorgmehr, 1987). However, only a few researchers have examined ethnic entrepreneurship among Iranians (Bozorgmehr, 1992; Dallalfar, 1989, 1994; Light et al., 1993, 1994; Moallem, 1991; Mobasher, 1996; Min and Bozorgmehr, 2000). Because of concentration of close to 50 per cent of Iranians in California, the bulk of research on Iranian ethnic economy was conducted in Los Angeles. Consistent with the ethnic economy literature, research on Iranian ethnic economy has primarily addressed the reasons for such a high rate of self-employment among Iranians; the impact of gender, ethnic, class resources and social networks on Iranian ethnic economy; the link between religious affiliation and entrepreneurship among Muslims and other religious groups from Iran; and the relationship between ethnic economy, ethnic institutions, and the Iranian community. Despite some contradictory results mainly due to differences in the demographic composition of Iranian immigrants where these studies were conducted, the common conclusion pervading the research is that Iranians are among the most entrepreneurial new immigrants in the United States. According to Light et al. (1993), 58.6 per cent of Iranians in Los Angeles are selfemployed. Similarly, Mobasher’s (1996) research on Iranian ethnic economy in Dallas estimates that about 56 per cent of those working are self-employed. Waldinger et al. (1990) agree that the self-employment rate among Iranians is high. Sabagh and Bozorgmehr (1987) estimated that 30 per cent of Iranian men in Los Angeles had been self-employed in 1980. In another survey conducted in 1987–88 they found that 56.7 per cent of Iranian heads of household were self-employed. In all, 61.3 per cent of Iranians worked in the Iranian ethnic economy. Min and Bozorgmehr (2000) consider Koreans and Iranians as the two most entrepreneurial groups in Los Angeles. Their findings indicate that the self-employment rate of Iranians increased from 20.9 per cent in 1980 to 27.8 per cent in 1990.

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Table 15.4 Top ten states with highest self-employment income for Iranian households (1999)

Rank

State

1 2 3 4 5 6 7 8 9 10

California New York Texas Virginia Maryland Florida Illinois New Jersey Massachusetts Georgia

Total number of Iranian households

Iranian households with self-employment income

58 112 8 460 8 444 5 186 4 557 3 702 3 143 2 721 2 136 2 264

13 449 1 615 1 587 861 775 536 502 472 447 336

Source: Census (2000), Summary file 4-sample data.

It is difficult, if not impossible, to estimate the exact number of self-employed Iranians in the United States. The only reliable source is the 2000 US Census. Table 15.4 shows the top ten states with the highest number of Iranian households in 1999 whose income is generated through self-employment. As anticipated, states with the largest Iranian concentration have the highest selfemployment rate for Iranian men and women. After California and New York, Texas, Virginia, and Maryland have the largest Iranian ethnic economies in the US. This is very consistent with the geographic distribution of Iranian immigrants. To examine the characteristics of the Iranian ethnic economy in states with a notable number of self-employed Iranians, I surveyed the Iranian Yellow Page Directory for Los Angeles County, Orange County, San Diego, Northern California, New York, New Jersey, Texas, Washington, Washington DC, Virginia, Maryland, and Pennsylvania. These yellow page directories list a total of 4515 Iranian establishments. Acknowledging that these directories undercount the number of Iranian owned businesses and most likely list business with an Iranian clientèle, the listing of business establishments in these directories would provide a sample for analysis. Using the Occupational Outlook Handbook of 2004–05, published by the Bureau of Labor Statistics, I assigned these businesses to ten occupational categories. These categories include management and business and financial operation occupations; professional and related occupations; service occupations; sales and related occupations; office and administrative support occupations; farming, fishing, and forestry occupations; construction trades and related workers; installation, maintenance, and repair occupations; production occupations; and transportation and material moving occupations. As indicated in Table 15.5, nearly half of these businesses are in professional and related occupations with a sizable proportion involving health diagnosis and treatment. Businesses in this category tend to require high levels of educational training. Concentration of a considerable number of Iranian firms in professional categories is consistent with the high level of educational achievement. As indicated by Min and Bozorgmehr (2000) this also suggests

The Iranian ethnic economy in the United States Table 15.5

Occupational classification of Iranian firms

Occupational category

Number of firms

Management and business and financial operation Management Business and financial operations

459 220 239

Professional and related occupations Architects, surveyors and cartographers Engineers Social scientists Community and related social services Legal Educational, training, library and museum Art and design Entertainers and performers, sports and related Media and communications-related Health diagnosing and treating Health technologists and technicians

2088 28 15 70 36 261 152 38 226 201 1050 11

Sales and related occupations Insurance sales agents Real estate and sales agents Retail sales Securities, commodities and financial services Travel agents

884 126 181 456 21 100

Service occupations Healthcare support Protective service Food preparation and serving-related occupations Building and grounds clearing and maintenance Personal care and service occupations

562 2 5 317 13 225

Office and administrative support occupations Office and administrative support worker supervisors and managers

5 5

Construction traders and related work

104

Installation, maintenance and repair occupations Electrical and electronic equipment mechanics, installers and repairers Vehicle and mobile equipment mechanics, installers and repairers Other installation, maintenance and repair occupations

235 33 152 50

Production occupations Printing Other production

133 51 82

Transportation and material moving occupations Motor vehicle operators Material moving Farming, fishing and forestry occupations Total

235

45 19 26 0 4515

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that a significant number of Iranian proprietors in the United States rely on cultural aspects of class resources in pursuit of their entrepreneurial activities. After professional category, sales and related occupations, particularly retail sales, real estate, insurance, and travel agents seem to be the second business line with a large concentration of Iranian entrepreneurs. It should be noted that, despite self-employment, some firms in this category may be branches of larger companies. This is especially the case for real estate and insurance agents. Service occupations such as beauty salons, restaurants, and personal care and service followed by management and financial occupations appear to be other attractive lines of business for self-employed Iranians. On the whole, Iranian entrepreneurs seem to avoid office and administrative support, and farming occupations, and have a marginal presence in production and construction occupations. Although the number of self-employed Iranians is relatively large and growing, there is yet to be a ‘Little Iran’ or what sociologists call an ‘ethnic enclave economy’, that is, a spatial clustering of firms, economic interdependency or vertical and horizontal integration between the enterprises, and hiring co-ethnic employees (Light and Karageorgis, 1993) anywhere in the United States. On the whole, with the exception of a small cluster of businesses that are oriented toward the Iranian community (see the discussion on market orientation of Iranian firms) Iranian firms rely less on co-ethnic employees and are diffused geographically. There are very small Iranian commercial pockets of Iranian restaurants, ethnic food stores, Persian rug stores, and travel agencies, in Dallas, Houston, and Los Angeles, but they do not fit the enclave model. Ethno-religious diversity of the Iranian ethnic economy The concept of ethnic economy derives from historical sociology and from the literature on middleman minorities (Light and Karageorgis, 1993). It was operationalized and defined by Bonacich and Modell for the first time in 1980 as ‘any ethnic or immigrant group’s selfemployed, employers, and their co-ethnic employees’ (1980: 45). Thus defined, two of the most important characteristics of the ethnic economy, among others, are the dependence upon ethnicity, not national origins, and co-ethnic personnel (Light and Karageorgis, 1993). The difference between the national-origin definition of the ethnic economy and a definition based on ethnicity is theoretically significant. An ethnic immigrant group may contain within it several different sub-ethnic groups based on religion or region in their country of origin. Thus the ethnic identity of immigrant minorities may not coincide with their national origin. In that case, in studying ethnic economy, one needs to be aware of the internal ethnic boundaries actually salient to the immigrants, themselves. As noted by Light and his colleagues (1993) the recognition of internal ethnicity allows one to examine the real sub-ethnic economies within the immigrant populations. Neglecting internal ethnicity, however, can oversimplify the concept of ethnic economy (Light et al., 1993). In their study of the Iranian ethnic economy in Los Angeles, Light et al. (1993) address the influence of internal ethnicity. By internal ethnicity they mean the existence of ethnic subgroups within an immigrant group. Immigrants who come from ethnically heterogeneous countries, instead of identifying themselves with their nationality, may identify themselves with the ethnic sub-group to which they belong. In that case, Light et al. (1993) assert, ethnicity transcends national origin and is not synonymous with it. Light and his associates reveal that the real economic organization within the Iranian community in Los Angeles centers around four internal ethnic economies which are based

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on ethno-religious (Armenian, Bahai’e, Jewish and Muslim) affiliations rather than national affiliation. These separate economies are weakly tied to an encompassing Iranian ethnic economy. Furthermore, their findings suggest that each ethno-religious Iranian sub-group has a distinctive occupational and industrial clustering and employment structure. Whereas Jews tend to be more clustered in the wholesale and retail trade, especially clothing and jewelry, Iranian Armenians are primarily concentrated in finance, insurance and real estate, and business repair and service. Iranian Muslims, in contrast, are more concentrated in construction and durable goods manufacture. Lastly, Bahais are most concentrated in durable goods manufacture, and other health and legal services. Based on the employment structure of the Iranian ethnic economy, Light and his colleagues distinguish five exhaustive classes of self-employed Iranians: (1) those who work alone, (2) those who work with unpaid family members, (3) those who work with partners, (4) those who work with both employees and partners, and (5) those who work with employees and unpaid family workers. Market orientation and diversity of Iranian businesses In addition to ethno-religious diversity, the Iranian ethnic economy encompasses three distinct types of enterprises based on their market orientation. My fieldwork between 1993 and 1995 in Dallas–Fort Worth metropolitan area indicates that Iranian firms are not uniform in their market orientation. While some Iranian businesses are predominantly oriented toward the Iranian community and clientèle, others are oriented toward non-Iranian clientèle. Still others have a mixed market orientation and provide services to both co-ethnics and non-co-ethnics. Enterprises with co-ethnic clientèle provide what Light (1972) calls a ‘protected market’. Ethnic grocery stores, ethnic restaurants, tax accountants, translation agencies, entertainers, and educational businesses which offer Persian language and Persian music classes are some examples of businesses with ethnic clientèle. Most of the businesses in this category are open more than ten hours a day, seven days a week. Enterprises in this category were among the first businesses that were established at the early stage of the formation of the Iranian community. Thus the origin and popularity of these enterprises is linked to demographic and cultural factors. Without exception, the history of establishment of these enterprises throughout the United States parallels the immigration of thousands of Iranian immigrants into the United States during the post-Revolutionary period. Furthermore, these enterprises provide goods and services specifically directed toward ethnic taste, need, and unique features of the Iranian culture that native enterprises do not provide. Finally, in these businesses, economic transactions are conducted in a very traditional way. Business transactions are very informal and co-ethnic customers try to argue the price down. Most of the businesses in this category rely on the labor of the co-ethnic employees for their operation. This is in part related to language convenience for customers. Businesses with ethnic clientèle have more attachment to the ethnic community and interact more with co-ethnics. Consequently, they have access to a wider network for community news and information. Moreover, for advertising and hiring purposes, these businesses are strongly woven into a network of ethnic institutions, particularly the ethnic media. One of the major characteristics of Iranian businesses with co-ethnic clientèle is the prevalence of severe intra-ethnic competition. This competition is more conspicuous among Iranian grocery stores and restaurants. It results mainly from the heavy

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dependency of the few Iranian restaurants and grocery stores on a limited pool of Iranian customers in the community. One way to cope with this competition is horizontal integration between Iranian grocery stores and restaurants and other ethnic institutions such as professional associations. This horizontal integration is formed through direct participation of business owners in such community events as the New Year celebration and the lecture series sponsored by professional associations. By donating money and time to these community events, Iranian grocery stores and restaurants find an opportunity to proclaim monetary and moral support of the community and gain more respect, a better reputation, and ultimately more customers in the community. In addition to enterprises which mainly cater to Iranian immigrants, the Iranian ethnic economy in Dallas consists of enterprises which go beyond the boundaries of the ethnic community for their survival. Since the main pool of customers for these businesses are nonIranian populations, the ethnic resource utilization by these enterprises is very selective and minimal. The only ethnic resources that are commonly utilized by enterprises in this category are co-ethnic employees and ethnic networks for partnership arrangements. In general, compared with businesses with co-ethnic clientèle, businesses with non-co-ethnic clientèle are more likely to rely on class resources such as capital, personal skills, and educational or professional training than ethnic resources for business start-up and operation. Unlike ethnic enterprises with ethnic customers which are strongly present and visible in the ethnic community, ethnic enterprises with non-co-ethnic clientèle tend to be removed from the ethnic community and its affairs. Ethnic enterprises with non-co-ethnic clients can be divided into two sub-categories considering the nature of the enterprise and individual skills of the entrepreneurs: (1) white-collar enterprises such as various engineering firms, and (2) blue-collar enterprises such as non-ethnic restaurants, gas stations, convenience stores, and cab companies. Although similar in market orientation, these two enterprise sub-categories are extremely different in operation, and in the demographic characteristics of their proprietors. Whereas self-employed Iranians who own a whitecollar firm put in fewer hours and enjoy the luxury of a two-day weekend rest from work, proprietors of blue-collar ethnic firms put in more hours and work much harder. Compared to self-employed Iranians in blue-collar ethnic firms, white-collar entrepreneurs have higher levels of education and language skills. Moreover, they usually establish a firm after obtaining a college degree in the United States and working for another firm in the primary sector of the market. Unlike owners of the blue-collar enterprises who turn to self-employment mainly because of low educational skills, insufficient qualifications for a white-collar job, and the language barrier, owners of the white-collar ethnic enterprises have turned to self-employment because of blocked mobility in the primary sector of the labor market, not individual disadvantages such as language difficulty. Finally, because the owners of the white-collar firms possess such class resources as educational and occupational skills and provide professional services, ethnic resource utilization for operation of these firms is irrelevant and insignificant. Enterprises with mixed clientèle are the third category of Iranian businesses, which are typical American small businesses such as photo-labs, print shops, mechanic shops, jewelry stores, and repair shops. These mixed customer-oriented business enterprises constitute the largest portion of the Iranian ethnic economy in Dallas. This is the only sector of the Iranian ethnic economy in which the proprietors seem to have had some previous experience before emigration from Iran. In addition to proprietors with previous experience, this

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sector of the Iranian ethnic economy is also dominated by persons who immigrated to the United States as students, but were unable to find a desirable job in their educational field. In general, proprietors of these enterprises rely on both ethnic and class resources for their survival. Nevertheless, the significance of the ethnic and class resources changes over the course of business development. Because of their reliance on both the non-ethnic and the co-ethnic customers, these enterprises advertise in the ethnic community as well as in the host community. However, advertising in the ethnic community tends to be sporadic and is often done through various ethnic media sources. Nevertheless, many of the business owners whom I interviewed indicated that they get most of their ethnic customers through word of mouth and referrals through networks of friends. Advertising in the host community, however, is done mainly through the local business guides and coupon books for various business enterprises. Compared to ethnic enterprises in the first two categories, ethnic enterprises in this category have a stronger desire to hire non-co-ethnic employees for customer relations and marketing positions. In almost all of the enterprises within this category which I observed there was at least one full-time American employee. Results of the interviews with owners of these enterprises confirmed my field observations. Regardless of the market orientation and ethno-religious diversity of Iranian businesses today, almost any goods or services an Iranian immigrant might need, from the most authentic food items and Persian music classes to financial advising and insurance, is provided by another Iranian within the confines of the Iranian ethnic economy. Whether Iranians confine themselves to their own ethnic economy for their economic needs is, however, open to question. Evidence from my community survey in Dallas–Fort Worth suggests that, while a large number of Iranians frequent Iranian businesses to purchase their goods and services, many Iranians refuse to do so. My survey results indicate that as many as 52 per cent of Iranian immigrants in Dallas–Fort Worth frequent Iranian businesses on a regular basis. Another 41 per cent frequent enterprises owned by Iranians occasionally. This is especially true for ethnic enterprises with culturally distinctive goods and services. As anticipated, ethnic grocery stores and restaurants are the top two businesses visited by Iranian customers. After ethnic grocery stores and restaurants, travel agencies, mechanic shops, insurance agencies, and beauty salons are the second most popular enterprises utilized by Iranian customers. The dependence of Iranian customers upon these co-ethnic businesses is greater among the new arrivals and older immigrants who have language barriers. In general, these businesses acquire co-ethnic customers through networks of friends, word of mouth, and the ethnic media. Ethnic economy, ethnic institutions and Iranian community The ethnic economy literature has been relatively insensitive to the link between the ethnic economy and the ethnic community, yet, as indicated earlier, a segment of the Iranian ethnic economy, that is, the segment which is oriented toward the co-ethnic market, is an integral part of the Iranian community. These entrepreneurs maintain and reinforce this link mainly through participation in such community events as the New Year celebration and the lecture series sponsored by Iranian professional organizations. By donating money and time to these community events, Iranian business owners find an opportunity to proclaim monetary and moral support of the community and gain respect, reputation, and customers in the community.

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During the first stages of the development of the Iranian community, when major ethnic institutions and community centers were underdeveloped, Iranian ethnic grocery stores provided a multitude of social and economic services throughout the Iranian community. The ethnic grocery stores helped many newly arrived immigrants to find housing and employment. They also functioned as an information center, providing names and telephone numbers of immigration attorneys, major government institutions, and community specialists such as entertainers, religious leaders, and advisers. In addition to their social services, ethnic grocery stores provided many commercial services such as exchanging money and sending immigrants’ remittances to Iran. In addition to providing ethnic items, Iranian ethnic grocery stores are the nucleus of the Iranian community in many other ways. Virtually every cultural and social event in the Iranian community, whether major, such as the New Year celebration concert, or minor, such as a small poetry reading night, is promoted and publicized in these stores. Promoting a particular event, however, depends on the relationship between the store owner and the event’s sponsor. Like Iranian grocery stores, Iranian restaurants play significant social, cultural, and economic roles in the community life of Iranian immigrants. These establishments are the arenas for social exchange between widely scattered people and groups. At lunch time, the patrons receive and pass on news regarding community events, businesses and the rest. For many self-employed Iranians these restaurants are convenient places to meet friends and clients, and discuss business. In addition to Iranian grocery stores and restaurants, ethnic associations play a major role in maintaining a link between the Iranian ethnic economy and Iranian community. Between September 1993 and August 1995, the period of my fieldwork, the Iranian professional associations in Dallas sponsored approximately 34 programs including picnics, film festivals, lectures, educational classes and workshops, cultural celebrations, and concerts. These programs help the Iranian ethnic economy directly and indirectly in several ways. First, about 10 per cent of the lectures were presented by Iranian ethnic entrepreneurs such as tax accountants, real estate brokers, computer consultants, insurance agents, and engineers in a different field. These lectures and meetings provide an opportunity for the white collar ethnic entrepreneurs within the Iranian community to advertise their services, develop and maintain ties with other entrepreneurs, and obtain clients. Second, to organize the community events and celebrations, the Iranian professional associations rely on ethnic restaurants for catering, ethnic entertainers for music, and other ethnic businesses such as print shops for printing the pamphlets and electronic shops for setting up the sound system. In addition to the financial benefits of such events for both the organizers and ethnic businesses, these events contribute to the formation of horizontal integration among these businesses. Finally, some of the programs organized by the professional associations are co-sponsored and supported by ethnic entrepreneurs for business reasons as well as a sense of in-group loyalty. In particular, this has been the common marketing and competition strategy adopted by some of the ethnic restaurants and grocery stores. By participating, co-sponsoring, and sometimes providing space, beverage, pastries and the like, the owners of ethnic restaurants and grocery stores strive to gain reputation and credibility as concerned, decent, generous, and well-thought-of members of the community. This reputation is not only crucial for their success within the Iranian community, but also very effective in competing with non-ethnic businesses who

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offer some of the same goods and services to the Iranian community. Another way for Iranian entrepreneurs to maintain their link to the community is through regular extensive advertisement on Iranian mass media, particularly, the print media. Today the Iranian community in America contains more than ten Iranian Yellow Page directories, one in each of ten US cities, listing only Iranian firms, as well as hundreds of monthly and weekly Iranian magazines, and numerous radio and TV stations. Except for two or three TV stations and a few magazines, all of the print and electronic Iranian media in exile is produced in California, particularly Los Angeles. Every Iranian Yellow Page directory and issue of Iranian magazines contains advertisements about the local restaurants and grocery stores, Iranian physicians, dentists, certified tax accountants, travel agents, and other businesses owned by Iranians. Similarly, through radio and TV commercials, the Iranian media in exile provides an opportunity for ethnic entrepreneurs to advertise their goods and services as well as their commitment and loyalty to the immigrant community. In addition to business commercials, the ethnic media advertises business opportunities and invitations for employment in ethnic enterprises. In addition to the lower prices, better quality products and services, and accessibility to experienced co-ethnic personnel, such cultural values as rastee (honesty), dostee (friendliness), samemeeat (cordiality/sincerity) and safa (pleasantness) are strongly emphasized in these ads. Moreover, Iranian customers are constantly reminded of how the atmospheres of these places revive pleasant memories of Iran. In summary, the Iranian ethnic media is very crucial for the survival of the Iranian ethnic economy and maintaining its link to the ethnic community. Through the ethnic media, businesses owned by co-ethnics are introduced to the community. Information about the type and location of Iranian businesses conveyed through the local ethnic media sources helps to expand and strengthen the ethnic economy in many ways. First, it increases the participation of the businesses in the community by publicizing their services, and calling attention to their importance in the community. Second, it increases the interaction between co-ethnics and the business owner. Third, it facilitates employment opportunities within the ethnic economy. Finally, it facilitates the potential economic advancement of ethnic entrepreneurs. The Iranian print media in exile has been instrumental not only in strengthening the Iranian ethnic economy and linking it to the ethnic community, but also in promoting and enhancing the significance of Iranian ethnic identity and Iranian culture in exile. In almost every business ad and commercial such words as Iran, Iranian, Persian, Iranian community, Iranian compatriots, Iranian nationality and Iranian culture are manipulated as an important basis for economic transaction between the business owners and the co-ethnic customers. Ethnic and class resources One of the most important issues in contemporary anthropological study of ethnic groups is the relationship between ethnicity and social class (Bonacich, 1975; Harris, 1995). As part of their attempt to improve their position in the social and economic hierarchy, ethnic groups mobilize their resources to get jobs, develop enterprises and dominate an economic niche. Many studies concerned with ethnic groups and occupations focus narrowly upon the utilization of ethnic and class resources by ethnic entrepreneurs in their economic activities (Bonacich, 1975; Light, 1984; Light and Bonacich, 1988; Waldinger, 1989; Yoon, 1991; Zimmer and Aldrich, 1987). Light (1984) defines class resources as ‘private property in the means of production and distribution, human

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capital, and money to invest’ (Light, 1984: 201). In their definition of class resources Light and Karageorgis (1993) distinguish the cultural from the material endowment of the bourgeoisie. By material endowment of class, they mean private property, wealth, capital to invest, and human capital. The cultural endowment, however, includes the vocational culture of the bourgeoisie as well as its status culture. Whereas class resources are available only to a segment of an ethnic group whose social and economic position in society enabled them to invest in human capital or to be endowed with these resources by their parents, ethnic resources are available to every member of an ethnic group who shares the common origin and culture (Yoon, 1991; Light, 1984; Light and Bonacich, 1988; Light and Karageorgis, 1993). Light and Karageorgis define ethnic resources as ‘Socio-cultural and demographic features of the whole group which co-ethnic entrepreneurs actively utilize in business or from which their business passively benefits’ (1993: 38). Like most other immigrant groups, Iranians often rely on ethnic and class resources to establish an enterprise. Min and Bozorgmehr’s (2000) analysis of business patterns among Iranian immigrants in Los Angeles indicates that Iranian entrepreneurs depend upon class resources for establishment and operation of their business. Because of their wealth, English fluency, high educational level, and relevant occupational skills, Iranian immigrants in Los Angeles have developed a high level of participation in professional and capital-intensive businesses such as medical firms, real estate agencies, engineering firms, garment manufacturing, and construction (Min and Bozorgmehr, 2000). According to Min and Bozorgmehr (2000), Iranian’s reliance on class resources has enabled them to find high earning occupations that serve a non-ethnic, white clientèle, widely dispersed in middle-class white neighborhoods. Business concentration away from low-income black and Hispanic neighborhoods and customers has protected Iranian entrepreneurs against ethnic hostility and business-related inter-group conflicts. While Min and Bozorgmehr’s study underlines previous business experience and class resource utilization as major reasons for business establishment among Iranian entrepreneurs in Los Angeles, my study of Iranians in Dallas–Fort Worth (1996) reveals the opposite. As a first step in the examination of the extent of class endowment of entrepreneurship among Iranians, I asked the business owners in the sample two questions concerning their occupation and their father’s occupation in Iran. These questions were constructed on the basis of Light’s assertion (1984) that the cultural endowments of class resources, such as bourgeois values, attitudes, knowledge, and skills which are internalized through the socialization process allow the bourgeoisie’s youth to prosper in a market economy (Light, 1984). Consequently, it was hypothesized that self-employed Iranians would more often come from families with an entrepreneurship background. However, a considerable number (56 per cent) of Iranian entrepreneurs in the sample were sons of white-collar government employees and professionals. This indicates that nearly half of Iranian business owners were not predisposed to an entrepreneurial culture prior to their emigration from Iran. Moreover, a significant number (64 per cent) of Iranian entrepreneurs in the sample were students and had no business experience prior to their departure from Iran. Only 7 per cent of the respondents had their own business prior to emigration from Iran. The remaining 29 per cent indicated that they had white-collar occupations. Since a significant number of Iranian proprietors in Dallas were neither self-employed nor had self-employed fathers in Iran, the cultural aspects of the class resources of

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entrepreneurship fall short as an explanation of Iranian entrepreneurship in Dallas. However, when the socio-economic aspects of class such as education, occupation and money to invest are considered, a stronger correlation between class resources and entrepreneurship appears. These data indicate that Iranian entrepreneurs are a select group with a high pre-immigration socio-economic status. In fact, most non-student Iranian immigrants experienced some downward occupational mobility in the period immediately following immigration and this became a major reason for starting a small business. With respect to the Iranian entrepreneurs who were students prior to their emigration from Iran, the limited job opportunities upon graduation from college, as well as their class background, seem to have been the main reasons pushing them toward self-employment. Few of these middle-class Iranians had any business experience when they arrived in the United States, and they often mentioned the lack of business skills and management experience as major problems during the initial stages of their business operation. However, educational training combined with their middle-class social values internalized in the course of primary socialization afforded them the human capital to run a business successfully. My analysis of the Iranian ethnic economy in Dallas indicates that utilization of class and ethnic resources changes over the course of business development and is affected by the type and market orientation of the enterprise. As indicated in Table 15.6, the white-collar Table 15.6 Diversity of Iranian businesses and their relation to ethnic community, ethnic institutions and ethnic resources in Dallas–Fort Worth metropolitan area Non-ethnic clientèle

Community attachment and integration Reliance on co-ethnic workers Reliance on co-ethnic customers Reliance on ethnic institutions Reason(s) for selfemployment Previous experience in America Previous experience in Iran

Ethnic clientèle Mixed clientèle

White collar

Ethnic grocery stores and restaurants, educational and social services

Photo labs, repair shops, beauty salons, insurance agencies

Non-ethnic restaurants, Engineering convenience firms, medical stores, gas and financial stations and cab services companies

High

Moderate

Low

low

High

Low

low

High

High

Moderate

low

low

High

Moderate

low

low

Blue collar

Disadvantages Opportunity Blocked in the market structure and mobility blocked mobility No No Yes

Disadvantages in the market

No

No

Yes

No

Yes

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Iranian businesses that are oriented toward non-Iranian customers are less likely to rely on co-ethnic workers, ethnic institutions, and co-ethnic customers than ethnically-oriented businesses such as ethnic restaurants. The reliance of non-ethnic oriented businesses on ethnic resources seems to be limited to the financial assistance from family and friends at the initial stage of business development. As the business grows and enters the advanced stage, ethnic resources lose their significance. Instead, an individual’s class resources, such as education, fluency in English and interpersonal management skills, become more and more significant in determining the expansion of the business. Conclusion This chapter was written with two principal goals. The first was to review the major scholarly work on Iranian ethnic economy in America. The second was to describe some of the major characteristics of the Iranian ethnic economy in America, based on the research findings in the literature. To the best of my knowledge, with the exception of my own work in Texas, all other research on the Iranian ethnic economy has been confined to California. As indicated earlier, this has mainly been due to the demographic concentration of nearly half of Iranians in California. Despite the lack of research findings about entrepreneurial activities of Iranians in other regions, several major points were evident through the literature review. First, large numbers of Iranians in the United States have turned to entrepreneurship either because of their endowed affluent class resources and pre-migration business experience, as has been the case for most Iranians in California, or to escape disadvantages in the labor market and act upon the desire for upward social and economic mobility as well as for autonomy, flexibility, and freedom associated with self-employment, as has been the case for the majority of Iranian entrepreneurs in Texas. Unlike Iranian entrepreneurs in California, except a small portion, not many of the Iranian business owners in Dallas had previous experience of running a small business in Iran. Most, in fact, immigrated to the United States for educational purposes and did not expect to become entrepreneurs. Second, the Iranian ethnic economy in America is not uniform and homogeneous and contains either several ethnic economies based on ethno-religious group membership or multiple sectors based on market orientation and clientèle, each with reliance on a different level of ethnic and class resources. For example, the white-collar sector of the Iranian ethnic economy that is oriented toward non-Iranian customers is less likely to rely on co-ethnic workers, ethnic institutions, and co-ethnic customers than the business sector with co-ethnic market orientation. Third, despite the high rate of self-employment among Iranians, there is yet to be an Iranian enclave economy in any major US city. As indicated by Min and Bozorgmehr (2000) dispersion of Iranian businesses in non-Hispanic white neighborhoods is largely due to their greater class resources that has enabled them to establish larger and higherskilled professions that serve white customers. Fourth, the tie between the ethnic economy and the ethnic community is crucial and has economic, social and political consequences for owners of ethnic businesses. For one thing, it increases their access to a protected ethnic market and a pool of co-ethnic labor. Moreover, by manipulating words such as ‘dear fellow citizens and compatriots’ in business ads, ethnic businesses promote and strengthen ethnic identity, ethnic culture, and

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group consciousness in exile. In turn, increased ethnic identity and consciousness give rise to support of the ethnic businesses when competing with non-co-ethnic business owners. Finally, the Iranian ethnic media contributes significantly to the expansion and strengthening of the ethnic economy through (1) introducing the ethnic businesses to the ethnic community; and (2) carrying advertising for ethnic business products and services as well as employment and business opportunities. In addition to strengthening the ethnic economy, the ethnic media provides the most effective means through which the ethnic economy and the ethnic community are linked. To conclude, the findings reported in this study present a preliminary examination of some of the major features of the Iranian ethnic economy in the United States. To test the validity of the findings, a comparative study of Iranian ethnic economy in California and Texas as well as other states where there is a relatively large Iranian population needs to be drawn. The array of similarities and differences between the Iranian ethnic economy in California and Texas would provide an excellent opportunity to address several issues of theoretical importance to economic adaptation of immigrants. These include (a) the impact of pre-migration business skills on rate of self-employment and entrepreneurship among immigrants, and (b) the effect of community size and ethnic institutional development on the size, nature, formation, market orientation, and ethnic versus class resource utilization of an ethnic economy. With the exception of few studies (Dallalfar, 1994; Moallem, 1991; Mobasher, 1996) the study of Iranian ethnic entrepreneurship and patterns of class and ethnic resource mobilization has focused primarily upon the activities of Iranian men. Given the active and vital role of Iranian women in the Iranian ethnic economy, to strengthen existing explanations of immigrant entrepreneurship and to enrich our understanding of economic adaptation of Iranians, the analysis of economic activities of Iranian entrepreneurs must incorporate the experiences of Iranian women. Acknowledgement I would like to thank my colleague Greg Getz at the University of Houston-Downtown for reviewing this chapter. Notes 1. My primary objective during my fieldwork in Dallas was to examine the history, nature, characteristics, and dynamics of the Iranian ethnic economy. Owing to the lack of any demographic data on Iranians in Dallas, during the second phase, I devoted most of my time to the distribution of 3500 questionnaires in the community. The number of questionnaires that were completed was 485, or 14 per cent were collected. The survey was in Farsi and contained 28 questions. The questions were very simple and straightforward and could be comprehended by everyone. It covered various demographic characteristics, migration histories, economic activities, and socio-cultural characteristics of Iranians in Dallas. During the last phase of my fieldwork I collected 57 questionnaires and conducted 45 telephone and face-to-face interviews with Iranian men and women who were self-employed and had their own business in various locations in the Metropolitan area. Whereas the questionnaire enabled me to collect objective aggregate data on the reasons for establishing a business, the in-depth open ended interviews allowed me to uncover and understand the subjective dimensions of self-employment and the dynamics of class and ethnic resource mobilization by both Iranian men and women. Questions asked in the interview focused on (1) the nature and the reasons for self-employment and establishing the business, (2) the availability of capital, human capital, information, and other ethnic and class resources, (3) the role of the female family members in the business world, (4) contacts with other Iranians and family members, (5) legal, social, cultural, and economic barriers in establishing a business, (6) advantages and disadvantages of self-employment and (7) management and other aspects of the business such as clients, nationality and relationship of employees, and wages and salaries.

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2. John H. Lorentz and John T. Wertime report that, between 1842 and 1903, as many as 130 Iranian nationals entered the United States. This number increased to 780 between 1925 and 1932. According to Lorentz and Wertime, the number of Iranians who entered the United States between 1904 and 1924 was too small to warrant a separate breakdown in the immigration statistics. Statistics are not available for 1933–44. However, according to the authors, in 1945, there were 82 Iranian immigrants in the United States.

Bibliography Aldrich, Howard and Roger Waldinger (1990), ‘Ethnicity and entrepreneurship’, Annual Review of Sociology, 16, 111–35. Ansari, Abdoulmaboud (1977), ‘A community in process: the first generation of the Iranian professional middleclass immigrants in the United States’, International Review of Modern Sociology, 7, 85–101. Ansari, Abdoulmaboud (1988), ‘Iranian immigrants in the United States: a case of dual marginality’, New York: Associated Faculty Press, Inc. Ansari, Abdoulmaboud (1992), The Making of the Iranian Community in America, New York: Pardis Press, Inc. Auster, Ellen and Howard Aldrich (1984), ‘Small business vulnerability, ethnic enclaves and ethnic enterprise’, in Robin Ward and Richard Jenkins (eds), Ethnic Communities in Business: Strategies for Economic Survival, Cambridge: Cambridge University Press, pp. 39–56. BiParva, Ebrahim (1994), ‘Ethnic organizations: integration and assimilation vs. segregation and cultural preservation with specific reference to the Iranians in the Washington, D.C. Metropolitan Area’, Journal of Third World Studies, 11(1), 369–404. Boissevain, Jeremy (1984), ‘Small entrepreneurs in contemporary Europe’, in Robin Ward and Richard Jenkins (eds), Ethnic Communities in Business: Strategies for Economic Survival, Cambridge: Cambridge University Press, pp. 20–38. Bonacich, Edna (1973), ‘A theory of middleman minorities’, American Sociological Review, 38, 583–94. Bonacich, Edna (1975), ‘Small business and Japanese American ethnic solidarity’, Amerasia, 3, 96–112. Bonacich, Edna and John Modell (1980), The Economic Basis of Ethnic Solidarity: Small Business in The Japanese American Community, Berkely: University of California Press. Bonacich Edna et al. (1980), ‘Korean immigrant: small business in Los Angeles’, in Roy Simon Bryce-Laporte (ed.), Sourcebook on The New Immigration: Implications for the United States and the International Community, New Jersey: Transaction Books, pp. 167–84. Bozorgmehr, Mehdi and Georges Sabagh (1988), ‘High status immigrants: a statistical Profile of Iranians in the United States’, Iranian Studies, 21(3–4), 5–36. Bozorgmehr, Mehdi (1992), ‘Internal ethnicity: Armenian, Bahai, Jewish, and Muslim Iranians in Los Angeles’, University Microfilms International Dissertation Services, Ann Arbor: Michigan. Chai, Alice Yun (1987), ‘Adaptive strategies of recent Korean immigrant women in Hawaii’, in Janet Sharistanian (ed.), Beyond the Public/Domestic Dichotomy: Contemporary perspective on Women’s Public Lives, New York: Greenwood Press, pp. 65–99. Dallalfar, Arlenee (1989), ‘Iranian immigrant women in Los Angeles: the reconstruction of work, ethnicity, and community’, University Microfilms International Dissertation Services. Ann Arbor: Michigan. Dallalfar, Arlenee (1994), ‘Iranian women as immigrant entrepreneurs’, Gender and Society, 8(4), 541–61. Eitzen, Stanley D. and Maxine Baca Zinn (1989), ‘The forces reshaping America’, in Eitzen Stanley and Maxine Baca Zinn (eds), The Reshaping of America: Social Consequences of the Changing Economy, New Jersey: Prentice-Hall, pp. 1–13. Fata Soraya and Raha Rafti (2003), ‘Strength in numbers: the relative concentration of Iranian Americans across the United States’, Iran Census Report. Fathi, Asghar (1991), ‘Theories of involuntary migration and the Iranian experience’, in Asghar Fathi (ed.), Iranian Refugees and Exiles Since Khomeini, Costa Thesa, CA: Mazda Publishers, pp. 8–18. Gaffarian, Shireen (1987), ‘The acculturation of Iranians in the United States’, The Journal of Social Psychology, 127(6), 565–71. Gold, Steven J. (1988), ‘Refugees and small business: the case of Soviet Jews and Vietnamese’, Ethnic and Racial Studies, 11(4), 411–38. Gold, Steven J. (1992), Refugee Communities, Newbury Park: Sage. Gold, Steven J. (1994), ‘Patterns of economic cooperation among Israeli immigrants in Los Angeles’, International Migration Review, 28(1), 114–35. Hanssab, Shideh (1991), ‘Acculturation and young Iranian women: attitudes toward sex roles and intimate relationships’, Journal of Multicultural Counseling and Development, 19, 11–21. Harris, Marvin (1995), Cultural Anthropology, 4th edn, New York: Harper & Row. Hoffman, Diane M. (1989), ‘Language and culture acquisition among Iranians in the United States’, Anthropology and Educational Quarterly, 20, 118–32.

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Jalali, Behnaz (1982), ‘Iranian families’, in M. McGoldrick, J. Pearce and J. Giordano, (eds), Ethnicity and Family Therapy, New York: Gulford, pp. 289–309. Kelley, R., Jonathan Friedlander and Anita Colby (1993), Irangeles: Iranians in Los Angeles, Los Angeles: University of California Press. Kim, Kwang C. (1985), ‘Ethnic resource utilization of Korean immigrant entrepreneurs in the Chicago minority area’, International Migration Review, 19(1), 82–111. Light, Ivan H. (1972), Ethnic Enterprise in America: Business and Welfare Among Chinese, Japanese, and Blacks, Berkeley: University of California Press. Light, Ivan H. (1979), ‘Disadvantaged minorities in self-employment’, International Journal of Comparative Sociology, 20(1–2), 31–45. Light, Ivan H. (1980), ‘Asian enterprise in America: Chinese, Japanese, and Koreans in small business’, in Scott Cummings (ed.), Self-Help in Urban America: Patterns of Minority Business Enterprise, London: National University Publications, pp. 33–57. Light, Ivan H. (1984), ‘Immigrant and ethnic enterprise in North America’, Ethnic and Racial Studies, 7(2), 195–216. Light, Ivan H. and Edna Bonacich (1988), Immigrant Entrepreneurs: Koreans in Los Angeles 1965–1982, Berkeley: University of California Press. Light, Ivan H. and Stavros Karageorgis (1993), ‘The ethnic economy’, in Neil Smelser and Richard Swedberg (eds), Handbook of Economic Sociology, New York: Russell Sage Foundation, pp. 1–78. Light, Ivan H. and Angel Sanchez (1987), ‘Immigrant entrepreneurs in 272 SMSAs’, Sociological Perspectives, 30(4), 373–99. Light, Ivan, Im Jung Kwuon and Deng Zhong (1990), ‘Korean rotating credit associations in Los Angeles’, Amerasia, 16(1), 35–54. Light, Ivan H., Georges Sabagh, Mehdi Bozorgmehr and Claudia Der-Martirosian (1993), ‘Internal ethnicity in the ethnic economy’, Ethnic and Racial Studies, 16(4), 581–97. Light, Ivan H., Georges Sabagh, Mehdi Bozorgmehr and Claudia Der-Martirosian (1994), ‘Beyond the ethnic enclave economy’, Social Problems, 41(1), 65–80. Min, Pyong Gap (1984a), ‘From white-collar occupations to small business: Korean immigrants’ occupational adjustment’, The Sociological Quarterly, 25, 333–52. Min, Pyong Gap (1984b), ‘A structural analysis of Korean business in the United States’, Ethnic Groups, 6, 1–25. Min, Pyong Gap (1987), ‘Factors contributing to ethnic business: a comparative synthesis’, International Journal of Comparative Sociology, 28(3–4), 171–93. Min, Pyong Gap and Mehdi Bozorgmehr (2000), ‘Immigrant entrepreneurship and business patterns: a comparison of Koreans and Iranians in Los Angeles’, The International Migration Review, 34(3), 707–38. Moallem, Minoo (1991), ‘Ethnic entrepreneurship and gender relations among Iranians in Montreal, Quebec, Canada’, in Asghar Fathi (ed.), Iranian Refugees and Exiles Since Khomeini, California: Mazda Publishers, pp. 180–199. Modarres, Ali (1992), ‘Ethnic community development: a spatial examination’, Journal of Urban Affairs, 14(2), 97–107. Model, Suzanne (1985), ‘A comparative perspective on the ethnic enclave: Blacks, Italians, and Jews in New York City’, International Migration Review, 19, 64–81. Moghaddam, Fathali, Donald Taylor, and Richard N. Lalonde (1987), ‘Individualistic and collective integration strategies among iranians in Canada’, International Journal of Psychology, 22, 301–13. Momeni, Jamshid (1984), ‘Size and distribution of Iranian ethnic group in the United States: 1980’, Iran Nameh, 2, 17–21. Naficy, Hamid (1991a), ‘Exile discourse and television fetishization’, Quarterly Review of Film and Video, 13(1–3), 85–116. Naficy, Hamid (1991b), ‘From liminality to incorporation: Iranian exile television in the USA, in Asghar Fathi (ed.), Iranian Refugees and Exiles Since Khomeini, Costa Mesa, CA: Mazda Publishers, pp. 228–50. Naficy, Hamid (1993), ‘Narrowcasting and nationality: Middle Eastern television in Los Angeles’, Afterimage, 20(7), 9–12. Nassehy-Behnam, Vida (1985), ‘Change and the Iranian family’, Current Anthropology 26(5), 557–62. Niknia Zohreh Mirzadegan (2001), The intersection of immigration and gender: the socioeconomic integration of Iranian immigrant Women in Kansas City’, unpublished PhD. dissertation, University of Missouri-Kansas City. Sabagh, Georges and Mehdi Bozorgmehr (1987), ‘Are the characteristics of exiles different from Immigrants? The case of Iranians in Los Angeles’, Sociology and Social Research, 71(2), 77–83. Sabagh, Georges, Ivan Light and Mehdi Bozorgmehr (1986), ‘Emerging ethnicity: Iranians in Los Angeles’ Institute for Social Science Research, 3, 7–10. Tohidi, Nayereh (1993), ‘Iranian women and gender relations in Los Angeles’, in R. Kelley, Jonathan Friedlander and Anita Colby (eds), Irangeles: Iranians in Los Angeles, Los Angeles: University of California Press, pp. 175–83.

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U.S. Census (1990, 2000). U.S. (2001), Statistical Yearbook of the Immigration and Naturalization Service. U.S. (2003), Homeland Security, Yearbook of Immigration Statistics, Office of Immigration Statistics. Waldinger, Roger D. (1986), Through The Eye of the Needle: Immigrants and Enterprise in New York’s Garment Trades, New York: New York University Press. Waldinger, Roger D. (1989), ‘Structural opportunity or ethnic advantage? Immigrant business development in New York’, International Migration Review, 23, 48–72. Waldinger, Roger D. (1993), ‘The ethnic enclave debate revisited’, International Journal of Urban and Regional Research, 17, 444–52. Waldinger, R., Haward Aldrich, Robin Ward and Associates (1990), Ethnic Entrepreneurs: Immigrant Business in Industrial Societies, Newbury Park: Sage Publications. Ward, Robin (1987), ‘Ethnic entrepreneurs in Britain and Europe’, in Robert Goffee and Richard Scase (eds), Entrepreneurship in Europe: The Social Processes, London: Croom Helm, pp. 83–104. Yoon, In-jin (1991), ‘The changing significance of ethnic and class resources in immigrant businesses: the case of Korean immigrant businesses in Chicago’, International Migration Review, 25(2), 303–32. Zenner, Walter (1991), Minorities in the Middle, Albany, NY: State University of New York Press. Zentgraf, Kristine M. (1989), ‘Gender, immigration, and economic restructuring in Los Angeles’, California Sociologist, 12, 111–36. Zhou, Min (1992), Chinatown, Philadelphia: Temple University Press. Zhou, Min and John Logan (1989), ‘Returns on human capital in ethnic enclave’, American Sociological Review, 54, 809–20. Zimmer, Cathrine and Howard Aldrich (1987), ‘Resource mobilization through ethnic networks: kinship and friendship ties of shopkeepers in England’, Sociological Perspectives, 30(4), 422–45.

16 Entrepreneurship among Filipino immigrants J. Mark Muñoz and Ilan Alon

Introduction The global environment has provided for opportunities for intensive migrant flows and cultural propagation across countries. Cohen (1997) alluded to the existence of a contemporary society offering unending streams of destinations and resulting in the convergence of national frameworks. Yet, within this landscape, Brah (1991) argued that economic placements remain shaped by ethnicity and related factors. Nevertheless, in cities around the world, ethnic communities have been empowered to polish their entrepreneurial craft and make a significant impact on their adopted home countries. The role of ethnic entrepreneurs in societies is expanding (Cui, 2001). In the case of the US, data from the US Census Bureau (1997) indicated that, out of 21 million firms in the country, three million are minority-owned, and about one-third of the minority-owned ventures are operated by Asians and Pacific Islanders. Saxenian (1999) indicated that, in 1998, ventures operated by immigrants contributed over $16.8 billion in sales and helped create close to 60 000 jobs in the US. Kurklantzick (2004) cited the importance of minority entrepreneurship in the US, and characterized the process as (1) evolving and growing as more women and minority ventures are expected to be created by 2010, (2) spurred by changes in demographic compositions, (3) perceived favorably thanks to the existence of successful role models, and (4) increasing in visibility and involvement in community affairs. Furthermore, ethnic minorities may comprise over half of the US population by 2060 (Feagin and Feagin, 1996). This chapter explores the dynamics of ethnic entrepreneurship, and seeks to understand its implications for one of the largest migrant communities in the world, the Filipinos. Ethnic entrepreneurship defined In order to better understand the concept of ethnic entrepreneurship, the concept of ethnicity needs to be qualified. Ethnicity has been defined in the context of shared history arising from the divergence of cultures, politics, and economics among groups in a society. By this definition, individuals bonded by such commonalities and engaged in entrepreneurial activities may be described as ethnic entrepreneurs. Yinger (1985) views ethnic entrepreneurs as persons associated with a group through a commonality of culture and origin, while Ibrahim and Galt (2003) indicate that this group remains largely heterogeneous owing to differences in economic class, educational attainment, and cultural influences. There is a confluence of factors that affects entrepreneurial propensities among immigrants. For instance, Waldinger et al. (1990) highlighted that the interplay of characteristics relating to premigration conditions, migration circumstances, and the postmigration situation leads to variations among ethnic enterprises. In addition, Portes and Rumbaut (1990) attribute entrepreneurship propensities among immigrants as being shaped by environmental factors like human capital access, community integration, economic opportunities, and government policies. 249

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Ethnic entrepreneurship is driven by either proactive or reactive factors. Aldrich and Waldinger (1990) observed that the interconnection of social characteristics inevitably impact behavior, relations, and economic advantages among immigrants. Proactive factors refer to underlying circumstances or conditions that favorably encourage immigrants to engage in entrepreneurship in order that an economic advantage may be gained. Light and Bonacich (1988) cited resources such as wealth, values, and knowledge as drivers of ethnic entrepreneurship. The presence of support networks, as well as prior business experiences further encourage migrants to engage in entrepreneurial activities (Massey et al., 1994; Portes and Bach, 1985). In addition, emerging opportunities may open up as immigrants see avenues to bridge trade gaps across regions (Saxenian and Edulbehran, 1998). Reactive factors are circumstances or conditions that force immigrants to engage in entrepreneurship as a means of survival and in coping with a new environment. Portes and Rumbaut (1990) pointed out that some immigrants pursue entrepreneurial activities in order to survive or improve their economic situation, while Mata and Pendakur (1999) noted that immigrants undertake entrepreneurial activities because of constraints on status, language, and human capital limitations. When educated immigrants are hindered by language proficiencies they would be more likely inclined to engage in entrepreneurship (Tienda, 2001). Entrepreneurial activities pursued by ethnic minorities pave the way for domestic and international trade expansion. Galster et al. (1999) pointed out that ethnic entrepreneurs have the ability to prosper in their host countries by capturing local market niches, engaging in trade arbitrage between the host and home countries, and establishing ventures in enclaves in the host country. In the context of the host country, ethnic entrepreneurship can be practiced in ‘enclaves’ consisting of co-ethnic members that serve as avenues for economic upliftment (Portes, 1995). These communities stimulate self-employment, work flexibility, and training (Zhou, 1992). In addition, skilled immigrants are in a position to engage in corporate entrepreneurship. Saxenian (2002) observed that, in 1998, approximately 25 per cent of the senior engineering executives in Silicon Valley were Chinese and Indian immigrants. Within a broader and international context, ethnic entrepreneurs are also in a unique position to make an impact. Basch et al. (1994) pointed out the concept of ‘transnationalism’, where immigrants build upon multi-faceted social links between their country of origin and present residency, while Saxenian (1999) observed the expanding entrepreneurial role of highly skilled immigrants and their ability to establish business ties between domestic and foreign enterprises. In the case of Asian immigrants in the US, Le (2004) attributes the expansion of entrepreneurial propensities to (1) labor market penetration challenges, (2) cultural factors and work ethics, (3) resource availability in the form of capital and skill sets, and (4) economic opportunities derived from ethnic support, location, and venture availability. In addition, Tienda (2001) observed that Asian entrepreneurs perceive business ownership as a way to generate more income and achieve prosperity. International emigration in the Philippines The Philippines is located in Southeastern Asia, in an archipelago between the Philippine Sea and the South China Sea. The country has a population of around 86 million, and is slightly larger than the state of Arizona, with a total land area of 300 000 square kilometers (CIA World Fact Book, 2004).

Entrepreneurship among Filipino immigrants Table 16.1

Number of registered Philippine emigrants (1981–2001)

Country of destination USA Canada Australia Japan UK Germany Others Total

251

No. of emigrants

Percentage

Annual average

799 501 151 127 81 397 56 756 5 732 8 464 23 100

71.0 13.4 7.2 5.0 0.5 0.8 2.1

36 582 6 733 3 782 2 416 265 379 988

1 126 077

100

53 623

Source: Commission on Filipinos Overseas (2004).

Interestingly, the country is among the most active participants in international labor mobilization and migration. Mercado (2002) depicted the Philippines as the largest labor exporter in Asia, having sent over 7.4 million or 22 per cent of its entire labor force of 30 million to over 120 countries. In addition, over one million Filipinos emigrated to other countries in the past 20 years and more than 70 per cent of the migrants headed for the United States. Table 16.1 shows the countries of destination of Filipino emigrants. A number of reasons may be cited for this intense migration. In a study among Philippine immigrants in Italy, Crane (2004) observed that Filipinos migrated in the 1970s and 1980s as a result of economic difficulties experienced during the regime of President Ferdinand Marcos, and in the 1990s as a response to the proliferation of labor intermediary agencies. Scarcity of jobs and higher income abroad has triggered the mass exodus, resulting in a scenario where the total number of overseas Filipinos exceeded 10 per cent of the total population (Mercado, 2002). Migration into the US is largely attributed to family-related reasons. Data from the US Department of Homeland Security (2004) indicate that, out of the 45 397 Filipino immigrants in the US in 2003, 20 498 (45 per cent) were immediate relatives of US citizens, while 14 974 (32 per cent) were family-sponsored. Philippine emigration has also been spurred by marriage to foreign nationals. The Commission on Filipinos Overseas (2004) reported that, in the period 1989–2001, 192 052 Filipinos migrated for marital reasons or as fiancées. Most of this migration flow was towards industrialized countries: USA (39.6 per cent), Japan (30.4 per cent), Australia (8.7 per cent), Germany (4.2 per cent), and Canada (3.8 per cent). The majority (91.3 per cent) were women with an average age of 29 years, were single and never married, and had high school education or some vocational training. Most of the emigrants (47 per cent) had limited knowledge of their country of destination. The majority of Filipinos who left the Philippines in the period 1981–2001 were unemployed and were students and housewives. Those that were employed have been categorized as professional and technical workers. Table 16.2 highlights the emigration volume in 1981–2001 according to occupational groups. The data suggest that, while about 30 per cent of Philippine emigrants during the period had some form of employment, 70 per cent were unemployed. In addition, the emigrants

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Table 16.2

Philippine emigrants according to occupational groups (1981–2001)

Occupational group Employed Professional, technical and related workers Managerial, executive and administrative workers Clerical workers Sales workers Service workers Agriculture, animal husbandry, forestry workers and fishermen Production process, transport equipment operators and laborers Members of the Armed Forces Unemployed Housewives Retirees Students Minors (below 7 years old) Out of school youth Refugees No occupation reported Total

Number

Percentage

118 185 11 849 48 276 47 035 28 623 26 762

10.50 1.05 4.29 4.18 2.54 2.38

46 124

4.10

3 868

0.34

240 867 36 690 272 979 89 288 1 908 3 153 620

21.39 3.26 24.24 7.93 0.17 0.00 13.64

1 126 077

100

Source: Commission on Filipinos Overseas (2004).

are mostly female with a ratio of 100 females for every 67 males, and have an average age of 32. Crane (2004) pointed out that immigration has been socially accepted in Philippine society and has been viewed as a means towards the attainment of economic prosperity. Philippine immigration in the US The Philippines had a long history of worker migration starting in the early 1900s with laborers working in pineapple plantations in Hawaii, fruit picking in California, and fish canning in Alaska (Morada, 2004). Since then, immigration into the US has increased significantly. Data from the US Department of Homeland Security (2004) indicate that, in the past 184 years (1820–2003), a total of 1 673 400 Filipinos have migrated to the United States. The majority of the migration took place in the past 30 years. Table 16.3 shows the number of Filipino arrivals from 1931 to 2000. The Inquirer News Service (2004) characterized the Filipino community in the US as (1) the second largest Asian population and fast growing, (2) predominantly in the California area with 49 per cent of US Filipinos living in the state, and (3) one of the most educated among the US ethnic groups. Filipinos constituted the third largest immigrant group in the US in 2003, with 45 397 migrants accounting for 6.4 per cent of the total 705 827 persons granted lawful permanent status. Most of the US immigrants establish residence in California, New York, Texas, Florida, New Jersey, and Illinois (US Department of Homeland Security, 2004).

Entrepreneurship among Filipino immigrants Table 16.3 Period 1931–1940 1941–1950 1951–1960 1961–1970 1971–1980 1981–1990 1991–2000 Total

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Philippine immigrants in the US (1930–2000) Number of immigrants 528 4 691 19 307 98 376 354 987 548 764 503 945 1 530 598

Source: Department of Homeland Security (2004), 2003 Yearbook of Immigration Statistics.

A number of Filipino professionals have assimilated well in the US society. In a study among US immigrants, Galster et al. (1999) noted that, in the 1980s, Philippine immigrants made inroads in professional positions and income, particularly in the Los Angeles, New York, and Philadelphia areas. Saxenian and Edulbehran (1998) observed that, in Silicon Valley in the 1990s, 30 per cent of the workers in the high-tech sector were foreign born, and many were of Asian origin. Philippine immigrants have a lot to offer to their adopted countries. Crane (2004) characterized the Filipino migrants as (1) well-liked, (2) polite, (3) dependable, (4) optimistic about the future, (5) possessing a wide range of skills, (6) flexible with the demands of the job market, and (7) uncomplaining on tasks assigned. Entrepreneurship among Philippine immigrants in the US Data from the US Census Bureau (1997) show that Filipinos operate close to 85 000 ventures, have more than 100 000 employees, and have generated sales exceeding $10 billion. Table 16.4 presents relevant data on Philippine business ownership in the US. The data further suggest that most of these ventures are in the service industries, retail trade, and real estate. Table 16.5 shows the categories of Philippine-owned ventures in the US. From these data, the following are inferred about Philippine ventures in the US: (1) while the wholesale sector constitutes among the lowest number of participants, it has posted one of the highest sales receipts, (2) while the service industry has the highest sales receipt contribution, there is likely a saturation in the sector, and (3) as shown in Table 16.2, only 2.54 per cent of departing migrants in the Philippines were involved in the service sector, yet in the US a majority of ventures were in the service category. This suggests that numerous immigrants are pursuing service-oriented ventures in the US without having prior training or experience in the field. Research data also suggest that Philippine entrepreneurs in the US have among the lowest number of ventures among immigrants from the Asia-Pacific Region. Table 16.6 shows the relevant data. The data imply that (1) there has been a dramatically higher propensity for Asian Indians, Chinese and Korean immigrants in the US to start entrepreneurial ventures than

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Table 16.4

Philippine venture ownership in the US (1997)

Category

Number

All Firm number Sales receipts ($1000)

84 534 11 077 885

Firms with paid employees Firm number Sales and receipts ($1000) Employees Payroll ($1000)

14 581 8 966 386 110 130 2 667 333

Source: US Census Bureau (1997).

Table 16.5

Philippine-owned ventures in the US (according to classification, 1997)

Category Agricultural services, forestry, and fishing Construction industries, subdividers, and developers Manufacturing

Number

Sales receipts ($1000)

Major activities

831

38 673

2 990

551 610

Special trade contractors

1 615

932 452

Transportation, communication, and utilities

3 628

334 354

Wholesale trade Retail trade

2 672 9 323

2 013 297 764 361

8 356 46 629

628 532 5 375 426

Apparel and textiles, printing and publishing, food Motor freight transportation and warehousing, transport services, and local interurban passenger transport Mostly in durable goods Eating and drinking places, food stores, other retail Real estate and insurance agents Health, business, and personal, engineering, accounting, and management services

8 493

439 180

84 534

11 077 885

Real estate industries Service industries

Other industries not classified Total

Agricultural services

Source: US Census Bureau (1997).

Filipino immigrants, (2) the Asian Indians, Chinese and Korean venture owners in the US achieved greater sales returns than Filipino venture owners, (3) the Asian Indians, Chinese, and Korean venture owners employ more workers in the US than Filipino venture owners and consequently contributed a higher amount in payroll, (4) the average sales per business of Filipino venture owners is approximately $131 000, a figure significantly lower than

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US Census Bureau (1997).

84 534 166 737 252 577 85 538 135 571 97 764 70 868 15 544 3 826 912 960

Filipino Indian Chinese Japanese Korean Vietnamese Other Asian Hawaiian Other Asia-Pacific Asia-Pacific total

Source:

Number 11 077 885 67 503 357 106 196 794 43 741 051 45 936 497 9 322 891 19 016 149 2 250 153 1 888 205 306 932 982

Sales and receipts ($1000)

All firms

14 581 67 189 90 582 23 309 50 076 18 948 22 292 2 023 1 000 289 999

Number 8 966 386 61 760 453 98 233 262 41 294 865 40 745 504 6 768 324 16 800 603 1 956 793 1 768 155 278 294 345

Sales and receipts ($1000)

110 130 490 629 691 757 262 223 333 649 79 035 201 610 20 698 13 349 2 203 079

Employees

Firms with paid employees

2 667 333 12 585 621 12 944 824 7 106 692 5 789 472 1 165 550 3 135 784 497 950 286 293 46 179 519

Payroll

Number of Philippine-owned enterprises in the US in comparison with other races from the Asia-Pacific Region (1997)

Race

Table 16.6

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Table 16.7

Average sales of Asia-Pacific enterprises in the US

Race Filipino Indian Chinese Japanese Korean Vietnamese Other Asian Hawaiian Other Asia-Pacific Asia-Pacific total

No. of ventures

Sales and receipts ($1000)

Average

84 534 166 737 252 577 85 538 135 571 97 764 70 868 15 544 3 826 912 960

11 077 885 67 503 357 106 196 794 43 741 051 45 936 497 9 322 891 19 016 149 2 250 153 1 888 205 306 932 982

131.0465 404.8493 420.4531 511.364 338.8372 95.36119 268.332 144.7602 493.5193 336.1954

Source: US Census Bureau (1997).

those of the Asian Indians, Chinese, and Koreans, and, (5) though Filipino venture owners in the US had fewer ventures compared to Vietnamese, the average sales per business were higher. Table 16.7 shows the average sales of Asia-Pacific business owners in the US. Le (2004) cited a 2000 US Census report indicating that the self-employment rates of Filipino immigrants in the US was the lowest among all Asian groups at 5.8 per cent, compared to Koreans (24.1 per cent), Taiwanese (19.8 per cent), Japanese (12.3 per cent), Asian Indians (11.1 per cent), Chinese (10.9 per cent) and Vietnamese (10.9 per cent). While there are several plausible explanations for the lower entrepreneurial propensity, a valid explanation has been attributed to the Filipinos’ easier absorption into the job market, thereby precluding an urgent need for entrepreneurial activities (Crane, 2004). Opportunities and challenges relating to ethnic entrepreneurship The pursuit of ethnic entrepreneurial activities offers numerous advantages. For instance, Zhou (2002) pointed out that ethnic entrepreneurship facilitates community building and information flow, and enhances relationships. Eaton (1998) suggested that, in the case of smaller cities, immigrants absorb professions that would not have been filled in their absence. A number of Asian ventures in the US are successful (Le, 2004). However, in the course of an immigrant’s assimilation into a new society, cultural identities may be challenged. Thompson (2003) noted that, in the case of Malay men, the intersection of forces such as ethnicity, gender, religion, class, and socio-cultural forces are changing lives. Despite the risk of facing cultural alterations, ethnic entrepreneurship can strengthen intra-cultural bonds. Waldinger (1986) suggested that social formations among ethnic groups strengthen relationships and contribute to firm competitiveness. Academic literature points out numerous benefits arising from the pursuit of ethnic entrepreneurship: informal networks contribute to business success (Masurel et al., 2002); through the strategic use of support networks there is gained knowledge about industry practice and management, capital acquisition, and human resources development (Smart, 2003); ethnic support networks expand entrepreneurial contacts, facilitate training and business advice, and provide access to loans and credit, including money pools and loan clubs (Chotigeat et al., 1991; Ginsberg, 2003); gain support from co-ethnic members

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thanks to trust, ease of communication, credit privileges, and cultural compatibility (Tienda, 2001); and spurs the formation of economic clusters that reinforce value systems (Portes and Zhou, 1992). Relevant research also points out challenges, such as limitations on class resources (Ram et al., 2000); non-usage of formal business loans and tax credits from the government (Ginsberg, 2003); language barriers and non-transferability of degrees acquired in their home countries (Tienda, 2001); existence of quasi-legal structures and taxation challenges (Ginsberg, 2003); poor personnel practices and low rate of utilization of institutionalized training programs (Ram et al., 2000); non-awareness of new venture government support programs and benefits (Tienda, 2001); being segregated in certain locations and lack capitalization (Louie and Ong, 1995); facing the challenge of capital acquisition (Kurklantzick, 2004); and the existence of internal diversity (Crane, 2004). Operational hurdles also need to be addressed. Le (2004) identified some of the challenges of Asian immigrant ventures in the US as (1) having overworked owners putting in long hours, (2) exposed to inter-racial tension, (3) experiencing low profit margins, and (4) experiencing high rates of failure. Ethnic ventures tend to be more common in industries such as restaurants, personnel services, and retailing, owing to the fact that entry barriers are lower (Butler and Greene, 1997). Despite similarities among ethnic ventures, differences exist. Immigrants in contemporary society are socio-economically diverse (Min and Bozorgmehr, 2000). Masurel et al. (2002) alluded to the fact that levels of performance tend to be different among ethnic groups. In starting new ventures, certain ethnic groups face more obstacles than others (Robb, 2002). Basu and Altinay (2002) attribute these differences to cultural attributes such as family tradition, motive for migration, religion, family linkages, entrepreneurial experience, and educational background. In essence, certain ethnic groups have a higher entrepreneurial predisposition than others. A range of other economic, business, and cross-cultural factors also affect selfemployment propensities among ethnic minorities. Razin and Light (1998) pointed out the role of location and ethnicity on entrepreneurship, self-employment, industry preferences, and competitive approaches. Chrisman et al. (2002) highlighted the impact of family involvement on venture performance among ethnic groups, while Rasheed (2004) observed the confluence of factors such as gender and education on capital access and market penetration. Factors affecting entrepreneurship among Philippine immigrants The incidence of entrepreneurship among Philippine migrants is low. There are only 85 000 Filipino owned ventures in the US, out of a total of 21 million businesses in the country, and self-employment rates are lower than those of their Asian counterparts (Inquirer News Service, 2004; US Census Bureau, 1997; Le, 2004). The authors corresponded with several Philippine embassies around the world to determine the breadth and scope of entrepreneurship among Filipino immigrants. The data gathered also confirm a low incidence of entrepreneurship in other locations outside of the US. Table 16.8 shows selected data on the number of Filipinos in foreign locations, and the incidence of entrepreneurship. In the US, the ease of finding jobs, and closer cultural assimilation with the mainstream society, has inhibited Filipino migrants from pursuing avenues for self-employment and

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Table 16.8 Selected information on Philippine entrepreneurship in international locations (2004)

Location

No. of Filipinos

Entrepreneurs

Description Mostly temporary migrants working in UN agencies, multi-national companies engaged in construction engineering, or international consulting, non-government offices, and government institutions Mostly employed as consultants, managers, technicians and workers in the service sector Majority employed in government and private offices, including hotels, restaurants, factories, and family residences. Majority (60 per cent) are classified as skilled workers. Presence of entrepreneurial activities were noted in education, and the food industry (restaurants) Mostly employed as consultants, managers, technicians and workers in the service sector Mostly professionals in the information and communication technology sector. Others are spouses of expatriates, and workers in international organizations such as Red Cross, WHO, and the UN Mostly employed as consultants, managers, technicians and workers in the service sector Mostly employed as consultants, managers, technicians and in the service sector Mostly employed as consultants, managers, technicians and workers in the service sector Majority are students, unskilled workers (i.e. domestic helpers), and housewives. Majority (68 per cent) are females, and most are 18–45 years old Many are employed as overseas foreign workers hired by the American Embassy as service crew in cafeterias, and recreation or day care centers. Others work as domestic helpers in private homes Mostly employed as consultants, managers, technicians and workers in the service sector Mostly employed as consultants, managers, technicians and workers in the service sector Mostly employed as consultants, managers, technicians and workers in the service sector Mostly employed as consultants, managers, technicians and workers in the service sector

Afghanistan

300

None known

Angola

605

None identified

Bahrain

30 000

Very few

Botswana

260

None identified

India

450

None known

Lesotho

269

None identified

Mozambique

170

None identified

Namibia

934

None identified

Pakistan

500

None known

Russia

116

None known

South Africa Swaziland Zambia Zimbabwe

1 111

None identified

70

None identified

175

None identified

44

None identified

Source: Philippine Embassy official correspondence to J.M. Munoz (2004).

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has dampened the urgency to pursue entrepreneurial activities (Min, 1986; Crane, 2004). Saxenian and Edulbehran (1998) pointed out the presence of Filipino executives handling semi-skilled and administrative positions in the high-tech environment in Silicon Valley. Employability among Filipinos arises from attractive skills and friendly demeanor. Greenemeier (2002) noted the existence of technology skills, and DiCarlo (2003a) observed the good language skills and strong customer service orientation. Andres and Ilada-Andres (2001) pointed to ‘popularism’ as among the attributes possessed by Filipinos, while Mendoza (2001) cited the culture’s high regard for authority and high premium placed on good interpersonal relationships. A combination of attributes has facilitated the Filipinos’ rapid assimilation into foreign environments. Min (1986) pointed out the advantages of Filipino migrants as (1) proficiency in English, (2) commonality with US educational approaches, (3) possession of a high level of cultural integration. In addition, the Philippines has been exposed to Asian, European and American cultures throughout its history. The country has traded with China since 960AD, has been under Spanish rule for over 300 years, and has been a US colony for about 50 years (Sison, 2003). DiCarlo (2003a) observed the country’s compatibility and affinity with Western culture, while Sison (2003) noted the Filipinos’ creative and innovative spirit that often spurs improvisation. Faster assimilation into societies has also resulted from the support of the community. In Italy, Crane (2004) observed that Filipino immigrants enjoyed the support of the Catholic Church and co-ethnic members. The Filipinos have a strong sense of group loyalty and social harmony, and emphasize reciprocity (Henderson, 1999; Timbermann, 1995). In the management of entrepreneurial ventures in foreign shores, Filipinos are likely to implement practices that are inherently different from the prevalent practices in the society owing to its unique characteristics. Henderson (1999) depicted the key attributes of traditional Philippine management as formal (need to use titles, formal names, and handshakes); punctual (need to prepare for delays due to traffic congestion), relaxed (allow time for small talk); sensitive (avoid raising voices or implication of incompetence); paternalistic; dense with close work networks; emphasize group loyalty and social harmony; indirect and elusive communicative responses (executives tend to use a variety of approaches to say ‘no’ to soften the blow and prevent embarrassment); leave projects uncompleted (ningas cogon); and anchored on trust building (tiwala), a key ingredient in building a successful relationship. Andres and Ilada-Andres (2001) cited the Philippine culture as possessing attributes such as personalism, familism, and particularism, while Mendoza (2001) pointed out that these attributes are misaligned with certain Western values that emphasize objectivity, professionalism, and goal orientation. These cultural differences can lead to misunderstandings and work conflicts with employees, business partners, and other stakeholders. Values play a role in venture formation and entrepreneurial activity (Bryan, 1999; Lipset, 2000). For instance, the value of sharing among Filipinos can curtail business propensity and efficiencies. The moral pressure of obligatory sharing has hindered entrepreneurial Filipinos from engaging in commerce (Szanton, 1998). The Philippine culture has a favorable disposition towards entrepreneurship, except for the aspect of individualism. Hofstede (1991) in his cross-cultural study has shown that the Philippine culture has high power distance, high masculinity and low uncertainty avoidance. These attributes have been identified by McGrath et al. (1992) as traits typically

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present among entrepreneurs in various cultures. However, as shown in Hofstede’s (1991) study, Filipinos scored low on individualism, high individualism rating typically characterizes entrepreneurs (McGrath et al., 1992). The culture’s low level of individualism can have an adverse impact on entrepreneurial tendencies. Furthermore, Mueller and Thomas (2000) uncovered that cultures possessing high individualism and low uncertainty avoidance created a succeeding generation with stronger entrepreneurial attributes. The entrepreneurial propensity among Filipino immigrants can also be dampened by the culture’s fatalism. Sison (2003) pointed out the culture’s short-term perspective and fatalistic or ‘bahala na’ attitude, where fate is ultimately left to God. The Philippine culture scores low on long-term orientation (Hofstede, 1991). A shortterm rather than long-term focus translates into the immediate desire for financial gains that are not often attainable in self-employment or in start-up entrepreneurial ventures. Additionally, many Filipinos view their immigration as a temporary period and eventually dream of returning to their home country (Crane, 2004). This perspective therefore discourages the formation or acquisition of concrete and long-term business infrastructure in foreign locations. Filipino immigrants often have remaining relatives in the home country and many provide financial support to relatives in the Philippines. In 2003, remittances from overseas workers to families in the Philippines reached US$7.6 billion (Banco Central ng Pilipinas (a), 2004). Immigrants tend to continue to view their home countries as cultural reference points and benchmarks for success (Crane, 2004). Thanks to the corporate and business success attained by many Filipino immigrants, and the poor economic conditions in the Philippines, the flow of emigration from the country will likely continue. The economic environment in the country is delimited by drastic currency devaluation over the past ten years (Banco Central ng Pilipinas (b), 2004); government facing a $3.5 billion annual budget deficit (Daily Times, 2004); significant socio-political risks due to peace and order concerns and cases of bribery (DiCarlo, 2003a); highest unemployment in Asia, at 13 per cent, and difficulties in providing jobs for about 300 000 graduates each year (Daily Times, 2004), and prevalence of labor migration (Leung, 2003). As emigration continues, tough entrepreneurial challenges face new migrants. As indicated in Table 16.2, 70 per cent of the Filipinos who departed the country in the period 1981–2001 were unemployed and were mostly students and housewives. Furthermore, most of the emigrants (47 per cent) had limited knowledge about their country of destination (Commission on Filipinos Overseas, 2004). Most of the emigrants were female and they had an average age of 32. Many left the country for family reasons or as spouses of foreign nationals (US Department of Homeland Security, 2004; Commission on Filipinos Overseas, 2004). This demographic profile exposes the group to several challenges that confront new migrants, such as limitations on capital and relevant resources (Louie and Ong, 1995; Ram et al., 2000); non-awareness and non-usage of formal business loans and tax credits from the government (Tienda, 2001; Ginsberg, 2003); language barriers and non-transferability of degrees (Tienda, 2001); and challenges in capital acquisition (Kurklantzick, 2004). Since, the migrants were predominantly unemployed they are likely to possess limited business skills. Lucas (1978) highlighted the importance of managerial ability in the practice of entrepreneurship. As previously unemployed spouses, many are likely financially dependent on their spouses. In general, ethnic minorities have limited

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ability to provide for personal collateral (Bates, 1997). As women minorities, their quest for venture capital may be hindered because of higher interest rates and collateral requirements (Coleman, 2000). Asian women business owners face challenges within the business environment and in the framework of society as they balance role expectations in their families and communities (Wright et al., 2003). Women-owned firms also tend to have higher incidences of closure, lower survival rates, and are numerous in the retail and service industries (Srinivasan et al., 1993; Boden and Nucci, 2000; Robb, 2002). In addition, the migrants need time to be acclimatized culturally and economically before venture opportunities are identified and pursued. While striving to understand the new environment better, migrant entrepreneurs are challenged in their acquisition of relevant business and economic data that will help gauge the attractiveness of the market (Wright et al., 2003). While these are daunting challenges, opportunities ascribed to ethnic entrepreneurship also apply to migrating Philippine migrants. Specifically, advantages may be derived from co-ethnic support networks through entrepreneurial contacts, acquisition of business advice, training, and loan or credit access (Masurel et al., 2002; Smart, 2003; Chotigeat et al., 1991; Ginsberg, 2003) and participation in activities in economic clusters (Portes and Zhou, 1992). The path toward self-employment may be the way to overcome obstacles in job acquisition and financial betterment (Srinivasan, 1992). Boissevain et al. (1990) pointed to the need for ethnic minorities to pursue a unique set of strategies. A well-conceived and effectively executed set of strategies can pave the way for entrepreneurial success and prosperity among Philippine immigrants. Strategic entrepreneurial approaches for Philippine immigrants In light of the research findings, the authors recommend 12 approaches for Philippine immigrants to use. Develop a keen understanding of the new business environment The business and economic environments of the home and host countries are different. A thorough examination of the business dynamics of the host country leads to knowledge about markets and trends, legal policies and procedures, as well as viable business development approaches. Puttnam (2004) highlighted organizational benefits that may be gained through understanding the market dynamics in a new location. Wilson (2001) indicated that ethnic groups are in a position to tap into business opportunities by producing and distributing goods that did not have prior demand. Opportunity identification is facilitated by a good understanding of the business landscape. Gain relevant work exposure Acquiring experience in a preferred industry can add to knowledge that can heighten venture success in the future. The data in Table 16.5 suggested that numerous Philippine immigrants are pursuing service-oriented ventures in the US without having prior training or experience in the field. Raijman and Tienda (2000) observed that employment, even in the informal sector of a society, can eventually lead to a migrant’s business formation. Ram et al. (2000) view employment among immigrants as a period of ‘apprenticeship’ where future entrepreneurs can gain new skills and training. Knowledge of an industry can enhance prospects for business survival (Cooper et al., 1994).

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Engage in creative capital acquisition New Filipino immigrants would likely face challenges in capital acquisition as a credit history would not likely be recorded in the host country or would not be as extensive. Capital can be acquired through innovative approaches. Ginsberg (2003) noted that immigrant entrepreneurs utilized informal sources for capital acquisition, such as money pooling, loan clubs and by borrowing from family, friends, and co-ethnic members and by pooling resources in order to gain large discounts from suppliers. In addition, Saxenian and Edulbehran (1998) alluded to potential benefits that may be derived when international capital flows from overseas flow into ethnic ventures. Pursue entrepreneurial activities in smaller phases and degrees There is a low self-employment rate among Filipinos that may be attributed to their ease of job acquisition (Le, 2004; Crane, 2004). As an alternative, Philippine immigrants can engage in entrepreneurial activities on a part-time basis to test the waters. They can pursue venture interests initially on a staggered basis or as venture partners, without giving up their jobs. Kloosterman et al. (1998) observed that some immigrant ventures have a semiformal structure. Ethnic and women ventures organized in the form of partnerships had higher survival rates than those organized as sole proprietorships (Robb, 2002). Capitalize on uniquely competitive skills Competition in new environments is not easy for new entrants. Building on distinctive strengths and competencies can provide a unique advantage. DiCarlo (2003b) noted the technological strengths in the Philippines as anchored in accounting, finance, call centers, animation, and human resources. Build on co-ethnic market niches Tapping into the co-ethnic market offers a unique starting point and can be a foundation for future business development. In Bahrain, Filipino entrepreneur Eliseo Bautista built a successful restaurant called Bahay Kubo that provided Filipino food specialties for immigrants and foreign workers in the country (Maglaya, 2004). Setting up a venture in ethnic neighborhoods can be used to reach specific ethnic customers and can serve as preliminary building blocks for future business expansion (Dyer and Ross, 2003; Ginsberg, 2003). As immigrant ventures further assimilate into the broader economy avenues for profit enhancement and better employee welfare expand (Zhou, 2001). Arbitrage opportunities across countries There exist potential demand, supply, and price gaps among products and services between the home and the host countries. Philippine immigrants can tap into these disparities and profit from them. Saxenian and Edulbehran (1998) pointed out that immigrants are in a position to identify and bridge trade gaps across countries. As an example, Maglaya (2004) cited the case of Filipino entrepreneur Amable Aguiluz, who founded AMA International University (Bahrain) in an effort to transfer competencies in technology and education developed in the Philippines into a new and growing market. In the US, there may be unique opportunities for trade arbitrage in the wholesale sector. As shown in Table 16.5, this sector has among the lowest level of competition and has one of the highest sales receipts among Philippines ventures.

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Prepare to undertake cultural and management adjustments The Philippine management style is unique thanks to its inherent attributes. Mendoza (2001) pointed out that certain cultural attributes may lead to conflict with Western expectations on objectivity, professionalism, and goal orientation. Modifications in management approaches to suit the new environment may be beneficial. Provide emphasis on profitability Le (2004) observed that Asian immigrant ventures tend to have low profit margins. This is often a result of the utilization of price rather quality as a competitive strategy (Rath and Kloosterman, 2000). Data gathered from Table 16.6 show that, in the US, Asian Indians, Chinese and Korean venture owners achieved greater sales returns than Filipino venture owners. Attention needs to be provided to financial management and pricing approaches in order that profit streams may be expanded. Seek support from the host government Among the cited challenges of ethnic entrepreneurs is their non-awareness of existing business programs offered by the government in the host country. Few ethnic entrepreneurs seek the support of government agencies (Fadahunsi et al., 2000). Tienda (2001) recommends the implementation of specific policies directed at supporting ethnic entrepreneurs, such as (1) reinforcement of business and legal knowledge and finance acquisition, (2) strengthening economic linkages, (3) assistance in market analysis, strategy formulation, and venture sustainability, and (4) broadening avenues for training. In addition, the authors propose that ethnic entrepreneurs should take a proactive role, and work with the host government by requesting relevant information and soliciting support. Identify role models and work with mentors There are numerous successful ethnic entrepreneurs in different countries. Ibrahim and Galt (2003) pointed out the merits of tapping into the expertise of ethnic mentors. By understanding the successful methodologies employed by other immigrant entrepreneurs, Philippine ethnic entrepreneurs can shorten the learning curve and avoid major business pitfalls in the host country. Request assistance from the home government and support groups The Philippine government has embassies worldwide. Filipino immigrants contemplating new ventures can seek the assistance of ambassadors and commercial attachés in acquiring business information or in building business networks and contacts. In addition, support may be derived from business organizations (Ram and Smallbone, 2002). Philippine immigrants worldwide have reached the millions. Despite daunting obstacles brought about by inherent cultural constraints, as well as the dynamics of business and economics in new environments, venture opportunities need to be continually perused and pursued. Since the majority of the migrants are women who were previously unemployed, engaging in self-employment puts them on a position to conquer potential career obstacles and sets them in a more prosperous path. The road ahead is not without challenges, yet the creative leveraging of skills, abilities, resources, and the pursuit of strategic approaches paves the way towards success.

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References Aldrich, H.E. and R. Waldinger (1990), ‘Ethnicity and entrepreneurship’, Annual Review of Sociology, 16, 111–35. Andres, T.D. and P.C.B. Ilada-Andres (2001), Understanding the Filipino, Quezon City, Philippines: New Day Publishers. Banco Central ng Pilipinas (2004a), ‘Overseas Filipino workers remittances’ (accessed October 2004), available at http://www.bsp.gov.ph/Statistics/sefi/ofw.htm. Banco Central ng Pilipinas (2004b), ‘Philippine exchange rates’, available at http://www.bsp.gov.ph/Statistics/ spei/tab12.htm. Basch, L., N. Glick-Schiller and C. Blanc-Szanton (1994), Nation Unbounded: Transnational Projects, Post Colonial Predicaments, and Deterritorialized Nation States, Langhome, PA: Gordon and Breach. Basu, A. and E. Altinay (2002), ‘The interaction between culture and entrepreneurship in London’s immigrant business’, International Small Business Journal, 20(4), 371–93. Bates, T. (1997), ‘Unequal access: financial institutions lending to black and white-owned small business startups’, Journal of Urban Affairs, 19, 487–96. Boden, R. and A. Nucci (2000), ‘On the survival prospects of men’s and women’s new business ventures’, Journal of Business Venturing, 15(4), 347–62. Boissevain, J., J. Blaschke, H. Grotenberg, I. Light, M. Sway, R. Waldinger and P. Werbner (1990), ‘Ethnic entrepreneurs and ethnic strategies’, in R. Waldinger, H. Aldrich and R. Ward (eds), Ethnic Entrepreneurs, Beverly Hills, CA: Sage Publications. Brah, A. (1991), ‘Questions of difference and international feminism’, in J. Aaron and S. Walby (eds), Out of the Margins, London: Falmer Press. Bryan, L. (1999), ‘American Indian entrepreneurs: Rosebud and Pine Ridge Reservations’, case studies, MT Salish Kootenai College Press. Butler, J. and P. Greene (1997), ‘Ethnic entrepreneurship: the continuous rebirth of American enterprise’, in Donald L. Sexton and Raymond W. Smilor (eds), Entrepreneurship 2000, Chicago, IL: Upstart Publishing Co., pp. 267–89. Chotigeat, T., P.W. Balsmeier and T.O. Stanley (1991), ‘Fueling Asian immigrants’ entrepreneurship: a source of capital’, Journal of Small Business Management, 29(3), 50–61. Chrisman, J.J., J.H. Chua and L.P. Steier (2002), ‘The influence of national culture and family involvement on entrepreneurship perceptions and performance at the state level’, Entrepreneurship Theory & Practice, 26(4), 113–30. CIA (2004), ‘The Philippines, World Fact Book’ (available at http://www.cia.gov/cia/publications/factbook/ geos/rp.html#Geo). Cohen, R. (1997), Global Diasporas: An Introduction, London: UCL Press. Coleman, S. (2000), ‘Access to capital and terms of credit: a comparison of men and women-owned small business’, Journal of Small Business Management, 38, 37–51. Commission on Filipinos Overseas (2004), ‘Number of registered Filipino emigrants by major country of destination: 1981–2001’ (accessed September 2004); available at http://www.cfo.gov.ph/stat_bod.htm). Cooper, A., J. Gimenco-Gascon and C. Woo (1994), ‘Initial human and financial capital as predictors of new venture performance’, Journal of Business Venturing, 9(5), 371–95. Crane, K. (2004), ‘Governing migration: immigrant groups’ strategies in three Italian cities, Rome, Naples, and Bari’, Psychoanalytic Institute for Social Research, Rome (accessed September 2004; available at http://www.feem.it/NR/rdonlyres/6D92E1D5-F3B4-4727-A5C6-ADC8BBF58E41/1081/3704.pdf). Cui, G. (2001), ‘Marketing to ethnic minority consumers: a historical journey (1932–1997)’, Journal of Macromarketing, 21(1), 23–31. Daily Times (2004, 16 September), ‘Feature: Philippines frets as US targets outsourcing (accessed Sept, 2004; available at http://www.dailytimes.com.pk/default.asp?page=story_15-8-2004_pg 5_27). Department of Homeland Security (2004), ‘2003 Yearbook of Immigration Statistics’ (accessed Sept. 2004; available at http://uscis.gov/graphics/shared/aboutus/statistics/IMM03yrbk/2003IMM.pdf). DiCarlo, L. (2003a), ‘The Philippines fights for US business. Forbes.com’ (accessed Sept. 2004; available at http://www.forbes.com/2003/05/22/cx_ld_0522philippines.html). DiCarlo, L. (2003b), ‘Best countries for outsourcing. Forbes.com’ (accessed Sept. 2004; available at http://www. forbes.com/2003/08/27/cx_ld_0827bestcountries.html). Dyer, L.M. and C.A. Ross (2003), ‘Customer communication and the small ethnic firm’, Journal of Developmental Entrepreneurship, 8(1), 19–40. Eaton, A.L. (1998), ‘Immigration and the structure of demand: do immigrants alter the labor market composition of US cities’, working paper 98-11, Seattle Population Research Center, University of Washington, Seattle. Fadahunsi, A., D. Smallbone and S. Supri (2000), ‘Networking in ethnic minority entrepreneurship: an analysis of ethnic minority owned firms in North London’, Journal of Small Business and Enterprise Development, 7(3), 228–40.

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Feagin, J.R. and C.B. Feagin (1996), Racial and Ethnic Relations, 5th edn, New Jersey: Prentice-Hall. Galster, G.C., K. Metzger and R. Waite (1999), ‘Neighborhood opportunity structures and immigrants’ socioeconomic advancement’, Journal of Housing Research, 10(1), 95–127. Ginsberg, T. (2003), ‘Immigrants pool money, find success’, The Philadelphia Inquirer (accessed Oct. 2004; available at http://www.philly.com/mld/inquirer/7279815.htm?1c). Greenemeier, L. (2002), ‘Offshore outsourcing grows to global proportions’, Insurance & Technology, 27(5), A12. Henderson, C. (1999), ‘Filipino business norms, etiquette, and style’, Asia Pacific Management Forum (accessed June 2004; available at http://www.apmforum.com/columns/orientseas 6.htm). Hofstede, G. (1991), Culture and Organizations: Software of the Mind, London: McGraw-Hill. Ibrahim, G. and V. Galt (2003), ‘Ethnic business development: toward a theoretical synthesis and policy framework’, Journal of Economic Issues, 37(4), 1107–19. Inquirer News Service (2004), ‘Filipino business leaders share secrets to success (accessed Sept. 2004; available at http://inq7.net/globalnation/ser_ann/2004/jul/30-01). Kloosterman, R.C., J.P. van der Leun and J. Rath (1998), ‘Across the border: economic opportunities, social capital, and informal business activities of immigrants’, Journal of Ethnic and Migration Studies, 24(2), 239–58. Kurklantzick, J. (2004), ‘About face. Entrepreneur.com’ (accessed October 2004; available at http://www. entrepreneur.com/Magazines/Copy_of_MA_SegArticle/0,4453,312260,00.html). Le, C.N. (2004), ‘Asian small businesses. Asian-Nation: The landscape of Asian America’ (accessed October 2004; available at http://www.asian-nation.org/small-business.shtml). Leung, L. (2003), ‘Taking IT offshore’, Network World, 20(34), 57. Light, I. and E. Bonacich (1988), Immigrant Entrepreneurs: Koreans in Los Angeles, Los Angeles: University of California Press. Lipset, S.M. (2000), ‘Values and entrepreneurship in the Americas’, in R. Swedberg (ed.), Entrepreneurship: The Social Science View, Oxford, UK: Oxford University Press. Louie, W. and P. Ong (1995), ‘Asian immigrant investors and the immigration act of 1990’, California Policy Seminar Research Project Report, Berkeley, California Policy Seminar. Lucas, R.E. (1978), ‘On the size distribution of firms’, The Bell Journal of Economics, 9(2), 508–23. Maglaya, E.M. (2004), ‘In an official correspondence to the authors, in his capacity as Philippine Ambassador to Bahrain.’ Massey, D., J. Arango, G. Hugo, A. Kovaovci, A. Pellegrino and J.E. Taylor (1994), ‘An evaluation of international migration theory: the North American case’, Population and Development Review, 20, 699–752. Masurel, E., P. Nijkmamp, M. Tastan and G. Vindigni (2002), ‘Motivations and performance conditions for ethnic entrepreneurship’, Growth & Change, 33(2), 238–60. Mata, F. and R. Pendakur (1999), ‘Immigration, labor force integration, and the pursuit of self-employment’, International Migration Review, 33(2), 378–402. McGrath, R., I. McMillan and S. Scheinberg (1992), ‘Elitists, risk-takers, and rugged individualists? An exploratory analysis of cultural differences between entrepreneurs and nonentrepreneurs’, Journal of Business Venturing, 7, 115–35. Mendoza, M.L. (2001), ‘The crisis of management culture in the Philippines: neither East Asian nor Western’, paper presented at the 3rd EUROSEAS Conference in London, UK and the 4th European Philippine Studies Conference in Alcoba, Spain, September. Mercado, J.L. (2002), ‘Chatting up Filipinas in airport queues’, Philippines Today Online edition (accessed October 2004; available at http://www.philippinestoday.net/ofwcorner/ofw11_3.htm). Min, P.G. (1986), ‘Filipino and Korean immigrants in small business: a comparative analysis’, Amerasia Journal, 13(1), 53–71. Min, P.G. and M. Bozorgmehr (2000), ‘Immigrant entrepreneurship and business patterns: a comparison of Koreans and Iranians in Los Angeles’, International Migration Review, 34(3), 707–38. Morada, H.B. (2004), ‘Left behind households of Filipino overseas workers’ (accessed September 2004; available at http://www.manila-online.net/bles/download/lbh.pdf). Mueller, S. and A. Thomas (2000), ‘Culture and entrepreneurial potential: a nine-country study of locus of control and innovativeness’, Journal of Business Venturing, 16, 51–75. Philippine Embassy Correspondences (2004), ‘Official correspondences sent to J.M. Munoz in September 2004 by Robespierre Bolivar (Second Secretary and Consul, Russia); Ma. Agnes Cervantes (Chargé d’Affaires, Pakistan); Information Section (New Delhi); Medardo G. Macaraig (Second Secretary and Consul, Ottawa, Canada); Eduardo Pablo Maglaya (Ambassador, Bahrain); and Oscar G. Orcine (Chargé d’Affaires, South Africa). Portes, A. (1995), ‘Economic sociology and the sociology of immigration: a conceptual overview’, The Economic Sociology of Immigration (ed. Alejandro Portes), New York: Russell Sage Foundation. Portes, A. and R. Bach (1985), Latin Journey: Cuban and Mexican Immigrants in the United States, Berkeley: University of California Press. Portes, A. and R. Rumbaut (1990), Immigrant America: A Portrait, Berkeley & Los Angeles: University of California Press.

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Portes, A. and M. Zhou (1992), ‘Gaining the upper hand: economic mobility among immigrant and domestic minorities’, Ethnic and Racial Studies, 15(4), 491–522. Puttnam, D. (2004), ‘Hearts before pockets’, New Statesman, 17(793), 26. Raijman, R. and M. Tienda (2000), ‘Pathways to business ownership among immigrants to Chicago: a comparative ethnic perspective’, International Migration Review, 34(3), 681–705. Ram, M. D. Smallbone (2002), ‘Ethnic minority business policy in the era of the small business service’, Government and Policy, 20(2), 235–49. Ram, M. and B., Sanghera, T. Abbas and G. Barlow (2000), ‘Training and ethnic minority firms: the case of the independent restaurant sector’, Education & Training, 42(4/5), 334–41. Rasheed, H.S. (2004), ‘Capital access barriers to government performance: moderating effects of ethnicity, gender, and education’, Journal of Developmental Entrepreneurship, 9(2), 109–26. Rath, J. and R. Kloosterman (2000), ‘Outsiders’ business: a critical review of research on immigrant entrepreneurship’, International Migration Review, 34(3), 657–81. Razin, E. and I. Light (1998), ‘Ethnic entrepreneurship in America’s largest metropolitan areas’, Urban Affairs Review, 33(3), 332–60. Robb, A.M. (2002), ‘Entrepreneurship performance by women and minorities: the case of new firms’, Journal of Developmental Entrepreneurship, 7(4), 383–97. Saxenian, A. (1999), ‘Silicon Valley’s new immigrant entrepreneurs’, Public Policy Institute of California (accessed September 2004; available at http://www.ppic.org/content/pubs/R_699ASR.pdf). Saxenian, A. (2002), ‘Silicon Valley’s new immigrant high-growth entrepreneurs’, Economic Development Quarterly, 16(1), 20–31. Saxenian, A. and J. Edulbehran (1998), ‘Immigrant entrepreneurs in Silicon Valley’, Berkeley Planning Journal, 12, 32–49. Sison, A.J. (2003), ‘Business and culture in the Philippines: a story of gradual progress’, (available at http://www. unav.es/empresayhumanismo/2activ/seminario/miembros/sison/ii26/default.html). Smart, J. (2003), ‘Ethnic entrepreneurship, transmigration, and social integration: an ethnographic study of Chinese restaurant owners in rural western Canada’, Urban Anthropology and Studies of Cultural Systems & World Economic Development, 32(3/4), 311–42. Srinivasan, S. (1992), ‘The class position of the Asian petty bourgeoisie’, New Community, 19 (1), 61–74. Srinivasan, R., C. Woo and A. Cooper (1993), ‘Performance determinants for male and female entrepreneurs’, in W.D. Bygrave, S. Birley, N.C. Churchill, E. Gatewood, F. Hoy, R.H. Keeley and W.E. Wetzel (eds), Frontiers of Entrepreneurship Research, Babson Park, MA: Babson. Szanton, D.L. (1998), ‘Contingent moralities – social and economic investment in a Philippine fishing town’, in R.W. Hefner (ed.), Market Cultures: Society and Morality in the New Asian Capitalisms, Boulder, CO: Westview Press. Thompson, E.C. (2003), ‘Malay male migrants: negotiating contested identities in Malaysia’, American Ethnologist, 30(3), 418–38. Tienda, M. (2001), ‘Comparative perspectives on ethnic and immigrant entrepreneurship and business development in Chicago’, paper prepared for the Illinois Coalition for Immigrant and Refugee Rights (accessed September 2004; available at http://www.roosevelt.edu/ima/pdfs/ethnic-immigrant-entrepreneurship.pdf). Timbermann, D. (1995), A Changeless Land. Continuity and Change in Philippine Politics, Singapore: Institute of Southeast Asian Studies. U.S. Census Bureau (1997), ‘Economic census minority and women owned businesses, United States’ (accessed September 2004; available at http://www.census.gov/epcd/mwb97/us/us.html). Waldinger, R. (1986), ‘Immigrant enterprise: a critique and reformulation’, Theory and Society, 15, 249–85. Waldinger, R., H. Aldrich, R. Ward and associates (1990), Ethnic Entrepreneurs: Immigrant Business in Industrial Societies, Newbury Park: Sage Publications. Wilson, F.D. (2001), ‘Ethnic niching and metropolitan labor markets’, working paper 99-29, Center for Demography and Ecology, University of Wisconsin-Madison. Wright, L.T., L.M. Martin and M. Stone (2003), ‘Exploring the characteristics, attitudes to targeting and relationship marketing of small ethnic minority businesses’, Journal of Targeting, Measurement & Analysis for Marketing, 12(2), 173–84. Yinger, J.M. (1985), ‘Ethnicity’, Annual Review of Sociology, 11, 151–80. Zhou, M. (1992), Chinatown: The Socioeconomic Potential of an Urban Enclave, Philadelphia, Temple University Press. Zhou, Y. ( 2001), ‘Caught under the fashion runway in the big apple: immigrant enterprises in the garment industry in New York city’, in Jan Rath (ed.), Unraveling the Rag Trade: Immigrant Entrepreneurship in Seven World Cities, Oxford: Berg Publishers. Zhou, M. (2002), ‘How neighborhoods matter for immigrant adolescents’, CPRC Brief, 14(8) (accessed September 2004; available at http://www.ucop.edu/cprc/neighborhoods.pdf).

17 Minority entrepreneurship in New York Jerome Krase

Introduction This chapter synthesizes some of the most powerful ways of theorizing about ethnic minorities in modern and, indeed, post-modern, cities. In the process it also presents an innovative way to assess the impact of ethnic minorities on urban centers via a consideration of the visible productions of their entrepreneurs. This approach has been developed over the course of a decade in the presentation and publication of a series of papers by the author (Krase, 1993, 1997, 2002, 2003a, 2003b, 2004a, 2004b). The new and not so new city Five years ago American social scientists and practitioners of all sorts were anxiously awaiting the results of the 2000 United States Census. Some were hoping to test their hypotheses about the changing ethnic and other demography of American cities and others anticipated new data in order to better plan for them. Since the 1960s, there have been major real and imagined changes in the structure and appearances of America’s most well-known metropolitan areas, such as New York City, Chicago, and Los Angeles. Social scientists have also been debating the relative roles of the market and government in accounting for these developments. The term ‘globalization’ is often used in this context to describe a combination of factors changing values and norms that are spread across the world. These include new technologies, increased trade, concentration of economic control, reduced welfare state, spatial integration of economic activities and, most important for this chapter, movement of both capital and people. Another term that has entered our post-modern urban vocabulary is ‘de-industrialization’, referring in general to the reduced importance of manufacturing, movement abroad of heavy industry, as well as the decline of historically important urban ports and railroad centers. Concomitant with this has been increased reliance on air, auto, and truck transportation resulting in the spread, perhaps, even better, the ‘displacement’, of the city toward the fringes and suburbs. Many of the newest ethnic flavors of the city are accounted for by post-1965 changes in American immigration laws that have made possible an increasing diversity of permanent and temporary residents of our cities. The diversity of residential neighborhoods, and lower-level workforces, has been further enhanced in recent decades by large numbers of undocumented aliens (Portes, 1995). From a distance it might appear that the new elements thrown into the assimilation cauldron of the American ‘Melting Pot’ are blending together, but up close at the street level they appear more as pieces of a complex and rapidly changing jigsaw puzzle. As was true in the past, but even more so today, by the time the 2000 Census information was published many of the facts that we literally ‘see’ on neighborhood streets are already contradicting those we are reading in the reports. There are at least two reasons for this lack of fit between published data and contemporary urban life. The first is the 267

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rapidity of localized population changes due to the migration and immigration of ethnic minorities. The second is the concentration of ‘illegal aliens’ in specific sections of Global Cities who, although quite apparent to pedestrians, are often invisible to researchers. In this chapter I hope to offer some spatial semiotic insight into this problem as well as some Visual Sociological alternatives, or enhancements, to standard research on immigration and the ethnic composition of Global Cities in the US and abroad. A major factor in this phenomenon is the visual and symbolic impact of ethnic minority entrepreneurs as they change the appearance and therefore the meanings of commercial streetscapes and in the process create diminutives of their places of origin. Their visual impact can be documented all over the city even though they sometimes are ignored by those who for social or political reasons try hard not to recognize them. From West African sidewalk vendors in the heart of major retail centers and Latinos hawking piraguas within the confines of El Barrio, to small Haitian tailoring shops and large Chinese supermarkets, ethnic minority entrepreneurs challenge the visual hegemony and therefore the meanings of highly contested spaces and places. In the same way, then, we can argue that new immigrants, by displaying their own cultural and social practices are undoing what others did before them, and this in turn might be a cause of conflict. For example, there have been many incidents reported in local newspapers of inter-minority bias crimes such as physical and verbal assaults by American Blacks on Asian grocers. Asians and Middle-Easterners have moved into vacant entrepreneurial niches. Even the tragic loss of thousands of lives and the destruction of the World Trade Center created economic opportunity for vendors as the hallowed Ground Zero was rapidly surrounded by entrepreneurs hawking mementos, books, posters and t-shirts emblazoned with painfully profitable images. These concrete as well as purely symbolic battles are added to those which already exist between classes as in the related processes of gentrification, displacement, and renewal, or regeneration. The presence of immigrant and migrant minorities can be interpreted as either a positive or negative sign. To some they are a stigma which indicates the incipient decline of older ethnic groups, or the neighborhood qua city or country as a whole. To others, thriving ethnic commercial retail centers announce that cities continue to be engines of urban economic vitality which attract legions of needed energetic newcomers. New and old approaches Ever since Robert Ezra Park and Ernest Burgess published their classic research on Chicago, which described ‘how’ residential neighborhoods follow a distinct ecological pattern, generations of urban practitioners and theoreticians have been arguing about ‘why’ they are spatially distributed. In a simpler time, Ernest W. Burgess’ Concentric Zone diagram from The City (Park, Burgess and McKenzie, 1925) provided students of urban life with ‘The’ semiotic for ‘The’ City. Since then much ‘urban’ research continued to be focused on the domains and denizens of ‘Inner City’ or other euphemisms for what Ernest W. Burgess called the ‘Zone of Transition’. There one found roomers, hobos, addicts, poor folks, nonwhite minorities, and lower class immigrants who lived in real and symbolic places called the Ghetto, Slum, Black Belt, Chinatown, Underworld, Vice, and Little Sicily. At the turn of the century tens of thousands of immigrants flooded Chicago and mobilization for World War I brought with it a large number of southern blacks. Urban

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Ecology, the study of the spatial distribution of human activity, developed as a way to make sense of what was for the period an amazingly complex ethnic and racial city landscape. Simply put, the Chicago School of Urban Sociology had borrowed an analogy from biology, in the principles of cooperation and competition for space and resources, to create inadvertently an icon for urban development. Heuristically, the Chicago School’s powerful notions such as ‘Natural Areas’ and ‘Invasion and Succession’ well served those who sought to understand racial segregation, as well as immigrant and ethnic enclaves. Increasingly, however, the accepted wisdom that the stability and change of the metropolis was merely ‘natural’ as opposed to the consequence of the way that powerful people and institutions think and plan became contested. The discipline of Urban Ecology was seen by more radical analysts as too timid (for example ‘conservative’) for honest analyses of White flight, Urban Blight, Red-Lining, not to mention simultaneous Gentrification and Dis-investment (Feagin, 1998: 19). In my opinion, however, its basic descriptive principles continue today to have a great deal of value when contemporized by studious attention to more analytic notions such as ‘Circuits of Capital’ and ‘Spatial Semiotics’. Under these newer rubrics the same immigrant and ethnic enclaves are treated not as much as merely ‘natural’ but nevertheless ‘inevitable’. Today’s major urban models and paradigms continue the sociological profession’s tradition of place names such as the Los Angeles and New York City ‘Schools’. One must ultimately agree that no concrete entity can adequately serve as an abstract concept, but we must recognize the value of ideas that are grounded in empirical geographical realities. A look at Chicago by Erick Howenstine is a literal case of déjà vu: ‘Eighty years ago the ethnic mosaic of Chicago was defined primarily on the basis of first and second generation European groups settling in inner-city neighborhoods. Thirty years ago a large population of first and second generation Black internal migrants from the South changed the character of that mosaic. Today the mosaic is again being changed by immigrant groups, this time from Latin America and Asia. Today’s ethnic mosaic has extended to suburban territory. Details of the specific settlement and segregation patterns, as shown in these analyses, continue to change. Nonetheless, Chicago continues to be an ethnically diverse and also, to an important extent, a racially segregated urban area’ (1996: 47). Note here the use of the visually meaningful term ‘mosaic’, as opposed to neat concentric rings to enhance the factual description of demographic facts. Next is a peek at the heteropolis of Los Angeles by Mike Davis who, after discussing some of what I would call the range of signs and symbols, semiotics if you will, of various Latino groups in American cities, concludes: Yet, if there is no reducible essence to latinidad – even in languages or religion – it does not necessarily follow that there is no substance. In playing with the Rubik’s Cube of ethnicity, it is important to resist the temptation of prematurely resolving its contradictions. ‘Hispanic/Latino’ is not merely an artificial, racialized box like ‘Asian-American’, invented by the majority society to uncomfortably contain individuals of the most emphatically disparate national origins who may subsequently develop some loosely shared identity as a reaction-formation to this labeling. Nor is it simply a marketing ploy – like right-wing Coors brewery’s opportunistic promotion of the 1980s as the ‘Decade of the Hispanic’ – that exploits superficial national similarities in language, cuisine and fashion. To be Latino in the United States is rather to participate in a unique process of cultural syncretism that may become a transformative template for the whole society. Latinidad, Flores emphasizes, has nothing to do with ‘post-modern aesthetic indeterminacy, . . . it is practice

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rather than representation of Latino identity. And it is on this terrain that Latinos wage their cultural politics as a social movement. As in Octavio Paz’s famous definition of mexicanidad, to be Latino is ‘not an essence but a history.’ (Davis (2001), 15)

My own work on Italian and Italian American spaces identified the spatial and visible components of the complex, as yet undeconstructed, notion of Italianita such as how notions of both omerta and bella figura are visually available as social performance and in vernacular architecture (Krase, 1993). As Mike Davis argued for Latinidad, I would submit that Italianita as well as any other ethnic performance can be viewed as practice as well as representation (Krase (1993), 15). It is agency which transforms mere representation into practice. I use a simple formula for this process; members of ethnic minority groups, by simply going about their daily business, present themselves to the observer; the observer re-presents their performances as description; which in turn becomes representation. Mike Davis clearly indicates the necessity of exploring the role played by space and place in ethnicity and ethnic identity of all self- or otherwise identified social groups. It might be useful for us to think for a moment of immigrant and other minority neighborhoods for example as ‘Third Spaces’ or interstitial places where things such as ethnic identity are being created and then negotiated, demonstrating in this way the agency of ordinary people. Whereas much of Third Space discourse concerns the negotiation of identities of persons within real and imagined spaces, my own special interest has been in how those identities change the meaning of the space in which ethnicity is acted out or practiced. Consequently one can also consider how the newly defined space affects the identities of the people within it. I would argue that, by doing ‘their thing’, immigrants and other ethnic minorities in America socially created new spaces or changed their prior meanings. Little Italies and Chinatowns as genres are well-practiced examples of this phenomenon. Compared to 1900, in 2000 the proportion of the total US population that is foreignborn is not nearly as great. In contrast to the simpler times and spaces of the past, the changing uses of urban spaces today give the appearance to some that newer immigrant settlements follow no pattern whatsoever. It is more likely, however, that the patterns are simply not seen as such. Many of the most recent poor and working-class migrants to American cities are no longer found near the expected, stereotypical places where jobs for newcomers were found in decades past because that ‘traditional’ work is no longer done in those places. In addition, many of the historical areas of first wave settlements are concurrently being gentrified. Yet, in order to find new immigrant and ethnic enclaves, we still must take into account the same factors that have always been part of location formulas such as public transportation routes, proximity to work, rental rates, ethnic markets, social networks, and ethnic institutions. Whether or not ‘globalization’, ‘de-industrialization’, ‘post-industrialism’, and/or ‘postFordism’ have produced a ‘New Spatial Order’ for the ‘Global City’ was considered by Ronald Van Kempen and Peter Marcuse. They cautioned that no uniform pattern can be expected as ‘The functional, social, and cultural division we expect to find is one of consistent and general tendencies expressed in widely varying contexts, along widely varying lines, with widely varying results’ (1997: 293). And to those who are suggesting the decreasing value of the traditional ‘neighborhood’ in the new city, they offer contemporary residential community forms in the ‘citadels of the rich’, gentrified areas, middle-class

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suburbs, tenement areas, ethnic enclaves, and what is to them a ‘new type’ of ghetto (Van Kempen and Marcuse (1997), 4). In a related way, Robert A. Beauregard and Anne Haila note that Postmodern urbanists tend to ‘portray the contemporary city as fragmented, partitioned, and precarious, and as a result, less legible that its modernist precursor’. Discussing Modernist and Post Modernist, Fordist and Post-Fordist Cities they write that ‘No one would dispute that the city of the late 20th century differs spatially from the city of the early to mid-20th century. The multiple business centers, transformed waterfronts, gentrified neighborhoods, and hollowed-out zones of manufacturing distinguish the contemporary US city from its precursors’ (Beauregard and Haila, 2000: 23). They conclude, and I strongly concur, however that a distinctly ‘postmodern’ city has not displaced the modern one despite a more complex patterning of old and new, and of continuing trends and new forces. As noted by Lyn H. Lofland, urban areas have always been changing in response to the entrance of ‘strangers’ (1985). The difference today is primarily the rapidity and variety of that change which produces different kinds of segregation and a different logic of location. Especially important is the uneven spatial competition that lower class immigrants face with more privileged members of society. Gentrification of areas which once offered good-paying blue-collar jobs, industrial loft conversions for artists, and co-op and condo conversions of workingmen’s houses create inner city neighborhoods where visible indications of ethnicity are merely a part of the local ‘ambiance’. For those who study the city there are two essential questions. The first is descriptive: ‘Who or what is where in the city?’ The second is analytic: ‘How and why’ they got there. The purely descriptive models of Classical Urban Ecology come from a biological analogy. In the city, equilibrium is expressed through the interaction of human nature with geographical and spatial factors producing ‘natural’ areas. This view is seen as ideologically conservative as others, more to the left, see these same ecological zones as the result of ‘uneven development’ or perhaps even planned cycles of decay and renewal. On a theoretical plane Sharon Zukin discusses two schools of thought about the urban environment: ‘One, identified with political economy, emphasizes investment shifts among different circuits of capital that transfer the ownership and uses of land from one social class to another. Its basic terms are land, labor, and capital. The other school of thought, identified with the symbolic economy, focuses on the representations of social groups and visual means of excluding or including them in public and private spaces. From this view, the endless negotiation of cultural meanings in built forms – in buildings, streets, parks, interiors – contributes to the construction of social identities’ (1996: 43). Her suggestion that we employ both approaches to interpret landscapes of culture and power in the city is well taken. Another tool for deciphering the complex metropolis is spatial semiotics, defined by Mark Gottdiener as ‘the study of culture which links symbols to objects’ (1994: 15–16). A spatial semiotician would recognize that social and cultural meanings are attached to urban landscapes as well as to the people and activities observed on the scene. According to him the most basic concept for urban studies is the settlement space which is both constructed and organized. Looking at an immigrant ethnic neighborhood in this way, as part of national and global systems, ‘It is built by people who have followed some meaningful plan for the purposes of containing economic, political, and cultural activities. Within it people organize their daily actions according to meaningful aspects of the constructed space’(16). Semiotic and sociospatial analysis makes it possible to see the most powerless

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of urban dwellers as social ‘agents’ in the local reproduction of regional, national, and global societal relations. In this regard, it is important to note that perceptions and valuations of residential neighborhood spaces, for example, may be significantly different for insiders as opposed to outsiders. For the casual passersby, foreign language shop signs are easily noticed, but understanding the meanings of the spaces they define requires sensitivity and understanding of the particular culture that creates, maintains, and uses the re-signified space. Most of this work is framed in the terms of Henri Lefebvre’s ‘Spatial Practices’, as presented by David Harvey. Harvey (1989) recognizes that those who have the power to command and produce space are therefore able to reproduce and enhance their own power. It is within the parameters outlined by these practices that the local lives of ordinary urban dwellers take place. ‘Material social practices refer to the physical and material flows, transfers, and interactions that occur in and across space in such a way as to assure production and social reproduction.’ ‘Representations of space encompass all of the signs and significations, codes and knowledge, that allow such material practices to be talked about and understood, no matter whether in terms of everyday common sense or through the sometimes arcane jargon of the academic disciplines that deal with spatial practices.’ ‘Spaces of representations are social inventions that seek to generate new meanings of possibilities for spatial practices.’ Accessibility and distanciation speaks to the role of the ‘friction of distance’ in human affairs. Distance is both a barrier to and a defense against human interaction. It imposes transaction costs upon any system of production and reproduction. ‘The appropriation of space examines the way in which space is used and occupied by individuals, classes, or other social groupings. Systematized and institutionalized appropriation may entail the production of territorially bounded forms of social solidarity.’ ‘The domination of space reflects how individuals or powerful groups dominate the organization and production of space so as to exercise a greater degree of control either over the friction of distance or over the manner in which space is appropriated by themselves or others’ (1989: 261–4). Anthony D. King (1996) speaks of cities as ‘text’ to be read. Ethnic Vernacular Landscapes are crucial, yet often ignored parts of that text. In basic agreement, Zukin noted that the emphasis and interest by urbanists has been on the geographic battles over access and representations of the urban center: ‘Visual artifacts of material culture and political economy thus reinforce – or comment on – social structure. By making social rules “legible” they represent the city’ (1996: 44). As a sign of decline, for example, ‘In the long run vacant and undervalued space is bound to recede into the vernacular landscapes of the powerless and replaced by a new landscape of power’ (49). ‘In Henri Lefebvre’s framework, New York is an example of abstract space: simultaneously homogeneous and fragmented, subordinated to the flows and networks of world markets, and divided into units of exchange by real estate developers’ (1991: 50). ‘In this enigmatic text immigrant shopping strips sometimes fare better than Madison Avenue and combative ethnic groups maintain uneasy coexistence in Brooklyn neighborhoods’ (50). Manuel Castells provides us with another view of how real and imagined urban spaces are used, contested, and transformed by different social groups. For him power is information, and ‘Spaces of Places’ are superseded by networks of information or ‘Spaces of Flows’. Along with this comes the tribalization of local communities. As local identities lose meaning, place-based societies and cultures (cities, neighborhoods) also lose power.

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Castells proposes that this momentum toward the total disempowerment of urban dwellers can be reversed by the reconstruction of place-based meaning via social and spatial projects at cultural, economic, and political levels. Territorially defined ethnic groups, for example, can preserve their identities and build on their historical roots by the ‘symbolic marking of places’, preservation of ‘symbols of recognition’ and the ‘expression of collective memory in actual practices of communication’ (1989, 1996). Visual sociology Douglas Harper divided Visual Sociology into two types: ‘Visual Methods, where researchers “take” photographs in order to study social worlds’, and ‘Visual Studies’, in which researchers ‘analyze images that are produced by the culture’. In this second approach, ‘sociologists typically explore the semiotics, or sign systems, of different visual communication systems’ (Harper, 1988). John Grady broadened the visual perspective by defining it pragmatically: 1. ‘Seeing’: how sight and vision helps construct social organization and meaning’, 2. ‘Communicating with Icons ‘looks to how images and imagery can both inform and be used to manage social relations’, and 3. ‘Doing Sociology Visually’ or ‘how the techniques of producing and decoding images can be used to empirically investigate social organization, cultural meaning and psychological processes.’ Here the techniques, methodologies and concerns of Visual Sociology are the best known and where the camera and other techniques of representation play crucial roles in the analytic process (Grady, 1996: 14). Finally, Jon Rieger notes, that among many research advantages, such as freezing a complex scene or enabling unobtrusive measurement, ‘Photography is wellsuited to the study of social change because of its capacity to record a scene with far greater speed and completeness than could ever be accomplished by a human observer taking notes’ (Rieger, 1996). Given the rapidly changing scenes, the value of visual methods and techniques is therefore obvious. Visual Sociology of even the most deteriorated central city area would vividly demonstrate the ‘Human Agency’ of even the least empowered, if only by capturing the ‘deliberate efforts of human beings, thinking and acting, alone or in concert’ to create or modify the spaces they occupy, demonstrated in the marking of their own vernacular landscapes with graffitti and vandalism. In this regard the work of Camilo Vergara is especially instructive (1995). Visual attention to Vernacular Landscapes allows us to read conflict, competition, and dominance at a level not usually analysed. Just think of how more useful Lefebvre’s (1991) notions of ‘accessibility’ and ‘distanciation’ become when we visualize discrimination in local housing markets. How better to explain ethnic or class-based neighborhoods than when Harvey writes: ‘Successful control presumes a power to exclude unwanted elements. Fine-tuned ethnic, religious, racial, and status discriminations are frequently called into play within such a process of community construction’ (1989: 266). Seeing other productions of Symbolic Capital, defined by Bourdieu as ‘The collection of luxury goods attesting to the taste and distinction of the owner’ (1977: 188) might help us to understand the gentrification of immigrant ethnic enclaves during a later phase in the second circuit of capital when they become shabbily chic ‘in’ places to live. The vernacular landscape The study of the vernacular ethnic landscapes lends itself to both the new and old urban sciences. As a sociologist, I must admit that one can’t go further than John Brinckerhoff

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Jackson in appreciating what ‘lies underneath below the symbols of permanent power expressed in the “Political Landscape” ’ (1984: 6). His perceptive work neatly complements Sociology’s interest in how and why groups are where they are in the city, and how space effects their social interactions and opportunities. According to Helen Lefkowitz Horowitz, ‘Jackson always asserted that to interpret landscapes accurately we must turn to the common places of ordinary people rather than to the rarefied designs of architects and planners.’ . . . ‘The side of him that recognized his own “commonness” insisted the landscape shaped by the needs and tastes of average working people was more important than that created by architects and planners. In this vein, he argued that we should consider the houses and places of work of the poor as well as the rich, of those on the margin as well as those at the center. In essays that others have criticized as being too accepting of contemporary blight, Jackson insisted that we are not rejecting the common landscape but seek to understand and love it’ (1997: xxx–xxxi). Jackson noted that, what people do in a particular physical territory and how they use objects therein are critical for understanding the space. Writing about gentrification, and the displacement of the activities of the poor from the streets and city spaces in eighteenth and nineteenth-century England, he noted that ‘in brief, much of the traditional play, popular with working class citizens, located at the center of town where the players lived and worked, was driven out, either by the shortage of space or by police decisions to improve traffic circulation and promote order’ (11). As to why the study of vernacular, as opposed to ‘polite’, architecture has become more valuable for insight into social history, he argued that, since the nineteenth century, ‘Innumerable new forms have evolved, not only in our public existence – such as the factory, the shopping center, the gas station, and so on – but in our private lives as well’ (118–19). In the same way, Dolores Hayden (1990) recognized the potential contribution of immigrant and ethnic vernacular urban landscapes for urban planners in helping to make city life more livable, equitable and at the same time visually interesting (7). Harvey seems to be in total agreement with Jackson, and Hayden, when he writes that ‘Different classes construct their sense of territory and community in radically different ways. This elemental fact is often overlooked by those theorists who presume a priori that there is some ideal-typical and universal tendency for all human beings to construct a human community of roughly similar sort, no matter what the political or economic circumstances’ (1989: 265). For those lacking power (especially ‘low-income populations’) ‘the main way to dominate space is through continuous appropriation. Exchange values are scarce, and so the pursuit of use values for daily survival is central to social action. This means frequent material and interpersonal transactions and the formation of very small-scale communities. Within the community space, use values get shared through some mix of mutual aid and mutual predation, creating tight but often highly conflictual interpersonal social bonding in both private and public spaces. The result is an often intense attachment to place and “turf ” and an exact sense of boundaries because it is only through active appropriation that control over space is assured’ (265–6). For Puerto Rican residents of New York City, folklorist Joseph Sciorra provides a radical and noble, but ultimately naïve, framework for the vernacular and the ethnic: ‘It is within this imposed economic, political and social marginality that poor people of color struggle to change the existing conditions in which they live by creating spaces of their own design that serve as locations of resistance to a system of inequity and domination’

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(1996: 61). In the South Bronx, East Harlem, and the Lower East Side they ‘clear the detritus of urban decay to cultivate bountiful gardens and construct wood-frame structures typical of the Caribbean. These transformed sites serve as shelter for the homeless, social clubs, block associations, cultural centers, summer retreats and entrepreneurial ventures. The cultural production of vernacular horticulture and architecture create local landscapes of empowerment that serve as centers of community action where people engage in modes of expressivity that are alternatives to those imposed from above by the dominant culture. In turn these concerted actions pose a direct challenge to official notions pertaining to the status of public land and its future use. These vernacular forms are united temporally and spatially with the historic dispossession of laboring people by the forces of a global capitalist economy’ (61–2). As with the spontaneous vernacular expressions of Hispanic agency lionized in Mike Davis’s LA, those of New York’s Latinos are easily commodified and placed on the cultural tourism menu. New York’s indigenous Latinidad is represented today by exclusive receptions and openings at Museo el Barrio on the once dangerous and now chicly gentrified East Side of Manhattan. According to the Lonely Planet Travel guide to Los Angeles, ‘A few blocks east of the Civic Center, El Pueblo de Los Angeles is a 44-acre (18ha) state historic park commemorating the site where the city was founded in 1781 and preserving many of its earliest buildings. Its central attraction for most visitors is Olvera Street, a narrow, block-long passageway that was restored as an open-air Mexican marketplace in 1930. In addition to its restaurants, Olvera St teems with the shops and stalls of vendors selling all manner of Mexican crafts, from leather belts and bags to handmade candles and colourful piñatas’ (2004). Like Census and other survey data, images can also be deceiving. The power of the visual is clearly demonstrated by Steven A. Camarota (2000), noting that stories of immigrant businesses revitalizing neighborhoods are a staple of local news coverage used by immigration advocates to show ‘that immigrants infuse the country with an entrepreneurial spirit unmatched by natives’. However, data show that immigrants are not more likely to be selfemployed than natives. People are more likely to encounter immigrant entrepreneurs than immigrant workers. ‘The immigrant restaurant owner who greets customers is much more likely to be remembered than are the immigrant cooks and dishwashers, whom the patron never sees.’ And ‘Most Americans have much more personal contact in their daily lives with self-employed immigrant street vendors or kiosk operators than with immigrant farm laborers or construction workers. Since most people make generalizations based on their own experience, it is not surprising that they see immigrants as particularly entrepreneurial’ (32). As an aside to ethnic impressions created by commercial streets in immigrant neighborhoods, I note that many ‘Indian’ restaurants in New York City are operated by Bangladeshis, as are ‘Japanese’ restaurants owned and operated by Koreans, Italian restaurants by Albanians, and ‘Mexican’ eateries by other-than-Mexicans. In addition to the obvious décor and menu, the ethnic authenticity of the establishment rests on the visual competency of the patron vis-à-vis the staff. There is of course a special relevance of race (and racism) for the visualized spatial structure of cities – for most Americans, Blackness, Latinoness, Asianess, are generalized visual values that are partial explanations for some areas looking more ‘dangerous’, ‘inviting’ and/or at least ‘exotic’. Ethnic enclaves are products as well as sources of both social and cultural capital. When new immigrants alter the territory allowed to them, they simultaneously become part of the transformed urban landscape. The images they create eventually come to represent them

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and, in the process, they lose their autonomy. In some cases the enclave comes to symbolize its imagined inhabitants and is also commodified. For example, for the delight of New York’s tourists, the expropriated cultural capital of more recent Caribbean immigrants, as well as that of turn-of-the century Italians are turned into ‘Ethnic Theme Parks’ (Krase, 1997). Stepping off in the heart of Caribbean Brooklyn there is the reasonably ‘authentic’ West Indian Day Carnival Parade while the San Gennaro Feast in Manhattan’s Little Italy takes place in an area populated primarily by Asians. In these and other cases visual study can show how what I have termed ‘Traces of Home’ (1993) and Lefebvre’s ‘material spatial practices’ are transformed via ‘representations of space’ into ‘spaces of representation’. Summary Theoreticians and practitioners in the field of urban sociology are faced with a wide range of apparently competing theories and methods for describing and analyzing the postmodern metropolitan urban scene. Because the main focus in urban studies is ‘space’, explaining how these actual and virtual spaces are used, contested, and transformed by different social groups is a crucial task. All the ‘urban’ disciplines use visual approaches more or less explicitly, whether through mapping, architectural rendering, photographic surveys, or land use and building condition surveys. In architecture and planning the visual has always been important in documentation, presentation, research and teaching. Historical photographic archives are used in the processes of Historical Landmark research, restoration, and preservation. ‘Windshield’ surveys, conducted with eyes, cameras, and camcorders, have a long tradition in urban studies. In most cases visual techniques are used in qualitative or descriptive studies. It can be argued that generalizations can also be made from visual surveys and employed in hypothesis testing. The simplest types of analytic studies would be longitudinal studies of physical changes as a consequence of specified variables. In any case the method used and the link between the evidence presented in ‘before and after’ photographs, for example, would have to be quite explicit. At the least, as a purely qualitative method, such research ought to produce delightful insights even if of limited generalizability. My own procedure has been to treat observations and photographs as I do other information, such as interviews, or demographic data which are specific to areas, neighborhoods, streets, organizational boundaries, and census tracts. I should note here that my snap shots attempt to be as close as I can get to what an ordinary person might see as they traverse a space. They are not attempts at artist representation, but are intended to document visual surveys. In addition to the general utility of this visual approach, there are I believe distinct advantages of documented visual surveys for social research, urban planning, as well as informing policy makers. Findings from visual surveys can differ significantly from census or other published data. In addition to the general enumeration taking place only every ten years, Census and other data may not be as up-to-date as needed when dealing with ethnically, racially, or culturally sensitive issues. Much published data tend also not to be specific to the smaller pieces of territory that one might study, such as a single intersection or cluster of buildings. As one moves to the block level in Census data, for example, the categories become less meaningful. Not only do official immigration data not accurately show, or locate, the undocumented, but most data are reported by Zip Code for registration of resident aliens. In my experience the visible presence of the undocumented is considerable in certain areas, as are the homeless, and other ‘statistically invisible’ populations.

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We can add to this the simple observations of illegal business and other activities that can be made in these same places, and which contradict official portraits. Finally, in some cases, seeing is the only way of knowing. Ethnic groups can be quite concentrated in small ‘pockets’ but because of the geography of census, or other maps, the numbers can be shared between two or more units. In a related vein, on the basis of published data and casual observation, substantial residential concentrations of ethnic groups can be missed. It is not unusual for people to falsely assume the ethnic character of a neighborhood by reading the symbolic environment of its commercial streets. Such was the case of Brooklyn’s Eighth Avenue in Sunset Park. Even though Chinese dominated the residential scene for at least a decade, it became a virtual ‘Chinatown’ only after the stores on the commercial strip announced their hegemony. Ironically, whereas at first the Chinese were invisible in Sunset Park, other Asians (Burmese, Cambodian, Korean, Laotian Pakistani, Turkish, and Vietnamese) who share some of the territory with them now merely blend into the background. Similarly, in the year 2000, there were well over a half a million Latinos in Brooklyn. Seeing ‘differences’ among Spanish-speaking people from, let us say, Mexico and The Dominican Republic, in the barrios they share can be as easy as deciphering Productos Mexicanos from Productos Dominicanos. Recognizing the national flags, cultural emblems, and religious effigies such as those of La Vierge de Guadalupe are more challenging. Most difficult is noting the variations of native dress worn by the newest arrivals to the neighborhood. In the age of globalization we cannot afford to ignore the ethnic vernacular landscapes as they are part and parcel of the ‘urban’. Ethnic enclaves often belie any ‘simple dimension’. When ethnic minorities alter their territories, they simultaneously become part of the transformed urban landscape. The images they create eventually come to represent them and in the process lose part of their autonomy. In the wake of the twenty-first century, ethnic landscapes co-exist, overlap, and compete with one another, but also get to define the essence of the American city, and ethnic minority entrepreneurs play a major role in this process. References Beauregard, R.A. and A. Haila (2000), ‘The unavoidable continuities of the city’, in P. Marcuse and R. Van Kempen (2000) (eds), Globalizing Cities: A New Spatial Order?, Oxford: Blackwell, pp. 22–36. Bourdieu, P. (1977), Outline of a Theory of Practice, New York: Cambridge University Press. Camarota, S.A. (2000), ‘Reconsidering immigrant entrepreneurship: an examination of self-employment among natives and the foreign-born’, available at: http://www.cis.org/articles/1999/selfemployment/index.html. Castells, M. (1989), The Informational City, Oxford: Blackwell Publishers. Castells, M. (1996), ‘Conclusion: the reconstruction of social meaning in the space of flows’, in R.T. LeGates and F. Stout (eds), The City Reader, London: Routledge, pp. 494–8. Davis, M. (2001), Magical Urbanism: Latinos Reinvent the U.S. City, New York: Verso. Feagin, J.R. (1998), The New Urban Paradigm: Critical Perspectives on the City, Lanham, Maryland: Rowman and Littlefield. Gottdiener, M. (1994), The New Urban Sociology, New York: McGraw-Hill. Grady, J. (1996), ‘The scope of visual sociology’, Visual Sociology, 11(2), 10–24. Harper, D. (1988), ‘Visual sociology: expanding sociological vision’, American Sociologist, 19(10), 54–70. Harvey, D. (1989), The Urban Experience, Baltimore: Johns Hopkins University Press. Hayden, Dolores (1990), ‘The potential of ethnic places for urban landscapes’, Places, 7(1), 1991, 11–17. Horowitz, H.L. (ed.) (1997), Landscape in Sight: Looking at America/John Brinckerhoff Jackson, New Haven: Yale University Press. Howenstine, E. (1996), ‘Ethnic change in Chicago’, in C.C. Roseman, H.D. Laux and G. Thieme (eds), EthniCity: Geographic Perspectives on Ethnic Change in Modern Cities, Lanham, Maryland: Rowman and Littlefield, pp. 31–47.

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Jackson, J.B. (1984), Discovering the Vernacular Landscape, New Haven: Yale University Press. King, A.D. (ed.) (1996), Re-Presenting the City: Ethnicity, Capital and Culture in the Twenty-First Century Metropolis, London: Macmillan. Krase, J. (1993), ‘Traces of Home’, Places: A Quarterly Journal of Environmental Design, 8(4), 46–55. Krase, J. (1997), ‘Polish and Italian vernacular landscapes in Brooklyn’, Polish American Studies, LIV(1), 9–31. Krase, J. (2002), ‘Navigating ethnic vernacular landscapes then and now’, Journal of Architecture and Planning Research, 19(4), 274–81. Krase, J. (2003a), ‘Italian American urban landscapes: images of social and cultural capital’, Italian Americana, XXII(1), Winter, 17–44. Krase, J. (2003b), ‘Chinatown: a visual approach to ethnic spectacles’, CUNY Bulletin of Asian American/ Asian Affairs, the Proceedings of the Asian American Conference ‘Education: Challenges and Perspectives’, Queens, New York, Asian American/Asian Research Institute of The City University of New York, pp. 89–90; also on line at (http://www.aaari.info/2003workshop 4b.html). Krase, J. (2004a), ‘Little Italy, identita e semiotica spaziale’, in N. Ceramella and G. Massara (eds), Merica: forme della cultura italoamericana, Isernia, Italy: Cosmo Iannone Editore, pp. 115–42. Krase, J. (2004b), ‘New York City’s ethnic landscapes’, in J. Krase and R. Hutchinson (eds), Race and Ethnicity in New York City, Vol. 7, Research in Urban Sociology, JAI Press. Lefebvre, H. (1991), The Production of Space, Oxford: Blackwell. Lofland, L.H. (1985), A World of Strangers: Order and Action in Urban Public Spaces, Prospect Heights, Illinois: Waveland Press. Lonely Planet World Guide, Destination Los Angeles (2004) (http://www.lonelyplanet.com/destinations/north_ america/los_angeles/attractions.htm). Marcuse, P. and R. Van Kempen (eds) (2000), Globalizing Cities: A New Spatial Order?, Oxford: Blackwell. Park, R.E., E.W. Burgess and R.D. McKenzie (eds) (1925), The City, Chicago: University of Chicago Press. Portes, A. (ed.) (1995), The Economic Sociology of Immigration: Essays on Network, Ethnicity, and Entrepreneurship, New York: Russell Sage Foundation. Rieger, J.H. (1996), ‘Photographing social change’, Visual Sociology, 11(1), 5–49. Sciorra, J. (1996), ‘Return to the future; Puerto Rican vernacular architecture in New York City’, in A.D. King (ed.), Re-Presenting the City: Ethnicity, Capital and Culture in the Twenty-First Century Metropolis, London: Macmillan, pp. 60–92. Van Kempen, R. and P. Marcuse (eds) (1997), ‘The changing spatial order in cities’, American Behavioral Scientist, 41(3), November/December. Vergara, C.J. (1995), The New American Ghetto, New Brunswick: Rutgers University Press. Zukin, Sharon (1996), ‘Space and symbols in an age of decline’, in A.D. King (ed.), Re-Presenting the City: Ethnicity, Capital and Culture in the Twenty-First Century Metropolis, London: Macmillan, pp. 43–59.

18 Non-economic effects of ethnic entrepreneurship1 Min Zhou

Introduction The growth of contemporary entrepreneurial activities among ethnic and immigrant groups in the United States has produced desirable social mobility outcomes for group members. Ethnic entrepreneurship as a social phenomenon has long fascinated many social scientists and stimulated considerable research and debate. In the past few decades, many relevant concepts and theories have been developed, challenged, and revised. However, existing literature tends to emphasize direct economic effects of entrepreneurship to the neglect of its non-economic effects. Since ethnic entrepreneurs often embed their economic decisions and actions in specific social structures, variations in ethnic social structures may be conceptualized as both causes and outcomes of entrepreneurship. In this chapter, I focus on highlighting some significant ways in which ethnic entrepreneurship affects community building, based on my ethnographic case study of Koreatown in Los Angeles, USA.2 I argue that it is the social embeddedness of ethnic economic activities, rather than the ethnic economy per se, that affects a unique social environment facilitating or constraining group mobility. I begin with a brief conceptual discussion. Middleman-minority entrepreneurs v. ethnic-enclave entrepreneurs Ethnic entrepreneurs are often referred to as simultaneously owners and managers (or operators) of their own businesses, whose group membership is tied to a common cultural heritage or origin and is known to out-group members as having such traits; more importantly, they are intrinsically intertwined in particular social structures in which individual behavior, social relations, and economic transactions are constrained (Yinger, 1985; Aldrich and Waldinger, 1990). Existing literature analytically distinguishes two main types of ethnic entrepreneurs: middleman-minority entrepreneurs and ethnic-enclave entrepreneurs. Middleman-minority entrepreneurs are those who trade in between a society’s élite and the masses. In the past, they were sojourners, interested in making a quick profit from their portable and liquefiable businesses and then reinvesting their money elsewhere, often implying a return home (Bonacich, 1973). Therefore, they most commonly established business niches in poor minority neighborhoods or immigrant ghettos in urban areas deserted by mainstream retail and service industries or by business owners of a society’s dominant group. But, in recent years, they have been found to open up businesses in affluent urban neighborhoods and middle-class suburbs and have shown up, not only in the secondary sector, but also in the primary sector of the host society’s mainstream economy. Because middleman-minority entrepreneurs locate and conduct economic activities in non-coethnic communities, they tend to have few intrinsic ties to the social structures and social relations of these local communities. Ethnic-enclave entrepreneurs, in contrast, include mainly those who are bounded by ethnicity, an ethnic community’s social structures, and a geographic location. In the past, they typically operated businesses in immigrant neighborhoods where their own ethnic 279

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group members dominated, and they themselves were also intertwined in an intricate system of ethnic social networks within a self-sustaining ethnic enclave. In present times, as many ethnic enclaves evolve into multiethnic neighborhoods and new ones develop in affluent middle-class suburbs, those who run businesses in a particular location may simultaneously play double roles – as middleman minorities and as enclave entrepreneurs. For example, a Chinese immigrant who runs a fast food takeout restaurant in a Latinodominant neighborhood is a middleman-minority entrepreneur, but he will become an enclave entrepreneur when he comes back to his other fast-food takeout in Chinatown. Similarly, a Korean immigrant who opens up his business in Los Angeles’ Koreatown may be an ethnic-enclave entrepreneur to his Korean coethnics who live there. Yet, simultaneously to his Latino residents who make up the majority of that neighborhood, he is perceived as just one of many middleman-minority entrepreneurs. The analytical distinction thus becomes sociologically meaningful as economic transactions of these two types of ethnic entrepreneurs are conditioned by different social structures and social relations. For example, the stony face of a Korean shop owner in a black neighborhood is often interpreted as hostile and even racist, and the effect of that facial expression can be exacerbated by a lack of English proficiency. But the same face is taken matter-of-factly by Koreans in Koreatown where a common language often eases potential anxiety. The ethnic economy v. the enclave economy Sociologists Bonacich, Modell, and Light were among the first to theoretically develop the ethnic economy concept which broadly includes any immigrant or ethnic group’s selfemployed, employers, and coethnic employees (Light, 1972, 1994; Bonacich and Modell, 1980). Light and his colleagues later rearticulated the concept to a higher level of generality (Light et al., 1994; Light and Karageorgis, 1994; Light and Gold, 2000). The reconceptualized ethnic economy includes two key aspects: one is the ethnic group’s maintenance of ‘a controlling ownership stake’ and its coethnic labor force or unpaid family labor; and the other is the ethnic group’s control over the employment network, which allows the channeling of coethnics into non-coethnic firms and even into the public sector of the larger labor market (Light and Karageorgis, 1994: 648). The ethnic economy concept, with its dual aspects of coethnic ownership and employment network, is thus a neutral designation for every enterprise that is either owned, or supervised, or staffed by racial/ethnic minority group members regardless of size, type, and locational clustering. It is also agnostic about the intensity of ethnicity, neither requiring nor assuming ‘an ethnic cultural ambience within the firm or among sellers and buyers’ (Light and Karageorgis, 1994: 649). The ethnic economy concept thus encompasses businesses owned by middlemanminorities, businesses owned by coethnics in ethnic enclaves, as well as all other ethnicowned or ethnic-controlled enterprises in the general economy. Under this conception, the groups that are known to have higher than average rates of self-employment, such as Jews, Japanese, Koreans, Chinese, Iranians, and Cubans, have their respective ethnic economies; the groups that are known to have low self-employment rates but have control over recruitment networks in certain industries in non-coethnic firms and even in the public sector, such as blacks, Mexicans, and Salvadorans, would also have their own ethnic economies. Such conception allows for two types of analyses: one is to account for variations in mobility outcomes among ethnic group members who create employment opportunities for

Non-economic effects of ethnic entrepreneurship 281 themselves and their coethnic workers, and the other is to account for variations in the level of economic integration of group members who enter the general economy via coethnic employment networks. However, when a concept is too broad, it risks weakening its explanatory power because substantive internal differences are so large. For example, coethnic businesses concentrated in an ethnic enclave are very different from those dispersed in other non-coethnic neighborhoods serving primarily non-coethnics, a situation more appropriately referred to as the middleman minority. Similarly, businesses that are owned and staffed by coethnics are very different from those that are owned by noncoethnics but staffed by supervisors and coworkers of the same ethnicity, a situation more appropriately referred to as ethnic niching, or ethnic occupational concentration/ segregation (Waldinger, 1996). Furthermore, by extending ethnic economies beyond bounded ethnicity, the ethnic economy concept is decontextualized. Such a broad concept may be useful when examining individual outcomes, such as earnings outcomes or employment opportunities of the disadvantaged; but it is not of much use when examining processes of community building in immigrant or ethnic minority neighborhoods. The enclave economy is a special case of the ethnic economy, one that is bounded by coethnicity and location. Not every group’s ethnic economy can be called an enclave economy. Likewise, not every ethnic economy betokens a middleman minority (Light and Karageorgis, 1994). Portes and his colleagues were among the first to develop the enclave economy concept, drawing on the dual labor market theory (Wilson and Portes, 1980). In its original conceptualization, the enclave economy had a structural and a cultural component. As a distinct type of the ethnic economy, it consisted of a wide range and diversity of economies’ activities that exceeded the limits of small businesses trade and commerce and traditional mom-and-pop stores, as well as ethnic institutions that mediated economic action, such as merchant associations, chambers of commerce, informal credit associations, and family/hometown associations. To a varying degree, it resembled some of the key characteristics of both primary and secondary sectors of the mainstream economy. Unlike the ethnic economy concept that includes almost every business under an ethnic umbrella, the enclave economy has several unique characteristics. First, the group involved has a sizeable entrepreneurial class. Second, economic activities are not exclusively commercial, but include productive activities directed toward the general consumer market. Third, the business clustering entails a high level of diversity including, not just niches shunned by natives, but also a wide variety of economic activities common in the general economy, such as professional services and production. Fourth, coethnicity epitomizes the relationships between owners and workers and, to a lesser extent, between patrons and clients. Last, and perhaps most importantly, the enclave economy requires a physical concentration within an ethnically identifiable neighborhood with a minimum level of institutional completeness. Especially in their early stages of development, ethnic businesses have a need for proximity to a coethnic clientèle which they initially serve, a need for proximity to ethnic resources, including access to credit, information and other sources of support, and a need for ethnic labor supplies (Portes and Manning, 1986). The enclave economy also has an integrated cultural component. Economic activities are governed by bounded solidarity and enforceable trust – mechanisms of support and control necessary for economic life in the community and for reinforcement of norms and values and sanctioning of socially disapproved behavior (Portes and Zhou, 1992). Relationships

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between coethnic owners and workers, as well as customers, generally transcend a contractual monetary bond and are based on a commonly accepted norm of reciprocity. My own study of the garment workers in New York’s Chinatown offers a concrete example. Immigrant Chinese women with little English and few job skills often find working in Chinatown a better option despite low wages, because the enclave enables them to fulfill their multiple roles more effectively as wage earners, wives, and mothers. In Chinatown, jobs are easier to find, working hours are more flexible, employers are more tolerant of the presence of children, and private child-care within close walking distance from work is more accessible and affordable (Zhou, 1992). Such tangible and intangible benefits associated with the ethnic enclave are absent in the general secondary labor market, where coethnicity is atypical of owner–worker relationships and reciprocity is not an enforceable norm. Likewise, ethnic employers who run businesses in non-coethnic neighborhoods or who employ non-coethnic workers can effectively evade the social control of the ethnic community while causing unintended consequences of heavier social costs such as interethnic conflicts. In sum, the enclave economy is not any type of ethnic economy. The word ‘enclave’ is not just there to invoke the concept of ‘ethnic economy’, but refers to a specific phenomenon, one that is bounded by an identifiable ethnic community and embedded in a system of community-based coethnic social relations and observable institutions. The central idea of the enclave economy concept is that the enclave is more than just a shelter for the disadvantaged who are forced to take on either self-employment or marginal wage work in small business. Rather, the ethnic enclave possesses the potential to develop a distinct structure of economic opportunities as well as opportunities of rebuilding social networks which are disrupted by international migration. A focused look at the enclave economy through the case of Koreatown The burgeoning research on ethnic entrepreneurship has been more concerned with the causes and effects of entrepreneurship on economic integration among immigrant and ethnic minorities than with its influence on the social contexts mediating ethnic economic life, and has largely overlooked its non-economic effects. Some non-economic effects, such as serving as an alternative means to social status recognition, nurturing entrepreneurial spirit, providing role modeling that inspire others to follow suit, and strengthening social networks locally and internationally, are noted in the existing literature but lack further investigation. Just through what mechanisms and under what conditions these noneconomic effects are produced is unclear, leaving a substantial conceptual gap. I think that examining how a particular ethnic community may be affected by entrepreneurship can help fill this gap. Before illustrating the relationship between ethnic entrepreneurship and community building, I shall once again reiterate the conceptual distinction between the ethnic economy and the enclave economy, even though the latter is a type included in, and often mistaken for, the former. As I have just discussed, the ethnic economy is an umbrella concept that takes into consideration, not simply job creation by ethnic entrepreneurs, but also access to existing jobs in the general economy by ethnic networks. Such an inclusive concept runs the risk of decontextualization and a loss of analytical rigor when examining group-level processes, particularly variations in ethnic social structures and social capital formation among disadvantaged immigrant and ethnic minorities. For example,

Non-economic effects of ethnic entrepreneurship 283 Korean entrepreneurs running businesses as middleman minorities in non-Korean neighborhoods do not tend to invest in the social structures of the neighborhoods they are serving, because they are not bounded by social relationships with local residents and because their businesses serve a singular function (trade or commerce) with little attachment to any significant social structures there (Min, 1996). Quite the contrary, Korean entrepreneurs running businesses in Koreatown have a ‘stake’ in the community and are intertwined in multiple social relationships with coethnic residents and multiple ethnic social structures there. Therefore, I argue that it is the social embeddedness of ethnic economic activities, rather than the ethnic economy per se, that affects a unique social environment facilitating or constraining group mobility. The enclave economy concept is useful for us to examine the non-economic effects of entrepreneurship and to explain why social environments affecting group mobility vary by national origins or race/ethnicity and why ethnic communities vary in their capacities to protect group members from disadvantages and move them up the ladder in society. Koreatown in Los Angeles Koreatown is located west of downtown Los Angeles. Perhaps more than other ethnic enclaves, there is much ambiguity as to what constitutes the ‘boundaries’ of Koreatown and there is much discrepancy between what the residents identify as Koreatown and what is officially demarcated as Koreatown.3 Nonetheless, Koreatown is a typical inner-city neighborhood that has a concentration of racial minorities, recent immigrants, and the poor. But this neighborhood is an unusual immigrant enclave since it is multiethnic, shared by Koreans, Mexicans, Salvadorans, Guatemalans, and other Asians (mostly Filipinos, along with some Chinese and Southeast Asians). Although Koreans are the fastest growing group, at a growth rate of 164 per cent between 1980 and 1990, they make up only one-fifth of the neighborhood’s population. In contrast, more than half of the residents are Latinos, among whom 28 per cent are Salvadorans, 16 per cent Guatemalans, and 40 per cent Mexicans. No single national-origin group constitutes a numerical majority. Koreatown is known not for its ethnic residential concentration but for its high density of Korean-owned businesses, churches, and other cultural and social institutions. The most distinctive feature of Koreatown’s economic activities is its wide variety of ethnic retail combined with a Korean-flavor recreational entertainment industry, featuring a colorful nightlife and a focus on golf. The Korean-owned businesses encompass both traditional mom-and-pop stores serving local residents and upscale retail and professional establishments catering to the tastes and needs of suburban middle-class Korean families and, to a lesser extent, tourists. Two major shopping malls in Koreatown – Koreatown Plaza and Koreatown Galleria – resemble some of the trendiest shopping centers in Asia. Upscale restaurants cater to a predominantly middle class clientèle: a multi-ethnic lunch crowd and an ethnic evening and weekend crowd. There are three indoor golf ranges in Koreatown, feeding the golf craze that has become fashionable in Asian countries since the early 1990s. There are also quite a few trendy, stylish, and neon-lit nightclubs, karoake bars, pool halls, and video game stores catering to Korean men and young people from the suburbs and nearby colleges. With numerous large and small retail shops and restaurants, numerous large and small professional services, social services, religious organizations, and a complex system of supplementary education, all owned by Koreans, have also sprung up to form the core of the Korean enclave. This particular combination of ethnic economic,

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sociocultural, and religious activities is turning Koreatown into a magnet, attracting suburban Korean immigrants and their families to come to Koreatown to shop, entertain, socialize, and conduct various aspects of their ethnic life on a regular basis. The return of the middle class, in turn, promotes further coethnic business investment and the proliferation of a wide range of cultural, religious, and social institutions. The enclave economy and the ethnic social environment The dominance of Korean-owned businesses and Korean social and religious institutions in Koreatown suggests that Koreans and Latinos who live in this inner-city neighborhood are actually living in two very different social worlds. Korean residents who are poor, and mostly recent immigrants, are in a social environment in which they have convenient access to a wide variety of jobs, ethnic goods and services, and neighborhood-based organizations. They are able to re-establish and maintain frequent contact with their suburban middle class coethnics, who return to the ethnic enclave to participate in the economic and social life there, and benefit tremendously from such contact. Latino residents living in the same neighborhood, in contrast, are unlikely to share the tangible and intangible benefits arising from the Korean social environment. To Latino residents, Koreatown is nothing more than the name of a place where they live, and Korean entrepreneurs and other ethnic (including some Latino) entrepreneurs are merely middleman-minority entrepreneurs. It is apparent that the ethnic social environment should not simply be defined by the neighborhood’s characteristics, nor by residents’ socioeconomic status, nor by institutions that are located there, but by a complicated set of interrelated social relationships between various institutions and residents bounded by ethnicity, which has significant consequences facilitating or constraining possibilities for social mobility. Koreatown’s unique social context for Koreans is a direct outcome of the enclave economy. Let me elaborate further on the way Korean entrepreneurship shapes an ethnic environment conducive to education, that benefits Korean immigrant children to the exclusion of Latino children sharing the same neighborhood. In Koreatown’s enclave economy, there is a visibly high concentration of Korean-owned and Korean-run businesses targeting children and youth, most noticeably the hagwons (after-school tutoring), college preparation schools, Korean language centers, pre-school daycare centers, businesses offering music, dance, karate classes, and vocational training, and recreational facilities. These private businesses constitute an effective system of supplementary education (Bhattacharyya, 2003), functioning as any other for-profit businesses to meet a particular demand, but serving important social functions as well. First, the concentration of educational enterprises in Koreatown gives suburban middle-class Korean immigrants a reason to go to Koreatown other than shopping because they believe that the ethnic system of education is best for their children. When the middleclass suburbanites come to Koreatown, they come for multiple purposes: sending their children to hagwons, going to church, playing golf, eating real Korean food, shopping, and even for a facial, massage or haircut. The presence of the middle class, in turn, stimulates not only more entrepreneurial investment in businesses of varying scales, but also the development of religious and cultural institutions. Second, the ethnic system of supplemental education reinforces the overriding importance of education and facilitates educationally relevant information flows among the children of Korean immigrants. We noticed in our interviews that Korean adolescents in

Non-economic effects of ethnic entrepreneurship 285 Koreatown have a more sophisticated understanding of the educational system and are more informed about college options than their Latino peers. They seem to know what the specific paths to higher education are, such as which middle school is a feeder school to a better high school, which high school offers sufficient Advanced Placement (AP) and Scholastic Aptitude Test (SAT) courses, how to prepare for AP and SAT tests, and when to take these standardized tests. Many mentioned that they had to take SAT tests early so that they had time to retake them if necessary. They also mentioned a lot the names of prestigious colleges, such as Harvard, Princeton, Caltech, and Stanford, and made concrete remarks about the way colleges were ranked; the seniors reported that they had visited the web sites of many colleges. With regard to structured after-school academic or recreational activities, our Korean teenage respondents would say that taking more AP exams, having higher SAT scores, or playing a musical instrument made them ‘look good on college applications’, that participating in after-school activities could connect them to those who ‘know about college admission and financial aid stuff’, or those who ‘can write you recommendation letters for college’. They also would say that voluntary work in the community could help them ‘make up for bad grades in school’. A Korean lowachiever told us why he got involved in a service club: ‘Well, I like to help people, but mostly it’s for college, because my grades aren’t too good. They [colleges] like to see some of that extra stuff.’ Third, multiple purposes for community participation lead to the involvement in multiple institutions, hence broadening the basis for social interaction between local Korean residents and their suburban coethnics. Such relationships, though more secondary and instrumental than primary and intimate, create channels for information exchange and thus ease the negative consequences of social isolation associated with inner-city living. For example, Korean parents, often non-English speaking, are able to obtain detailed information about high school and college requirements, school and college rankings, scholarship and financial aid, and other education-related matters through their casual contacts with a more informed group of coethnics in churches, restaurants, beauty salons, and other ethnic institutions, and also through the Korean language media. They can find tutors and afterschool programs from a range of options offered by for-profit businesses which are advertised in Korean language newspapers. The ethnic media routinely announce and honor Korean children and youths who win national or regional awards and competitive fellowships, get accepted into prestigious colleges, and score exceptionally well on SAT and other scholastic standardized tests. However, while the Korean social environment accrues ample tangible or intangible benefits within the easy reach of Korean residents, it is not equally accessible to Latino residents living in Koreatown. The enclave economy and community building The case of Koreatown offers insights into the understanding of the role of the enclave economy in community building. I argue that social structures in an ethnic community require the support of an enclave economy, not just any type of ethnic economy. For Latinos, Koreatown’s ethnic businesses are not connected to the social structures of their ethnic community, be it Mexican, Salvadoran, or Guatemalan. Korean business owners are merely middleman-minority entrepreneurs. Even Latino business owners tend to be middleman-minority entrepreneurs of their own ethnic groups because of the lack of development of diversity and scale of Latino-owned businesses that can stimulate the

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development of other social structures in the Latino community. When local businesses are intertwined with the social structures of the locality, the community becomes greatly strengthened as it achieves a high level of institutional completeness, which refers to the degree to which an ethnic community’s formal institutions sufficiently satisfy all the needs required by members (Breton, 1964). The development of the enclave economy increases the level of institutional completeness in an ethnic community by stimulating more diverse economic investment and community-based social, cultural, and religious organizations. A high level of institutional completeness, intertwined with the enclave economy, in turn creates a physical site where coethnics of diverse class backgrounds meet one another face-to-face and rebuild social networks that have been disrupted through the process of immigration. New ties may not be as intimate as those based on family and kin, but they are nonetheless bridge ties centering on the enclave while having many outlets branching out of it. Mixed-class interactions among coethnics tend to generate more beneficial social relations and more valuable social capital arising from these social relations, which in turn effectively reduces the level of social isolation in the inner city and leads to effective and practical means to social mobility. Koreatown’s enclave economy apparently helps make Koreatown institutionally complete for Koreans who live there and for other Koreans who live elsewhere. But it does not help build an ethnic community for Latino residents who live and work there. To Latinos, many Korean-owned businesses are not even accessible to them because of cultural and language barriers. Los Angeles’ Koreatown demonstrates that ethnic entrepreneurship has social consequences that go well beyond the economic success of individual entrepreneurs, and that an enclave economy, rather than a mere concentration of ethnic businesses, provides a critical material base for the ethnic community to function effectively. In inner-city minority neighborhoods, many viable social institutions are gone with the out-migration of the middle-class to suburbs, leaving the ‘truly disadvantaged’ trapped in social and economic isolation (Wilson, 1987). Urban public schools, churches, non-profit organizations, and other publicly funded agencies are not, by themselves, up to the task of protecting children from descending into the underclass. Despite multiple risks, however, not all poor inner-city neighborhoods are predestined to ghettoization. Conclusion My analysis of the Koreatown case contributes to the literature on ethnic entrepreneurship by shifting the focal point from ultimate mobility outcomes (earnings or employment opportunities) to intermediate social processes: the creating of an ethnic social environment conducive to upward social mobility. Social organization in immigrant neighborhoods varies by ethnicity and the presence of an enclave economy, not just the concentration of a variety of local ethnic businesses, influences not only the economic life but also the social environment of coethnic group members. The vitality of the ethnic community and its ability to generate resources conducive to the acquisition of skills and information necessary for social mobility depends largely on the development of the enclave economy. Varied levels of enclave economic development among different immigrant groups affect community building, which in turn creates differences in the availability of and access to neighborhood-based resources, especially those pertaining to socioeconomic integration

Non-economic effects of ethnic entrepreneurship 287 of adult immigrants and to the education of immigrant children. Social capital formed in different ethnic social environments appears to have different values, and what appears to be social capital for one ethnic group may not equally benefit another sharing the same neighborhood. In this respect, the enclave economy concept is superior for investigating specific ethnic social environments and processes of group mobility. It allows for a more focused and detailed examination of varied social contexts and their effects on mobility outcomes, hence unpacking the black box of ethnicity. A fuller account of the variations in ethnic social environments, in turn, can offer a better explanation for the ethnicity variable having a positive effect on outcome for some groups and a negative effect for others in the same model. It also allows for the development of a theoretical conception to understand more precisely how social resources are produced and reproduced in the ethnic community. Notes 1. This chapter is based on my article, ‘Revisiting ethnic entrepreneurship: convergencies, controversies, and conceptual advancements’, in International Migration Review, 38(3), 1040–74, 2004. I thank Nancy Foner, Riva Kastoryano, and Alejandro Portes for their insightful comments and Chiaki Inutake and Angela Sung for their research assistance. 2. The study of Koreatown in Los Angeles is part of my comparative ethnographic study of three immigrant neighborhoods in Los Angeles, based on intensive one-on-one interviews and extensive field observations conducted in 1998 to 2000. The other two neighborhoods are Chinatown and Pico-Union (A Mexican/Central American neighborhood). See Zhou et al. (2000) for more detail. 3. Despite the lack of a consistent definition, the neighborhood under study refers to the area bounded by Vermont Street to the east, San Mariro to the south, Western Avenue to the west, and Beverly Boulevard to the north.

References Aldrich, Howard E. and Roger Waldinger (1990), ‘Ethnicity and entrepreneurship’, Annual Review of Sociology, 16, 111–35. Bhattacharyya, M. (2003), ‘Korean supplementary education in Los Angeles: an urban community’s resource for families’, in E.W. Gordon, A.S. Meroe and B.L. Bridglall (eds), Supplementary Education, Denver: Rowman and Littlefield. Bonacich, Edna (1973), ‘A theory of middleman minorities’, American Sociological Review, 38, 583–94. Bonacich, Edna and John Modell (1980), The Economic Basis of Ethnic Solidarity, Berkeley, CA: University of California Press. Breton, Raymond (1964), ‘Institutional completeness of ethnic communities and the personal relations of immigrants’, American Journal of Sociology, 70(2), 193–205. Light, Ivan (1972), Ethnic Enterprise in America: Business and Welfare among Chinese, Japanese, and Blacks, Berkeley, CA: University of California Press. Light, Ivan (1994), ‘Beyond the ethnic enclave economy’, Social Problems, 41(1), 601–16. Light, Ivan and Steven J. Gold (2000), Ethnic Economies, San Diego, CA: Academic Press. Light, Ivan and Stavros Karageorgis (1994), ‘The ethnic economy’, in Neil J. Smelser and Richard Swedberg (eds), The Handbook of Economic Sociology, Princeton: Princeton University Press, pp. 647–69. Light, Ivan, George Sabagh, Mehdi Bozorgnehr and Claudia Der-Martirosian (1994), ‘Beyond the ethnic enclave economy’, Social Problems, 41, 65–80. Min, Pyong Gap (1996), Caught in the Middle: Koreatown Communities in New York and Los Angeles, Berkeley, CA: University of California Press. Portes, Alejandro and Robert L. Bach (1985), The Latin Journey: Cuban and Mexican Immigrants in the United States, Berkeley, CA: University of California Press. Portes, Alejandro and R.D. Manning (1986), ‘The immigrant enclave: theory and empirical examples’, in S. Olzak and J. Nagel (eds), Comparative Ethnic Relations, Orlando, FL: Academic Press, pp. 47–68. Portes, Alejandro and Min Zhou (1992), ‘Gaining the upper hand: economic mobility among immigrant and domestic minorities’, Ethnic and Racial Studies, 15, 491–522. Waldinger, Roger (1996), Still the Promised City? African-American and New Immigrants in Postindustrial New York, Cambridge, MA: Harvard University Press.

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Wilson, Kennith and Alejandro Portes (1980), ‘Immigrant enclaves: an analysis of the labor market experience of Cubans in Miami’, American Journal of Sociology, 86, 295–319. Wilson, William J. (1987), The Truly Disadvantaged: The Inner City, the Underclass, and Public Policy, Chicago: University of Chicago Press. Yinger, J.M. (1985), ‘Ethnicity’, Annual Review of Sociology, 11, 151–80. Zhou, Min (1992), Chinatown: The Socioeconomic Potential of an Urban Enclave, Philadelphia: Temple University Press. Zhou, Min, with JoAnn Adefuin, Angie Chung and Elizabeth Roach (2000), ‘How community matters for immigrant children: structural constraints and resources in Chinatown, Koreatown, and Pico-Union, Los Angeles’, project final report submitted to the California Policy Research Center.

19 The rise and fall of specialized small business investment: taking the taxi to oblivion Milford B. Green and Rod B. McNaughton

Introduction Participation in entrepreneurship by minorities can be a pathway to improved economic standing and income. This is true for the United States as well as other countries. Minority-owned businesses are an important component of the US economy. The Survey of Business Owners revealed there were 2.8 million Black and Hispanic-owned businesses in the US (US Census, 2006a, 2006b). They employed 2.3 million people and generated about $311 billion in revenues. This is about 12 per cent of the US’s non-farm businesses. Hispanics owned 5.2 per cent, while Blacks owned about 3.3 per cent of small businesses. During the period 1997 to 2002, the number of Black businesses grew by 45 per cent and the number of Hispanic firms grew by 31 per cent, more than three times faster than the number of all businesses, and receipts for minority businesses grew faster than those of all US firms (statistics for other minority groups have not yet been released). This growth is important because the promotion of investment in minority entrepreneurship is often advocated as a means of economic and social development for the underprivileged (Van Fleet and Van Fleet, 1985; Bates, 2001a). However, minority entrepreneurs face difficulties raising capital. All small firms face barriers in accessing capital, but minority firms may be additionally saddled with discrimination. Alan Greenspan, the former long serving Chairman of the Federal Reserve Board, recognized this in a speech in 1999: An important key to the success of small and large businesses is having access to capital and credit. . . . Continued efforts to develop the markets for private equity investments will be rewarded by an innovative and productive business community. This is especially true in lowerincome communities, where the weight of expansive debt obligations on small firms can severely impede growth prospects, or more readily lead to business failures. (Greenspan, 1999)

Since the late 1960s there have been efforts in the US to provide support for the creation of Black businesses, with recognition of other minorities coming later. This has occurred at the local, state, federal and corporation levels. Supporters of such efforts argue they are necessary to provide a more level playing field. Opponents view them as a form of reverse discrimination (Sonfield, 2001). The US Federal Government has been particularly active in undertaking programs supporting minority entrepreneurship. Papadimitriou and Mourdoukoutas (2002) argue that two stages of the US government’s attempts to bridge the equity start-up-financing gap have occurred. The first, from 1946 to 1977, was characterized by limited success. The authors advance three reasons for this limited success. First, the Company Act of 1940 prohibited pension funds from investing in Small Business Investment Companies (SBICs) or Specialised SBICs (SSBICs), the primary vehicles the government used to leverage available equity capital. Second, high capital 289

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gains taxes made high risk/return investments unattractive, and third, NASDAQ rules made it difficult for venture capitalists to float initial public offerings (IPOs). The second stage, starting in 1977, saw five policy measures that were more successful: 1. 2. 3. 4. 5.

creation of small business centers to assist start-ups business plan development, the allowance of limited partnerships that paid fund managers on performance, pension plans which could invest a small portion of the funds in venture capital and start-ups, reduction of the capital gains tax, and introduction of the NASDAQ Small Cap market that made equity markets more accessible.

Within this general framework, the needs of minority enterprises were addressed by government programs aimed at their needs. One of these was the Minority Enterprise Small Business Investment Company (MESBIC) program, later renamed the Specialized Small Business Investment Company (SSBIC) program. The administrating agency for the program was the Small Business Administration (SBA). Whistler and Wickmann (1979) argue that minority entrepreneurs have four needs: capital and credit, assistance in management, qualified personnel, and greater opportunity to participate in the economy. The SBA answers the first of these: the need for capital. This chapter reviews the history of the MESBIC and SSBIC programs. The story is of a program that was well intentioned and addressed a real gap in capital markets, but which failed to gain support within government or business communities. Data obtained from the SBA are analyzed to show the pattern of investments by location and industry sector. Investments are concentrated in a few major cities, and in sectors with low barriers to entry. A disproportionate amount of funds are lent for the purchase of taxi medallions (licenses to operate taxi cabs) by immigrant entrepreneurs, and take the form of assetbased lending rather than equity participation. The SSBIC program was discontinued in 1996 and the follow-on New Markets Venture Capital Funds program was cancelled in 2003. However, ‘grandfathered’ firms are still operating. The SBIC and SSBIC programs The Small Business Investment Companies program was created by Congress in 1958 through passage of the Small Business Investment Company Act. At that time, the US venture capital industry was in its nascent stage. The SBIC program had a mandate to stimulate long-term debt and equity investment in American small business. Since 1958, the SBA has funded over 90 000 small businesses, including icons such as Apple Computer, Intel and Staples (Teckler, 2004). The SBIC program provides government assistance to privately owned venture capital firms. The SBICs are licensed by the Small Business Administration (SBA) which provides access to matching capital funds (Rubin, 2001). For the period 1994 to 2002, SBICs provided about 8 per cent of total venture capital financing, 64 per cent of all seed financings and 62 per cent of venture capital funding by number (SBA, 2003, 2004). At the end of 2003 there were 435 licensed SBICs with $5.5 billion invested (SBA, 2004). Most SBICs obtain their funding from the SBA, which provides the opportunity to have their capital matched on a two or three to one basis. There are two types of SBA

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leverage instruments: the Participating Security, authorized by legislation in 1992, and the older form of Debentures (Staebler, 2004). A tax advantage of Participating Securities to tax-exempt institutional investors has led to an increase in SBICs that use this type of leverage (Teckler, 2004). To issue an SBIC license, the SBA required the following: An experienced team of private equity managers must secure minimum commitments from private investors of either $5 million (for a debenture fund) or $10 million (for an equity fund). For every $10 million in private equity, SBIC licensees are eligible to receive up to a $20 million SBA commitment (2: 1 public–private leverage), substantially enhancing prospective portfolio returns. (SBA, 2006a)

The size of an SBIC typically ranges from $30 million to $170 million. SBICs may only invest in ‘small businesses’, defined as net worth less than $18 million and prior two years’ average after-tax income less than $6 million. In addition, the potential recipient must establish the need for SBIC financing in the geographic area in which the applicant proposes to operate (CDFA, 2004). SBICs may not invest in other SBICs, finance and investment companies, unimproved real estate, companies with less than 50 per cent of their assets and operations in the United States, firms not engaged in a regular and continuous business operation, or companies which will use the proceeds to acquire farm land (eSource Center, 2006). The SBIC program was expanded with the establishment of Minority Enterprise Small Business Investment Companies (MESBICs). This program was created in 1969 during the Nixon Administration as an outcome of Nixon’s trumpeting of ‘black capitalism’ as a campaign issue (Kotlowski, 1998). The MESBIC program could be viewed as an outcome of the Civil Rights movement of the 1960s (Bates, 1997; Bean, 2001). The program was to increase the availability of financial capital to minorities. It was originally envisioned as a way that major corporations could participate in the funding of minority business enterprises. It was expected that at least 100 major corporations would participate. This view was wildly optimistic, with only 15 coming forward. Of those, many were sold or shut down during the coming years. The program proceeded through largely minority-owned business investment companies that had capitalizations of only several million dollars (Bates, 1998). MESBICs were renamed Specialized Small Business Investment Companies (SSBICs). SSBICs have a somewhat different mission in that they are to serve entrepreneurs who are denied access to capital because of economic disadvantage (SBA, 2006b). Those who are socially or economically disadvantaged are usually thought to comprise African Americans, Hispanic Americans, Native Americans, Subcontinent Asian Americans, and Asian Pacific Americans. Members of other groups may qualify if they meet specified conditions (SBA, 2006d). SSBICs, unlike SBICs, can get 100 per cent leverage of their private capital through the sale of preferred stock to the SBA. SSBICs also receive a rate subsidy of 3 per cent for the first five years of a ten-year term loan. The SSBIC program was repealed in 1996, but existing firms were grandfathered. The cancellation of the program was fueled by losses (Octopus Asset Management, 2003), public scandals (Bond, 1996) and mismanagement (Mukherjee, 1996). The use of an SSBIC in the Clinton Administration’s Whitewater investment scandal is probably the best-known scandal.

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New markets venture capital program The SSBIC program serves as a template for more recent government initiatives. The New Markets Venture Capital (NMVC) program was modeled after the Small Business Administration’s SBIC program but has the specific mission of economic development in Low-Income (LI) areas. This program was announced in 1999 with the hope of attracting up to $15 billion to economically distressed inner cities and rural areas (SBA, 1999). Through a combination of equity-type financing and intensive operational assistance to smaller businesses located in low-income areas, the program sought to assist local entrepreneurs, to create quality employment opportunities for residents and to build wealth within these communities. The SBA intended to achieve these public policy objectives through financial assistance to newly formed NMVC companies and to existing SSBICs (SBA, 2006c). NMVC companies target entire communities for business investments, while SSBICs seek business investments in small businesses owned by individuals that are socially or economically disadvantaged. NMVC firms focus on the geographic location rather than on the ownership of small businesses. However, SSBICs were eligible to apply for grant funds under the NMVC program to provide operational assistance to businesses located in LI areas, if such SSBICs planned to raise additional capital and to use it to make developmental venture capital investments. As of August 2003, there were only six NMVC firms licensed (SBA, 2006c), and the NMVC program had its funding rescinded in that fiscal year. Previous studies Although the MESBIC and SSBIC programs resulted in over a billion dollars in investment, there has been scarce academic attention paid to them or even to their host, the Small Business Administration. An exception is research conducted by Bates (1997, 1998, 2001b), who provides an extensive critique and history of the MESBIC program. Bates argues that the program was unwanted by the SBA and was consequently either by accident or design poorly administered. The program was created to parallel the SBIC program but additional staff was not allocated. It was rumored that the worst staff were reallocated to the program. Generally, the MESBICs were capitalized at levels too small to permit diversification of investment, or to attain scale economies. Often the MESBIC licensees simply invested in bank certificates of deposit to realize a profit from their subsidized SBA funds. The SBA created further difficulties in the program by reneging upon earlier funding commitments. Bates argues the agency rarely requested adequate funding from Congress. The period 1985 to 1987 saw the Reagan Administration attempt to dismantle the Small Business Administration and its programs. Congress refused and allocated money to the MESBIC program and the SBA. It appears that, although the SBA could not be eliminated from the outside, it was being undermined on the inside. The SBA undertook questionable acts that placed MESBIC program funding in legal uncertainty. Details of these actions are provided in Bates (1998). Congress attempted to revitalize the program in 1989 by allowing MESBICs to repurchase their preferred stock from the SBA for 35 cents on the dollar. Selling preferred stock to the SBA had been the preferred financing method because it required the payment of only a 3 per cent dividend to the SBA. Unfortunately, it took the SBA nearly five years to implement the repurchase program. During this period Congressional funding dwindled from $31 million to $5.8 million. In comparison, the SBIC program received a similar

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repurchase package in 1992 which took two years to implement. Bates (1998) concludes that the MESBIC repurchase experience provides a template for limiting a program’s success: 1. 2. 3. 4. 5.

delaying implementation for as long as possible, continually changing the rules, lack of administrative personnel continuity, using participation in the program to force compliance in unrelated areas, and technical regulations that largely nullify the intent of the program.

Bean (2001) tells a similar story. The Small Business Administration was and is a Federal Agency that serves a constituency that does not really want it. It has served as a political football since its inception and has been used to further goals unconnected with small business. It was one of the first forays into affirmative action by the Federal Government. Its success has been less than sterling and has been marked by repeated scandals. This history had a strong impact on the SSBIC program and explains why small business associations did not vigorously defend the program when it was cancelled. Bates (1997, 2001) provides an analysis of the financial characteristics and performance of 1101 investments made by MESBICs in 1993. He points out that most of the investments made were for the purchase of New York City taxicab medallions by the firm Medallion Funding. This situation continued to be true through 2003, as is shown later in this chapter. Investment in taxicab medallions is illustrative of the asset-based lending which was and is carried out by most MESBICs and SSBICs. Asset-based lending is simple: if the firm succeeds, the investee repays the loan; if the firm fails, the assets are liquidated and the MESBIC gets paid. For lenders who pursue this strategy, growth is not as important as the value of the collateral. Loans to restaurants, laundries and grocery stores are the next most common types of investments (Bates, 2001). The loans go primarily to immigrant Asian entrepreneurs in Los Angeles and New York City. Small MESBIC firms were not economically viable. The period 1969 to 1979 saw the licensing of many MESBICs with median capitalizations of less than $1 million. Such small firms were probably not viable from the start. The mean MESBIC in 1993 lost 2.70 cents per asset dollar. Smaller MESBICs did worse than larger ones. A series of logistic regressions revealed the following: 1. 2. 3. 4. 5.

large MESBICs (over $2 million in capitalization) were more likely to survive than smaller ones, low-cost MESBICs were more likely to survive, MESBICs with high liquidity were more likely to remain active, MESBICs with high loan losses were more likely to close, and MESBICs that could achieve capital gains on their investments were more likely to survive (Bates, 1997, 2001).

Bates and Bradford (2003a) undertook a study of 50 funds operated by active members of the National Association of Investment Companies. The investments by these minorityoriented firms were across a broad range of industries. Most funds were in three or four unrelated industry sectors. The media and communication sector had the largest number of investments, followed by manufacturing, except electronics and computer-related. The

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more mature funds had a mean internal rate of return (IRR) of 23.9 per cent. A regression analysis of the IRR found that higher IRRs were associated with larger investments, venture capital partners being actively involved in the portfolio firm and diversified funds. Lower IRRs were associated with smaller investments, being licensed by the Small Business Administration (SBA) and funds with larger than average capitalization. Bates and Bradford suggest that minority venture capital funds invest in a less risky mix than the private venture capital firms, and that this lower risk orientation means that the minority funds exhibit less of a bust–boom cycle (this is illustrated later in this chapter). Bates and his colleague provide a thorough examination of the MESBIC and SSBIC program from an aspatial perspective, but the geography of the programs are ignored. McNaughton and Green (1989) address this deficiency in their analysis of the investment preferences of MESBICs. They found that MESBICs are smaller than other venture capital firms with disproportionate representation in certain large urban areas, particularly in Washington DC, Miami and Detroit. Further analysis showed that the pattern of office location for MESBICs was substantially different from that for either SBICs or private venture capital firms. MESBICs preferred to avoid high technology investments, concentrating on manufacturing, retailing and distribution and had a marked aversion to investing in early stage deals. Larger MESBICs were found to more closely follow the investment preferences of private venture capital firms. Data The data for this study were provided by the Small Business Administration, Investment Division.1 The data comprise two sets. One is a listing of all SBIC and SSBIC licensees past and present since the inception of the SBIC program. Each company has headquarters location, date of licensee, date of licensee surrender (if applicable), type of firm (SBIC or SSBIC), and type of funding. The second data set is a listing of all investments in dollars made by SBICS and SSBICs since 1985 for each three-digit zipcode in the US. The industry of the investment is also reported. Prior to 2000, it is reported by US SIC code (Standard Industrial Classification) and for the year 2000 and later it is reported by NAICS (North American Industrial Classification System) code. The post 1999 data are recoded into their equivalent SIC class using a concordance provided by the US Census Bureau (2002). There are known data deficiencies in SBA tabulations. Data on reported investment amounts of the SBIC and SSBIC programs collected by the SBA were found to be somewhat incomplete and inaccurate (OIG, 2000). Some years appear to be overestimated as a result, while others may be underestimated. The primary fault is that investments may not be reported to have occurred in the correct year, although the SBA argues that over time the errors average out. The SSBIC program requires the creation of an Eligibility Profile on each small business. This profile affirms the minority status of the small business, and is verified during SSBIC examinations (OIG, 2000). Currently the SSBIC program has only 42 participating firms located primarily in selected large cities (Figure 19.1). New York City has nine firms, the largest number in any city. What is perhaps surprising is that there are many cities with substantial minority populations that have no representation, Chicago is an example. Location matters as venture capital firms tend to fund entrepreneurs in the immediate area. Therefore minority entrepreneurs in cities with SSBICs might experience an easier time in finding funding.

295

Figure 19.1

Locations of SSBIC firms, circa 2003

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Handbook of research on ethnic minority entrepreneurship 4000 3500 Number of deals

3000

Specialized Small Business Investment Company Small Business Investment Company

2500 2000 1500 1000 500 0 1985

Figure 19.2

1987

1989

1991

1993 1995 Year

1997

1999

2001

2003

Number of licensed SSBIC and SBIC firms, 1960 to 2003

The number of firms licensed in the program has been steadily shrinking since the mid1980s (Figure 19.2). The variation in the number of SSBIC firms has been low compared to the companion SBIC program. This may be a reflection of the reluctance of the Small Business Administration to embrace the program with much enthusiasm and the lack of an easily identifiable constituency (Bean, 2001). The program was never provided significant promotion and consequently grew slowly. To be fair, the slow growth in participation was also a reflection of the difficulty in finding suitable candidates. Investment patterns Although the number of SSBIC firms has been declining, the total amount of investment has been relatively constant (Figure 19.3). Figure 19.3 shows the investment trends of SSBICs, SBICs and private venture capital firms since 1985. (Note that the trend lines represent different scales of investment. The private sector investment has been divided by a value of 100 and the SBIC investment has been divided by a value of ten to allow direct comparison of the trends.) Figure 19.3 makes clear the small size of the SSBIC program versus the SBIC program (one-tenth the size) and the private venture capital industry (one-hundredth the size). Both the private firms (as measured by the Moneytree Survey) and the SBIC firms experienced the investment bubble of 1998 to 2001. The SSBIC firms did not participate in the bubble. This is because the industry mix of SSBICs tended not to include the highly speculative technology investments pursued by the other types of investment firms. So, while the SSBICs did not experience some of the very high return rates of the bubble, they also did not experience the collapse. This lack of participation in pursuit of very high rates of return had often been a criticism of the SSBIC program. History, however, has shown the risk of such a strategy, particularly for entrepreneurs that may well be less prepared by experience and opportunity. Although the number of SSBIC firms has been declining, the average deal value has been steadily increasing (Figure 19.4). This results in a generally upward trend for yearly

The rise and fall of specialized small business investment

Investment (millions of US dollars)

1200

297

Specialized Small Business Investment Company (SSBIC) Small Business Investment Company (SBIC)/10 Moneytree Survey/100

1000 800 600 400 200

0 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 Year

Figure 19.3

SSBIC, SBIC and private venture capital investment, 1985 to 2003 1000000

Average deal value (US dollars)

800000

Specialized Small Business Investment Company Small Business Investment Company

600000

400000

200000

0 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 Year

Figure 19.4

Average deal values for SSBIC and SBIC firms since 1985

investment total as shown in Figure 19.3. Compared with the SBIC program, the SSBIC program has exhibited stable investment patterns. Clearly the SSBIC sector does not follow the general trends of the venture capital industry the way the SBIC firms do. The total amount of investment contributed by SSBICs for the period 1985 to 2003 is shown by state in Figure 19.5. New York State attracted the greatest level of investment. Of that investment, the great majority was in New York City in the taxicab industry (as discussed later). Figure 19.6 presents the investment pattern by state for the SBIC firms

298

Figure 19.5

Total SSBIC investment by state, 1985 to 2003

299

Figure 19.6

Total SBIC investment by state, 1985 to 2003

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Table 19.1 SSBIC versus SBIC investment by industry groupings, top 1985 to 2003 investment (classes)

(SIC code)

SSBIC (%) (%) of 2 SBIC investment of all digit investments ($millions) investment group ($ millions)

(%) of all investment

Local and suburban transit (41) Taxicabs (4121) Eating and drinking places (48) Communications (48) Radio broadcasting stations (4832) Communication services (nec) (4899) Telephone communications (4813) Television broadcasting stations (4833) Hotel, rooming houses, camps (70) Hotels and motels (7011) Food stores (54) Grocery stores (5411) Personal services (72) Power laundries (7211) & dry cleaning (7216) Coin operated laundries (7215) Funeral service and crematories (7261) Wholesale trade (51) Miscellaneous retail (59)

1 248.6

43.8

1 246.4 164.9

5.8

59.8 48.0

2.1 1.7

677.9 471.5

2.1 1.4

Total investments 1985 to 2003

2 852.7

73.7

32 626.0

15.4

162.9 115.4

99.8

0.8

161.4 532.6

1.6

61.9

70.9

2 527.5 394.5

11.6

7.1

494.6

19.6

11.4

7.0

634.1

25.1

9.7

5.9

268.5

10.6

177.5

5.7

260.9

(%) of 2 digit group

6.2

176.8 122.5 94.7 118.1 76.4

122.5 99.6

4.3

7.7 15.6

0.4

81.6

66.6

64.7

216.7 143.1 203.5 28.0

19.7

16.6

9.2

4.5

5.4

4.6

33.5

16.5

77.4 4.1

0.7 66.1 0.6 13.8

to allow for comparison. It is clear that the two investment maps exhibit considerable differences. In particular, SSBIC investment is not of the first rank in California as it is in the case of SBICs or of the rest of the venture capital industry as a whole. Again the industry mix of the investments is responsible. Table 19.1 provides a breakdown of the SSBIC versus SBIC investments for the period 1985 to 2003 industrial groupings. By far the largest class is taxicab investments (SIC 4121) with about 44 per cent of all investment since 1985. This heavy concentration has

The rise and fall of specialized small business investment

301

been noted by both Bates (2001) and Porter (1997). The bulk of this investment is concentrated in New York City. The other major sectors such as restaurants, hotels, and food stores are all lower barrier to entry industries with lower growth potentials. Porter (1995, 1997) however, argues that these sectors are exactly the ones that should receive investment because they are realistic given market conditions in inner cities. The investment patterns of the SSBIC firms can be broken down by urban area to provide a more detailed picture of the investment. Figure 19.7 shows the investment for SSBICs for the period 1985 to 2003 by metropolitan area. As mentioned, the dominance of New York City is clear. It is a factor of ten times the investment of other major centers such as Chicago. A number of small urban areas are present for the lowest levels of investment, but generally only medium level and higher cities as measured by population are represented. SSBIC investment is punctiform in nature, like many other forms of investment. The SBA data provide information on the geographical preferences for investment as expressed by SSBICs. Table 19.2 shows the cross-tabulation of location of the SSBIC and the expressed preferences for investment. The table clearly shows a marked preference for nearby investment. This is consistent with the preferences expressed by other types of venture capital firms (Green, 2004). Taxi medallions In terms of the amount of money invested, the taxi cab medallion industry has been the dominant industry sector. The leading providers of taxi medallions financings have been Medallion Funding Corporation and its subsidiary, Freshstart Venture Capital Corporation. Both were licensed SSBICs (Freshstart became a regular SBIC in 2002, Medallion became a regular SBIC in 1997). The medallions are the licenses required to operate taxicabs in some major cities. The companies provide funding in several cities that include New York, Boston, Chicago, Newark, Philadelphia and Baltimore. The companies claim to have provided over $900 million in financing (Medallion Financial Group, 2004). If this claim is true the companies provide the bulk of financings in the industry for SSBICs (see Table 19.3). The funding level for medallions by SBIC firms is much lower. For medallion financings overall, New York City is overwhelmingly the city of choice. Boston and Chicago are of secondary importance, but have also experienced activity by Medallion Funding Corporation. The importance of medallion investment varies considerably by city (Figure 19.8). The figure shows those cities with substantial investments in taxi cab medallions. For very large cities such as New York, Chicago and Boston, that have regulated taxi industries, medallion financings are the dominant form of investment. While such investment certainly provides opportunity for individual drivers and small companies, it does little to stimulate the overall minority business environment. Regression analysis The SSBIC program was designed to provide increased opportunity for funding for minority entrepreneurs. It is not unreasonable therefore to expect that the level of minority population in a geographic area should be positively related to SSBIC investment levels. This hypothesis is tested by multiple regression where the variables are as follows:

302

Figure 19.7

SSBIC total investment, 1985 to 2003, by Metropolitan Area

303

4

West Coast

1 1

2

1

Local

1

SW

1

1

1

1

SE

1

2 4

NE

1 2

1

Mid Atlantic

Expressed regional investment preferences for SSBIC firms

Alabama California Washington DC Maryland Michigan Minnesota Mississippi New Jersey New York Ohio Puerto Rico Tennessee Texas Virginia

Table 19.2

1

1 1

1 1

2

Own State

1 1

2

1

2

1 1

National

1

1

1

1

Midwest

n34

1 7 1 1 3 1 1 2 8 1 1 2 3 2

Number of firms

304

$1 094 760 278 $108 523 615 $65 902 472 $1 893 977 0 $9 516 972

$1 280 597 314

Total

total

SSBIC

85.47 8.47 5.15 0.15 0.00 0.76

(%) of total

Tax medallion investments by major target cities

New York Chicago Boston Philadelphia Houston 20 other locales

City

Table 19.3

New York Chicago Boston Philadelphia Houston 7 other locales

City

$151 616 652

$143 441 803 $93 872 $3 594 000 $1 893 977 $2 000 000 $536 872

Total

SBIC

92.41 0.06 2.32 3.64 1.29 0.29

(%) of total

The rise and fall of specialized small business investment

Figure 19.8 ● ● ● ● ● ●

New York

Boston

Philadelphia

Los Angeles

Minneapolis

Baltimore

Chicago

Miami

West Palm Beach

305

Taxi cab medallion investment, selected cities

dependent variable: nontaxi Industry SSBIC financings 1985–2003, Totalpop: population of zipcode tract, LT10K: number of households with less than $10 000 income, PWHITE: percentage of zipcode tract classified as White, PBLACK: percentage of zipcode tract classified as Black, PHISP: percentage of zipcode tract classified as Hispanic.

A stepwise multiple regression was performed using SSBIC financings tabulated by threedigit zipcode matched with the year 2000 three digit zipcode census data. The census variables available are limited and included total population of the tract, the number of households in various income classes and the population in various racial categories (US Census, 2004). Percentages of White, Black and Hispanic populations in each tract were calculated. Because taxicab medallion financings are restricted to only a few urban areas with licensing requirements, these financings were removed from the SSBIC financings data. The regression equation has five statistically significant variables. The relationship is somewhat weak, with an r2  0.37. The significant variables, in order of entry, are total population of the zipcode tract, the number of households with less than $10 000 in income, the percentage of the zipcode tract classified as White, the percentage of the zipcode tract classified as Black and the percentage of the zipcode tract classified as Hispanic. The standardized coefficients show that the larger the population of a zipcode, the greater the likelihood of investment. Population is a surrogate for market potential and would naturally be related to business investment opportunity. This is particularly true for small firms that trade locally and would be the likely recipients of SSBIC investments. Since minority status is correlated to income, the second variable, number of households with less than $10 000 income, is also reasonable and it has the expected sign.

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The percentage of Whites in the zipcode had a negative effect on investment, as might be expected. Perhaps surprisingly, the percentage of Blacks and Hispanics also had a negative effect on investment values, although not as strong as that for Whites. Hispanics had the least negative effect, probably reflecting their dominance in small business ownership compared to Black entrepreneurs. The weakness of the regression can be partially attributed to the spatial concentration of SSBIC investments. Only 55.8 per cent of the threedigit zipcode tracts had any investment reported. Conclusions The Specialized Small Business Investment Company program started through political expediency and was plagued by politics for its entire existence. Although the program never reached the scale of its sibling, the Small Business Investment Company program, it has over the last three decades provided billions of dollars of investment for minority entrepreneurs. This funding was concentrated in low barrier-to-entry sectors that had a strong service component. The program has largely funded industries with low barriers to entry. This reduces the possibilities for substantial growth rates for funded companies, as seen in private venture capital portfolios. If the program is judged on its ability to attract minority investment into strong growth sectors, it receives a poor grade. If, on the other hand, it is judged solely on the provision of capital to minority entrepreneurs, it was more successful. The program provided funding for firms that might otherwise have gone unfunded. Both the locations of the SSBIC firms and their investments have been largely concentrated in larger urban areas, particularly New York City. The bulk of the investments have been in taxi cab medallions. These medallions are virtually risk-free for the investor because they have historically appreciated in value and are highly liquid investments. This is asset-based lending, and probably not what the framers of the enabling legislation had in mind. Although the number of SSBIC firms has been falling since the mid-1980s and is now capped with no new licenses, the level of investments made and their size have steadily increased over the same period. This indicates that the viability of the programs’ participating firms has been increasing. The cancellation of the program could be viewed as inevitable as the SBIC program and private venture capital firms become more open to minority participation. The regression analysis of three-digit level zipcodes shows that SSBIC investments are statistically related to levels of total population (a surrogate for market size) and the ethnic breakdown of that population. The relationship, although somewhat weak, indicates that the program has been meeting the mandate of providing investment funds for minorities. The program has served as an important social policy experiment. As Bates (2001) stated, Small Business Administration (SBA) and its programs never really established a strong relationship with the small business sector in the United States. This was particularly true for the Specialized Small Business Investment Company program. When the program was terminated – having taken the taxi to oblivion – there was very little opposition from small business organizations or from the SBA. Note 1. The authors thank John Wilmeth of the Small Business Administration, Investment Division for his assistance in providing data.

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References Bates, T. (1997), ‘The minority enterprise small business investment company program: institutionalizing a nonviable minority business assistance infrastructure’, Urban Affairs Review, 32(5), 683–703. Bates, T. (1998), ‘Is the US small business administration a racist institution’, Review of Black Political Economy, 26(1), 89–104. Bates, T. (2001a), ‘Financing the development of urban minority communities: lessons of history’, in J.L. Blanton, A. Williams and S.L.W. Rhine (eds), Changing Financial Markets and Community Development: A Federal Reserve System Community Affairs Research Conference, Washington D.C., pp. 217–36, (http://www. chicagofed.org/cedric/files/cfmacd_conference_book.pdf). Bates, T. (2001b), ‘Minority-owned businesses: public policy approaches’, Occasional paper Series Number 6, Wayne State University, College of Urban, Labor and Metropolitan Affairs, Detroit Michigan. Bates, T. and W.B. Bradford (2003a), ‘A study of venture capital investment in minority business’, National Association of Investment Companies Journal, 4, 1, 5–6. Bean, J.J. (2001), ‘Big government and affirmative action: the scandalous history of the small business administration’, Lexington, KY: University of Kentucky Press. Bond, C. (1996), ‘Floor statement Division D, the Omnibus Appropriations Bill the Small Business Programs Improvement Act of 1996’, US Senate (http://sbc.senate.gov/104bills/ hr 3719fl.html). Catalogue of Domestic Federal Assistance (CDFA) (2004), ‘59.011 small business investment companies’ (http://12.46.245.173/pls/portal30/SYSTEM.PROGRAM_TEXT_RPT.SHOW?p_arg_namesprog_nbr&p_ arg_values59.011). eSource Center (2006), ‘Overview – small business investment companies (SBIC)’ (http://www.onlinequity.com/ esource_center/business/sba/sbic_overview.htm). Green, M.B. (2004), ‘Venture capital investment in the United States 1995–2002’, The Industrial Geographer, 2(1), 2–29. Greenspan, A. (1999), ‘Changes in small business finance’, Federal Reserve System Research Conference on Business Access to Capital and Credit, Arlington, Virginia, 9 March (http://www.federalreserve.gov/boarddocs/ speeches/1999/19990309.htm). Kotlowski, D. (1998), ‘Black power – Nixon style: the Nixon administration and minority business enterprise’, Business History Review, 72(3), 409–46. McNaughton, R.B. and M.B. Green (1989), ‘Venture capital investment in minority business enterprise: an evaluation of MESBIC investment preferences’, Environment and Planning C, 7, 193–204. Medallion Financial Group (2004), ‘Lending solutions – taxi medallion loans’ (http://www.medallionfinancial.com/lending_taxmedallion.htm). Mukherjee, S. (1996), ‘Congress infuses small biz’, Denver Business Journal, 4 Oct (http://www.bizjournals.com/ denver/stories/1996/10/07/smallb2.html). Octopus Asset Management (2003), ‘Responses to bridging the finance gap: a consultation on improving access to growth capital for small businesses’, Small Business Service, Government of the United Kingdom (http://www.sbs.gov.uk/). Office of the Inspector General (2000), ‘Audit report results act performance measurement for the small business investment company program’, Audit Report Number 0-25, Washington, DC. Papadimitriou, S. and P. Mourdoukoutas (2002), ‘Bridging the start-up equity financing gap: three policy models’, European Business, 14(2), 104–10. Porter, M. (1995), ‘The competitive advantage of the inner city’, Harvard Business Review, 73, 55–71. Porter, M. (1997), ‘New strategies for inner-city economic development’, Economic Development Quarterly, 11(1), 11–27. Rubin, J.S. (2001), ‘Community development venture capital: a double-bottom line approach to poverty alleviation’, in J.L. Blanton, A. Williams and S.L.W. Rhine (eds), Changing Financial Markets and Community Development: A Federal Reserve System Community Affairs Research Conference, Washington, D.C., pp. 121–54 (http://www.chicagofed.org/cedric/files/cfmacd_conference_book.pdf). Small Business Administration (SBA) (1999), ‘President Clinton, SBA offer new markets investment initiatives to Fuel Business and Job Creation in Rural, Inner City Areas’, SBA News Release (http://www.sba.gov/news/ archive99/99-04.html). Small Business Administration (SBA) (2003), ‘Small business investment companies (SBIC) program’ (http://www.sba.gov/INV/specialreport.html). Small Business Administration (SBA) (2004), ‘The SBIC program’ (http://www.sba.gov/INV/programbasics.pdf). Small Business Administration (SBA) (2006a), ‘Frequently asked questions’ (http://app 1.sba.gov/faqs/faqindex. cfm?areaID31). Small Business Administration (SBA) (2006b), ‘Overview: the SBIC program’ (http://www.sba.gov/INV/textonly/ overview.html). Small Business Administration (SBA) (2006c), ‘New markets venture capital investment program’ (http://www. sba.gov/INV/nmvcfaqs.doc).

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Small Business Administration (SBA) (2006d), ‘About small disadvantaged business (SDB) certification and eligibility’ (http://www.sba.gov/sdb/indexaboutsdb.html). Sonfield, M.C. (2001), ‘Re-defining “minority business”: challenges and opportunities’, Journal of Developmental Entrepreneurship, 6(3), 269–76. Staebler, M.B. (2004), ‘An overview of the small business investment company program’ (http://library. lp.findlaw.com/articles/file/00081/003499/title/subject/topic/banking%20%20finance%20law_other/filename/ bankingfinancelaw_1_17). Teckler, M.D. (2004), ‘Evaluating capital sources SBICs in the 2004 funding cycle’, Venture Capital Journal, 1 March, 1. US Bureau of the Census (2002), ‘North American Industry Classification System, revisions for 2002’ (http://www.census.gov/epcd/naics 02/). US Bureau of the Census (2004), ‘American Factfinder’ Census 2000 Summary File 3 (SF 3) Sample Data, Detailed Tables (http://factfinder.census.gov/servlet/DTSubjectShowTablesServlet?_ts106241327171). US Bureau of the Census (2006a), ‘Black-owned firms 2002’, 2002 Economic Census, Survey of Business Owners, Company Statistics Series (http://www.census.gov/prod/ec02/sb0200csblk.pdf). US Bureau of the Census (2006b), ‘Hispanic-owned firms 2002’, 2002 Economic Census, Survey of Business Owners, Company Statistics Series (http://www.census.gov/prod/ec02/sb0200cshisp.pdf). Van Fleet E. and D. Van Fleet (1985), ‘Entrepreneurship and black capitalism’, American Journal of Small Business, Fall issue, 31–40. Whistler, M.J. and H. Wichmann Jr (1979), ‘Providing economic opportunity to small minority enterprises’, Journal of Small Business Management, 17, 1–10.

20 Does ethnicity matter? A study of the strategic intent of Internet ventures founded by ethnic and ‘non-ethnic’ entrepreneurs Rajeswararao (Raj) Chaganti, Radha Chaganti and Monica Treichel

Introduction Waldinger and Aldrich (1990), among other scholars interested in ‘ethnic entrepreneurship’ in the US, examined the incidence of entrepreneurship in different ethnic communities and offered several theories to explain the distinct patterns of incidence (Bates, 1994a; Bonacich and Modell, 1980; Light, 1972, 1980). One is the cultural theory, which posits that the culture of some ethnic groups predisposes members of the community to engage in entrepreneurial behavior (Light, 1972). Another is the sojourner theory (Bonacich, 1987). According to this theory, immigrants often see themselves as temporary residents of the US and, hence, take up economic activities, such as service-oriented ventures, that enable them to return to the home country in the long run. In addition, scholars offer lack of opportunity (Aldrich and Waldinger, 1990; Bonacich and Modell, 1980; Light, 1980) as another explanation. Self-employment-based ventures are started by members of certain ethnic communities because they lack personal resources, including language proficiency and education to seek attractive economic opportunities in the broader markets. These ventures perform rather marginally on sales and employment growth. However, some researchers (Fairlie and Meyer, 1996) question these theories. In fact, Bates’s (1994b) thesis suggests that certain ethnic entrepreneurs who do attain the requisite human capital in education and skills target the broader non-ethnic markets and do not turn to the ethnic networks (Chaganti and Greene, 2002). Concurrently, performance of ventures founded by these ethnic entrepreneurs tends to be strong. From a different perspective, research on a ‘top management team’ (TMT) argues that organization is a reflection of its top executives. A long stream of research on TMTs concludes that TMT characteristics do make a difference to the strategic choices that management teams make. Ethnic entrepreneurs, as members of a venture’s founding team, are valuable resources for new ventures. According to Barney, ‘A firm’s resources and capabilities include all of the financial, physical, human and organizational assets used by a firm to develop, manufacture, and deliver products or services to its customers. They include intangible resources, such as the history, relationships, trust, and organizational culture’ (1995: 50). Resources can be physical, human, organizational assets and skills (Barney, 1991). The lead entrepreneur and her venture team members enable the new venture to seize opportunities, build competitive advantage or at least achieve competitive parity. Ventures whose TMTs are able to accumulate resources that are ‘specialized and difficult-to-replicate or non-imitable resources’ tend to attain a sustainable stream of rents in the market place. While the influence of TMT characteristics on strategy and performance in relatively large firms has been extensively researched, research is limited on the influence of top 309

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management team characteristics on new venture performance. Carpenter, Pollock and Leary (2003) asserted that the top management teams in new ventures, compared to teams in relatively old and established ventures, are valuable because, in new ventures, the top management represents a larger portion of the firm’s resources. In addition, Carpenter, Pollock and Leary note that TMT’s decisions are critical to venture’s survival because of the unique challenges that new ventures face and the short time period during which new venture’s success is determined. The key founder and the characteristics of the new venture interact to influence the survival and growth of the venture. Chaganti, DeCarolis and Deeds (1996) found that the entrepreneurs’ characteristics figure heavily and centrally in the evaluation of the venture by potential investors and creditors. Therefore, TMT theory will be useful in studying the impact, if any, of entrepreneurs’ ethnicity on the strategic intent of new ventures. New ventures, because of their short history, and the stage of development that they are in, cannot be reliably measured on the usual strategy and performance variables, such as growth in sales and earnings, or return on equity. Yet entrepreneurs and founding teams in nascent organizations have visions, ambitions, designs, and intents with respect to strategy that they wish to pursue in creating value. The initial business plan, and the prospectus issued at the time of initial public offering attempt to communicate entrepreneurs’ intended strategies and the odds of success of the venture. Indeed, prospective investors base their investment decisions on entrepreneurs’ ‘strategic intents’. According to Hamel and Prahalad (1989), strategic intent ‘envisions a desired leadership position and establishes the criterion the organization will use to chart its progress’. Strategic intent captures the essence of winning, it is stable over time, and sets a target that deserves personal effort and commitment. However, strategic intents of new ventures with ethnic presence in the founding team have not been studied. Therefore, this study will examine the relationship between ethnic presence and strategic intents of new ventures. Research propositions Entrepreneurship research, specifically ethnic entrepreneurship research, can usefully draw on TMT literature, in that it helps to consider the impacts of not only the lead entrepreneur but also the whole team that is associated with the enterprise. The challenges faced by top executives of relatively new ventures and the challenges faced by the top executives of relatively large and established firms are different and distinct. Although top executives in both new ventures and old firms may be entrepreneurs, for ‘the manager of a new venture, the starting point is typically a chaotic organization with minimal structure and the time orientation . . . is hypnotically centered on the future. For the managers of an established firm, the starting point is typically a bureaucratic organization with a rigid structure and a tendency to stay locked in the past’ (Eisenhardt, Brown and Neck, 2000: 52). Therefore, it is useful to distinguish the teams associated with relatively new ventures from the teams associated with relatively large and established corporations. In this chapter, we will refer to the former set as founding teams. The literature on TMTs is replete with studies of demographics of top executives. The characteristics included in the studies range from educational background, age (for example, Boeker, 1988), previous work experience (for example, Eisenhardt and Schoonhoven, 1990), knowledge and skill, social status and affiliations (for example, D’Aveni, 1990), to international experience (for example, Reid, 1981). Smith, Smith, Olian, Sims, O’Bannon and

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Scully (1994), in their study of top management team demography and processes in hightech firms, tested three models of TMTs: a demography model – demographic characteristics of the top executives dominate the explanation of firm performance, and processes in the firm do not contribute to performance; a process model – process contributes incrementally and directly to performance over and above team demographic characteristics; and an intervening model – process directly affects firm performance and process is affected by team demographics. The results of Smith et al.’s study show that empirical results do not neatly fit into any of the three models. Instead, some demographics directly affect performance, while some others affect processes, viz., social integration and communication. The top management team behavior is more complex than any of the theories suggest. Presence of an ethnic person in a founding team produces a degree of heterogeneity within the team. In a review of the multiple effects of diversity in organizational outcomes, Milliken and Martins (1996), based on an extensive review of literature on diversity in groups, reported: ‘heterogeneity in groups . . . offers both a great opportunity for organizations as well as an enormous challenge. On the one hand, some research suggests that more diverse groups have the potential to consider a greater range of perspectives and to generate more high-quality solutions than less diverse groups. . . . On the other hand, the greater the amount of diversity in a group or an organizational subunit, the less integrated the group is likely to be . . . and the higher the dissatisfaction and turnover’. Research completed on relatively small groups also points to rather conflicting and inconclusive findings: diversity does seem to have positive effects at the individual and small-group levels (Cox, Lobel and McLeod, 1991), but, according to other studies, notably, Pelled, Eisenhardt and Xin (1999) and Tsui, Egan and O’Reilly (1992), heterogeneous groups perform rather more poorly than homogeneous groups. In the top management team (TMT) literature, out of 116 studies catalogued on top management team heterogeneity, 75 studies yielded no significant results. Team heterogeneity was associated with certain managerial processes (such as, group consensus), which in turn might influence firm performance, but there seemed to be no direct path from TMT heterogeneity to firm strategy or performance. To what extent these findings extend to heterogeneity with the top management team arising from ethnic presence is not clear. Does ethnic presence in a founding team make any difference to strategic intent of the venture? Being a voluntary immigrant seems to increase the opportunity-seeking orientation of an individual relative to a comparable native born. Such opportunity-seeking behavior is likely to be particularly pronounced among entrepreneurs who are firstgeneration immigrants. While their distinctive cultural heritage could differentiate these entrepreneurs from the mainstream entrepreneurs in the US, still, as McGrath and MacMillan pointed out, entrepreneurs ‘hold a basic set of beliefs about themselves’ (1992: 419) such as ‘being entrepreneur means being creative’ and ‘these sets of beliefs transcend cultures’ (ibid.: 420). Thomas and Mueller (2000) reiterate that, across varied cultures, the entrepreneurial predisposition is prominent on innovativeness consisting of inventiveness, imaginativeness, and creativity. Logically, therefore, first-generation entrepreneurs would combine the immigrant and entrepreneurial characteristics, and hence their strategic actions would be more attuned towards bold and creative business moves. Of course, the level of actual success achieved by their ventures would depend on a number of additional factors, such as the individual’s human and social capital, nature

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of the business climate and institutional environment in the host country. Accordingly, we proposed the following: P1 New ventures with ethnic presence in a founding team tend to have stronger strategic intents than new ventures with no ethnic presence in the founding team. The venture Cross-cultural studies on entrepreneurship suggest that contextual variables, like public policies and the institutional environment in which ethnic entrepreneurs are situated, combined with individual characteristics, can make a difference to the enterprise success (Tiessen, 1997). We will extend this line of thinking on the contextual variables to include the characteristics of the new venture itself. Strategic intent invariably calls for ‘stretching’ the venture’s existing capabilities; it forces the entrepreneur and her team to be inventive and to make the most of the limited resources. The odds that an ethnic entrepreneur can actually accomplish her strategic intent, in part, hinges on the context in which the firm operates. Decisions and deals that entrepreneurs make in early stages of venture development define the ‘strategic circumference’ of the venture (Timmons, 1999). A variety of attributes of new ventures describe the context: quality of, and risk associated with the opportunity that is at hand, quality of the venture team, bargaining power of the team, fund of resources that is in supply and accessible, length of time before the venture will run out of cash, among others. Financial condition of the new venture and cash burn rate determine the range of options that the ethnic entrepreneur and his venture team face. It is in that financial context that the ethnic entrepreneur attains or does not attain her strategic intents. Therefore, we propose: P2 The relationship between ethnic presence in the founding team and venture’s strategic intent is moderated by the financial context of the new venture. Founding team & its characteristics While ethnic presence in the founding team affects strategic intent, demographic characteristics of the team with ethnic entrepreneur members may diminish, enhance, or suppress the effect of ethnicity on the venture’s strategic intent. Ethnic and non-ethnic entrepreneurs on founding teams, just like other top executives, lead their teams and work with the team members. Group cohesiveness, group dynamics, and group productivity are at work, and other team members serve as resources, too. Accordingly, many group characteristics and processes impact strategy and performance of the venture either directly or indirectly. From the extensive body of TMT literature, we find two demographic attributes as particularly significant for our study: team size and average age of the members. Founding team size Relatively large teams tend to suffer from a lack of social integration, strained group communications, and a lack of group cohesion (Tiessen, 1997). Relatively large teams tend to experience frequent opportunities for conflict, because relatively large teams offer greater possibilities for the formation of sub-groups, each with its own power base (Bales and Borgatta, 1966). Looking at the positive side, relatively large teams can offer a wealth of information and the venture can benefit from the intellectual wealth that is within the group. These positives can be particularly valuable for new

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ventures that have to navigate ambiguous, unstructured, rather risky situations and the benefits associated with relatively large size venture teams may outweigh the downside risks. In any case, ethnic entrepreneurs’ contribution to the strategic intents may depend on the size of the team that he is a member of. Age of the founding team Hambrick and Mason (1984) asserted that relatively young teams, compared to relatively old teams, take great risks and pursue novel and unprecedented approaches. Hambrick and Mason proposed that firms managed by young managers, compared to the firms managed by old executives, grow fast, and profits of firms with young teams tend to vary significantly from the industry average. The founding team the ethnic entrepreneur is associated with can make a difference to the contribution of the ethnic top executive. Therefore, we offer the following proposition for testing: P3 The relationship between ethnic presence in the founding team and the venture’s strategic intent is moderated by the team size and age of the team. Study design To test the propositions, we examined the Security & Exchange Commission filings of 250 Internet ventures that have gone public over a three-year period spanning 1998 and 2000 in the US. Internet-based new ventures are ideal subjects for our study: over the decade or so, Internet-based technologies created a ‘hot spot’ of unprecedented intensity in the financial market; Internet-based technologies spawned several hundred new ventures, approximately 300 of the ventures have gone public within the last three years or so, and market value of the publicly held Internet ventures was $1.4 trillion dollars at the peak of the stock maker; and entrepreneurs from the ‘so-called’ ethnic communities, such as, India, played an important role as lead entrepreneurs, founding team members, and as venture capitalists. For the purposes of our study, new ventures with ethnic presence were defined as ventures that have at least one founding team member who received his or her undergraduate degree from an institution in one of the following countries: Korea, Japan, Taiwan, Hong Kong, People’s Republic of China, Southeast Asia (Vietnam, Thailand, Indonesia, Singapore), South Asia (India, Bangladesh, Pakistan), Mexico, or Puerto Rico. In contrast, a venture that does not have any founding team members with undergraduate degrees from institutions in these countries was categorized as a venture with no ethnic presence. Per this definition, among 250 Internet ventures that have gone public in 1998 to 2000, we identified 27 ventures (about 10 per cent) with ethnic presence. Our study design called for matching each new venture with ethnic presence with a different venture that does not have any ethnic presence. The criterion used in matching was that both ventures in the pair must be based on the same e-business model. That is, both ventures create, produce, and distribute value in more or less the same way, so we can say with a degree of confidence that both ventures are in the ‘same business’. In identifying the e-business models and matching the Internet ventures, we used the typology suggested by Applegate and Collura (2000). For the purposes of this chapter we compared 27 Internet ventures with ethnic presence with 13 ventures that do not have any ethnic presence in the founding teams. That brings the total number of Internet ventures analyzed in this paper to n40 (27 ventures

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with ethnic presence  13 ventures that do not have any ethnic presence). For each new Internet venture included in the study, the following attributes were examined. Strategic intent Strategic intent of ventures is revealed in the objectives of the venture, plans for expansion, speed with which they would like to move ahead of rivals in seizing the opportunity, aggressiveness shown in building competitive edge, expected proportion of dollars allocated to domain creation and domain expansion activities, such as research and development, new product development, market development and market expansion, projected capital expenditures, anticipated financial leverage (Hamilton, Eskin and Michaels, 1998). From the array of possible measures of strategic intent, we selected the following two measures: (a) time to IPO as measured by the number of months since inception of the venture to the time of initial public offering; (b) financial exposure as measured by ratio of debt to total capital. Financial context In nascent ventures and ventures that are in very early stages of development, resource poverty, notably shortage of financial resources, raises the odds of failure. The ‘distance to go’ before reaching the breakeven point, size of the funding base, and the rate at which the new venture is burning its cash, determined the bargaining power of the entrepreneur and the range of options she has. We measured the financial context of the new venture in the following three ways: (a) extent of profit (loss) was measured as ratio of profit (loss) to total revenue; (b) cash resources was measured as ratio of cash to total assets; (c) time to ‘out of cash’ was measured as ratio of cash to profit (loss). Founding team characteristics We included the following two attributes of the venture: (a) founding team size was measured as the number of individuals in the team (not including directors and key employees); and (b) age of the founding team was measured as the average of the chronological age of team members (not including directors and key employees). Study results Descriptive statistics (mean and standard deviation) for all variables in the study are presented in Table 20.1. On average, Internet ventures that we researched have taken 46.47 months from inception to go IPO; and average financial leverage of the ventures was 0.92. With respect to the financial context of the venture: average ratio of profit (loss) to revenue was
3.46; average ratio of cash resources to total assets was 23.90; and average of cash to profit (loss) ratio was
2.0. Finally, average size of the new venture team was 8.60 and the average age of the founding team was 40.80 years. In Table 20.2, we report results from t-tests comparing mean values for strategic intents of ventures with ethnic presence and mean values for ventures that do not have ethnic presence. Among the three strategic intent variables examined, ventures with ethnic presence tended to take less time to IPO, compared to ventures that do not have any ethnic presence (42.82 months versus 55.00 months). However, the difference between the two groups was not significant. For the debt–capital ratio measure of strategic intent, the two groups of ventures were significantly different. Internet ventures with ethnic presence tended to have a lower debt–capital ratio (mean0.54 for teams with ethnic entrepreneur members, and 1.85 for non-ethnic teams, t2.21, p0.05).

Does ethnicity matter? Table 20.1

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Descriptive statistics

Time taken to IPO (months from inception) Ratio of debt–total capital Founding team size Age of founding team Ratio of profit (loss) – revenue Ratio of cash resources – total assets Cash burn rate

n

Minimum

40

8

39 40 40 38 35


1.18 2 30
26.67 0.00

37


50.37

Maximum

Mean

std. deviation

46.47

27.35

4.99 21 52 22.10 1.15

0.92 8.60 40.80
3.46 0.47

1.46 3.39 4.40 7.91 0.31

6.76


2.00

8.48

156

Table 20.2 Strategic intents of new Internet ventures: a comparison of ventures with ethnic presence and ventures that do not have ethnic presence in founding teams (n 40) Ethnic presence1

n

Mean

std. deviation

Time to IPO (months from inception)

0 1

12 28

55 42.82

36.71 22.03

t-value1.07 n.s.

Debt–total capital ratio

0

11

1.85

1.83

1

28

0.54

1.12

t-value2.21 significant at p0.05

Note: 1 0ventures that do not have any ethnic presence in founding team; 1 ventures that have ethnic presence in founding teams.

Therefore Proposition 1, which argued that new ventures with ethnic presence tend to have stronger strategic intent than new ventures that do not have any ethnic presence, did not find support with one measure of strategic intent, viz., time taken to IPO, and did find support with respect to new ventures’ financial leverage. A series of analyses of variance was completed to test the moderating effects of the venture’s financial context on the linkages between ethnicity of TMT and the strategic intent measures. Only significant results are presented in Table 20.3. Among the three measures of financial context, two, namely, the extent of loss at the time of IPO and the venture’s cash burn rate, did not significantly moderate the relationship between ethnic presence and strategic intent, and these results are not shown. In contrast, the remaining financial context variable cash resources of the new venture had a significant effect on time to IPO, as seen in Table 20.3. Further, the results showed that both cash resources of the venture (Eta square0.17, p0.02) and ethnic presence (Eta square0.11, p0.06) seemed to affect the time taken to IPO directly; in addition, cash resources and ethnic presence seemed to interact and jointly determine the time to IPO (Eta square0.11, p0.07). The results are mapped in Figure 20.1. Results for cash burn rate were non-significant and hence

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Table 20.3 Effects of ethnic presence and cash resources of venture on time taken to IPO by new Internet ventures; R Squared 0.237 (Adjusted R squared  0.163) Source

Sum of squares

Corrected model

d.f.

Mean square

F

6401.82

3

2133.94

3.21

63 877.38

1

63 877.38

96.08

Cash resources of venture

4404.71

1

4404.71

6.63

Cash resources of venture ethnic presence Ethnic presence

4397.76

1

4397.76

6.61

3905.66

1

3 905.66

5.87

20 610.86 108 519.00 27 012.69

31 35 34

664.87

Intercept

Error Total Corrected total

Eta square & sig. 0.19 0.04 0.64 0.00 0.17 0.02 0.11 0.07 0.11 0.06

X 66 months

Relatively cash poor ventures Time to IPO (months)

X 46.2 months Relatively cash rich ventures X 43.2 months

33 months X

Ventures with no ethnic presence

Ventures with ethnic presence

Median split on cash resources = 0.4527

Figure 20.1

Relation between ethnic presence, venture’s cash resources, and time to IPO

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Table 20.4 Effects of ethnic presence and age of founding team on time taken to IPO by new internet ventures; R Squared 0.258 (Adjusted R squared0.196) Source

Sum of squares

d.f.

Mean square

F

Eta square & sig. 0.26 0.01 0.08 0.08 0.22 0.00 0.12 0.04 0.10 0.05

Corrected model

7517.31

3

2505.77

4.17

Intercept

1906.55

1

1906.55

3.17

Age of founding team

5946.35

1

5946.35

9.89

Ethnic presence  age of founding team Ethnic presence

2871.84

1

2871.84

4.78

2512.91

1

2512.91

4.18

36 40 39

601.35

Error Total Corrected total

21 648.66 115 563.000 29 165.98

are not shown. Thus, overall, the results with the extent of loss and cash burn rate did not support Proposition 2, but this proposition found support with cash resources of the venture. Finally, between the two founding team characteristics that were examined in the study, founding team size did not show any role in moderating the relationship between ethnic presence and any of the measures of strategic intent. These results are not presented. Table 20.4 presents the results for analysis of variance on age of team and the strategic intent measure of time taken to IPO. Age of the founding team showed significant effect on time taken to IPO. Table 20.4 shows that both founding team’s age (Eta square0.22, p0.00) and ethnic presence (Eta square0.10, p0.05) had significant and direct effect on time to IPO. Further, the two variables seemed to interact (Eta square0.12, p0.04) and jointly impacted the time taken to IPO. The results are mapped in Figure 20.2. Overall, the results show that Proposition 3 did not find support with one of the contextual variables, founding team size, but did find support with the other variable, viz., age of the team. Discussion and conclusions The study presented in this chapter focused on the question: does ethnic presence in the founding team make any difference to the strategic intent of the venture? Answer: Yes, ethnic presence does make a difference, but the effect of ethnic presence depends on the type of strategic intent that is under consideration, the financial context of the venture, and other founding team characteristics. Among the two strategic intent measures that we examined, results for the debt-tocapital ratio, an indicator of the venture’s financial leverage, suggest that there is a strong and significant association between ethnic presence and financial risk exposure. When it comes to funding the venture, there seems to be a pecking order. Ventures with ethnic presence seemed to rely less on debt. To the extent that capital structure signals the founding

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X 61.5 months Relatively old founding teams Time to IPO (months) Relatively young founding teams

X 43.63 months

42 months X X 41.75 months Ventures with no ethnic presence

Ventures with ethnic presence

Median split for the age of the founding team = 40.88 years Figure 20.2

Relation between ethnic presence, age of the founding team, and time to IPO

team’s outlook for the venture, founding teams that have ethnic presence seemed to be less bullish about their outlook. Another possible interpretation of the result for the association between debt ratio and ethnic presence is that these ventures may have a rather limited range of options with respect to funding sources and, therefore, rely rather heavily on equity capital. Conceivably, founding teams with ethnic presence may be lacking in the bargaining power to seek debt capital, and therefore, are forced to distribute the risk among the shareholders and other investors. It is noteworthy that the relatively high financial risk exposure that is seen in ventures with ethnic presence is not dependent on the financial context of the venture or its founding team characteristics. Ethnic presence seemed to have an impact on the time to IPO. However, the direction of its effect is dependent on the financial context of the venture and on the age of the founding team. As shown in Figure 20.1, new Internet ventures that are cash rich seemed to take more time to IPO than ventures that do not have any ethnic presence. In contrast, new Internet ventures that are cash poor seemed to take less time than ventures that do not have any ethnic presence. In cash-poor ventures, the founding team’s motivation to go to IPO seems to be to bolster the resource base and lower the odds of failing on account of resource shortage. Such a motivation appeared to be stronger in ventures with ethnic presence. In cash-rich ventures, motivation to seek equity capital may not be that strong; therefore, ventures with ethnic presence appeared to be willing to delay the IPO and wait for a more opportune time. In sum, not all ventures with ethnic presence rush to the equity

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markets with the same speed. Their aggressiveness in going to the equity markets seemed to depend on the cash resources of the venture, to begin with. Along the same lines, ethnic presence seemed to affect the time to IPO, but the direction of impact was dependent on the age of the founding team: as shown in Figure 20.2, in Internet ventures that have relatively young teams, ethnic presence seemed to lengthen the time to IPO. However, in ventures that have relatively older teams, ethnic presence seemed to shorten the time to IPO. Prior researchers on TMT did not explicitly look at ethnic background of the top executives when considering the age of the team, but this stream of research suggested that younger teams tend to be more aggressive in seizing opportunities. Our findings are in accordance with TMT theory, in that age of the team showed a significant bearing on the time to IPO, but in the opposite direction. Our findings thus seem to add some depth to prior TMT research studies: ethnic background of the team members has a distinct and different effect on strategic intent. Further, our results suggest that the effect of ethnic presence tends to vary across age groups. The ethnic entrepreneurship literature has posited that values that promote entrepreneurship are more alike than different across cultures. At venture level, however, we did find that ventures with ethnic presence did behave differently from ventures that did not have any ethnic presence. Depending on the specific measure of strategic intent that is under consideration, ethnic presence in the founding teams does make a difference, either singly or in combination with financial context of the firm and age of the founding team. The results presented here are preliminary in nature. They need to be confirmed by matching all of the 27 ethnic-presence Internet IPOs with comparable non-ethnic Internet IPOs. Further, generalizability of the results to new and old economy ventures remains to be tested by including ventures from old economy in the study. In this study we have looked at ethnic presence without regard to the position that is held by the person or number of ethnic persons in the team. TMT literature on the relative power of top team members would suggest that ethnic persons in positions of power (for example, lead entrepreneur, lead investor) could have greater influence on the strategic intent than ethnic persons in relatively less powerful positions. Further, size of ethnic presence, that is, number of ethnic persons in the team, can make a difference to the strategic intent. These and other issues may be examined in future studies. References Aldrich, H. and R. Waldinger (1990), ‘Ethnicity and entrepreneurship’, Annual Review of Sociology, 16, 111–35. Applegate, L. and M. Collura (2000), Overview of E-business models, Boston, MA: Harvard Business School Publishing. Bales, R.F. and E.F. Borgatta (1966), ‘Size of group as a factor in the interaction profile’, in A. Paul Hare, Edgar F. Borgatta and Robert F. Bales (eds), Studies in Social Interaction, New York: Knopf, pp. 495–512. Barney, J. (1991), ‘Firm resources and sustained competitive advantage’, Journal of Management, 17(1), 99–120. Barney, J. (1995), ‘Lookng inside for competitive advantage’, Academy of Management Executive, 9(4), 49–61. Bates, T. (1994a), ‘An analysis of Korean immigrant-owned small business startups with comparisons to African American and non-minority-owned firms’, Urban Affairs Quarterly, 30(2), 227–48. Bates, T. (1994b), ‘Social resources generated by group support networks may not be beneficial to Asian immigrant-owned small businesses’, Social Forces, 72, 671–89. Boeker, W.H. (1988), ‘Organizational origins: entrepreneurial and environmental imprinting at the time of founding’, in G.R. Carroll (ed.), Ecological Models of Organizations, Cambridge: Ballinger Publishing Company, pp. 33–51. Bonacich, Edna (1987), ‘Making it in America’, Sociological Perspective, 40(4) (April), 446–66. Bonacich, E. and J. Modell (1980), The Economic Basis of Ethnic Solidarity: Small Business in the Japanese– American Community, Berkeley: University of California Press.

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Carpenter, M., T. Pollock and M. Leary (2003), ‘Testing a model of reasoned risk-taking: governance, the experience of principals and agents, and global strategy in high-technology IPO firms’, Strategic Management Journal, 24(9), 802–20. Chaganti, Radha and Patricia, G. Greene (2002), ‘Who are ethnic entrepreneurs? A study of entrepreneurs’ ethnic involvement and business characteristics’, Journal of Small Business Management, 40(2), April, 126–43. Chaganti, Rajeswararao, Dona DeCarolis and David Deeds (1996), ‘Predictors of capital structure in small ventures’, Entrepreneurship: Theory and Practice, 20(2), Winter 1995 (released Fall 1996), 7–18. Cox, T., S.A. Lobel and P.L. McLeod (1991), ‘Effects of ethnic group cultural differences on cooperative and competitive behavior on a group task’, Academy of Management Journal, 4, 827–47. D’Aveni, Richard (1990), ‘Top management prestige and organizational bankruptcy’, Organization Science, 1(2), 121–42. Eisenhardt, K.M. and C.B. Schoonhoven (1990), ‘Organizational growth: linking founding team, strategy, environment, and growth among U.S. semiconductor ventures, 1978–1988’, Administrative Science Quarterly, 35, 504–29. Eisenhardt, K.M., S.L. Brown and H.M. Neck (2000), ‘Competing on the edge’, in G. Dale Meyer and Kurt A. Heppard (ed.), Entrepreneurship as Strategy: Competing on the Entrepreneurial Edge, Thousand Oaks: Sage Publications, pp. 49–62. Fairlie, Robert W. and Bruce D. Meyer (1996), ‘Ethnic and racial self-employment differences and possible explanations’, Journal of Human Resources, 31(4), 757–93. Hambrick, D.C. and P.A. Mason (1984), ‘Upper echelons: the organization as a reflection of its top managers’, Academy of Management Review, 9(2), 193–206. Hamel, G. and C.K. Prahalad (1989), ‘Strategic intent’, Harvard Business Review, May–June, 63–76. Hamilton, R.D.I., E.D. Eskin and M.P. Michaels (1998), ‘Assessing competitors: the gap between strategic intent and core capability’, Long Range Planning, 31(3), 406–17. Light, I.H. (1972), Ethnic Enterprise in America: Business Welfare among Chinese, Japanese and Blacks, Berkeley: University of California Press. Light, I.H. (1980), ‘Asian enterprise in America’, in S. Cummings (ed.), Self Help in America: Patterns of Minority Economic Development, Port Washington, NY: Kennikat Press. McGrath, R. and I.C. MacMillan (1992), ‘More like each other than anyone else? A cross-cultural study of entrepreneurial perceptions’, Journal of Business Venturing, 75(5), 419–29. Milliken, F.J. and L.L. Martins (1996), ‘Searching for common threads: understanding the multiple effects of diversity in organizational groups’, Academy of Management Review, 21, 402–33. Pelled, L.H., K.M. Eisenhardt and K.R. Xin (1999), ‘Exploring the black box: an analysis of work group diversity, conflict, and performance’, Administrative Science Quarterly, 44, 1–28. Reid, Stand D. (1981), ‘The decision-maker and export entry and expansion’, Journal of International Business Studies, 12(2) (Fall), 101–12. Smith, Ken G., Ken A. Smith, Judy D. Olian, Henry P. Sims, Jr., Douglas P. O’Bannon and Judith A. Scully (1994), ‘Top management team demography and process: the role of social integration and communication’, Administrative Science Quarterly, 39, 412–38. Thomas, A.S. and S.L. Mueller (2000), ‘A case for comparative entrepreneurship: assessing the relevance of culture’, Journal of International Business Studies, 31(2), 287–301. Tiessen, J.H. (1997), ‘Individualism, collectivism and entrepreneurship: a framework for international comparative research’, Journal of Business Venturing, 12, 367–84. Timmons, J.A. (1999), New Venture Creation: Entrepreneurship in the 1990s, Boston, MA: Irwin McGraw-Hill. Tsui, A., T. Egan and C. O’Reilly (1992), ‘Being different: relational demography and organizational attachment’, Administrative Science Quarterly, 37, 549–79. Waldinger, R. and H. Aldrich (1990), ‘Trends in ethnic business in the U.S’, in R. Waldinger, H. Aldrich and R. Ward (eds), Ethnic Entrepreneurs, Thousand Oaks: Sage Publications, pp. 49–78.

PART III ETHNIC MINORITY SELF-EMPLOYMENT IN EUROPE

21 Ethnic entrepreneurship in European cities: 21 a comparative study of Amsterdam Tüzin Baycan-Levent and Peter Nijkamp

1 Introduction In the past decades, most cities in the industrialized world, especially metropolitan areas in many countries, have seen a massive influx of people with different sociocultural or ethnic origins. With this influx of foreign migrants, cities have increasingly become pluriform and multicultural societies. The influx of foreign migrants has certainly brought about economic advantages (such as the fulfilment of structural vacancies in various segments of the labour market), but it has also caused a multiplicity of social and economic tensions (for example, in the local housing market, ghetto formation in cities, differences in lifestyle and behaviour, and sociocultural stress situations). With a few exceptions, ethnic groups belong in general to the lower socioeconomic segment of European cities, mainly as a result of their lack of education and skills. This lower socioeconomic situation has led to a significant shift in the orientation of ethnic groups, namely towards self-employment. This movement is generally referred to as ‘ethnic (or migrant) entrepreneurship’ (see, for example, Baycan-Levent et al., 2003; CEEDR, 2000; Choenni, 1997; Delft et al., 2000; Greenwood, 1994; Masurel et al., 2002; Min, 1987; Nijkamp, 2003; Waldinger et al., 1990; Ward and Jenkins, 1984). After the first wave of orientation towards ethnic products, ethnic markets and customers, or indigenous ethnic business strategies, in recent years ethnic entrepreneurs have gradually become an indigenous and significant part of the local economy, especially in big cities and metropoles, since an expansion of their market potential towards a much broader coverage of urban demand has occurred. Ethnic entrepreneurs, with their untapped job-creating potential, offer, on the one hand, different approaches and management styles within urban economic life which reflect their cultural diversity, and, on the other hand, many opportunities for urban revitalization/development of local economies, thereby increasing economic and cultural diversity, reducing unemployment and social exclusion, mitigating the problematic employment situation of young people in the ethnic segment and raising living standards in ethnic groups that often belong to the more disadvantaged segments of society. Against this background, the aim of this chapter is to investigate the phenomenon of ethnic entrepreneurship in urban economic life on a comparative basis of several case study researches by addressing the attitudes and behaviour of both ethnic male and female entrepreneurs in Amsterdam. The case studies considered in this chapter were conducted among different ethnic groups, including Turkish, Indian/Pakistani and Moroccan male and female entrepreneurs between 1999 and 2002. The focus of our comparative evaluation is on motivation, labour and capital conditions, and customer relationships to highlight gender and generation differences and break-out strategies (see below) in ethnic entrepreneurship. In the next section, ethnic entrepreneurship theories are discussed, 323

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while the entrepreneurial behaviour and processes of ethnic entrepreneurs are investigated. After this overview of the literature, ethnic entrepreneurship in Amsterdam is investigated in Section 3. Various comparative empirical results are given to describe the general profiles of ethnic male and female entrepreneurs and enterprises, gender and generation differences in ethnic entrepreneurship, and trends in break-out strategies. Section 4 concludes with a discussion of the results, and offers recommendations for further research. 2 Ethnic entrepreneurship An increasing participation rate of ethnic minorities in the labour market and, in parallel to this trend, a significant increase in the number of ethnic minorities-owned businesses have led to the emergence of a new concept and a special interest field in entrepreneurship, viz. ethnic entrepreneurship. In recent years, this new concept has become an important research topic in the social sciences (for example, sociology, management science, economics, geography). Much research has addressed the opportunities for and the barriers to ethnic entrepreneurship by identifying critical success or performance conditions for ethnic entrepreneurs. Structural factors (such as social exclusion and discrimination, poor access to markets and high unemployment) and cultural factors (such as specific values, skills and cultural features including internal solidarity and loyalty, flexibility, personal motivation, strong work ethics, informal network contacts with people from the same ethnic group, and flexible financing arrangements) or a blend of these factors, included in the so-called interaction model formulated by Waldinger et al. (1990), that influence the step towards ethnic entrepreneurship, have been examined in these studies. 2.1 Ethnic characteristics in entrepreneurship The motives for ethnic entrepreneurship are to be found largely in the challenges imposed by their less favoured position. Social exclusion, discrimination, lack of education and skills, high levels of unemployment and cultural factors push an increasing number of immigrants towards entrepreneurship. The existence of ethnic and social networks also plays a major role in motivating immigrants towards entrepreneurship (Delft et al., 2000; Kloosterman et al., 1998; Masurel et al. 2002; Ram, 1994; Wilson and Portes, 1980). The empirical results of many case studies show that ethnic entrepreneurs usually set up their business in the sectors where informal production would give them a competitive advantage and where the network of ethnic people provides them with an opportunity for an informal way of doing business and exchanging information. Normally, ethnic enterprises start with a focus on clients from their own ethnic group, with traditional products, services and communication channels. Therefore, the orientation for the majority of ethnic entrepreneurs is internal in the beginning. This internal orientation and the mutual trust within the ethnic network provide, on the one hand, rotating credits, a protected market and a proper labour force (Basu, 1998; Deakins et al., 1997; Kloosterman et al., 1998; Lee et al., 1997), while, on the other hand, they create a more than average loyalty between the ethnic firm and its clients (Dyer and Ross, 2000). Therefore, it can be said that the traditional business strategies including internal orientation, traditional sectors, ethnic employees and ethnic customers may give the impression of a ‘safe haven’.

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2.2 Gender and generation differences in ethnic entrepreneurship Although an internal orientation is the main feature of ethnic entrepreneurship, it is observed that there are different motivations for different generations of immigrants, as the profile of ethnic people is developing over time. This development is heavily related to educational opportunities. In general, the first-generation entrepreneurs entail more push factors, whereas the second generation may exhibit more pull factors. In other words, while first-generation immigrants may be more frequently ‘forced entrepreneurs’, secondgeneration immigrants may act more frequently as ‘voluntary entrepreneurs’. The results of recent case study researches (see, for example, Masurel et al., 2003) show that the younger generation is more open and looks for new opportunities outside the traditional markets. The differences in motivation are not only observed between different generations, but also between different genders. Like young-generation ethnic entrepreneurs, ethnic female entrepreneurs (they also constitute young-generation ethnic entrepreneurs) entail more pull factors. Their motivation stems from their education level and work experience. They show a dual character, ethnic and female, in which sometimes their ethnic characteristics dominate their behaviour and in which sometimes, on the contrary, their female characteristics have a greater effect on their attitudes (Baycan-Levent et al., 2003). As observed generally in ethnic enterprises, most of the ethnic female enterprises belong to the services sector and they are small and relatively young. The existence of ethnic and social networks also plays a major role in motivating females, like their male counterparts, towards entrepreneurship. Besides these similarities in the characteristics of ethnic male and female entrepreneurs, there are also some gender-based differences between them (see Baycan-Levent et al., 2006). In general, gender-based differences in entrepreneurship are to be found in educational background, work experience and skills, business goals and management styles and personal value systems (see, for example, Brush, 1992; Cowling and Taylor, 2001; Fagenson, 1993; Fischer et al., 1993; Verheul et al., 2001). These differences are also observed in ethnic female entrepreneurship. In particular, a better education level and a stronger orientation to the service sector are the most prominent features of gender-based differences in ethnic entrepreneurship. 2.3 Break-out strategies in ethnic entrepreneurship An important issue in ethnic entrepreneurship is whether ethnic entrepreneurs produce for their own ethnic niches or whether they try to cover a wider market of customers. This difference between so-called internal and external orientation has been the subject of many recent empirical investigations (see, for example, Choenni, 1997). An internal orientation may offer a more protected market, but will never lead to market expansion (‘break-out strategy’). An external orientation requires more skills, diversified communication channels and access to government policy support measures (see, for example, Bates, 1997; Deakins et al., 1997; van Delft et al., 2000; Light and Bhachu, 1993). A break-out strategy in ethnic entrepreneurship can be defined as a strategy to get away from the situation in which individual ethnic groups dominate such factors as capital, clients and employees (Baycan-Levent et al., 2005). In other words, a break-out strategy is a strategy to escape from internal orientation or from being an ‘ethnic enclave’

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at some stage in order to move towards external markets. However, breaking out from this ethnic dependency may not be possible, owing to the special relationships between ethnic entrepreneurs and their ethnic niches. The advantages of an internal orientation may also create many disadvantages when a number of ethnic entrepreneurs seek to expand their market domain by offering products and services for a broader group of clients, outside their own ethnic group. An exclusive focus on a limited market in the beginning can pose a serious threat to the future of many ethnic minority firms. The ‘safe haven’ conditions do not create promising opportunities for economic expansion of the firms concerned. However, when they seek a market expansion, a number of ethnic entrepreneurs together may succeed in this goal and thus bring their firms into the next development stage. A number of them will not succeed in this breaking-out strategy and will be left to the commercial constraints of their own group. A number of the latter will deliberately choose to stay in this market niche. Although their own ethnic group offers the entrepreneurs certain advantages in terms of customer loyalty, it seems that this focus makes them vulnerable and denies them opportunities for expansion. So there is a paradox concerning the ethnic minority entrepreneur and his ethnic group: there is both a strength and a weakness, but in the end this seems to be a life-threatening weakness for many ethnic firms. How can breaking-out strategies be achieved? One may expect that promising ethnic business perspectives can be found in niches outside traditional sectors. Although the older generation of migrants tends to be more oriented towards traditional sectors serving the needs of their own ethnic groups, the younger generation is more open and looks for new opportunities outside the traditional markets. They often have more experience of non-ethnic situations, and therefore an orientation towards non-traditional markets may especially help the younger generation of entrepreneurs. Another pathway can be found in the new marketing strategies. It is obvious that break-out strategies require some crucial changes in marketing strategies (see, on marketing strategies, Masurel et al., 2004). In order to develop a break-out strategy, changes in products, people, place, promotion and prices should be envisaged. 3

Ethnic entrepreneurship in Amsterdam: a comparative evaluation

3.1 Prefatory remarks The aim of this chapter is to investigate the phenomenon of ethnic entrepreneurship in urban economic life on a comparative basis of several case studies by investigating the attitudes and behaviour of both ethnic male and female entrepreneurs in Amsterdam. The case studies considered here consist of three previous case study researches; the first one (Masurel et al., 2002) was conducted among three different ethnic groups, including Turkish, Indian/Pakistani and Moroccan male entrepreneurs, and the second one (BaycanLevent et al., 2002, 2003) was conducted among Turkish female entrepreneurs, while the third one (Masurel et al., 2003) was conducted among Turkish male entrepreneurs in Amsterdam between 1999 and 2002. This chapter is based on a comparative evaluation of the empirical results of our previous three case studies, while also addressing our two previous comparative evaluations about the results of these case studies to highlight the gender differences in ethnic entrepreneurship (Baycan-Levent et al., 2006) and break-out strategies of ethnic entrepreneurs (Baycan-Levent et al., 2005). Therefore, the present

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chapter can be seen as a general synthesis that brings the results of our previous case studies and evaluation studies together. The focus of our comparative evaluation is on business motivation, labour and capital conditions, and customer relationships, as well as gender and generation differences and break-out strategies in ethnic entrepreneurship. In the next sub-section (3.2) we will describe our previous case studies, while, in sub-section 3.3, we will offer the empirical results of these studies, comparing the most important characteristics of ethnic entrepreneurs and the features of ethnic enterprises. Although the Turkish group is overrepresented in these case studies, this group is rather illustrative of ethnic entrepreneurs in the Netherlands and is very recognizable in the Dutch urban sociodemographic landscape. For example, more than 10 per cent of the Turkish working population in Amsterdam consists of entrepreneurs, and they constitute about 20 per cent of all ethnic entrepreneurs in Amsterdam (Choenni, 1997). In relation to the total population, Turkish entrepreneurs account for the highest percentage of startups among all groups (including the native Dutch) in the Netherlands: 11.5 per cent of the Turkish working population started their own firm in 2000, versus 6.5 per cent of all other groups (www.kvk.nl). Although the Turkish immigrants show similar characteristics to other immigrants (from Morocco, Suriname and Antilles), their rate of entrepreneurship is much higher (Jansen et al., 2003). Therefore, we can say that our case study focus on Turkish entrepreneurs reflects the general environment of entrepreneurship in the city of Amsterdam. 3.2

Case studies

Case study 1: Turkish, Indian/Pakistani and Moroccan male entrepreneurs in Amsterdam This case study (by Masurel et al., 2002) is focused on differences in starting and continuing an individual business by three different ethnic groups in Amsterdam, including Turkish, Indian/Pakistani and Moroccan male entrepreneurs, by addressing the critical success conditions for their survival and performance. The empirical data of this research are based on in-depth personal interviews, held in the second half of 1999 among 40 ethnic entrepreneurs in Amsterdam. The sample contains 14 Turkish, 15 Indian/Pakistani and 11 Moroccan entrepreneurs who had expressed a willingness to participate in a personal interview. Case study 2: Turkish female entrepreneurs in Amsterdam The second case study (Baycan-Levent et al., 2002, 2003) investigates the phenomenon of ethnic female entrepreneurship by addressing Turkish female entrepreneurs in Amsterdam. The focus of the research is on the ethnic female profile and the dual character of ethnic female entrepreneurs that refers to the combined characteristics or indicators of ethnic entrepreneurship and female entrepreneurship. This case study research is based on in-depth personal interviews, held in the first half of 2002 among 34 Turkish female entrepreneurs in Amsterdam. Case study 3: Turkish male entrepreneurs in Amsterdam The third case study (Masurel et al., 2003) seeks to analyse the differences between first- and second-generation ethnic minority entrepreneurs in terms of entrepreneurial motivation. The empirical data of this research are based on in-depth personal interviews, held in the second half of 2001 among

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40 Turkish entrepreneurs in the hospitality sector in the Dutch cities of Amsterdam (28), Alkmaar (8) and Zaandam (4). However, the majority of the entrepreneurs are running their enterprises in Amsterdam. The particular sample consists of male entrepreneurs (except for one female entrepreneur). Therefore, it can be said that the third case study also reflects the attitudes and behaviours of male entrepreneurs as well as the first case study. 3.3 A comparative evaluation The three case studies summarized above show many similarities in the characteristics of ethnic entrepreneurs and the ethnic enterprises. However, an overall evaluation of these three case studies also draws attention to the differences between, especially, male and female entrepreneurs, first and second generations and different ethnic groups. In this sub-section we will compare the results of these three case studies by addressing in particular four important aspects, viz. personal characteristics, motivation and driving forces, labour and capital conditions, and customer relationships. Personal characteristics An examination of the profiles of ethnic entrepreneurs on the basis of the three case studies (see Table 21.1) in terms of personal characteristics shows that the majority of both ethnic male and female entrepreneurs fall into the age category of 31–40 for case study 1 and case study 2. However, female entrepreneurs are relatively younger than male entrepreneurs, with higher shares in both the age category 21–25 (15 per cent) and 31–40 (61.76 per cent). This can partly be explained by the fact that ethnic female entrepreneurship has emerged only very recently. As case study 3 has been focused on generation differences and was addressed to younger entrepreneurs, the age structure of this case study is not comparable with the other two studies. Educational level appears to be the most prominent and noticeable personal characteristic between, especially, ethnic male and female entrepreneurs when the empirical results of the three case study researches are examined (see Table 21.1). It is clearly seen that ethnic female entrepreneurs are relatively better educated than ethnic male entrepreneurs. While more than half of the ethnic male entrepreneurs (52 per cent) in case study 1 and the great majority (95 per cent) of the ethnic male entrepreneurs in case study 3 appear to have graduated from primary and secondary schools, the share of ethnic female entrepreneurs in this category is only 11.76 per cent. The majority of female entrepreneurs graduated from middle vocational schools (73.53 per cent). However, the share of higher educated male entrepreneurs (graduates from universities) in case study 1 is overwhelmingly higher than that of the ethnic female entrepreneurs in case study 2. These two extreme levels for ethnic male entrepreneurs in education (case study 1) can be explained by the differences among the three ethnic groups in the sample. As Masurel et al. (2002) indicated in their study, Indian/Pakistani people appear to have a relatively high involvement in ethnic business life, whereas Moroccans play only a minor role and Turkish people have an intermediate position. Motivation and driving forces The results of these three case studies draw attention to the common trends in motivation (see Table 21.1). When the reasons for becoming an entrepreneur are compared, to be one’s own boss stands out as the main motive in all

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three case studies, with scores of 70–80 per cent. However, when we examine the background of entrepreneurs, we can say that this outcome may have negative reasons, such as lack of education, lack of alternatives or unemployment. These negative reasons, or, in other words, push effects, seem plausible reasons, especially for male entrepreneurs, to become entrepreneurs in case study 1 and case study 3. The higher rate of unemployment among male entrepreneurs than among female entrepreneurs before starting appears as a distinctive feature in the differences in motivation between ethnic male and female entrepreneurs. Although employed and entrepreneur positions before starting are similar in all these groups, unemployment has appeared mainly as a male characteristic (case study 1 and 3). This situation shows that unemployment, particularly for male entrepreneurs, might have exerted a push effect towards entrepreneurship. Differently from male entrepreneurs, being your own boss as a reason for becoming an entrepreneur is determined by positive reasons or pull effects, such as education level and experience, for female entrepreneurs in case study 2. It can be said that the pull effects are more determinant in the choice of entrepreneurship by females than the push effects, such as unemployment, that do not exist in this case. Therefore, we can say that being one’s own boss as a reason does not only reflect the positive reasons or pull effects but also reflects negative reasons or push effects to become an entrepreneur. Labour and capital conditions The features of the enterprises show that the majority of the enterprises belong to the retail and service sector (see Table 21.1). The total share of retail and service sector is 75 per cent in case study 1 and 97.06 per cent in case study 2. As case study 3 addresses the hotelling sector, this orientation is 100 per cent for the service sector. The service sector for male and female enterprises (case study 1 and case study 2) comprises several activities, such as driving instruction, hairdressing, human resource management and temporary job agency, finance, insurance, tourism and real estate, laundry, press agency, repair, transport, hotels and restaurants. While 80 per cent of the female enterprises are in four sectors, viz. driving instruction, hairdressing, fashion retail, and human resource management and temporary job agency in case study 2, the majority, that is 69 per cent, of the male enterprises are in three sectors, viz. retail, hotel and restaurant and wholesale in case study 1. When the profiles of ethnic male and female enterprises are compared, the most important difference has occurred in the activities of the enterprises. The majority of female enterprises belong to the service sector, with a share of 76.47 per cent. On the other hand, the share of female enterprises in the manufacturing–wholesale sector is very small (2.94 per cent), when it is compared with the share of male enterprises in this sector (25 per cent) in case study 1. Therefore, it can be said that the orientation to the service sector is stronger for ethnic female entrepreneurs than for ethnic male entrepreneurs. The features of the enterprises show that these enterprises are generally small in terms of the number of employees. Unfortunately, there are no data about the number of employees in male enterprises for case study 1. However, the other two case studies (case studies 2 and 3) show that more than 80 per cent of the enterprises have fewer than five employees, while for female enterprises the share with no employees is also rather high, with half of them having no employees. Although there are no data about the number of employees for case study 1, all three case studies provide information about the composition of the employees. The

330 11.76 73.53 14.71

52.50 12.50 35.00

55.00 25.00 17.50 2.50

MOTIVATION AND DRIVING FORCES Position before starting Employed Entrepreneur Unemployed School

70.59 20.59 5.88 2.94

% 14.71 61.76

% 5.00 42.50

2002 34 ethnic female entrepreneurship

1999 40 motivation and driving force

PERSONAL CHARACTERISTICS Age < 25 years old 31–40 Education level Primary and secondary school Middle vocational Higher vocational and university

CASE STUDY II Turkish Female Entrepreneurs

CASE STUDY I Turkish, Indian/Pakistani, Moroccan Male Entrepreneurs

A comparison of characteristics of different ethnic minority entrepreneurs

Year of the research Sample Focus of the research

Table 21.1

50.00 27.50 10.00 12.50

95.00 — 5.00

% 57.50 —

2001 40 generation differences in motivation

CASE STUDY III Turkish Male Entrepreneurs

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LABOUR AND CAPITAL CONDITIONS Activities Manufacturing–wholesale Retail Service Number of employees No employees 1–5 employees > 6 employees Composition of employees* Employees from own ethnic group Employees from other groups Mixed Capital sources Own capital Family or friends

The reasons to be an entrepreneur To be own boss Unemployment

50.00 41.18 8.82

61.16 38.84 — 44.12 41.18

57.50 2.50 7.50 22.50 55.00

2.94 20.59 76.47 (35.29 in driving school sector)

70.59 —

no data no data no data

25.00 30.00 45.00

70.00 20.00

72.50 75.00

12.80 38.50

48.70

— 80.00 20.00

— — 100 (hotelling sector)

80.00 10.00

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(continued)

Note:

% 44.00 56.00

21.00 79.00

CASE STUDY II Turkish Female Entrepreneurs

%

CASE STUDY I Turkish, Indian/Pakistani, Moroccan Male Entrepreneurs

26.00 74.00

%

CASE STUDY III Turkish Male Entrepreneurs

* Composition of employees is based on the number of employees for case study 2 and the number of firms for case study 1 and case study 3.

CUSTOMER RELATIONSHIPS Composition of clients Clients from own ethnic group Clients from other groups

Table 21.1

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composition of employees is based on the number of employees from different groups for case study 2 and the number of firms which hire employees from different groups for case studies 1 and 3. While the majority of the employees in all three case studies stem from their own ethnic group, when the share of employees from only their own ethnic group and a mixed composition of the employees is taken into account, together this share can reach a level up to 60 per cent. However, an examination of the composition of employees in terms of the number of male enterprises which are hiring employees from their own ethnic group, and from other groups, shows us some interesting results. According to this information, more than 65 per cent of the male enterprises (a combination of employees from their own ethnic group and a mixed group in Table 21.1) tend to hire employees of their own ethnic group, whereas the share of employees from other groups is only around 10 per cent. In female enterprises these shares in terms of number of firms are 100 per cent for employees both from their own ethnic group and from other groups. When the number of employees is examined, 61.16 per cent of the employees are from their own ethnic group and 38.84 per cent are from other groups. This composition shows that all female enterprises tend to hire at least one employee from their own ethnic group; moreover, the majority of the employees are also from this group. Therefore, it can be said that female entrepreneurs are closer than the male entrepreneurs to their own ethnic group in terms of hiring employees. Another important feature, capital sources, of these enterprises also shows interesting results. The results of all three case studies show that more than half of the entrepreneurs combine their own capital with the capital support from family and friends. This financial support from family or friends can reach up to 75 per cent for Turkish male entrepreneurs who are active in the hotelling sector. Female entrepreneurs show a relatively balanced combination of capital sources and they tend to use their own capital rather than the capital obtained from family and friends. Customer relationships The ethnic dependency observed in the acquisition of capital and the composition of employees differ in the composition of clients. We observe a break or a transformation in the composition of clients. The results of case studies show that the majority of the clients are from other groups. The share of non-ethnic clients is almost 80 per cent for ethnic male enterprises (Table 21.1). This trend clearly shows that these enterprises are at a further stage of change in terms of orientation away from clients from ethnic origins and towards those from non-ethnic origins. However, this fact can partly be explained by the choice of economic activities. As the majority of the enterprises are in the service sector, the majority of the service sector in these case studies is made up of hotels and restaurants; they are more open to all clients without regard to ethnicity. On the other hand, this non-ethnic orientation seems less strong for ethnic female enterprises. Although the share of non-ethnic clients is more than 50 per cent, a higher ethnic dependency is observed in the ethnic female enterprises when compared to ethnic male enterprises that can be explained by a stronger niche strategy of female entrepreneurs. This can be also a result of a later entrance of female entrepreneurs to the market. However, this general trend in terms of composition of clients in all three case studies demonstrates a stage of change in orientation from own ethnic groups towards non-ethnic groups. Therefore, it can be said that ethnic entrepreneurs have become service providers, not only for their own ethnic group, but also for the other groups in the market. Nevertheless, this

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trend is strongly dependent on the sector and it is too early to call this a real transformation process for some sectors. The results of this comparison of three case studies draw attention to two general trends: (i) a rather high dependency on ethnic networks in terms of capital and labour sources, (ii) a transformation process in providing services which is moving away from ethnic and towards non-ethnic groups. Therefore, the results show that the ethnic entrepreneurs considered in this study are still rather far from breaking-out strategies. 4 Conclusion Ethnic entrepreneurs constitute a special group in urban economic life with their growing numbers and their contributions to economic diversity. They offer many opportunities for urban revitalization and the development of local economies with their job-creating potential. This potential not only reduces unemployment and helps to resolve the problematic employment situation of (especially) women and young people in the ethnic segment, but also reduces social exclusion and raises living standards in ethnic groups that are often among the disadvantaged in society. They offer economic and cultural diversity within the urban economy and they also create motivation for the ethnic entrepreneurial spirit by serving as a ‘role model’. The results of our comparative evaluation show that ethnic entrepreneurs have become service providers, not only for their own ethnic groups, but also for other population groups in the city. A transformation process in providing services moving away from ethnic and towards non-ethnic groups has gradually emerged. However, our comparative evaluation also shows that there is still a rather high dependency and a strong orientation to one’s own ethnic groups in terms of capital and labour force which make ethnic entrepreneurs vulnerable and may also create some barriers for break-out strategies in terms of new opportunities to expand the business and to open up to new and non-traditional markets. The results of our comparison show that this dependency is stronger for ethnic female entrepreneurs for male ones, whereas younggeneration entrepreneurs exhibit a more open attitude to non-traditional sectors. On the other hand, the results of our comparative study show that there are some genderbased differences in ethnic entrepreneurship similar to gender-based differences commonly observed in entrepreneurship. This similarity in trends demonstrates that gender as a driving factor has a higher importance than ethnicity in the characteristics and behavioural attitudes of ethnic entrepreneurs. However, these similar genderbased differences, especially in the orientation to the service sector or in the niche strategy, are more dominant for ethnic female entrepreneurs owing to the associated effect of ethnicity. The results of our comparative evaluation, in particular the ethnic dependency observed, draw attention to the principle of ‘trust’ within ethnic networks. Therefore, a focus on ‘trust’ for future research can offer us a more detailed picture of this ethnic dependency. The results of the case studies also draw attention to another transformation process for the young-generation entrepreneurs in terms of different motivation and orientation towards non-traditional sectors. Future research should also pay more attention to the young-generation entrepreneurs.

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References Basu, A. (1998), ‘An exploration of entrepreneurial activity among Asian small businesses in Britain’, Small Business Economics, 10, 313–26. Bates, T. (1997), ‘Financing small business creation: the case of Chinese and Korean immigrant entrepreneurs’, Journal of Business Venturing, 12, 109–24. Baycan-Levent, T., E. Masurel and P. Nijkamp (2002), ‘Entrepreneurial process and performance: a study on Turkish female entrepreneurs in Amsterdam’, paper presented at the 42nd ERSA Congress (European Regional Science Association), Dortmund, Germany, 27–31 August. Baycan-Levent, T., E. Masurel and P. Nijkamp (2003), ‘Diversity in entrepreneurship: ethnic and female roles in urban economic life’, International Journal of Social Economics, 30(11), 1131–61. Baycan-Levent, T., E. Masurel and P. Nijkamp (2005), ‘Break-out strategies of ethnic entrepreneurs’, in T. Vaz, E. Morgan and P. Nijkamp (eds), The New European Rurality: Strategies for Small Firms, Aldershot: Ashgate, pp. 143–56. Baycan-Levent, T., E. Masurel and P. Nijkamp (2006), ‘Gender differences in ethnic entrepreneurship’, International Journal of Entrepreneurship and Innovation Management, 6(3), 173–90. Brush, C.G. (1992), ‘Research on women business owners: past trends, a new perspective and future directions’, Entrepreneurship Theory and Practice, 17(4), 5–30. CEEDR (2000), Young Entrepreneurs, Women Entrepreneurs, Ethnic Minority Entrepreneurs and CoEntrepreneurs in the European Union and Central and Eastern Europe, Final Report to the European Commission, DG Enterprise, Centre for Enterprise and Economic Development Research (CEEDR) Middlesex University Business School, UK. Choenni, A. (1997), Veelsoortig Assortiment, Amsterdam: Het Spinhuis. Cowling, M. and M. Taylor (2001), ‘Entrepreneurial women and men: two different species’, Small Business Economics, 16, 167–75. Deakins, D., M. Majunder and A. Paddison (1997), ‘Developing success strategies for ethnic minorities in business: evidence from Scotland’, New Community, 23, 325–42. Delft, H. van, C. Gorter and P. Nijkamp (2000), ‘In search of ethnic entrepreneurship in the city’, Environmental Planning C, 18, 429–51. Dyer, L.M. and C.A. Ross (2000), ‘Ethnic enterprises and their clientele’, Journal of Small Business Management, 38(2), 48–66. Fagenson, E.A. (1993), ‘Personal value systems of men and women entrepreneurs versus managers’, Journal of Business Venturing, 8, 409–30. Fischer, E.M., A.R. Reuber and L.S. Dyke (1993), ‘A theoretical overview and extension of research on sex, gender, and entrepreneurship’, Journal of Business Venturing, 8(2), 151–68. Greenwood, M.J. (1994), ‘Potential channels of immigrants’ influence on the economy of the receiving country’, Papers in Regional Science, 73, 211–40. Jansen, M., J. De Kok, J. Van Spronsen and S. Willemsen (2003), Immigrant Entrepreneurship in the Netherlands, Research Report H200304, Zoetermeer: EIM. Kloosterman, R.C., J. van der Leun and J. Rath (1998), ‘Across the border: economic opportunities, social capital and informal businesses activities of immigrants’, Journal of Ethnic Migration Studies, 24, 367–76. Lee, Y., T. Cameroen, P. Schaeffer and C.G. Schmidt (1997), ‘Ethnic minority small business: a comparative analysis of restaurants in Denver’, Urban Geography, 18(7), 591–621. Light, I. and P. Bhachu (eds) (1993), Immigration and Entrepreneurship: Culture, Capital, and Ethnic Networks, New Brunswick, NJ: Transaction Books. Masurel, E., M. Yuzer and J. Holleman (2003), ‘Ethnic minority entrepreneurs: the generation effect, an analysis of motivational differences between first and second generations’, paper presented at the International Workshop on ‘Modern Entrepreneurship, Regional Development and Policy: Dynamic and Evolutionary Perspectives’, Amsterdam, The Netherlands, 23–24 May. Masurel, E., P. Nijkamp and G. Vindigni (2004), ‘Breeding places for ethnic entrepreneurs: a comparative marketing approach’, Entrepreneurship and Regional Development, 16(2), 77–86. Masurel, E., P. Nijkamp, M. Tastan and G. Vindigni (2002), ‘Motivations and performance conditions for ethnic entrepreneurship’, Growth & Change, 33(2), 238–60. Min, P.G. (1987), ‘Factors contributing to ethnic business: a comprehensive synthesis’, International Journal of Comparative Sociology, 28(3/4), 173–93. Nijkamp, P. (2003), ‘Entrepreneurship in a modern network economy’, Regional Studies, 37(4), 395–405. Ram, M. (1994), ‘Unravelling social networks in ethnic minority firms’, International Small Business Journal, 12(3), 42–59. Verheul, I., P. Risseeuw and G. Bartelse (2001), ‘Gender differences in strategy and human resource management’, Rotterdam Institute for Business Economic Studies.

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Waldinger, R., H. Aldrich and R. Ward (eds) (1990), Ethnic Entrepreneurs, Newbury Park, CA: Sage Publishers. Ward, R. and R. Jenkins (eds) (1984), Ethnic Communities in Business, Cambridge: Cambridge University Press. Wilson, K.L. and A. Portes (1980), ‘Immigrant enclaves: an analysis of the labour market experiences of Cubans in Miami’, American Journal of Sociology, 86, 295–319.

22 Temporal and geographical variations in ethnic minority business: thirty years of research in the United Kingdom Giles A. Barrett and David McEvoy

This is the story of a research group at Liverpool John Moores University, formerly Liverpool Polytechnic, which has been researching businesses owned by ethnic minorities for the last 30 years. The personnel involved have changed over the years, and this has sometimes influenced the theories and methodologies we have used. Our account therefore incorporates some biographical detail, but we look mainly at our research. Our focus has been on Britain’s South Asian firms, but we have also examined African–Caribbean enterprise in Britain, and South Asian enterprise in Canada. While some of our findings have remained consistent throughout, notably our emphasis on the disadvantaged urban situation of most ethnic minority firms, changing economic, political and social circumstances, and our encounters with other scholars, have enabled our discourse to evolve, and perhaps to progress. One recent interest, facilitated by the long view we are able to take, is the changing nature of minority firms over time. Britain’s South Asian communities are widely recognized for their heavy involvement in small businesses in manufacturing and in the service sector (Barrett, Jones and McEvoy, 1996; Ram and Jones, 1998). People of Indian, Pakistani and Bangladeshi origin are over-represented in self-employment compared with the white majority, and with other minority groups (Small Business Service, 2004, p. 12). The most numerous and visible of these businesses are those in retailing, catering and associated consumer services. The sheer number of these enterprises often lends itself to a narrative of growth and success. Our research group has been sceptical of this interpretation over a 30-year period. It has instead favoured a structural viewpoint, seeing the proliferation of South Asian enterprise in general, and of retail and consumer service firms in particular, as the outcome of a struggle against economic disadvantage and discrimination. Britain’s South Asians are part of the country’s imperial legacy. In the two decades after 1945, streams of migrants from the Caribbean, South Asia, Hong Kong and other quarters of the disappearing Empire were established. Most of the newcomers, as citizens of former or current British colonies, held British passports. These inflows were a response to national economic needs. Immigrants came to fill the vacant job niches in the British economy. In a period of economic growth and full employment, positions which were poorly paid, or involved long hours or unpleasant conditions, were unattractive to the indigenous population. Industries such as the foundries of the Midlands and the textile factories of Lancashire and Yorkshire relied on newcomers to maintain their competitiveness. Similarly, public services, such as hospitals and train and bus operators, came to value immigrant labour. This replacement labour phase did not, however, continue. New laws restricted primary immigration in 1962, 1968 and 1971 by changing passport entitlements. Nevertheless, family reunification was allowed to continue, so that the following 337

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decades saw possibly temporary migrant populations evolve into settled ethnic minority communities. Meanwhile the new labour force proved to be no solution to the competitive problems of British industry. Whole sectors slimmed down or disappeared, especially after the world recession of the 1970s. Unemployment increased substantially, particularly after the election of Margaret Thatcher’s Conservative government in 1979. Ethnic minorities, often concentrated in the most vulnerable jobs, suffered disproportionately. One major response to this crisis was a move into self-employment by South Asians. There had long been a small business presence in these communities. Before the Second World War, Punjabi Sikhs had been active as door-to-door salesmen in new suburbs where population growth had outrun shopping provision (Ballard and Ballard, 1977). During the 1950s, cafés and grocery stores catering for the tastes of the immigrant consumer had begun to emerge. Now a wider range of goods and services began to be offered, with South Asian retailers and restaurants becoming common in the inner urban areas where residential concentrations had developed. Over time this business presence extended into parts of the city, and into regions, where South Asian populations were sparse. As we shall see, however, the temporal sequence and geographical spread of this activity was highly differentiated. In 1972, David McEvoy joined the human geography staff at Liverpool Polytechnic. Already in post was Trevor Jones, who introduced him to the research topic of ethnic residential segregation. They studied McEvoy’s home city of Bradford, and nearby Huddersfield, where Jones had previously worked, to examine the inner urban zones where South Asian immigrants typically dwelt. McEvoy had conducted his graduate research on the geography of retailing (McEvoy, 1968a, 1968b, 1972) and it soon became clear that there was a possible connection between the highly segregated residential patterns under examination (Jones and McEvoy, 1978) and a growing South Asian retail and consumer service sector. The dominant mode of thought in retail geography was central place theory (Berry, 1967), and Jones and McEvoy speculated that the emergence of ethnic ghettos in Britain might be leading to the development of an ethnic minority retail hierarchy alongside a mainstream hierarchy of white-owned businesses. This led to their obtaining one of the few research assistantships available each year within the Polytechnic. Although the idea of differentiated business structures had already surfaced in geography in the United States (Berry, 1963; Pred, 1963; Rose, 1970) our plans were prepared without reference to this work. We also proceeded in total ignorance of seminal developments in other US disciplines (for example, Bonacich, 1973; Light, 1972). As our investigations developed, our original focus on central place theory evaporated in the face of the radical revolution in geographical thought, and through encounters with scholars from other disciplines. The research assistantship was award to John Cater, recently graduated in geography. For the next three years he accumulated information on the geographical pattern of South Asian population and business in Bradford. This produced our group’s first publications (Cater and Jones, 1978, 1979), which included maps and tables correlating these two distributions. Into our self-contained disciplinary world there now erupted an American sociological volcano in the form of Howard Aldrich, then of Cornell University. Aldrich had established a reputation with comparisons of African American and white businesses in the inner cities of Boston, Chicago and Washington, D.C. (Aldrich, 1973; Aldrich and Reiss, 1976). He had recently extended his investigations to South Asian retailers in

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London (Aldrich, 1980) and, while in Britain, discovered that we were engaged in related work. An intense collaboration ensued. While continuing to insist on the importance of business and population counts, we adopted Aldrich’s methodology for comparing minority and white enterprises in a study of Bradford, Leicester and the London Borough of Ealing. These were leading centres of South Asian immigration in the north, midlands and south of England. In each city, in 1978, we studied the five wards with the highest proportion of South Asians in the population We interviewed 580 South Asian and white owners or managers of retail businesses, divided approximately equally between the cities and ethnic groups. We first completed an enumeration of retail and service businesses, then we interviewed a random sample of the South Asian businesses, stratified by the number of South Asian firms in each ward. A white control sample was created. We obtained a rich set of data on the operating practices, labour force and clientèle of each establishment, and on the personal and family backgrounds of the business owners. We revisited each of the business sites at two-year intervals until 1984, confining our queries to whether the original business had survived, and to basic details of replacement businesses, such as the line of activity, and the ethnicity and background of the new owners. The resulting analyses emerged from a mainly fruitful tension between Aldrich’s application of statistical rigour, emerging from the US urban ecological tradition, and the increasingly radical political economy inclination of Jones. The latter was perhaps most successful in explaining the nature, scale and the very existence of the South Asian business sector, while – paradoxically – the nongeographer, Aldrich, provided greater insights into the geographer’s stock-in-trade, the spatial distribution of the firms we studied. Broadly, our survey revealed that South Asian retailers, in comparison to their white counterparts, were younger, worked even longer hours, were much better educated, used more family labour, were more likely to have raised business finance from family and friends and were more likely to want their children to take over the business (Aldrich et al., 1981, 1983). The follow-up visits revealed a higher South Asian survival rate from 1978 to 1984, 52 per cent against 39 per cent for whites, and that South Asian businesses numbers were increasing, while white numbers were declining (McEvoy and Aldrich, 1986). Proponents of a sanguine view of South Asian enterprise might have taken this evidence as proof of the entrepreneurial success of communities culturally endowed with resources, ambition and endeavour. Such views were widely held in the national press (for example, Smith, 1984; Sunday Telegraph, 1978). Some academics also emphasized the importance of community and family networks in creating economic success (Werbner, 1980, 1894, 1990). We, however, took a different view. We argued that business entry was often a response to unemployment or underemployment, themselves the result of racism, economic recession and employment in marginal industries and in disadvantaged regions and localities (Aldrich et al., 1981, 1983, 1984; Jones, 1981; Jones and McEvoy, 1986). We saw structural ‘push’ factors as more important than cultural ‘pull’ factors (Jones et al., 1992). Business involvement was an extension of the replacement labour phase of ethnic minority history. Typical South Asian retailers such as grocery shops and confectioners, tobacconists and newsagents (CTNs) were in declining sectors, which white entrepreneurs were becoming reluctant to enter. Having filled unwanted jobs, South Asians now filled unwanted business opportunities. The long hours of work and use of family labour were evidence of brutal necessity

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rather than entrepreneurial zeal. The superior educational qualifications of South Asian retailers reflected blocked opportunities in the mainstream labour market, not a cultural enterprise mission. Even the superior survival rate was problematised: when the overall survival rate was disaggregated by city and two-year time period, we discovered that South Asian figures were worse than those for whites in the weakest local economy (Bradford), and in all three cities at the low point of the business cycle. In better times whites could hand over difficult economic niches to South Asians, but when things were toughest they hung on, leaving South Asians, exposed in the business slots whites had already abandoned, to suffer the worst effects of recession (McEvoy and Aldrich, 1986; Barrett et al., 2002). Our views on the geographical distribution of South Asian firms proved less controversial than our account of their proliferation. This may have been partly the outcome of a tendency by non-geographers to regard questions about spatial patterns as less interesting than purely economic, political or sociological problems. It may also have been that the quantitative methodology we used proved too complex for many students of social issues. It is probably revealing that the subsequent work of the Liverpool group did not build on this aspect of the collaboration with Aldrich once his research turned to other aspects of entrepreneurship after 1990. Most of us also found it difficult! Nevertheless, the geographical findings are worth recalling (Aldrich et al., 1985, 1986, 1989). We first related the spatial distribution of businesses to the spatial distribution of the South Asian population at three scales: 300-metre squares, 500-metre squares and wards. At each scale, a positive correlation was discovered: 0.45 at the 300-metre scale; 0.61 at the 500-metre scale; and 0.90 at the ward level. The correlation increased as the units of analysis grew larger because the local variations disappeared in the average figures for wider areas. We saw these results as supporting an ecological succession interpretation of South Asian business geography. As whites moved out of inner city housing, South Asian residents moved in. As the South Asian population increased, it was followed by South Asian shopkeepers, replacing departing white retailers. We insisted, however, that this was not appropriately described as ‘white flight’. If white flight had been at work we argued that the rate at which whites left an area would increase as the proportion of South Asians increased. This was not the case. Instead, the pattern of transition was explained by white residents and businesses ceasing to move into areas which were becoming more South Asian. Ceasing to move into an area is not the same as leaving it. The white flight ‘explanation’ was still however in use in the twenty-first century in official reports into community relations in Bradford (Ouseley, 2001), and in government reports on urban riots (Home Office, 2001a, 2001b). We moved on from this bivariate analysis, with its implicit interpretation of population as market, to explicit consideration of patterns of patronage. Our survey included retailers’ estimates of the ethnicity of their customers. We used the proportion of a shop’s customers who were South Asian as the dependent variable (that is, as the phenomenon to be explained statistically) in a multiple regression analysis. The two main independent variables (the things doing the explaining) were the owner’s ethnicity (either South Asian or not) and the South Asian percentage of the population in the 500-metre square centred on the 100-metre square in which the business was located. The analysis was conducted three times. On the first occasion the dependent variable was the percentage of customers who were South Asian. In the other two analyses this percentage was subjected to

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Table 22.1 Regression analyses of the impact on customer composition of population composition and shopkeepers’ ethnicity Unstandardized (standardized) regression coefficients

% of residents Asian

Owners’ ethnicity (1white 0Asian)

Adjusted R2

0.36

0.58 (0.38)


0.29 (
0.41)

0.44


0.355

1.575 (0.35)


0.898 (
0.44)

0.43

0.086

1.406 (0.32)


0.988 (
0.48)

0.53

Constant term With untransformed dependent variable With logit transformation of dependent variable With logit transformation and more independent variables

the logit transformation; that is to say, it was expressed as the logarithm of the ratio of South Asian to white customers. Such a transformation emphasizes the relative importance of the South Asian and white populations, rather than their absolute magnitude. For example, in two areas with 25 per cent and 75 per cent of their populations South Asian, and the balance white, the ratios between the sizes of the two groups are 1:3 and 3: 1, respectively. This is a ninefold change in relative importance, compared with a threefold difference between the original South Asian proportions. In general, the logit transformation allows treating the extremes of the customer percentage scale more sensitively than is the case with untransformed data. The results of the three analyses are summarized in Table 22.1. There are broad similarities in the three assessments of the impact on customer ethnicity of owner’s ethnicity and area population composition. The adjusted R2 value in the table gives the proportion of the variation in customer composition which can be explained statistically by the independent variables. In the first two cases the proportions explained are very similar, 44 per cent and 43 per cent. In the third analysis, additional independent variables were incorporated into the calculations, pushing the level of explanation up to 53 per cent. The additional variables were type of retail business; interaction between type of business and ethnicity of owner; length of opening hours; presence of South Asian competitors; provision of special services to South Asians; and the city in which the shop was located. The individual impact of these additional variables can be found in Aldrich et al. (1985). The standardized regression coefficients in Table 22.1 indicate how far the independent variables contribute to the each model’s explanation of the variation in customer ethnicity between businesses. There is increasing divergence between the coefficient for area population composition and that for owner’s ethnicity as the analysis becomes more complex. With customer ethnicity untransformed the approximate equality of the two coefficients indicates that each of the explanatory variables contributes approximately equally to variations in the ethnicity of customers. In the second analysis, with customer ethnicity in logit form, owner’s ethnicity becomes more important than population composition. In the final

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model, with the logit transformation maintained, and the additional independent variables included, the regression coefficients suggest that owner’s ethnicity contributes about 50 per cent more than area population composition to the explanation of customer ethnicity. This suggested to us that, in these areas at least, South Asian businesses benefited from something of an ethnically protected market. This benefit amounted to a constant amount in the first of the three analyses. At any given level of South Asian population composition, a South Asian retailer would have a 29 per cent higher proportion of South Asian customers than a white retailer. In the more complex analyses the ethnic protection factor was stronger but variable. All in all we concluded that our South Asian businesses were more representative of an enclave or recluse economy than they were of the middleman minority status which had been applied to other entrepreneurial ethnic groups such as the Chinese and Japanese of inter-war California (Aldrich et al., 1984). We subsequently applied the logit form of analysis to the geographical pattern of temporal change in ethnicity of business ownership (Aldrich et al., 1989). This amounted to a rigorous testing, using longitudinal data, of processes we had previously inferred from the cross-sectional data for 1978, or had qualitatively eyeballed from simple tabulations of change. We will not further challenge our own explanatory powers, or the concentration of some of our readers, by detailing the data and calculations involved. Instead we outline the main features of the work. Using the 1978 survey, and the three follow-up investigations, we tested and confirmed three hypotheses: ●

● ●

Increases in the proportion of South Asian-owned businesses in an area occur because whites cease to buy into ethnically changing areas, not because they accelerate their rate of withdrawal. Business survival is more strongly affected by business profitability and area economic status than by neighbourhood ethnic change. Businesses acquired by South Asians will subsequently remain within the South Asian community.

Taken together, these findings supported the idea that ecological succession of population and businesses was creating significant ethnic enclaves in Britain. In these enclaves South Asian retailers and consumer service firms had substantially replaced their white predecessors. This ethnic transition did not, however, involve panic selling by whites; their withdrawal proceeded at a fairly slow but steady rate. In the autumn of 1988, Jones and McEvoy enjoyed a memorable four-week period in which news came through that three funding bids had been successful. One was an award from Britain’s Economic and Social Research Council (ESRC) to provide an ethnic minority component for its multi-university cross-disciplinary Small Business Initiative. Our brief was to re-examine the issues raised in our earlier three-city research, which had been funded by ESRC’s earlier incarnation as the Social Science Research Council (SSRC).1 The second was an award from the Canadian High Commission (embassy) in London to extend our British research to the three main centres of South Asian immigration in Canada. The third was from the Commission for Racial Equality, the national quango for identifying and rooting out ethnic discrimination. Our job was to examine barriers to the development of ethnic minority business in Bradford and to identify means for overcoming them.

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This meant a hectic programme of observational work and interviewing during 1989 and 1990. To assist us we recruited Pauline de Silva, who collected most of the information in Bradford, and Elaine Paulson-Box and Guy Abraham, who did most of the interviews in Vancouver and Montreal, respectively,2 and a whole team of people on the ESRC study, most notably Giles Barrett, who was subsequently to become a permanent member of the research group. In Bradford we interviewed again at almost 200 South Asian and white business sites we had studied between 1978 and 1984, and, secondly, conducted more qualitative discussions with a sample of 59 firms distinguished by one or more of suburban location, larger scale or diversification into non-retail activities. In Canada, we talked to about 70 South Asian retailers of goods or consumer services in each of Montreal, Toronto and Vancouver. We have referred only fleetingly to the Bradford study in our published output, though a report to the sponsor exists (Jones et al., 1989), and the qualitative data now await follow-up study assessing our ability to spot potential business winners. The Canadian work has generated more publications (Jones and McEvoy, 1992; Jones et al., 2000; McEvoy, 1999; McEvoy and Jones, 1993). It was, however, the ESRC survey, and the publications arising from it, which were to be the focus of much of our reflection in the next decade. To this work therefore our attention now turns. In early conference presentations we had been criticized for concentrating on disadvantaged inner city areas. It was implied that our pessimistic views were conditioned by our deliberate selection of the most difficult environments as study areas. Our defence, that most South Asian businesses were located in exactly such places, did not convince everybody. We therefore decided in our Small Business Intitiative contribution to examine a wider range of South Asian business settings. We followed the basic structure of the three-city study, and so studied 15 local authority wards. This time, however, we attempted to be representative of the range of ethnic environments across England and Wales,3 rather than seeking out places where South Asians were particularly prominent. First we divided the country into four regions, the north, the midlands, London and the outer south east, in order to capture a range of demographic and economic circumstances. The distinction between London and the rest of the south east was made specifically to distinguish the booming outer areas from presumed stability or decline in the urban core.4 In each of the regions we selected a ward representative of the sort of strongly South Asian areas we had previously examined. Then we chose three wards remote from any South Asian locality, and four wards which were predominantly white, but quite near to areas of South Asian population concentration. The reduced number of wards in the former group occurred because there is no ward in London which could be said to be remote from a South Asian area. Our rule of thumb for distinguishing remote areas from near areas was the possibility of easy daily commuting between home and business premises. The final ward in each region was identified as an area of ‘Afro-Caribbean’ population concentration. (British terminology had yet to stabilize on the present nomenclature, ‘African-Caribbean’). The reasoning behind this geographical framework related partly to the importance of community and culture in some explanations of South Asian business (Metcalf et al., 1996; Lyon and West, 1995; Werbner, 1980, 1984, 1990). There were, however, also practical business considerations. Firms in South Asian areas are best positioned to take any advantage that cultural immersion provides to the prosperity of an enterprise and the

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personal life of the owner. Co-ethnic customers, co-ethnic suppliers of goods and services, including finance and professional services, and co-ethnic employees are all conveniently to hand. Meanwhile owners can easily participate in religious and community life, and do so in a language of their own choice. To some extent these links can be maintained in nearby white areas; supplies and services are not too far away, and the owner and coethnic workers can easily commute, but co-ethnic custom may be more difficult to maintain as rival firms may be better positioned to tap the market based in the ethnic concentration. On the other hand, businesses in these nearby white areas will be better located with respect to the white markets which are demographically much larger than the South Asian market, and which often contain a more prosperous clientèle. South Asian businesses in white areas remote from South Asian quarters are likely to find maintaining all sorts of linkages with co-ethnic business partners and co-ethnic communal life much more difficult, but will often be without co-ethnic competition.5 While South Asians consist of a variety of national, religious and cultural groups (Aldrich et al., 1984, Metcalf et al., 1996) they perhaps have more in common with one another than they do with the United Kingdom’s other great stream of post-1945 replacement labour, that from the Caribbean. From earlier work, for example Reeves and Ward (1984), we knew that African–Caribbean firms were far less numerous than South Asian firms, even in relation to their somewhat smaller population base. We therefore studied African–Caribbean enterprises only in those areas where they were most numerous, that is, in wards with significant African–Caribbean populations. The inclusion of African–Caribbean businesses in our study added an important dimension to our study. Insofar as South Asian firms suffer from white racism, it is a disadvantage shared by African–Caribbean businesses. This may give them common characteristics, but, if culture is a component of economic success or failure, then they may differ in their sector, scale and operational characteristics (Barrett, 1999). We discovered important differences between ethnic minorities in level and scale of business development (Table 22.2). In their areas of greatest population concentration, African–Caribbeans accounted for only 11.2 per cent of all businesses, whereas South Asians comprised 41.5 per cent of firms in their equivalent areas. However, too much ought not to be made of this difference. Even in their areas where they are most numerous, African–Caribbeans do not constitute as high a proportion of the population as South Asians do in theirs, so we would expect their businesses to be correspondingly fewer. In the white areas we examined, the proportion of businesses which are South Asian differs by proximity to strongly South Asian area, 20.1 per cent in nearby areas, and only 2.6 per cent in more distant places. Table 22.2 also shows that diversity of businesses varied with their number. In remote white areas, most South Asian firms were the ubiquitous ‘Indian’ restaurants, although the owners were often Bangladeshi or Pakistani. Other South Asian entrepreneurs in these areas were confined to low order convenience retailing. In strongly South Asian areas, in contrast, although restaurants and convenience stores were well represented, there was a much richer mix of clothing stores and specialist suppliers of goods and services of particular interest to South Asian consumers. These included jewellers, travel agents and bookshops. In the white areas near to South Asian areas the business mix was generally intermediate between that in the other two sets of places. Note, however, that the proportion of CTN stores (confectioners, tobacconists and newsagents: a traditional

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Temporal and geographical variations in ethnic minority business Table 22.2 The sectoral distribution of ethnic minority business in England Percentage of minority businesses in named sector African–Caribbean

South Asian

All areas

South Asian areas

Nearby white areas

Distant white areas

23.5 2.9

23.6 11.3

21.8 4.9

28.1 25.2

20.0 13.3

1.5 16.2 19.1 23.5 2.9

16.1 18.2 14.5 11.1 3.5

21.5 21.1 14.7 11.7 1.6

5.0 13.7 9.4 10.8 7.9

6.7 0.0 60.0 0.0 0.0

African–Caribbean areas Food retailers Confectioners, tobacconists and newsagents (CTNs) Clothing retailers Other retailers Catering trade Other consumer services Wholesaling and manufacturing Other

10.3

1.7

2.6

0.0

0.0

Total Number of minority firms Named minority share of all local businesses

99.9 65.0 11.2

100.0 461.0 23.0

99.9 307.0 41.5

100.1 139.0 20.1

100.0 15.0 2.6

British combination of activities) was quite high, particularly in comparison with that in strongly South Asian areas. This may reflect relative demand in the two areas for Englishlanguage newspapers and magazines, and for British-style confectionery. The diversity of African–Caribbean firms was greater than their relatively low numbers might have implied. Food retailers were similar in proportion to the South Asian situation, but CTNs and clothing stores proved rare. More common were other retailers, especially music stores, and other consumer services, notably hairdressers. Both these specialities are related to particular Caribbean tastes. More detailed discussion of geographical variation in business types can be found in Barrett et al. (2001, 2002, 2003). Although our findings on business diversity were new, the picture we discerned on the scale and operating circumstances of South Asian firms proved to be similar to those we identified over a decade earlier. Hours of work were still very high, especially in convenience retailing, where the average white owner of a CTN worked 60.4 hours a week, but a typical South Asian competitor put in 77.5 hours. South Asians still relied heavily on family and other co-ethnic labour. They were still better educated than their white equivalents, 24 per cent holding a degree, compared with 7 per cent of whites, though both figures were four points higher than in our 1978 survey. They were still more reliant on finance from family and friends than whites, though they were also slightly more likely to have obtained a high proportion of their investment from a bank, despite experiencing more problems with this source than whites. Finally, South Asians were still much keener than whites to hand on their business to their children: 60 per cent compared to 29 per cent. (Jones et al., 1992, 1994a, 1994b; Barrett et al., 1996.)

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Having found South Asian business characteristics similar to those in our earlier work, we were reluctant to change our interpretation of business multiplication as arising from structural disadvantage. We did, however, attempt to demonstrate it in a different way, and to show how it varied according to the type of market served. In some earlier work we had analysed ethnic minority business development over time. For example, we wrote that the ‘enclave or ghetto economy may be succeeded by middleman orientation’ (Aldrich et al., 1984, p. 208). We drew parallels with Chinese and Japanese businesses in California, which Light (1972) had documented passing through these stages. Whereas enclave businesses relied predominantly on their own community for custom, ‘middleman minorities’ (Bonacich, 1973) found a wider market among other minorities or the majority population. In 1990, the transition from ‘ethnic niche’ to middleman markets was incorporated in a developmental sequence, preceded by a replacement labour stage in which minority businesses were very few, and succeeded by an economic assimilation stage when a minority, by now in second and subsequent generations, entered mainstream labour markets and business specialization waned (Waldinger et al.,1990). We next argued that ethnic orientation was not the only major dimension of the market. Another important factor was whether the market was local or non-local. If a business supplied only customers from its own locality, then its potential prosperity would be constrained by local wealth. If, however, a business supplies clients from a more extensive hinterland, then it is not limited by the local market. Our fieldwork had shown that South Asian firms sometimes cluster in large numbers, serving markets of considerable geographical extent. In Canada, Gerard Street East in Toronto, and Main Street in Vancouver, and in the UK Leicester’s Belgrave Road and Ealing’s Southall, were examples. These were places where shops tended to be larger than the typical corner store, and where specialist firms could tap the potential of clients willing to travel considerable distances, perhaps to compare the offerings of competing firms. At long last, we were beginning to reintroduce the central place notions with which our research had commenced. We cross-tabulated our geographical market dimension with ethnic orientation to produce a fourfold typology (Jones and McEvoy, 1992; Jones et al., 2000; Barrett et al., 1996; McEvoy, 1999). We operationalized this by splitting our respondents into groups according to whether they had more than 50 per cent of their custom from the South Asian communities, or not; and according to whether they obtained more than 50 per cent of their custom from within one mile (1.6 km), or not. In Canada we substituted a ten-minute drive as the criterion for serving a local market. The first grouping was the local ethnic market, for which we favoured the description ethnic enclosure, a type of place where business potential would be restricted both by localism and by the typical poverty of clustered minority populations. The second market space was the local nonethnic niche, which we equated with typical middleman activities. Here the enterprise has escaped the limitations of serving only the ethnic minority population, but it is still restricted to small-scale low-order activities by the neighbourhood effect. The third space was ethnic non-local; this incorporates those firms which continue to sell mainly to coethnics, but draw their custom from geographically wider markets. These businesses retain some advantages provided by ethnic networking, but avoid the restrictions of a local market. Finally, we identified the non-ethnic non-local market, where minority firms have entered the economic mainstream by selling to the open general market. This final

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category in our fourfold classification clearly connects with the concept of breakout, associated with Monder Ram (Ram and Hillin, 1994; Jones and Ram, 2003). To assess the value of the typology we needed to relate it to some measure of business success. As neither our 15-locality dataset nor the Canadian study were longitudinal, we decided to use our respondents’ qualitative self-assessment of their profitability. From the earlier three-city study, we knew that many small businesses are reluctant to confide turnover or profit information to outsiders. In the later investigations, therefore, we simply asked respondents whether profits in the previous year had been ‘satisfactory’, ‘better than satisfactory’ or ‘worse than satisfactory’. The results are shown in Table 22.3. Most respondents gave the neutral ‘satisfactory’ answer, regardless of their market space and of the country they were located in. To this extent our evidence is weakened, perhaps indicating that many businesses were not even willing to provide even a qualitative view on the success of their enterprise. Alternatively we might hypothesize that most firms are doing enough to survive, but not as well as the proprietor’s might have hoped. The remaining answers, however, point strongly in the direction of our prior reasoning. In both Britain and Canada, the local ethnic space produces the worst results, with almost 43 per cent of UK firms reporting ‘worse than satisfactory’ profits, and exactly a third of Canadian businesses responding likewise. In neither case was there a single ‘better than satisfactory’ response. The best market space for South Asians in each country was the non-local non-ethnic domain. In Canada, this space showed an excess of ‘better than satisfactory’ answers over those who were dissatisfied, and in UK there were as many of the former as the latter. None of the other spaces in either country can claim as much. In the two intermediate categories in Table 22.3, it seems that in Canada the non-local ethnic market is a more profitable environment than the local non-ethnic market. In Britain, however, the picture is not as clear; the ‘worse than satisfactory’ figures clearly suggest that, as in Canada, the non-local ethnic market is the place to be, but some of the local non-ethnic firms claim ‘better than satisfactory’ profits while none of their non-local ethnic comparators do so. Table 22.3

Satisfaction with profits by market space

South Asians in UK Local ethnic Local non-ethnic Non-local ethnic Non-local non-ethnic South Asians in Canada Local ethnic Local non-ethnic Non-local ethnic Non-local non-ethnic African–Caribbeans in UK

Percentage with profits ‘better than satisfactory’

Percentage with profits ‘satisfactory’

Percentage with profits ‘worse than satisfactory’

Number of cases

0.0 8.7 0.0 19.0

57.2 65.2 90.9 62.0

42.8 26.1 9.1 19.0

28 77 18 27

0.0 10.7 12.1 13.7 2.6

66.7 57.3 66.7 76.4 56.4

33.3 32.0 21.2 9.8 41.0

12 34 14 17 39

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The final row of Table 22.3 gives the results of our profitability question for African–Caribbean businesses in the Britain. We did not apply the market space analysis to these respondents, but they were all to be found in vicinities with a strong representation of their community in the local population, providing a strong possibility of local ethnic markets. The outcome is a set of answers remarkably similar to those for UK South Asians in the local ethnic market, which was the worst environment for firms of that ethnicity. We sadly infer that this community’s business involvement has rarely developed beyond the ethnic niche stage. In comparison some South Asians, albeit a minority, have broken out of restrictions imposed by locality and ethnicity. During the late 1990s, we made important new contacts in the form of the Dutch scholars, Jan Rath and Robert Kloosterman. They organized an international and interdisciplinary network of researchers on the theme: ‘Working on the fringes: immigrant businesses, economic integration and informal practices’. We were able to present our research on the UK to the most informed audiences we have ever encountered. Simultaneously we heard accounts of entrepreneurial minorities in other countries (Kloosterman and Rath, 2003). Most importantly, Rath and Kloosterman introduced us to their concept of mixed embeddedness (Kloosterman et al., 1999). This requires that, alongside examination of economic and cultural issues, ethnic minority enterprise be placed in its institutional context. Political and legal concepts are seen as a vital framework, which can completely change the number, types and significance of immigrant businesses in any economy. Relevant issues include constructions of nationality, policies on immigration and assimilation, credentialism in business registration, the regulation of urban land use, and attitudes to the enforcement of laws and regulations. Countries in which the economy and business are highly regulated, such as Germany and Austria, effectively discourage entrepreneurship among immigrants. Conversely, less regulated countries such as Britain, and above all the United States, allow minority business to multiply, though this does not happen for every migrant community. We now set out to identify the institutional context in Britain. In particular we looked at those institutional factors which were in flux, and therefore likely to impinge, positively or negatively, on business well-being. British governments since 1979 have strongly advocated an enterprise economy. There has therefore been a whole series of public initiatives designed to support small- and medium-sized enterprises (SMEs), some aimed at SMEs in general, but some focused on ethnic minority business in particular. Ram and Jones (1998) found that public intervention suffered from duplication, fragmentation and misapplication of resources. Measures were perceived to be poorly co-ordinated and confusing to their potential beneficiaries. Similar indications emerge from the work of Oc and Tiesdell (1998, 1999) on the parallel public policy field of urban regeneration in which policies are possibly even more numerous and confusing than their enterprise equivalents. The general feeling appears to be that ethnic minority firms, like small businesses the world over, have a strong ideology of self or community reliance. They are therefore antipathetic to receiving help from any outside source, particularly if it involves bureaucratic means of access and monitoring, as initiatives funded by the public purse inevitably do. Changes in land use planning regulations to facilitate out-of-town locations for ‘big box’ retailers have also had an adverse impact on many small-scale retail formats in which ethnic minorities are concentrated (Thomas et al., 2004). These effects have been

Temporal and geographical variations in ethnic minority business

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compounded by regulatory changes made by governments committed to the promotion of competition. These changes have favoured big business at the expense of their smaller competitors. One example is the abolition in 1994 of limitations on the opening hours of shops. Originally introduced in 1950 to prevent the exploitation of workers, these regulations effectively banned retailing on Sunday, required another half-day closure, and imposed daily closure by 8 p.m. Exceptions were allowed, such as the sale on Sundays of items with limited shelf life, including fresh vegetables and newspapers. This law had been weakly enforced but most large businesses respected it, while many smaller stores, especially those owned by South Asians in the grocery and CTN sectors, ignored it. This was possible because the law required proof that prohibited goods had been sold, not just that the premises had been open. When the law changed, chain stores began to extend their hours; some supermarkets adopted the legal maximum of 24 hours a day from Monday to Saturday, and six hours on Sunday. Where chains had branches below a threshold size they were able to open 24/7. South Asian firms which had previously benefited from protected, though illegal, time niches now found themselves open to the full blast of corporate competition (Barrett et al., 2001). In the CTN sector there is another pressure on the very existence of the niche. In 1994, newspaper wholesalers gave an undertaking to the competition authorities to reduce the restrictions they had hitherto placed on the supply of national newspapers to retailers. They undertook to reduce the threshold size of order which they would supply, and to permit retailers to supply neighbouring stores (sub-retailing) (OFT, 2002). This has substantially increased the number of outlets supplying newspapers, many of them supermarkets and filling stations. Between 1992 and 2000, the number of retailers selling newspapers increased by about 10 000, over 20 per cent. Meanwhile the number of CTN specialists fell by about 25 per cent (Mintel, 2001). Because of their strong representation in the sector, South Asians are in increasing difficulty. A further complication derives from the decision of Post Office Ltd, an arm’s-length enterprise owned by the government, to rationalize its network of urban post offices (Postcomm, 2004). It is planned to close up to 3000 outlets, out of about 17 000, over the period 2002 to 2005. Many of them combine their post office functions with other forms of convenience retailing, and viability is a matter of symbiosis of the different activities. The logic of the closure programme is an overprovision of post offices in urban areas, which is a threat to their viability. It is of course urban areas in which South Asian retailers are concentrated. A very important background factor is the government’s decision to move state pension and social security benefits, hitherto normally collected from a post office, to direct payment into bank accounts over the years 2003 to 2005. This removes a considerable proportion of business from many post offices, and reduces the number of visits on which non-post office goods might be purchased. We should acknowledge that the closure scheme is accompanied by a compensation package, and that many subpostmasters have volunteered to participate. It seems probable that such regulatory change will continue to adversely affect small businesses, including South Asian firms. For example, it may be easier for large stores to respond to cost increases occasioned by the introduction of a national minimum wage, in April 1999, than it is for family-scale shops. Scale economies are not easy to find when a single employee is a major fraction of the labour force, and may also be a relative or close friend. Without wishing to promote continued exploitation of poorly paid workers,

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one suspects that the impact of the national minimum wage has been negative for many small minority firms. Developments in the hotel trade and clothing manufacture are perhaps indicative of what may be occurring in retailing. In hotels, a buoyant industry, the most common response by management has involved cost reductions at the expense of workers’ fringe benefits (Brown and Crossman, 2000). In the clothing industry, which, like independent retailing, is in a very difficult competitive position, the response has often been closure, or a retreat to illegal operation (Ram et al., 2001; Arrowsmith et al., 2003). Even without these regulatory changes, competition from big business would have continued to impinge on small firms. For example, in food retailing, several forces are acting upon the independent food sector in which so many South Asians are active. The first is the continued spread and growth of superstores owned by the major national chains: these multiples have also been opening smaller format stores in more crowded urban centres where superstores cannot be fitted. Then there is the spread of food discounters (Wrigley, 1996). Chain convenience operators such as Alldays have also been growing. Finally, and overlapping with some of these other trends, there has been the widespread addition of food sales to the retail offer of petrol filling stations (Baron et al., 2001). By the beginning of the new millennium, both Jones and McEvoy had retired from fulltime employment.6 Both have continued as active researchers, however, McEvoy in association with Barrett, and Jones in a prolific partnership with Monder Ram, first at the University of Central England, and now at De Montfort University. Two papers therefore appeared attempting to identify an emerging decline in the number of South Asian businesses in Britain (McEvoy, 2002; Jones and Ram, 2003). Both described the challenging competitive and regulatory environments. Both quoted figures from the Labour Force Survey, appearing at various dates in the government publication Labour Market Trends; self-employment fell from about 20 per cent of the Indian labour force in the late 1980s, to about 14.5 per cent in 2000; among Pakistanis and Bangladeshis the shift was from about 22 per cent to around 18 per cent.7 Both suggested that a generational shift was at work, with British-born and British-educated members of the South Asian communities reluctant to follow their parents into onerous self-exploitation. Jones would have been justified in quoting his own prescient words, ‘it is unimaginable that Englisheducated Asian youths will forever be content to make a first class job of second class citizenship’ (Cater and Jones, 1978). The new generation sometimes enters a professional career, drawing on educational attainment, particularly among Indians. Sadly, however, the results for Pakistani and Bangladeshi men include extraordinarily high levels of unemployment and part-time employment, while women from these groups have very low levels of labour market participation (Barrett and McEvoy, 2005). Both papers noted some diversification in South Asian enterprise. For Ram and Jones, these included the buoyant areas of computer manufacture, web design, IT consultancy, business consultancy, mobile phone retailing and private health care. They noted, however, that these sectors were not likely to become numerically dominant in South Asian business, and also pointed out that many such activities suffer from investment difficulties, have highly volatile profitability, and work in the market shadow of large corporations. McEvoy was more directly pessimistic, pointing out the high incidence of taxi driving in the Pakistani community. By 1991, one in eight Pakistani males was already a taxi driver, compared with one in a hundred in the whole population (Cabinet Office, 2002,

Temporal and geographical variations in ethnic minority business

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p. 56). The most common form of taxi driving followed is private hire, whereby the taxi is booked through a telephone office, rather than hailed on the street. Arguably the ownerdrivers are engaged in a form of labour-only sub-contracting. The cabby is forced to take on the costs of illness and capital, together with the risks of slack business periods and illness, thus protecting the owner of the office and the radio service, which passes bookings to drivers, from many business difficulties. For the driver, ‘the potential of violence is added to the indeterminate number of customers and insecure daily income’ (Kalra, 2000, pp. 188–9). McEvoy’s paper was presented to a small audience at an academic conference, but it generated great interest in the mass media. The conference organizers had included the paper in its press releases, and journalists from the four national broadsheet newspapers interviewed the author, though none actually attended the presentation. All four papers gave the story prominent coverage (Daily Telegraph, 2002a; Daily Telegraph, 2002b; The Independent, 2002a; The Guardian, 2002; The Times, 2002a), and it was the subject of editorials in three of them (Daily Telegraph, 2002c; The Independent, 2002b; The Times, 2002b). Two national television networks included it in their main evening news bulletin.8 In the following days and weeks, the story was picked up by a large number of local newspapers and radio stations, and by some ethnic and trade publications.9 Some coverage was assisted by telephone interviews with the author, but most outlets relied on the press release or earlier reports. Most stories were selective, often focusing on generational change and corner retailers as the only issues. They were surprisingly but gratifyingly uncritical, except for a story published in the author’s home city which quoted the leader of a business support agency to the effect that the decline in corner shops was balanced by growth in the fast food sector (Midgley, 2002). Most reports sought to supplement the original findings with their own interviews with retailers. This provides qualitative case studies, which we hope to publish soon, to elaborate a paper originally based on broad statistical generalization. A final dimension of our work worth reporting on is the examination of long-term business change in different places. Our 1978–84 studies in Bradford, Leicester and Ealing suffer not only from their dated setting, but also from their short time horizon. Although that period was one of rapid fluctuations in economic prosperity, it was short enough for many other dimensions of society to have remained relatively stable. To date we have attempted two longitudinal studies over longer periods, one from 1989 to 1999 in the environs of Batley in West Yorkshire, and the other of Manchester’s ‘curry mile’ over a much longer span, 1966–2002. The Batley study (Barrett et al., 2002) studied change in two adjacent but contrasting wards in the West Yorkshire metropolitan district of Kirklees: Batley East, a deprived urban area; and Birkenshaw and Birstall, a predominantly white area of expanding suburbs. Batley East had a population which was 41 per cent South Asian at the 2001 census, about two-thirds Indian and one-third Pakistani, both groups being predominantly Muslim. In contrast, Birkenshaw and Birstall was almost 98 per cent white, and only 1.2 per cent of residents were South Asian.10 In terms of our earlier work, Batley East is a South Asian area, while Birkenshaw and Birstall is a nearby white area. As Table 22.4 shows, Batley East already had significant Asian businesses by 1989, with a strong presence in food and other branches of retailing (McGoldrick and Reeve, 1989).11 Notions of breakout might lead us to expect spread of retail firms from Batley East into

352 2.7 1.3

2 1

75

Total

100.0

33.3 24.0 26.7 12.0

Batley East 1989 %

25 18 20 9

Batley East 1989 n

17

0 0

10 3 3 1

Birkenshaw and Birstall 1989 n

100.0

0.0 0.0

58.9 17.6 17.6 5.9

Birkenshaw and Birstall 1989 %

Selected wards, 1989 and 1999: South Asian businesses

Retail food Retail non-food Services Manufacturing and construction Wholesale Missing data

Table 22.4

99

3 1

20 21 28 26

Batley East 1999 n

100.0

3.0 1.0

20.2 21.2 28.3 26.3

Batley East 1999 %

17

0 0

7 5 4 1

Birkenshaw and Birstall 1999 n

100.0

0.0 0.0

41.2 29.4 23.5 5.9

Birkenshaw and Birstall 1999 %

Temporal and geographical variations in ethnic minority business

353

the adjacent ward, but this has not occurred. The total number of South Asian retail and consumer service enterprises in Birkenshaw and Birstall has remained static at 16, with a decline of three in the archetypal food retail category. The main change shown in the table is instead a virtual tripling of the number of South Asian manufacturing firms in the strongly South Asian area. Almost all these firms are involved in bed manufacture. This industry has its origins in the local factory of a large national bed manufacturer. The South Asian pioneers in the sector had previously worked in this plant. Heavy use is made of co-ethnic labour, much of it surviving on low wages, and the manufacturing process is decidedly low-tech. Ostensibly this industry is a highly positive development, representing entry into the non-local non-ethnic market, since markets are nationwide. Caution is required, however, since deindustrialization continues to be a marked feature of the British economy; the Batley bed manufacturing sector may only survive because it has a bulky product, difficult to import cheaply, and because it still has access to a pool of exploitable workers for its labour-intensive processes. In Manchester we drew upon McEvoy’s graduate research to examine the transformation of an ordinary suburban shopping street in Rusholme (McEvoy, 1968a) into a celebrated ethnic destination, the ‘curry mile’. This process of change over a 36-year period is shown in Table 22.5; data for two intermediate years are given in Barrett and McEvoy (2006). The transition has both ethnic and functional dimensions. In ethnic terms a retail quarter in which less than 5 per cent of the businesses were South Asian is now almost 75 per cent South Asian. Moreover, few of the other firms now belong to native whites; there is also a cluster of Middle Eastern restaurants, and several other nationalities are represented. The restaurants serve a mainly white clientèle, with staff and students from two large nearby universities as a major element, although South Asian custom increases at weekends. In functional terms a broad mix of trades in 1966, nearly typical of the middle tiers of the local retail hierarchy, has become characterized by a large number of restaurants, over 80 per cent South Asian. In 2002, 56 retail goods stores survived, and 40 of these were South Asian, with jewellers, women’s clothing specialists, video cassette retailers, music stores, bookshops, travel agents and food shops all catering for the South Asian rather than the general market. In Rusholme, therefore, the market spaces served seem to be the two most promising environments identified in our earlier studies. On the one hand, clothing and jewellery retailers, and specialist consumer services, target a regional ethnic market. On the other hand, restaurants serve a predominantly non-ethnic market, which includes both whites and South Asians from beyond the locality. It remains moot, however, whether this constitutes a truly effective breakout. The main products on offer rely for their authenticity on close connection to South Asian culture; the labour force is mainly co-ethnic and poorly paid; and relationships with lawyers, landlords and other business actors often remain within the community. Moreover, as in other ethnic restaurant clusters, such as Birmingham’s Balti Quarter, customer expectation of low prices, which competitive pressures force restaurateurs to meet, is a key problem for restaurateurs (Annabel Jackson Associates, 1994; Ram et al., 2002). This is an important issue for policy makers seeking neighbourhood regeneration through the creation of ‘ethnoscapes’, as documented by Shaw et al., (2004), who studied Bangladeshi restaurants in London’s Brick Lane, and the South Asian fashion quarter at Green Street, a few miles away in the London Borough of Newham.

354 100.0

66.7 0.0 0.0 0.0 33.3 0.0 0.0

%

* Confectioners, tobacconists and newsagents.

6

Total

Note:

4 0 0 0 2 0 0

n

1966

91

11 5 10 14 43 0 8

n

%

100.1

12.1 5.5 11.0 15.4 47.3 0.0 8.8

2002

South Asians

Rusholme business counts, 1966–2002

Food stores CTNs* Clothing stores Other retail Restaurants and take-away foods Public houses Other consumer services

Table 22.5

117

26 7 19 27 5 5 28

n 22.2 6.0 16.2 23.1 4.3 4.3 23.9

%

100.0

1966

32

3 1 0 4 9 4 11

n

%

100.0

9.4 3.1 0.0 12.5 28.1 12.5 34.4

2002

Whites & others

123

30 7 19 27 7 5 28

n

%

100.1

24.4 5.7 15.4 22.0 5.7 4.1 22.8

1966

14 6 10 18 52 4 19

n

123

Total

%

100.0

11.4 4.9 8.1 14.6 42.3 3.3 15.4

2002

Temporal and geographical variations in ethnic minority business

355

Conclusion Much of the work we have reported cautions against the view that the multiplication of minority-owned businesses should be regarded as a sign of success. It is true that many individual enterprises do very well. In Bradford, we could cite Empire, now the country’s largest internet supplier of electrical and electronic consumer goods. In the same economically disadvantaged city, we also find Bombay Stores, a national magnet for purchasers of South Asian fabrics and clothing. Also based in Bradford, and spread over the prosperous parts of the surrounding region, is the Aagrah chain, a group of ten restaurants, which has targeted prosperous white markets for over 30 years. Such successes are by no means rare, but we would caution against the view that they are fully representative of South Asian enterprise in Britain. We believe that some celebrations of South Asian business success may be the outcome of winner’s bias, talking only to successful survivors. Our temporal and spatial investigations help to show that failure rates are often high, that the competitive environment is harsh, and that even survival in the medium to long term may be a result of efforts which many would find disproportionate to the rewards received. We once suggested that much South Asian business in the United Kingdom represented a ‘waste of capital, talent and energy’ (McEvoy et al., 1982). At best, we said, it was a survival mechanism for some, not a socially propulsive force for the whole community. The first of these claims may have been an exaggeration, the second a more reasonable interpretation. The divergent experiences of the Indian and Chinese communities, on the one hand, and the Pakistani and Bangladeshi communities, on the other, may be indicative. For the former groups, heavy small business involvement in the first generation seems to have been used as a base for higher education and professional careers in subsequent demographic cohorts. For the latter, however, the sacrifices of the entrepreneurial immigrant generation have yet to lead to high educational attainment or successful career development for many of their descendants; unemployment, or an unrewarding job such as waiting or taxi driving, is the fate of many. Notes 1. 2.

3.

4.

5. 6.

Renaming SSRC as ESRC was a political decision by Margaret Thatcher’s Conservative government, which appeared to believe that there was no sense in which the economic sphere could be seen as part of the social sphere. So much for social science! Paulson-Box was a lecturer from Liverpool Polytechnic’s School of Education with existing ties to Vancouver. Abraham was a member of the languages section of the Liverpool Business School and, as a Mauritian, a native speaker of French. Jones, assisted by Zenat Merali, did the interviews in Toronto. McEvoy had the arduous task of co-ordinating the work across the three cities, for which reason he saw fit to endure the luxury of the transcontinental train journey. We omitted Northern Ireland and Scotland from our investigation because background census material on population ethnicity is classified in different ways there, compared with England and Wales. In practice, our study was confined to England, despite the intense Welsh patriotism of the English-born Jones. (As with claimed Irishness in the United States, the model for Welshness seems to be the German concept of nationality by descent, rather than the French concept of nationality by citizenship.) London turned out to be more buoyant than we thought. Although we had not noticed it at the time, London’s population had begun to grow again in the second half of the 1980s, a trend which has continued to the present. Immigrants and ethnic minorities have been important contributors to this revival. (Hamnett, 2003, pp. 103–27). A South Asian restaurateur in a small country town in the Midlands told us that business was going well, but he lived in fear of a second Indian restaurant opening. Both Jones and McEvoy took advantage, at different times in the late 1990s, of generous early retirement terms, offered by the university to reduce its total of expensive staff on senior grades. The government has

356

7. 8. 9. 10. 11.

Handbook of research on ethnic minority entrepreneurship since blocked this tactic, which was placing an unnecessary strain on the viability of the national pension scheme for teachers. Note that the decline so far identified is relative, not absolute. Because minority populations of working age are still increasing, particularly among Pakistanis and Bangladeshis, the total number of firms represented by the percentages quoted is still going up. Andy Wharhol got it wrong on the time span of fame. McEvoy’s appearance on BBC news was a sound bite not even 15 seconds long, let alone 15 minutes. For a printed version of the BBC’s story, see (http://news.bbc.co.uk/1/hi/business/1744322.stm; last accessed 12 December 2004). The story even reached the Hindustan Times of New Delhi on 8 January 2002. Thanks to Professor Jennifer Latto for this sighting. Barrett has commented that most of the remaining 0.8 per cent are members of his, African–Caribbean, family. Birstall happens to be where Barrett was raised. The classification in this table is different from that used in earlier parts of this paper, and in particular in Table 22.2. This table draws on 1989 data used in the work of McGoldrick and Reeve (1989). The CTN category, previously identified separately, is included in the heading ‘retail food’.

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McEvoy, D. (1999), ‘Immigrant ethnic minorities in British and Canadian retailing’, in K. Jones (ed.), Case Studies of the Impact of International Retailing in Canada, Centre for the Study of Commercial Activity, Ryerson Polytechnic University, Toronto, pp. 27–32. McEvoy, D. (2002), ‘South Asian business in England: an emerging geography of decline?’, Annual Conference of the Royal Geographical Society (with the Institute of British Geographers), Queen’s University, Belfast. McEvoy, D. and H.E. Aldrich (1986), ‘Survival rates of Asian and white retailers’, International Journal of Small Business, 4, 28–37. McEvoy, D. and T.P. Jones (1993), ‘Relative economic welcomes: South Asian retailing in Britain and Canada’, in H. Rudolph and M. Morokvasic (eds), Bridging States and Markets, Berlin: Sigma, 141–62. McEvoy, D., T.P. Jones, J.C. Cater and H.E. Aldrich (1982), ‘Asian immigrant business in British cities’, British Association for the Advancemenement of Science, Liverpool. McGoldrick, C. and D.E. Reeve (1989), ‘Black business in Kirklees: a survey of Afro-Caribbean and South Asian businesses in the Kirklees Metropolitan District’, A report prepared for the Employment Development Unit, Kirklees Metropolitan Council. Metcalf, H., T. Modood and S. Virdee (1996), Asian Self-Employment. The Interaction of Culture and Economics in England, London: Policy Studies Institute. Midgley, I. (2002), ‘Are corner shops on the verge of extinction?’, Telegraph and Argus, Bradford, 9 January. Mintel (2001), ‘CTN retailing, sector structure’, Mintel International, 9 May. Oc, T. and S. Tiesdell (1998), ‘Training and business support for ethnic minority groups in city challenge areas’, Local Economy, 13, 71–7. Oc, T. and S. Tiesdell (1999), ‘Supporting ethnic minority business: a review of business support for ethnic minorities in city challenge areas’, Urban Studies, 36(10), 1723–46. OFT (Office of Fair Trading) (2002), ‘OFT review of undertakings given by newspaper wholesalers. A consultation paper’, Office of Fair Trading. Ouseley, H. (2001), ‘Community pride not prejudice, making diversity work in Bradford’, Bradford Vision, Bradford. Postcomm (2004), ‘Building a viable network. Postcomm’s fourth annual report on the network of post offices 2003–2004’, London, Postcomm. (www.psc.gov.uk). Pred, A. (1963), ‘Business thoroughfares as expressions of urban Negro culture’, Economic Geography, 39, 217–33. Ram, M. and G. Hillin (1994), ‘Achieving “break-out”: developing mainstream ethnic minority business’, Small Business Enterprise and Development, 1, 15–21. Ram, M. and T. Jones (1998), ‘Ethnic minorities in business’, Small Business Research Trust, Open University, Milton Keynes. Ram, M., P. Edwards, M. Gilman and J. Arrowsmith (2001), ‘The dynamics of informality: employment relations in small firms and the effects of regulatory change’, Work, Employment and Society, 15, 845–61. Ram, M., T. Jones, T. Abbas and B. Sanghera (2002), ‘Ethnic minority enterprise in its urban context: South Asian restaurants in Birmingham’, International Journal of Urban and Regional Research, 26(1), 24–40. Reeves, F. and R. Ward (1984), ‘West Indian business in Britain’, in R. Ward and R. Jenkins (eds), Ethnic Communities in Business, Cambridge: Cambridge University Press, pp. 125–46. Rose, H.M. (1970), ‘The structure of retail trade in a racially changing trade area’, Geographical Analysis, 2, 135–48. Shaw, S., S. Bagwell and J. Karmowska (2004), ‘Ethnoscapes as spectacle: reimaging multicultural districts as new destinations for leisure and tourism consumption’, Urban Studies, 41(10), 1983–2000. Small Business Service (2004), ‘A government action plan for small business. Making the UK the best place in the world to start and grow a business. The evidence base’, Department of Trade and Industry, London. Smith, G. (1984), ‘The Patels of Britain: from street-corner trader to millionaire’, Sunday Times, 20 February, 33–4. Sunday Telegraph (1978), ‘The bazaar on the corner’, Sunday Telegraph Magazine, 26 November, 82–99. The Guardian (2002), ‘Family-run Asian shops disappear. Competition hits corner stores’, The Guardian, 5 January. The Independent (2002a), ‘Asians turn their back on family-run corner shops’, The Independent, 5 January. The Independent (2002b), ‘Comment. Checking out’, The Independent, Weekend Review, 5 January. The Times (2002a), ‘Early closing as young Asians shut up shop’, The Times, London, 5 January. The Times (2002b), ‘Shop spoiled. The corner shop is no longer enough for Asian youth’, The Times, London, 5 January. Thomas, C.J., R.D.F. Bromley and A.R. Tallon (2004), ‘Retail parks revisited: a growing competitive threat to traditional shopping centres?’, Environment and Planning A, 36, 647–66. Waldinger, R., D. McEvoy and H. Aldrich (1990), ‘Spatial dimensions of opportunity structures’, in R. Waldinger, H. Aldrich, R. Ward and Associates (eds), Ethnic Entrepreneurs: Immigrant Business in Industrial Society, Newbury Park: Sage, pp. 106–30.

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Werbner, P. (1980), ‘From rags to riches. Manchester Pakistanis in the textile trade’, New Community, 8, 84–95. Werbner, P. (1984), ‘Business on trust: Pakistani entrepreneurship in the Manchester garment trade’, in R. Ward and R. Jenkins (eds), Ethnic Communities in Business, Cambridge: Cambridge University Press, pp. 166–88. Werbner, P. (1990), ‘Renewing an industrial past: British Pakistani entrepreneurship in Manchester’, Migration, 8, 17–41. Wrigley, N. (1996), ‘Sunk costs and corporate restructuring; British food retailing and the property crisis’, in N. Wrigley and M. Lowe (eds), Retailing, Consumption and Capital, Harlow: Longman, pp. 116–36.

23 Italians in Britain: ‘Britalian culture entrepreneurs’ revisited Robin Palmer

Introduction In the following I revisit an article of mine entitled ‘The rise of the Britalian culture entrepreneur’ (Palmer, 1984). As with other articles of that period that I wrote on Italian migration to Britain, the 1984 article was a spin-off from a Sussex masters and doctoral programme (Palmer, 1972, 1981) which entailed archival research and fieldwork in London and Italy between 1970 and 1974 (see also Palmer, 1977, 1980). When the 1984 article appeared I was already moving into new fields of research, and I have not written again on entrepreneurship, whether in the migrant or ethnic or any other contexts, but I have published or presented papers on other aspects of Italian migration to Britain (see, for example, Palmer, 1991, 2000) and I have returned to Abbazzia, the Italian hub of the migration network that served as a microcosm or ‘sample’ in my study. So I was as much surprised as gratified when Léo-Paul Dana, recalling my article from when he was a doctoral student 20 years ago, invited me to contribute to the present volume; and it was only after I accepted that I fully appreciated the challenge the commission represented . . . Under other circumstances I could have responded with a simple update of the data and the analysis of the original article, an even more longitudinal supplement to an already historical-oriented article. But that response would have required my continuation in the field of ethnic entrepreneurship in general, and those I termed ‘Britalians’ in particular (see below for a full explanation of this term); and that, as I have already mentioned, did not happen.1 Had I been able to update the study I would have encountered major changes. The 30 years since my study has been characterized by an entirely different kind of Italian migration than that which occurred in the 30 years leading up to my study; Medaglia’s recent research into other aspects of Italian life in London mentions in passing that ‘[in] the 1970s there was a period of return migration and 20% of the inward flow returned to Italy’ and ‘[t]he Italians who have come to Britain since the 1970s and 1980s are almost all either language students or belong to the professional classes’ (2001: 80–81). To extrapolate from that shift: the kinds of ambitious young men from poor rural communities that manipulated their Italian culture to become independent ‘self-made’ entrepreneurs that I discussed in the original 1984 study were either no longer coming to London in significant numbers or were returning to Italy. In the absence of new migration, the possibility of staffing by recruits from the country of origin and the creation of new ventures by co-ethnics of the younger generation (other than the migrants’ own children) was no longer possible; consolidation and diversification but also contraction of the Britalian entrepreneurial sector would have ensued. That statement is, of course, speculative; I do not have the data either to substantiate that scenario or to flesh it out in any detail comparable to that of my account of the situation up to 1974. 360

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What I do have is some related data on subsequent developments in the origins and base of my sample community, the Central Italian parish that I have called Abbazzia. It was collected on brief return visits in 1995 and again in 2001. These two re-visitations, in addition to the experience I have of the parish as it was in 1973, have provided me with insights into what followed the stagnation and reversal of Italian migration to Britain in the last 30 years. Interestingly, it is a continuation of the tradition of ‘culture entrepreneurship’ (see below) but transformed and in an entirely different context. Given the unevenness of my knowledge of the Britalian experience since the 1970s, this chapter has two distinct but complementary parts. The first part consists of a revisitation of the 1984 article, which was mainly an analysis of the long association between Britalians and entrepreneurship in London; it is essentially a revision but not in the light of new data. While much of the detail of the 1984 article is perforce omitted in this summary, some of the contextualization and connections that were not made sufficiently explicit in the earlier version are emphasized. The second part of the article not only updates the Italian side of the narrative through the microcosm of the Abbazzini (and especially Abbazzia as a site of new developments), but also places more emphasis on the Abbazzini microcosm than the 1984 article did, because knowledge of its origins and internal dynamics is crucial to understanding what happened subsequently. Conceptual issues In addition to being a revision and re-visitation in the senses just described, the chapter includes another, more scholarly understanding of ‘revisit’. It provides an opportunity to examine (in a limited way) whether the flood of new concepts flowing from the 1990s renaissance in migration and ethnic studies offers any fresh insights into my material (Cohen, 1997; Castles, 2002). Robin Cohen is one of the few contemporary theorists of migration and related phenomena who has acknowledged the pioneering work of my generation of anthropologists: ‘The perception that there were seminal changes in cultural interactions arising from migration was first adequately theorised by anthropologists’ (1997: 134). While my generation did not necessarily use the contemporary terminology, we anticipated transnationalism and the importance of culture, ethnicity, social change and multi-sited fieldwork in the study of migration (cf., for example, in the present context, Douglass, 1984; contributors to Watson, 1977).2 We may have called our subjects ‘emigrant communities’ (Watson, 1975, 1977: 4) rather than ‘transnational communities’ (Castles, 2002: 1159); the mechanism by which diasporas formed ‘chain migration’ (Price, 1963; Palmer, 1977) rather than ‘migration networks’ (Castles, 2002: 1152); but at least we were not neglecting ‘migration as a collective process based on the needs of families and communities’ which Castles cites as a major lacuna of migration research in the past (ibid.: 1147). And those of my generation who were interested in ethnic entrepreneurs also appear to have been ahead of the field. There were not a few of us.3 Recently it was observed that ‘[t]he revival of large-scale immigration has highlighted another feature of the twentieth century metropolis: the immigrant proclivity towards small-scale business enterprise as an alternative source of livelihood’ and the ‘well known’ case studies of the Koreans in Los Angeles (Light and Bonacich, 1988) and the Chinese in New York (Zhou, 1992) were acknowledged (Logan et al., 2003). But perhaps because we were anthropologists venturing into non-stereotypical territory rather than the ‘owners’ of these fields of research

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(sociologists and economists), and because most of us were working in Europe, the pioneers of empirical research in this field have been largely forgotten. This does not mean to say that I number myself with those who feel that the upsurge of interest in migration since 1990 and the new concepts and terminology that have resulted simply ‘reinvent the wheel’ (Portes, 2001: 19; Levitt et al., 2003: 565). I tend to agree with Robert Smith, who has pointed to the faulty logic of those who believe that nothing has changed but the terminology: ‘If transnational life existed in the past but was not seen as such, then the transnational lens does new analytical work by providing a way of seeing what was there that could not be seen before because of the lack of a lens to focus on it’ – and then there are the truly new kinds of ‘transnational life’ that are only emerging under conditions of contemporary globalization ‘which are more overtly amenable to the new transnational perspective’ (2003: 724). As Stephen Castles puts it, ‘the systemic role of migration in modern society can be seen as a constant . . . [but] its character changes in the context of economic and social shifts and developments in technology and culture’ (Castles, 2002: 1147). The principal driver of the change is globalization which ‘undermines many of the core features of the nation-state . . . [changing] the spatial organisation of the world from a “space of places” to a “space of flows” ’ (ibid.; Castells, 1996: ch. 6; see also Wimmer and Glick Schiller, 2003). Hence the new interest in transnational phenomena such as ‘diasporas’ (Cohen, 1977) and other accompaniments of migration and globalization such as ‘creolization’ or ‘hybrid identities’ (Cohen, 1977: 129–37).4 Then there are the more general theoretical developments and associated concepts emerging from the postmodern experience of flows rather than places. These include, besides ‘globalization’ itself, terms such as ‘discourse’, ‘narrative’, ‘contestation’ and ‘negotiation’ (Rapport and Overing, 2003). The academy itself has not been immune to the shift from ‘places’ to ‘flows’ as once-hermetic disciplinary boundaries collapse and interdisciplinary work accelerates conceptual development. As part of a critical, innovative but (so it now appears) essentially modernist and conceptually deprived generation (at once dissatisfied with the status quo but without the benefit of the contemporary lexicon of more useful concepts), I felt compelled to invent my own terminology and concepts in the interests of authenticity and in order to advance the analysis in my own field and subject. ‘Britalian’ was a product of the first intention, ‘culture entrepreneur’ a response to the second. As the two loom so large in both the title and the text of my 1984 article, they should be defined and explained before I proceed to the main task. In doing so I use both the original explanations (Palmer, 1984) and, following Smith (2003) cited above, the lens of subsequent experience and the new concepts. Why ‘Britalian’? ‘Britalian’ is a made-up word, an amalgam of ‘Briton’ and ‘Italian’ that served a similar function to ‘Italianate’, the term employed by anthropological predecessors in the field, Philip Garigue and Raymond Firth (1956), to encompass not only the Italian-born but also the less assimilated among their children and even grandchildren in this remarkably cohesive and inclusive minority. Why then replace ‘Italianate’? To me, it connoted things of Italian origin, not people, and I was reluctant to objectify my subjects more than absolutely necessary; I felt the social science approach tended to objectify through generalization quite enough without any terminological assistance from the analysts (Palmer, 1984: 241). Twenty years on, I am not entirely happy with either term, because most scholars simply

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use ‘Italian’ or ‘Polish’ or ‘Pakistani’ or whatever to describe the migrant ethnic group whether or not it includes those who are no longer citizens of the sending country. And then there is the strategic issue of not being recognized by search engines . . . However, because this chapter is a conversation with work that features the Britalian term prominently, it would be too confusing to drop it now. Another defence for retention of the term, which has more to do with conceptual than practical considerations, is that it draws attention to the hybrid identity of many in the Italian diaspora in London at that time, and was thus necessary and even, perhaps, ahead of its time (cf. Cohen, 1997: 129–37). Those most directly affected by the Britalian phenomenon besides the migrants themselves – their relatives and paesani (fellow-villagers) in Italy were very conscious of the ‘difference’ of especially the longer-term emigrants and their children. In Abbazzia they called them with deliberate irony ‘Inglesi’ using a certain inflection that I have indicated with inverted commas. A genuine English person was an Inglese vero e proprio – a true, proper English person, unlike their hybrid London-based kin and paesani whom they regarded as inauthentic, both as Italians (and especially paesani), and as Britons (Palmer, 1980, 1981: ch. 10). What is a ‘culture entrepreneur’? ‘Culture entrepreneur’ was another concoction that filled a need at the time. In the 1984 article I expressed the wish that the anthropologist who had contributed most creatively to both entrepreneurship and ethnicity up to then – Frederik Barth (1963, 1969) – had applied his sophisticated conceptual skills to the combining of the two concepts; but he had not, and so I came up with ‘culture entrepreneur’ to describe those who include their ‘ethnicity or culture – its distinctive products and orientation – as a vital part of [their] stock-in-trade’ (Barth, 1969: 90). Immigrants were especially predisposed to become culture entrepreneurs, I suggested, because, while the artefacts and approaches of a foreign culture are novel to actual and potential consumers in the host society, they are commonplace in the home culture: all the entrepreneur has to do is to transfer the items from where they are common to where they are scarce to enjoy all the benefits of the innovator without having to be truly innovative (in my experience, an extremely rare quality). It is thus a strategy that is not limited to a few gifted innovators, but may be practised by a wide range of people. If, further, one also agrees with Barth (as I did in the article) that the entrepreneur is not so much a whole person or even an entire role or status but that entrepreneurship is best conceptualized as an aspect of role (Barth, 1963: 5), then culture entrepreneurship defines not only large elements of full-time occupations but also aspects of the role of someone who is not even self-employed, such as a waiter. Conceptualized as such, culture entrepreneurship became a useful model for understanding the unique adaptation of a historically enduring and significant element of the Britalians. The classic example of culture entrepreneurship with an Italian connection would be the pizza, a filling but simple and inexpensive traditional dish that originally combined such readily available local items as dough, pureed tomatoes, mozzarella cheese and herbs such as origanum. From the mid-nineteenth century onwards, the pizza went wherever Neapolitans and Italians in general went, which was mainly to the Americas, and in great numbers (see below for further details). Now available globally, with every conceivable topping to satisfy the tastes of increasingly affluent customers and compete in an

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increasingly competitive fast-food market, the pizza is the example par excellence of culture entrepreneurship and how far it can go when combined with more conventional entrepreneurial characteristics, such as tailoring the product to the market and business innovation, such as the franchise. Mention of franchising recalls another example of culture entrepreneurship that ranks alongside the pizza in terms of global reach and success, but is not as readily identified as an example of culture entrepreneurship – McDonald’s. To be sure, Ronald McDonald was not a poor immigrant making a business out of some element of his native culture in some foreign metropole; his is rather the iconic American multinational company. But as James Watson and his collaborators point out in Golden Arches East (1997), the popularity of McDonald’s simple fare in East Asian countries with the most elaborate and delicious culinary traditions ever known, including their own traditional, freshly prepared street food, is only explainable in terms of culture: in this case local admiration for American culture and the status enhancement in their own eyes and in those of others enjoyed by the ‘sophisticates’, the ‘global citizens’ who consume the foreign fare (Watson, 1997). I did not include this example in the 1984 article because in the 1970s and early 1980s McDonald’s had not yet attained its global reach, and its relevance to the culture entrepreneurship model was not so obvious. But I recall now that even then catering entrepreneurs – not necessarily Americans – were already exploiting American themes in London alongside my subjects, the Italians, with a branch of the Hard Rock Cafés and up-market burger restaurants with décors that evoked the Great Depression in America; American cultural imperialism had already begun (cf. Ritzer, 1998). Just as twentieth-century American economic and cultural hegemony has provided the structural conditions for global culture entrepreneurs of all kinds of commodities, from burgers (and pizzas, now thoroughly Americanized) to sport shoes, so in earlier epochs successive political–economic and cultural phenomena originating in the Italic Peninsula (Roman, Vatican, Renaissance and Baroque hegemonies) supplied the principal positive incentive for generations of Italian migrant culture entrepreneurs to base careers on the less sophisticated but increasingly affluent periphery, in territories such as the British Isles. It might not be too far-fetched to characterize the process as an early form of ‘branding’ (Ind, 1997). Part I Britalian entrepreneurship and the role of ethnicity Each and every Italian diaspora is unique, of course, but there are broad trends (see Foerster, 1919; Palmer, 1981: part 2; Gabaccia, 2000). Emigration from Italy before the mid-nineteenth century involved mainly individuals or small groups of migrants travelling from North and Central Italy on a seasonal or other temporary as well as permanent basis to the more prosperous countries of Western Europe. Thereafter, and until the 1920s when restrictions abroad and at home limited emigration, it was sourced overwhelmingly in South Italy and directed mainly to the Americas; and it was on a phenomenal scale, temporarily depopulating whole regions of the South and Italianizing whole cities in South America (such as São Paolo) and quarters of cities and towns in the United States by force of numbers (Foerster, 1919). After 1945, the extra-European streams out of Italy revived, but with less emphasis on South America and more on new destinations, principally Canada and Australia (in addition to the United States, still an important destination). These new trends were rapidly overtaken from the mid-1950s by a strong revival of

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labour migration within Europe, now involving mainly South Italians. From the 1960s onwards, as Italy itself became a fully industrial society, urbanization increasingly replaced emigration, and today Italy is a net importer of immigrants from the Third World, including many asylum-seekers and illegal migrants (Grillo and Pratt, 2002). The Britalians as a special case The Britalian phenomenon was not atypical to begin with. In common with other European societies, Britain had been colonized by the Romans and subsequently, in a sense, by the Vatican through its monastic orders, and over an even longer period. Then there was the trading relationship in the high Middle Ages with the Italian city-states and the cultural transmissions that the Italian Renaissance and subsequent cultural phenomena such as the Baroque generated, including opportunities for artists, sculptors, architects, artisans, musicians, singers, actors, academics and tutors over the centuries. Spain, France and Germany before the Reformation, as well as the British Isles, had this kind of relationship with the Italic states. However, the more backward commercially and culturally the country, the more ‘Italians’ took an interest in it, especially if strategic resources, such as wool and tin were in abundance. Both of these criteria were met in pre-modern Britain, which made it a focus for successive ‘colonialisms’. These included the true colonialism of the Romans; the ‘theocolonialism’ of the Benedictine and other Italian-based monastic orders (until Henry  dissolved them); a forerunner of modern neo-colonialism involving especially the Genoese and the ‘Lombard’ bankers who financed the crown (and founded London’s financial district, ‘the City’); and a form of cultural colonization by the aforementioned artists, sculptors and the rest. With the rise of mercantilism in Britain during the Elizabethan period and after, British individuals and institutions increasingly had the means as well as the incentive to attract Italian entrepreneurs who traded in the prestige of their ethnicity as well as their skills. Italian cultural influence was longer and stronger in Britain than in other European countries.5 As the Italian city-states subsided into internecine conflicts and especially when these formerly imperialistic powers became colonized in their turn (by Spain and, later, Austria) new ‘push’ factors in Italy gave added impetus to Italian migration within Europe: even before it was directed overseas it began to acquire ‘mass’ as well as ‘élite’ characteristics (Marin, 1975). In the eighteenth and nineteenth centuries, a more proletarian, rural and desperate element – minor artisans and itinerant traders for the most part – congregated in London, mainly in Clerkenwell and Holborn. By 1893, a quarter of the 10 000 Italianborn in London were employed in these ways (Foerster, 1919: 204). They were considered a public nuisance and were one of the factors in the promulgation of the Aliens Act of 1905 (for details of their trades, see Palmer, 1981, 1984). The itinerants might have preferred to sell their labour, but there were few opportunities. As I observed in the 1984 article: ‘More than any other nationality the British worker has sought to maintain in native hands, and in those of the Irish, working class jobs that have been filled by immigrants in other countries – jobs in agriculture, mining, construction and manufacturing’ (Palmer, 1984: 93). The only vacancies for Italians and other foreigners were in asphalting and ice hauling – jobs too arduous to hold much appeal – and the public tertiary sector. This sector began to expand and develop rapidly after 1850. London was becoming the world’s greatest metropole, the hub of the British Empire, with a burgeoning hospitality industry. By 1901, the British census recorded about 2500 Italian-born involved

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in catering, mainly as waiters (Italian sources which also count the children of Italians, doubled that figure: see Marin, 1975: 49). Thus, even when Italian mass emigration had been under way for several decades, the Britalian numbers remained negligible, and they continued to be drawn from the North and centre rather than the South. The tenor of the migration also continued to be entrepreneurial, exploiting British stereotypes of Italian culture and the Italophilia of the upper classes and increasingly the new industrial bourgeoisie with its tendency to ape upper-class life-styles as well. The élite migrants were the most obviously culture entrepreneurial, to the extent that all their cachet derived from their ‘authenticity’ as highly skilled bearers of the Italian Great Tradition, whether in commerce or the arts. As for the small craftsmen and itinerants, they also trafficked in Italian artefacts, or in items that were associated with Italy by consumers of all classes simply because Britalians dealt in them, such as thermometers (Palmer, 1984: 96). Probably the most ‘Italian’ of the itinerant categories and the most successful at transforming themselves into a regular business people over time were the ice-cream traders; once this trade was linked to permanent premises, diversification into cafés and milk bars became possible, always with a strong ‘Italian’ identity. Culture entrepreneurship in employment The phenomenon of ethnicity-by-association, just described for the itinerants, also benefited the waiters. I have mentioned the scarcity of other economic opportunities for Italian migrants, and the increasing press of poverty in the home country and new restrictions on immigration in Britain; especially after 1905, the tertiary sector was in high demand among Italian migrants because there were so few other options. Besides, the waiter’s role, more than any other in catering, was the best way of both learning English and acquiring relevant skills while saving hard for a catering business of one’s own. Turning waiting into an ethnic monopoly was thus a good way of securing places for relatives and others from Italy and creating artificial scarcities, thus driving up wages. As late as the 1970s an Italian waiter could command double the wages of a Spaniard, regardless of qualifications and experience. Why the haste to become self-employed among the Britalians, even those who had secured regular employment? I think the motivator lay in the Northern and Central Italian peasant value system, where ‘quelli che lavora sotto gli altri’ (‘those who work under others’) constituted the lowest rural class: the landless peasants, the poorest of the poor. Acquiring sufficient land in the home community for economic independence was one way of becoming self-employed, but saving enough and finding suitable land on the open market were major challenges. The other strategy was to buy a business in London and this was for most Britalians the more viable option. Hubris and nemesis6 By the 1930s, with new immigration reduced long since to a trickle by the strictures of the Aliens Act, the Britalians of London especially had acquired a distinctly bourgeois profile. Many who had started out as craftsmen, itinerants and waiters had become ‘respectable business-people’ and either already had or were looking forward to having their Britishborn children continue to consolidate their rapidly improving socio-economic position. Theirs was a very different circumstance from contemporary Italian emigrant communities in the Americas, where mass migrants from the South were still crammed into tenements

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in the cities or camps and bunk-houses, doing the manual labour the natives and earlierentering immigrants (such as the Irish in the United States) derided (Gabaccia, 2000: chapters 3 and 4). Such entrepreneurial or middle-class elements as there were in the American diaspora still depended more on the custom of their co-nationals than on the receiving society, even criminal entrepreneurs such as initially the Black Hand and later the Cosa Nostra (Hannerz, 1974); anti-Italian prejudice and discrimination was still rife at this time. The London Britalians, meanwhile, more affluent, more sophisticated and less ‘ghetto-ized’ than probably any other Italian diaspora group at this time, were not generally subject to xenopohobia, so accustomed were Londoners to hosting ‘Italians’, even though Britalians did not generally assimilate and, at 30 000, were by now more conspicuous than ever before. Britalians were not so much resistant to assimilation – resistance implies pressure to assimilate, which was not then and has never been part of Britain’s immigration policies – as under no great pressure to assimilate, beyond the inevitable distancing that is a function of time in a new country, and the anglicization that their children inevitably underwent as soon as they started attending British schools. In addition, by the 1930s, they were incorporated as never before in a highly organized transnational community, the Italian diaspora. Following Unification in 1860, Italy was a neonate state striving to combine a more European and developed North with a Mediterranean and chronically underdeveloped South. At the same time, it had to cope with unprecedented emigration, mainly from the South, and a rapidly growing diaspora, mainly in the Americas. The first government of the unified state, made up of northern liberals, encouraged emigration and the remittances it generated as a development tool, but the lack of rural capital was viewed as more of a problem than over-population, so repatriation was also to be encouraged. In the contemporary idiom of Robert Smith (2003), the state took steps to help create a transnational public sphere and strengthen diasporic membership practices, all linked to domestic and foreign policies. These steps included pacifying local landowners, reassuring the receiving societies, enacting legislation and setting up institutions to manage the diaspora and its remittances, and working out a relationship with the Catholic Church that was already involved in the religious organization of the diaspora (ibid.). Following the replacement of the Liberals by the Fascists under Mussolini, the efforts to turn Italy and its diaspora into a single ‘imagined community’ (Anderson, 1991) were redoubled. The Italian Fascist state pursued its foreign policy through its consulates during the mid-1930s in a way that attempted to convert the diaspora into Italian agents (Smith, 2003). Nowhere was this intensification of established policy more enthusiastically applied than in Britain, despite the meagre size of this section of the diaspora; for this colonial super-power (as it was as the time) was decisive for the realization of Italian colonial ambitions in Africa. My interviews with older Britalians revealed how they were supported and cosseted by the Italian Embassy and Consulate (Palmer, 1981: ch. 3), and how the business community especially responded to the Siren song of Italian Fascist discourse. The junket, however, was short-lived: after Italy declared war on Britain in 1940, Italians were declared to be ‘enemy aliens’ and all male Italian-born immigrants between 16 and 70 were interned for the duration and their property confiscated, except for the 700 considered too fascistic to be securely interned in Britain, 470 of whom were drowned when the ship taking them to Canada, the Arandora Star, was torpedoed (Palmer, 1981: 129).

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After the war and their release from internment, most Britalians opted to remain in Britain, even though it was a very different environment for them. With Italy in ruins, there was little point in repatriating and, besides, the restaurateurs and other entrepreneurs had all their assets in the country; so as soon as they had secured the release of their premises from the Custodian of Enemy Property, they began the task of reconstruction, confronting the post-war ration-card austerity and a climate of unprecedented antiItalian feeling. To the roughly 30 000 pre-war migrants were immediately added about 1400 Italian prisoners-of war who opted to remain in Britain as Civilian Volunteers, and nearly 5000 Italian workers recruited under the European Voluntary Workers schemes, between 1947 and 1951 (Castles and Kosack, 1973: 79; Palmer, 1981: 130–32). Beyond these special schemes of the immediate post-war, individual industries such as mining and brickmaking, facing acute labour shortages generated by the entitlement spirit of ex-servicemen, tried to recruit labour from Italy, but only the brick industry was successful, bringing some 7000 South Italian men (who later brought wives from Italy and raised families, thereby multiplying the size of their community) to the Bedford area in the 1950s (Brown, 1970). Besides these mass-recruitment efforts, numerous businesses, large and small, primarily in the tertiary sector, continued to recruit Italian workers on contract, in accordance with the stipulations of the Aliens Act (Palmer, 1981: 134). All of these sources of new Britalians were relevant for the rapid increase of entrepreneurship in the post-war period, because, as before, migrants who began their careers in employment did not necessarily continue in such jobs. Those with entrepreneurial aspirations usually internally migrated to London and, if not already in ‘the catering’ as they called it, sought experience in that or another ethnic sector, such as terrazzo flooring. By all of these means, the Britalian minority swelled to an estimated 215 000 by 1973, with a particular focus on London (Problemi, 1974). Entrepreneurial alternatives The character of culture entrepreneurship among Britalians changed in the post-war period, becoming more diverse. In the 1984 article I discussed the highly innovative forms of culture entrepreneurship that responded to the major post-war shifts in spending power and taste, especially in metropolitan areas such as London (cf. Raban, 1974). Here the formal ristorante came under threat from the trattorie (the Italian equivalent of the Bistro) that proliferated both as single establishments and in chains from the late 1950s onwards. Besides their Italian roots, the ‘trats’ were also an outgrowth of the Milk Bar, that earlier Britalian form that grew out of the ice-cream trade and offered Italian-style coffee, ice cream and snacks in a manner reminiscent of the Italian ‘bar’ but without alcohol (in obeisance to British licensing laws). To many British youth of the immediate post-war seeking to differentiate themselves from their elders, the Milk Bar with its modern and Continental ambience was preferable to the traditional ‘tea room’ or ‘pub’ frequented by their elders. Not all aspirant entrepreneurs of the post-war revived the ancient strategy of the culture entrepreneur. Those who were interned, or were exposed to the climate of antiItalian feeling in the immediate aftermath of the war, experienced something like that which recent immigrants from Muslim countries to the United States have endured since 9/11. Those most exposed or most sensitive to the xenophobia responded with what I termed ‘culture-suppressed entrepreneurism’ in the 1984 article.

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Culture-suppressed entrepreneurism was most noticeable at either end of the Britalian entrepreneurial spectrum. Those with modest cafés and sandwich bars catering mainly to office and other workers provided the least exotic of Italian fare (such as spaghetti Bolognese) along with a great deal of standard British food (such as fish and chips), and frequently no Italian dishes and only instant or percolated coffee. Nor did these businesses necessarily have ‘Italian’ names or décor themes. At the other extreme was the case of arguably the most successful Britalian of his generation and the only one knighted by the Queen – Sir Charles Forte. He migrated to Scotland with his parents at the age of five in 1913, was interned, and began his independent entrepreneurial career in milk bars. Highly successful in this sector, he nevertheless re-oriented his business interests towards conventional hotel capitalism as soon as he was able to do so, taking over British-owned hotels and chains until his company, Trust Houses Forte, became one of the largest multinationals in its field (Davis, 1978). His entrepreneurial career had little to do with his ethnicity even though he never assimilated personally, and in his personal capacity devoted a great deal of time and effort to Britalian voluntary associations. Part II A Britalian microcosm: the Abbazzini The Abbazzini are broadly typical of the longer-standing migration networks connecting mainly northern and central Italy with London. In the 1984 article I only incorporated the Abbazzini towards the end, as an example of a group of Britalians who had to a large extent opted for culture-suppressed entrepreneurship. The Abbazzini were prone to this form of entrepreneurship because the bulk of those I encountered in 1973, at least, had migrated between 1945 and 1960, and so they were very much subject to the kinds of pressures I have just described. However, there were others, especially among the younger members, who opted for culture entrepreneurship as the social climate in Britain thawed and became more Italophile again from the mid-1950s onwards. There were many other dimensions of the migrant microcosm of the Abbazzini, as it existed in the 1970s, that were also not included in the 1984 article, mainly because of space constraints, but were covered in my doctoral thesis and publications (Palmer, 1977, 1980, 1981, 1991). In this closing part of the chapter I expand on Abbazzia and its emigrant diaspora as a prelude to discussing subsequent entrepreneurial developments in Abbazzia itself, the connection between these and the Britalian entrepreneurial tradition, and how the transnational community of the Abbazzini assisted in the process. An Appennine parish and its diaspora in 1973 In 1973, when I first surveyed it, the total transnational community of the Abbazzini consisted of 305 households in nine countries, of which the majority were in Britain (234), in London for the most part (219), leaving only 91 households at home, most of them middle-aged or elderly couples (Palmer, 1981: Appendix G6). The shift to transnationalism for the Abbazzini had begun gradually before the turn of the twentieth century in response to demographic pressure exacerbating poverty, and gathered ground in the midcentury, declining from the 1970s onwards as Italy industrialized (Palmer, 1977). The diaspora that resulted was, by 1973, so large (relative to its base), so powerful (largely through the success of its emigrant entrepreneurs) and so concentrated (because most of the emigrants were in London) that it threatened the autonomy and hence the status of the home community in Abbazzia (Palmer, 1977, 1980, 1981: ch. 10).

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The London-based Abbazzini I encountered both on leave in Abbazzia in the summer of 1973 and in London the following winter (the former by chance, the latter in a comprehensive survey) were extremely loyal to their parish of origin (Palmer, 1981: ch. 9; 1991). Whether or not they emphasized their national or regional ethnicity in their occupational or commercial lives, they went to great lengths to continue local cultural and social practices in Britain, including hunting, gathering fungi and the producing of wine, preserved meats and cheese in their cellars; and one of the motivations for self-employment, usually in a partnership, was so that they could take extended family breaks in Abbazzia during the summer school holidays at least every second year. They also had a Comitato or association in London, first just for the Abbazzini, later embracing the entire Comune (local administrative area), and through this they channelled major funding for public projects, such as the embellishment of the church at Abbazzia (Palmer, 1980, 1991). With its picturesque Appennine setting and distinguished history as the seat of a powerful Mediaeval Benedictine community (from which Abbazzia took its name), the paese was a source of pride as well as sentimental attachment to the London Abbazzini, the ‘Inglesi’ as they were known to their home-based paesani. This aspect was important in the way they presented themselves to fellow Britalians in the course of the many opportunities this highly interactive minority had to meet up with each other. But this agenda, when combined with the emigrants’ limited experience of everyday life in Abbazzia (since they had mostly migrated as young people and generally visited only in the holiday season) meant that the narrative of the London Abbazzini about the parish was very different from that of the locals. I have discussed elsewhere the socio-economic repercussions of the disjunction between narratives, which was aggravated by the hybridization and relative affluence of the Inglesi relative to the stay-at-homes (1977, 1980; 1981: ch. 10). In the 1970s it looked as if the contestation between Abbazzini at home and abroad would prevent the Inglesi from acquiring property and eventually retiring in the parish and thereby applying their entrepreneurial expertise, capital and influence to its development. Now that urbanization was carrying away those young people that had not gone abroad, Abbazzia, like so many depopulated mountain communities without winter sports potential in Europe, seemed to be heading for extinction, unless an alternative to the waning local peasant economy could be found (1977: 265–6). Abbazzia in 1995 Given this gloomy prognosis, I was amazed by the physical and other changes that I witnessed in 1995. Over the previous 25 years, the generations that were holding out against the would-be returnees had become aged or died, and their die-hard resistance was not transmitted to their children, most of whom were emigrants anyway. Now the parish was dotted with palatial holiday houses, including those of a new wave of Abbazzini based in the cities of northern and central Italy, where opportunities for employment and business had been growing so rapidly, since the 1960s, that they could now afford newly-built rural second homes (Ginsborg, 1990). The basic concrete bar and pensione where I had stayed in 1973 had been extended and upgraded. It was now a sophisticated ‘country lodge’ in a universal ‘alpine’ style with plantings of conifers to enhance that impression. The ugly, unpainted cement cladding had been removed from the church to reveal its fine dressedstone structure, and the main access road was tarred. More than modernity, charm and

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‘taste’ had come to Abbazzia. Beyond the settled area, the natural environment had also altered drastically. Before, there was a sharp contrast between the cultivated lands on the lower slopes of the valley and the forest plantations and indigenous woodlands of the provincial park on the higher slopes and mountaintop. Now the cleared fields were few and mainly supporting grass for fodder; everywhere else the natural vegetation had been returning, seemingly for many years. This was in part the sign of the depopulation I had feared would ensue: there were only four farmers left out of the 91 households I had counted in 1973. But it was also part of a conscious policy, the conversion of the local economy from agriculture to leisure. When the two sons of my former landlord, Walter and Fausto, grew up, they undertook what was by that time the virtual coming-of-age ritual of migrating to London. There they spent about ten years acquiring English, catering and business experience, strategic and affective links with the Abbazzini and other Britalian diaspora in Britain – and London-born Britalian wives. By 1995, they were back in Abbazzia, not only helping their father and mother with their booming country inn, but also developing a local hunting business. The inn had made a speciality of wild boar and other game-based cuisine that attracted droves of clients from the affluent cities of the nearby Po Valley, and the raw material was largely supplied through the hunting business managed by the sons. This explained the changes to the local environment: a presence of wild boars and cultivation are not mutually compatible; moreover boars and other game appreciate ‘cover’, so the new enterprise depended upon many small former peasant plots becoming united into a conservancy, something that could not have been achieved without the sons’ semihybridization into Inglesi – enhanced by their marriages – which gained them the credibility as well as the access to negotiate the shift in land-use among its now largely expatriate owners. Negotiating access to suitable plots for holiday or retirement villas in the settled area for those migrants whose inheritances were in the more remote hamlets was part of the deal. The shareholders seemed well satisfied with the new arrangement and, with two daughters-in-law to help with the catering, there was sufficient skilled staffing to drive the business, as well as seemingly unlimited demand. In place of the former mobilization of rural Italian values and Italian cultural artefacts to pander to and even create the British market for ‘the Italian’, rural-based Abbazzini were now manipulating nostalgia for the countryside among the new middle classes of the northern Italian cities that had grown so rapidly in numbers and affluence during the 1960s and 1970s. It was an entrepreneurship of culture, not in the ethnic sense, but in the sense of locality and status. Hunting confers considerable prestige in Italy, as it does everywhere in Europe (and among European descendants everywhere), and so does unusual dining in unusual locations. The Abbazzini had done well to tap into the increasing demand for both kinds of satisfactions and have them reinforce each other. And they had found the replacement economy their parish so badly needed if it was to survive into the future. Abbazzia in 2001 When I returned again in 2001 it was to find that the patriarch had died prematurely in the interim, and the younger son had returned to London (because his wife could no longer tolerate the isolation and loneliness of the semi-depopulated parish). Despite the reduction of the team by half, both the catering and the hunting aspects of the business were continuing

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(and the family had built a palatial house for themselves on the proceeds). Then there were the other difficulties. The increased regulation of the hunting industry was detrimentally affecting that side of the business, and Walter claimed that he continued with it more for pleasure than for profit.7 However, he still played a crucial role in the new local economy: his reputation as one the best hunters in the region attracted custom, and because boars cannot be bought, and his father and brother were no longer around, he alone was now responsible for keeping the inn’s cold room stocked with raw material for the family’s famous boar-based cuisine with the hunting season only two-and-a-half months’ long. These new setbacks were mitigated by a subsequent development that brought additional custom to the area. The Abbazzini’s extension of the natural environment into the former cultivated lands attracted not only game but also hikers. Well-marked trails, marketed by the provincial tourism board, now included the parish with the provincial park, and brought new patronage not only to the inn, but also to bars, cafes and B&Bs throughout the area. Cultural and status phenomena such as the ‘green’ movement and the quest for fitness were now combining with nostalgia for the countryside to take the local leisure revolution to another stage. None of these new entrepreneurial opportunities were restoring Abbazzia to the size it was in 1973, let alone before the mass exodus after 1945, but they are creating a replacement local economy that maintains some of the younger people in the parish, attracts former residents back for holidays, and draws hundreds of outsiders every weekend. It is a fate better than death. Conclusion Over hundreds of years, Britalian culture entrepreneurship has been inventing and reinventing itself, with the savvy to know when to express fully Italian ethnicity and when to play it down. Culture entrepreneurship as well as more anonymous enterprises have provided both temporary and permanent occupations for those who might otherwise have languished in poverty at home, transforming occupations such as that of the waiter, and making fortunes for those who anticipated changes in the market and responded in innovative ways. Latterly, experience in the transnational network – that continues long after the tide of Italian emigration has turned – can still benefit individuals and families and help to rescue doomed rural communities, as recent experience of the new leisure ventures in Abbazzia suggests. There is certainly more to be said about the contemporary transformations of Britalian entrepreneurship, especially in the light of the new concepts and models that have revitalized migration studies in sociology and social anthropology since 1990, but in the absence of major return fieldwork in London and Italy as well as further absorption in the literature, this is as far as a revisit (and revision) can go for the time being. In the meantime, the combination of an ethnic focus and an entrepreneurial focus that generated the culture entrepreneurship concept is eminently transferable to other contexts. It may well be that, just as generations of Britalians exploited British interest in ‘the Italian’, so there are already Somalian and Ethiopian traders in Italy, the modern counterparts of the Italian itinerants in early modern London, exploiting Italian nostalgia for Africa, where many of the parents, grandparents and great-grandparents of contemporary Italians lived and died furthering Italy’s short-lived colonial era. This experience may be sufficient, given current space–time compression, for the construction of a positive role, and business opportunities, for the first of perhaps generations of ‘Afritalians’.

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Notes 1. Working in South Africa with distance and the exchange rate against me, and plenty of accessible local research topics to distract me, I have not done London-based follow-up research, and so I have virtually no first hand information on the progress of Britalian entrepreneurship in London since the 1970s. 2. James Watson’s introduction to Between two cultures: Migrants and Minorities in Britain (1977) which collected ten articles by anthropologists studying different migrant nationalities, including himself and the present author, was prescient in many respects. He emphasized the importance of direct research ‘at both ends of the migration chain’ (p. 2, his emphasis), that is, a transnational approach treating community of origin and diaspora as a single network and analysing them in the same framework; he acknowledged ‘a process or ethnic redefinition . . . which entails the active recreation of a new cultural tradition that only has meaning in the British context’ (p. 3), in other words, cultural hybridization or creolization; and he delivered a spirited critique of both the older, one-sided sociological and assimilationist ‘race-relations approach’ to immigration in Britain (Banton, 1955; Patterson, 1963) and the newer but in its own way limited classbased alternative then being promoted by Stephen Castles and Godula Kosack (1973). 3. Cf., for example contributors to Ward and Jenkins (1984). 4. The anthropologist Ulf Hannerz has gone so far as to assert that distinct cultures are no more, having been replaced by ‘cultural flows in space’ (1993: 68), a world system of rapidly creolizing cultures (1992). 5. I have rehearsed the early history in varying degrees of detail elsewhere: see Palmer (1972, 1977, 1981, 1984). 6. To the ancient Greeks, hubris described mortals who assumed god-like powers; nemesis was the gods’ punishment for such presumption. 7. In order to get a licence to hunt wild boar in Italy you need to form a party of 40, at least half of whom should be present at each hunt; the liver of each boar killed has to be sent in good condition to a state veterinarian; and in return for a licence costing only about US$30 a season, each hunter has the right to keep the boar he has shot, regardless of whose land it might have been killed on. It is therefore impossible to profit from the sale of the trophy or its meat, but only from the support role of supplying dogs, guidance, accommodation, meals, drink and so on.

References Anderson, B. (1991), Imagined Communities: Reflections on the Growth and Spread of Nationalism, New York: Verso. Banton, Michael (1955), The Coloured Quarter, London: Jonathan Cape. Barth, Frederik (1963), The Role of the Entrepreneur in Social Change in Northern Norway, Bergen: Scandinavian University Books. Barth, Frederik (1969), Ethnic Groups and Boundaries: The Organisation of Cultural Difference, Oslo: Universitets for laget. Brown, John (1970), The Un-melting Pot: An English Town and its Immigrants, London: Macmillan. Castells, Manuel (1996), The Rise of the Network Society, Oxford: Blackwells. Castles, Stephen (2002), ‘Migration and community formation under conditions of globalization’, International Migration Review, 36(4), 1143–68. Castles, Stephen and Godula Kosack (1973), Immigrant Workers and Class Structure in Western Europe, London: Oxford University Press for the Institute of Race Relations. Cohen, Robin (1997), Global Diasporas: An Introduction, Seattle: University of Washington Press. Davis, William (1978), It’s No Sin to be Rich, London: Sphere. Douglass, William A. (1984), Emigration in a South Italian Town: An Anthropological History, New Brunswick: Rutgers University Press. Foerster, Robert F. (1919), The Italian Emigration of Our Times, Cambridge: Harvard University Press. Gabaccia, Donna R. (2000), Italy’s Many Diasporas, London: UCL Press. Garigue, Philip and Raymond Firth (1956), ‘Kinship organisation of Italianates in London’, in Raymond Firth (ed.), Two Studies of Kinship in London, London: Athlone Press. Ginsborg, Paul (1990), A History of Contemporary Italy, Harmondsworth: Penguin. Grillo, Ralph and Jeff Pratt (eds) (2002), The Politics of Recognizing Difference: Multiculturalism Italian-Style, London: Ashgate. Hannerz, Ulf (1974), ‘Ethnicity and opportunity in urban America’, in Abner Cohen (ed.), Urban Ethnicity, London: Tavistock. Hannerz, Ulf (1992), ‘The global Ecumene as a network of networks’, in Adam Kuper (ed.), Conceptualisng Society, London: Routledge. Ind, Nicholas (1997), The Corporate Brand, London: Macmillan. Levitt, Peggy, Josh de Wind and Stephen Vertovec (2003), ‘International perspectives on transnational migration: an introduction’, International Migration Review, 37(3), 565–76.

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Light, I. and E. Bonacich (1988), ‘Immigrant entrepreneurs: Koreans in Los Angeles, 1965–1982’, Berkeley: University of California Press. Logan, John R., Richard D. Alba and Brian J. Stults (2003), ‘Enclaves and entrepreneurs: assessing the payoff for immigrants and minorities’, International Migration Review, 37 (Summer), 344–88. Marin, Umberto (1975), Italiani in Gran Bretagna, Rome: Centro Studi Emigrazione. Medaglia, Asadeh (2001), Patriarchal Structures and Ethnicity in the Italian Community in Britain, Aldershot: Ashgate. Palmer, Robin C.G. (1972), ‘Immigrants ignored: an appraisal of the Italians in Britain’, MA dissertation,University of Sussex. Palmer, Robin C.G. (1977), ‘The Italians: patterns of migration to London’, in J.L. Watson (ed.), Between Two Cultures: Migrants and Minorities in Britain, Oxford: Basil Blackwell. Palmer, Robin C.G. (1980), ‘Processes of estrangement and disengagement in an Italian emigrant community’, New Community: Journal of the Commission for Racial Equality, 8(3), 277–87. Palmer, Robin C.G. (1981), ‘The Britalians: an anthropological investigation’, D Phil dissertation, University of Sussex. Palmer, Robin C.G. (1984), ‘The rise of the Britalian culture entrepreneur’, in R. Ward and R. Jenkins (eds), Ethnic Communities in Business: Strategies for Economic Survival, Cambridge: Cambridge University Press. Palmer, Robin C.G. (1991), ‘Migration, encapsulation and ethnicity: Italian villagers in London’, in A.D. Spiegel and P.A. Mcallister (eds), Tradition and Transition in Southern Africa, Johannesburg: Witwatersrand University Press. Palmer, Robin C.G. (2000), ‘A tale of two peripheries: a comparison between case studies of community-based natural resource management and income generation from tourism in Italy and South Africa’, Proceedings of the conference, Economic Development and Sustainabilitity: The Environment and Cultural Tourism as New Economic Opportunities (author’s trans.), Anacapri, Italy, 2–6 November. Patterson, Sheila (1963), Dark Strangers: A Sociological Study of a Recent West Indian Migrant Group in Brixton, South London, London: Tavistock. Portes, A. (2001), ‘The debates and significance of immigrant transnationalism’, Global Networks, 1(3), 181–94. Price, Charles A. (1963), Southern Europeans in Australia, Melbourne: Oxford University Press. Problemi del Lavoro Italiani all’Estero (1974), Rome: Ministry of Foreign Affairs. Raban, Jonathan (1974), Soft City, London: Fontana. Rapport, Nigel and Joanna Overing (2003), Social and Cultural Anthropology: The Key Concepts, London: Routledge. Ritzer, George (1998), The McDonaldization Thesis, London: Sage. Smith, Robert C. (2003), ‘Diasporic memberships in historical perspective: Comparative Insights from the Mexican, Italian and Polish Cases’, International Migration Review, 37(3), 724–60. Ward, Robin and Richard Jenkins (eds) (1984), Ethnic Communities in Business: Strategies for Economic Survival, Cambridge: Cambridge University Press. Watson, James L. (1975), Emigration and the Chinese Lineage: The Mans in Hong Kong and London, Berkeley: University of California Press. Watson, James L. (ed.) (1977), Between Two Cultures. Migrants and Minorities in Britain, Oxford: Basil Blackwell. Watson, James L. (1997), Golden Arches East, Stanford: Stanford University Press. Wimmer, Andreas and Nina Glick Schiller (2003), ‘Methodological nationalism, the social sciences and the study of migration: an essay in historical epistemology’, International Migration Review, 37(3), 576–601. Zhou, M. (1992), Chinatown: The Socioeconomic Potential of an Urban Enclave, Philadelphia: Temple University Press.

24 South Asian entrepreneurship in Britain: a critique of the ethnic enclave economy debate Pnina Werbner

Introduction The present chapter considers a particular debate in the scholarly literature on ethnicity in the US regarding ethnic entrepreneurship which has come to be known as the ‘ethnic enclave economy hypothesis’. According to this hypothesis, ethnic enterprises and their workers benefit from clustering. The current consensus seems to be that the hypothesis is both redundant and misguided. In denying this critique, the chapter draws on Lefebvre’s theorization of space and on industrial cluster and actor network theories to argue that the dominant interpretation of the notion of an enclave has been misconceived. Hence the need is to begin to theorize what ethnic enclave economies really are, beyond the spatial metaphor in which the hypothesis was first grounded, in order to interrogate generative processes of ethnic business formation. Industrial clusters and the dialectics of urban space Ethnic enterprises are often highly visible in cityscapes: Little Havana in Miami, Chinatown in New York City, Koreatown in Los Angeles, are characterized by high concentrations of ethnic businesses. As sites of consumption, the aesthetics of Chinese food serve a crucial economic role. Wong reports that ‘In the Chinatown area of New York City, 5,000 Chinese work in 250 restaurants within five blocks. Outside Chinatown, the number of Chinese restaurants in the greater New York area probably totals approximately 4,500’ (Wong, 1982: 38–9). Significantly for the argument to be presented below, these Chinese restaurants support a large number of Chinese vegetable farms in New Jersey and Long Island, as well as Chinese trucking companies, grocery stores, noodle factories, construction companies, interior decorators and import–export firms (ibid.: 39). The figures for Little Havana in Miami reveal a story of dramatic expansion. Between 1977 and 1982, a mere five-year period, the number of Cuban-owned firms in the Miami District increased from 7336 to 20 795 (Sanders and Nee, 1987: 749), a virtual tripling which was generated through internal capital formation and small business loans from the federal government. This growth ‘so intensified intra-enclave competition in sectors such as construction and wholesaling that numerous older firms have been losing their previous market-shares’ (ibid.). In other words, the competitive edge of Cuban firms resulted in a displacement of earlier, non-Cubans. Despite this visibility in space, research on South Asian entrepreneurship in Britain points to the fact that space is a critical but not determining factor of ethnic enclave economies; and second, that space needs to be conceptualized, not as a contiguous, circumscribed locality, but as networked, and socially produced through the manufacture and flow of distinctive goods between nodal points, vertically as well horizontally organized. 375

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Such a complex notion of space accords with recent debates underlining the significance of urban space in social theory. In response to earlier attempts by sociologists such as Saunders to de-emphasize the centrality of space in urban studies (Soja, 1997: 24), sociologists such as Soja argue for a need to recognize the ‘complex relation between social process and spatial form, as well as spatial process and social form’, a relation which he labels ‘the socio-spatial dialectic’ (ibid.: 20). Much of the debate has been inspired by Lefebvre’s theorization of space as socially produced and meaningfully constructed (Lefebvre, 1991). Rather than territorially circumscribed, Lefebvre argues that social spaces contain ‘the networks and pathways which facilitate the exchange of material things and information. Such “objects” are not only things but also relations. As objects, they possess discernible peculiarities, contours and form. Social labour transforms them, rearranging their positions within spatio-temporal configurations’ (Lefebvre, 1991: 77). Social spaces interpenetrate, intertwine and overlap, attaining ‘real’ existence ‘by virtue of networks and pathways, by virtue of bunches or clusters of relationships’ (ibid.: 86, 88). Multiple, overlapping markets ‘attain their concrete form by means of a network’ embodied materially in city scapes and structures (ibid.: 86). Yet ‘they retain their distinctiveness’ (ibid.: 342) through distinctive chains of commodities which may be conceived of as ‘formants’ of space (ibid.) activated by human labour. On the one hand, then, the argument proposed here rejects the notion of the ethnic enclave economy as a territorially circumscribed place. At the same time, by retaining a stress on the spatial dimensions of the ethnic enclave economy, I hope to guard against a tendency in many analyses of ethnic entrepreneurship to focus on the single, isolated business as the primary unit of comparison, at most connected to workers and customers. In other words, ethnic businesses are embedded in inter-firm relations which produce social space by trading in particular goods and commodities. My argument accords with recent theorizations of industrial clusters. Industrial clusters are networks of small or medium-sized firms (SMEs) interconnected within a single industrial sector both spatially and economically. A recent issue of World Development, edited by Schmitz and Nadvi (1999), gathers together studies of industrial clusters in Asia, Latin America and Africa, manufacturing clothing, shoes, surgical instruments and agricultural products. Industrial clustering is, however, also a prominent feature of the most sophisticated hi-tech sectors: Silicon Valley, Hollywood and the City of London are some of the outstanding examples of a tendency of SMEs within a single industry towards spatial clustering. A key advantage of the industrial cluster model is that it focuses on change: on trajectories and processes rather than static conditions. Schmitz, Nadvi and their colleagues consider the circumstances in which clustering boosts industrial growth and competitiveness. Clustering is particularly important, they propose, in the early phase of a firm’s life, ‘helping small enterprises to grow in riskable steps’ and to compete in broader, even global markets (Schmitz and Nadvi, 1999: 1503). This is because firms can limit themselves to a specific product, requiring only limited investment of human (that is, knowledge) and financial capital. Internal specialization is thus one feature of industrial clusters (ibid.: 1505). Another is their internal heterogeneity, with medium and large firms emerging and playing an important role in these clusters (ibid.: 1503). Hence we have argued (Werbner, 1999; Basu and Werbner, 2001) that evaluations of ethnic entrepreneurial success have to take into account the whole cluster, not just its most outstanding firms,

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since these owe their success to their embeddedness in the cluster. This is as true of Caribbeans or African Americans in the popular music industry as it is of Chinese or South Asians in the fashion and textile trades (see Basu and Werbner, 2001). Ethnic entrepreneurs follow each other into an economic enclave in ‘entrepreneurial chains’ (Werbner, 1990a, 1990b) or, as Schmitz and Nadvi put it, ‘the enterprise of one creates a foothold for the other, [so] that ladders are constructed which enable small enterprises to climb and grow’ (ibid.: 1506). New entrants allow established firms to expand, often by moving to a higher supply level or subcontracting. As early as 1920, A. Marshall argued that the agglomeration of firms engaged in similar or related activities generates a range of localized external economies that lowers costs for clustered producers. Such advantages include a pool of specialised workers, easy access to suppliers of specialised inputs and services and the quick dissemination of new knowledge. (Ibid.: 1504)

In addition, a cluster of firms may also engage in purposive joint action, particularly when it faces an external crisis. Industrial clusters depend crucially on the existence of trade networks and market channels (Knorringa, 1999: 1588) and on relations of trust and cooperation between producers and traders or buyers. They depend on a penumbra of ancillary services. Hence the ‘space’ of industrial clusters is ultimately networked and uncircumscribed, despite critical territorial concentrations. The ethnic enclave economy (EEE) hypothesis The ethnic enclave economy hypothesis reflected a renewed interest in industrial clustering. Conducted primarily on the pages of the American Sociological Review, the debate has been characterized by misreadings and distortions of the original hypothesis. In its original form, as published in the American Journal of Sociology, the hypothesis was inspired by the phenomenal growth of Cuban enterprises in Miami in the 1970s. Hence Wilson and Martin argued that the immigrant enclave economy tended to ‘reproduce the crucial features of the centre economy’ (1982: 138), that is, of large conglomerate corporations engaged in both manufacturing and distribution, of mutual servicing through internal supply; although, as they point out, whereas centre firms achieve a vertical and horizontal integration with a single firm, in the ethnic enclave the structuring is achieved by coordinating a cluster of firms (ibid.: 136, 138). Studies of Cuban businesses in Miami (Wilson and Portes, 1980; Wilson and Martin, 1982; Portes and Bach, 1985) revealed very high levels of vertical integration between Cuban construction firms, and a tendency for these firms to draw upon the Cuban service sector. This organizational structure, it was argued, generated multiple advantages for the ethnic group both in terms of profits, which were invested within the enclave rather than beyond it, and in terms of the labour opportunities generated by the enclave, which again were multiplied as a consequence of internal trading. This so-called ‘multiplier effect’ meant that each transaction ‘rippled’ beneficially through the enclave. Moreover, as the enclave expanded, Cuban labour reaped the benefits either through promotion or through openings created for new firms. This way of representing Wilson and Martin’s argument, which stresses the organisational pathways linking ethnic firms, based on vertical integration – of supply channels between manufacturers, wholesalers and retailers – and horizontal integration (mutual

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servicing), has not been the key aspect of the hypothesis which was taken up in the ensuing debate. Instead, the focus has been almost entirely on labour earnings and opportunities. A survey of employees within the spatially defined Miami enclave over a period of time showed that they fared better than co-ethnics who had gone to work in the general labour market, beyond that enclave (Wilson and Portes, 1980). Wilson and Portes also found that non-American educational qualifications or work experience in Cuba were rewarded better in the Miami enclave. The ethnic enclave hypothesis thus recast exploitative sweatshop labour as an apprenticeship: ethnics learned the tools of their trade in order to set up in their own business (Waldinger, 1993: 444). This implied that split labour market theory did not apply to ethnic enclave economies. Whereas in the secondary, casual labour market wages and job satisfaction were low, this was not the case for employees in the ethnic enclave, even when their jobs were unskilled and menial, and their initial wages relatively low, and even if the firms they worked for could be classed as part of the secondary sector (Portes and Bach, 1985). In later research Sanders and Nee (1987, 1992), found, however, that Cubans living and working in the enclave earned lower wages than those living outside it. This, it was argued, refuted the ethnic enclave hypothesis. The rejoinder from Portes and Jensen (1987, 1992) was that the enclave was never defined in residential terms and, indeed, some of the more successful Cuban owners of ethnic firms in the enclave lived outside it, in more salubrious suburbs. The earnings of Cuban enclave employees living elsewhere were above average (1987: 770). Nevertheless, in responding to the criticism, Portes and Jensen retained the original stress on the spatial dimension of the ethnic enclave defined as an area in which immigrant enterprises concentrate (1987: 769). Recasting the EEE hypothesis as exclusively about workers’ wages has, I propose, distorted its insights. For example, Ivan Light and his colleagues argue that, since a substantial proportion of those employed in the ethnic economy are self-employed individuals, neither employers nor employees, the EEE hypothesis is irrelevant. Whereas, in the general labour market, ‘there are ten employees for every one self-employed, so that the earnings of the employed largely determine the earnings of the whole group, numbers in the ethnic economy are reversed’. There ‘the self-employed outnumber the employees by three to two’. Moreover, ‘employer firms are only about one-fifth of all minority firms’ and they tend to be rather small (Light et al., 1995: 31; see also Light and Rosenstein, 1995). The fact that employees are so few leads Light and his colleagues to reject the usefulness of the EEE hypothesis, cast as an argument about labour. If the majority in the enclave draw no wages, their reasoning goes, what is the point of the hypothesis? Even integration is questioned. Contradicting his own evidence elsewhere (Waldinger, 1986: 50), Roger Waldinger denies the very existence of vertical or horizontal integration. There are grounds, he says, for rejecting the idea of vertical integration, most importantly the fact that barriers to entry differ significantly along the supply chain. It takes little, to start up a garment shop, and good deal more to begin a textile mill. Not surprisingly, there are many Cuban garment shops but no Cuban textile mills, not many Cuban apparel retailers, and even fewer Cuban apparel wholesalers. (Waldinger, 1993: 446)

This leads Waldinger to argue that the EEE hypothesis has lost its usefulness (ibid.: 445). He suggests replacing it with the notion of an ethnic ‘niche’ (Waldinger, 1996) by which

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he means the ethnic occupational concentration of professionals (say, Jewish doctors), or ethnic employees within a single firm (such as the local authority). Although a niche at least has the merit of highlighting the specificity of economic sectors in the formation of ethnic employment clustering, it lacks a conceptualization of inter-firm trading relations and the external economies these generate. Redefining the ethnic enclave economy In the face of this blanket condemnation, it would seem that we need to return to the original Wilson and Martin (1982) EEE hypothesis, but with a difference, based on much greater awareness of the ambiguities the debate has generated in scholarly discourse. I intend to define the ethnic enclave economy (as distinct from the ‘ethnic economy’ or ‘niche’), much as industrial clusters have been defined, as the networked cluster of ethnic firms producing particular goods, along with the connected ethnic firms and services servicing the cluster. The triadic relation generating an ethnic enclave economy is person/ good/networked space. Networks can be represented in spatial terms but the organization of space is non-uniform; instead, it is functionally related to the nature of the goods produced and marketed. Ethnic enclave economies may be localized or dispersed: in Manchester, the Asian residential cluster, the Asian clothing wholesale cluster and the Asian commercial and restaurant cluster are located in different places. The enclave may involve several different ethnic groups positioned differentially in the supply line. It may be characterized by cut-throat horizontal competition between co-ethnics at the same level of supply, or by the very opposite: circles of credit and trust between coevals. Once we identify the flow of goods through the network and the external forces bringing new entrants into the trade, we can begin to explain process: the generative trajectories that create the kind of exponential expansion and sudden visibilization that characterized the growth of the Cuban ethnic enclave economy in Miami or the Manchester-based South Asian fashion industry, which I discuss below. Miami is the gateway to South/Central America. It makes sense that a firm producing and exporting sugar-harvesting equipment and other agricultural machinery to Latin America would be located in Little Havana (Portes and Jensen, 1987: 769) where, presumably, importers from Latin America seek goods and equipment. But why do Cuban construction firms also cluster there? To answer this question we would need to know more about the internal specialization and differentiation of adjacent types of construction firms in the enclave, and their complementary features which enable them to service particular markets efficiently; what are the supply lines and mutual reciprocities between building material firms, architects, contractors, plumbers and so forth? In other words, the spatial concentration of SMEs is socially produced by the demands of particular products and markets, not merely by labour markets. Nor is the spatial dispersal of ethnic firms all operating within a single industry reason to declare the hypothesis redundant. Retailing, whether of Persian carpets or of the goods sold in off-licences, newsagents and Chinese fish and chip shops, is often dispersed within a city. Most long-distance trading in the developing world is based on the control of particular goods. Hausa trading networks in Nigeria, for example, historically traded in cattle or kola nut, while certain stages in the processing of these commodities were monopolized by other ethnic groups, with some areas of competition at the points where the groups traded with one another (Cohen, 1969). Such specializations create spheres of exchanges

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or markets in specific goods which move through nodes of distribution. These, in turn, organize trans-spatial networks. Like big multinational ‘centre’ firms which respect no boundaries, ethnic enclave economies need not be spatially concentrated at every stage. The goods themselves, their production, processing and movement, determine the visible spaces in which they are ultimately sold to the wider public. Typically, different points of sale have particular features of their own: traders originating from several ethnic groups, selling diverse goods, may cluster side-by-side in a single mall or bazaar; or, conversely, co-ethnic traders, all selling the same type of good (furniture, clothing, shoes), may cluster together, offering a wide range of goods of the same type. The triadic relation between person, networked space and good probes how these are interconnected and why, in what respects, ethnicity affects the capacity to command both goods and the locations of their production or distribution. A recognition of the importance of ‘hybrid’ networks of persons/objects is at the centre of Bruno Latour’s discussions of the production of scientific knowledge. Actor Network Theory stresses the agency of objects in the determination of cultural and social production (Latour, 1993; Callon and Law, 1995). Goods are ‘actants’: in the present instance, they effect distribution networks, spatial concentrations and dispersals and the growth of ethnic enclave economies. The enclave is an organized web shaped by the flow of specific (interconnected) goods and services. Although there are similarities in the way different industries are organized, there are also clearly different constraints and opportunities underpinning, say, the manufacturing and sale of aeroplanes, movies, clothes or pop music. Inter-ethnic friendship may ease transactions, but the structure of inter-firm relations is ultimately shaped by the goods produced and marketed. It is thus remarkable that the sociological literature on ethnic enclave economies has tended almost entirely to ignore the objects produced and traded or the networks through which these objects travel. The focus on ethnic employees’ wages and on residential clustering has been entirely divorced from any understanding of the generative economies of inter-firm trading. Hence the final judgement is still out on this potentially fruitful (indeed essential in my view) concept. The insight of Wilson and Martin’s 1982 article was to recognize that the flow of goods within the Cuban ethnic enclave economy moved between different supply levels vertically and that firms at a particular supply level serviced each other, leading to horizontal integration. My own work on the fashion and textile industries in Manchester exemplifies both the collective advantages of ethnic enclave economies and their collective vulnerability in the face of global economic changes. The South Asian enclave economy in Britain A good deal of research on Asian business in Britain has focused on the most visible businesses: cornershops and newsagents whose owners are visibly Asian, or retailers and restaurants located in ethnic commercial or residential clusters, catering specifically to members of the ethnic group, or selling their exotic wares to the wider public (for example, restaurants, delicatessens). But the vast majority of Asian-owned businesses are, in fact, relatively invisible. They may operate from home or be located in warehouses and back streets. They produce goods and services directed at wider public tastes beyond the ethnic group. The cultural capital needed to be a taxi driver, knitwear manufacturer, newsagent or landlord is not distinctively Asian and, indeed, different ethnic groups have followed

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one another into these economic sectors without necessarily even changing the name of the firm or the sign on the shop front. Just as the businesses themselves are invisible, so too are the flows of goods and social connections between Asian businesses within the enclave economy. There are, of course, some very visible wealthy British Asian businessmen in a variety of sectors, from steel, computers and pharmaceuticals to food, clothing and the internet. But most Asian businesses are small or medium-sized. The only way to identify them is to trace the goods they manufacture and sell through their stages of production and marketing. For example, an Asian clothing manufacturer typically uses cloth, cotton, trimmings, labels, plastic wrappers, boxes, industrial sewing machines, technical support, hangers and rails, premises, office equipment, transportation facilities – and he can choose to buy these from other Asian firms in the enclave. He is very likely to sell the clothes he manufactures to an Asian wholesaler who, in turn, sells them to an Asian market trader or shopkeeper. In Manchester, where the incidence of trading between Asian firms in the clothing and knitwear industry has been in the past remarkably high, firm profits have benefited other firms by providing them with sales, work and custom. In the long run, this has allowed the whole enclave to expand. By the same token, however, firm bankruptcies ripple negatively through the enclave. Prior to 1999, it is estimated conservatively that the predominantly Asian fashion industry in Manchester had an annual sales turnover of approximately half a billion pounds sterling, even before retailers were counted. The North West as a whole had far greater sales, with Rochdale, Bolton and Preston being major centres of manufacturing. In Manchester City there were around 150 knitwear manufacturers employing some 1500 workers with a combined turnover of approximately 75 million pounds, and an estimated 300 manufacturers, mostly making skirts and trousers, with combined sales of 180 million pounds. The major wholesalers-cum-importers between them had sales of some 200 million pounds and, in addition, there were at least 50 small wholesalers with a combined turnover of 50 million pounds. Most of the manufacturers are of Pakistani Punjabi origin, but among the large wholesalers are several Indian Punjabis. In addition the city has a concentration of grey cloth textile importers, mostly Gujeratis, as well fabric and yarn importers and various ancillary services. The number of workers employed in all these firms has been estimated to be about 10 000, most of them inner city residents with few formal educational qualifications. Not all workers are Asian, but Asians who want to work in the enclave are given preference by Asian firm owners. The fashion industry in Manchester in many ways resembles its counterparts elsewhere in the world but it also has some special features which I have discussed in my monograph (Werbner, 1990a/2002) and in a series of articles (Werbner, 1984, 1987, 1990b). In particular, a complex edifice of manufacturing and wholesaling relies on the custom of an army of self-employed Asian peripatetic market traders who operate from their homes where they store their goods. The markets they work are widely dispersed throughout Greater Manchester and beyond, in the Lake District, Scotland, Wales and Northern Ireland. Conversely, market traders from well beyond Manchester shop in the Manchester wholesale clothing district. For over 40 years, ever since Asians displaced small Jewish firms in the Manchester clothing industry, the reliance on markets has meant that the enclave has retained its autonomy, with very few manufacturers producing for the high street stores or mail order firms. Market traders rarely surface in survey or census statistics – they

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remain a kind of invisible presence. Yet they have critically underpinned the Manchester clothing ethnic enclave economy. They would normally be classified in censuses at the lower end of the class spectrum, as unskilled self-employed, yet many of them are quite wealthy. Indeed, it is from among these unskilled self-employed traders that large-scale manufacturers, wholesalers and importers with millions of pounds in annual sales have emerged (most notably, in Manchester, Joe Bloggs and Rajan Trading). Manufacturers have hitherto relied on wholesale cash and carry firms to purchase their goods. Entry into the trade has been through entrepreneurial chains, and new influxes into the enclave have come in response to economic recessions and the closing down of factories in the region. New entrants compete with old timers, propelling them into higher levels of supply. In time, this has created the vertical interconnections in the enclave. Entrepreneurial chains are generated not only by the exchange of know-how but by the extension of credit to newcomers, as wholesalers try to expand their range of new customers. Indeed, the whole enclave is financed through credit which flows from wholesalers and importers to retailers, and from manufacturers to wholesalers. In sum, then, Asians in Manchester dominate the cheap end of the fashion trade, catering primarily to markets or small shops rather than high street stores, although there are noteworthy exceptions. The dominance of Asian trading, initially somewhat hidden (since most traders were market traders operating from home), came to be tangibly inscribed in the city landscape during the 1980s. An arc of Asian wholesaler firms emerged, stretching immediately adjacent to the High Street retailing district for about a mile and a half. Interspersed with and surrounding the wholesale district was a further arc of small-scale manufacturers who mainly concentrated in specific locations, especially in areas of converted warehouses and old mills. Although most firms bore neutral or English names, the owners were predominantly South Asian, the majority Punjabis. Gujeratis concentrate in the textile trade. There is a fundamental difference between the fashion industry and the textile trade in greycloth (plain cotton, unprinted, which is the main commodity traded by Asian textile merchants) in the way both capital and knowledge are utilized. The textile trade is highly capitalized but no merchant can stock the full range of cottons the market demands. Moreover, temporary shortfalls in capital require mutual guarantees, usually provided within circles of mutually trusting merchants. Hence, relations of trust and credit are paramount in the textile trade and essential for its smooth operation. It is a gentleman’s trade: merchants work from offices equipped with telephone, fax and e-mail. Social relationships between merchants sustain at all times a facade of friendship and generosity, disguising competition. The trade itself is cross-continental, the direction of imports currently being from India and Pakistan to Britain. But many of the merchants are located in adjacent high-rise office buildings in the city centre, still bearing names like ‘Bombay Street’, which attest to Manchester’s traditional imperial role in cotton trading. By contrast to the textile trade, the clothing trade is highly competitive and uncertain; it involves constant hustling and short-term deals. Textile merchants deal with what are essentially commodities. This means that knowledge is a prerequisite for competent trading and has a measure of certainty in it (greycloth weights are measured in grams per square centimetre, an eye for quality is a must). By contrast, clothing traders deal in luxury items with uncertain values. Textile merchants are interdependent horizontally; clothing traders are interdependent vertically. The divide has social connotations in the

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mutual perceptions that traders and merchants have of each other: the merchants inevitably regard themselves as benevolent members of an exclusive circle of genuine businessmen, unlike (as they see it) the fly-by-night, untrustworthy traders; the traders regard the merchants as arrogant and status-conscious. This mutual stereotyping is reinforced by the fact that the two groups originate from different South Asian regions. An earlier divide between aristocratic Jewish Sephardic textile merchants and low-class East European Jewish clothing traders and manufacturers has been replaced by a similar divide between predominantly Gujerati or Marwati merchants (primarily Hindu but including some Muslims) and Punjabi clothing traders (both Muslim and Hindu. Muslims predominate numerically in the city). We see, then, that objects traded affect spatial clustering and norms of trading, as well as ethnic perceptions. In the fashion trade the dynamics of ethnic enclave development are characterized by two main processes: horizontal multiplication and competition, and vertical expansion and cooperation. The growth of the enclave has been fuelled by external economic factors (recession, racism and disadvantage in the open labour market) and internal factors (the maturation of families and the growth of a trusted labour force). Both precipitated increased entry into the enclave at the bottom; that is, at the level of retailing or petty manufacturing. Although the influx was associated with intensified competition between co-ethnic firms, it was also associated with the overall growth of the enclave and the emergence of very large, highly capitalized firms at higher supply levels (mainly in wholesaling and importing). Growth and decline If command of an enclave economy enables an ethnic group to acquire collectively wealth and influence, concentration in a single industry can also make it more vulnerable to collective failure, unless traders can mobilize collectively to combat competition or to meet new demands for quality control. One of the Asian-dominated sectors that grew rapidly in Manchester in the early 1990s was knitwear manufacturing, previously centred in Leicester. The growth of the knitwear cluster came mainly in response to very high demand for English knitwear goods from Eastern Europe. It was associated with largescale capital investment in computerized knitwear machines costing about £10 000. B.C., a young man of 33, arrived in England from Pakistan at the age of two and left school in Manchester at 16 without any qualifications. His father is disabled and has been unemployed for the past 30 years. After leaving school, B.C. worked for six years in a large Asian knitwear factory before opening his own factory in 1988 with an older brother who had previously worked in markets. The two men bought their first knitwear machine with a 20 per cent down payment and unfavourable hire purchase terms but, since they knew the seller, they needed no collateral. They started the factory with four machines, one new and three second hand, a total investment of £35 000, including the yarn. B.C. told me: We kept on expanding. We bought another two machines, then another two, until now we have 36 machines, all computerised (i.e. an investment of some £360,000 in machinery alone). We still continue to sell one hundred per cent of our goods to the wholesalers, not to stores or catalogue companies. We don’t like dealing with them – they’re arrogant. . . . We have started to expand a bit into Holland and Belgium – we deal with Indians (not Pakistanis) there. In London our customers are Indian Sikhs. Most of the people we deal with are between 30 and 50 years old. There are very few over 50.

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Our workers are all Asians, mostly Pakistanis. They just turn up. They knock on the door. But we like to get somebody who is already trained. We employ 30–35 workers. Mostly ladies do the sewing side. We use freelance designers. Our designer in Manchester is not an Asian but the one in London is. The computer technician is also English but one can get Asian technicians. The yarn suppliers are all Asians in Manchester.

This success story is now threatened by the imminent collapse of a large segment of the Asian fashion and clothing ethnic enclave economy in Manchester. Signs of this collapse are everywhere. Small wholesalers, part cash and carry, part retailers selling to the wider public on Sundays, have virtually disappeared in one wholesale district. In particular, a large block of some 50 small warehouses is now almost derelict, littered with cardboard boxes, as traders abandon the area when their leases run out. Even the local Asian café restaurant closed down in December 1999. The more upmarket wholesalers, just off the main city high street, are also depleted in numbers. Many of the larger ones have moved to a newly developing wholesaling area in Strangeways. Others who own their warehouses are expecting a financial property bonanza as the area is redesignated for chic housing and retailing in a multi-million urban regeneration scheme, Back Piccadilly, supported by the EU and big business. While the City Council has paid lip service to the loss of Asian business and inner city jobs in the area, little attempt is being made to invest in a solution to the ailing clothing industry. Manufacturers whom I interviewed cited several reasons for the decline of the enclave: 1.

2.

3. 4. 5.

6.

7.

The artificially strong pound and export liberalization policies, which have resulted in the flooding of UK markets with imports. In Manchester importers have expanded and thrived while wholesalers buying from local manufacturers have stagnated or gone into liquidation. The dying out of UK open air and covered markets. What had been a thriving retail sector, low in overheads and high in profits, is no longer a viable niche. Markets are closing down or are far less busy. This is attributed to the growth of hypermarkets and shopping malls, the pervasive use of credit cards and the increasing preference for designer clothes. Sunday opening of the large department stores and the city centre, which has cut the profits of Sunday markets and small cash and carry wholesalers. The introduction of minimum wages, which has cut profits severely in an industry relying on piece rate pay and machining speed. The loss of the Eastern European export market which, for several years after the fall of the Berlin wall, provided Manchester manufacturers and wholesalers with bonanza profits. Severe shortages of skilled labour. Young women in particular are unwilling to work as machinists at minimum wages when they can work as secretaries or shop assistants. Training facilities are few. One Pakistani manufacturer I interviewed now employs only young male Pakistani machinists, drawing on a pool of men who immigrated to the UK to marry local English Pakistani girls and who, he told me, were well trained as tailors. Intense competition between local manufacturers, which has pushed down prices and profits for the more established ones. This is of course not a new feature of the enclave.

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The unwillingness of the next generation, highly educated in Britain, to take over the family firm, and the inclination of young Asians generally to move into hi-tech and electronics rather than clothing. The absence of concerted action by manufacturers, or of government support. The collapse of local wholesaling means that low quality manufacturing is simply not in demand. Manufacturers who want to survive must go upmarket and sell beyond the Asian enclave. Most manufacturers in Manchester lack the contacts and expertise to make this leap. For those who do, there are dividends. S.R., a clothing manufacturer who specializes in school uniforms, is an educated man who came from Pakistan as an adult to work for an airline company before setting up as a manufacturer. In the 1980s, he lost over £100 000 in bad debts when some of his key customers went into liquidation. S.R. told me: When all this happened my question to myself was: how to survive? I knew I had to specialize – from fashion to a more specific good. I had to find something in demand, so I began to concentrate on school uniforms . . . [I found] two people who were supplying the chain stores . . . John Lewis’s, Debenham’s. We couldn’t approach them ourselves. We found a man (a supplier). [How?] I did research. The same product, we took it to Debenham’s ourselves and they didn’t take it from us. When it went through another person they took it. Probably he is established and they have good contacts with him. They were concerned that, being a small producing unit, we might not be able to fulfil the demand, we might not have the capacity. So many questions asked of you. He (the supplier) was also interested in getting to know us. He was introduced to me by a [Jewish] fabric supplier . . . who told him that he knew that we made good quality stuff. Yes, it was my reputation. Since then I have three more good customers who deal only in school uniforms. . . . For me quality is the only stick with which to beat my competitors. My accountant (an Asian) advised me not to go into liquidation. He told me, ‘Lose a hundred thousand pounds but don’t lose your reputation.’ Time will come when you will regain everything. . . . After bankruptcy there is no reputation – you can’t survive that . . . the bank was very helpful . . . They believed me because I had always paid my debts on time.

S.R. prides himself on the meticulousness of his design and specialist pleating of school skirts (for the latter he insists on using only one Asian pleater who lives in Yorkshire, some 40 miles away). Since his early contracts with large customers he has established links with two of the three major school merchandise companies in the UK. He was proud of a case in which he had to buy a specialist machine in order to produce a complex product for Littlewoods originally made in Taiwan. He claimed his product was far better than the original. He has had other offers but he cannot expand his factory in the absence of skilled labour. Both of his children are graduates with good jobs. Neither is willing to join the business. It is not only the fashion industry in Manchester which is in crisis. Rental housing, too, a major source of income for Asians in the city, has been hit by a surplus of housing, with new student hostels built by the University of Manchester and new Social Security regulations which have lowered rents arbitrarily. The new rules also mean that landlords risk losing several months’ rent if a tenant’s case is not approved. Under these circumstances the market in rental housing has slumped. Rental property is an almost entirely invisible Asian enclave economy. In the past it was seen as a good investment for windfall profits in the clothing trade, given the unpredictability and uncertainty of the fashion industry. Commercial or rental housing brings in

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a predictable, regular income; properties either retain their price or – in property boom times – increase their values dramatically. And property can be used as collateral to obtain bank loans in order to overcome dead periods or failed ventures in the fashion trade. Hence the housing market and the fashion clothing trade are symbiotically linked. But the housing market, at least in Manchester, encompasses also other Asian landlords who are uninvolved in the fashion trade, including even Asians in full-time wage employment. A common strategy I repeatedly observed among these landlords is gradually to buy and refurbish houses, one at a time, with the mortgage of each new property financed by rent paid on a prior property. It is thus quite common for people in low wage jobs, or even the unemployed, to own several rental properties. A prior research assistant of mine and her family had managed to purchase 12 inner-city rental properties through this strategy at a time when the assistant’s brother was unemployed and her father earned a meagre salary as a religious cleric. Most Asian rental property in Manchester is spatially clustered around the university and the inner suburbs where properties are either cheap or in demand by students and young professionals. Quite fortuitously, the Asian residential cluster is located close to the university and thus popular with students. It is difficult, however, to uncover this thriving, invisible business niche through the census or other, large-scale surveys. It is known that there is a good deal of rental property in particular areas. It is also known that many of the properties are owned by Asian landlords. Such information is known to the populations serviced: for example, to students, young professionals and the social security (many Asians rent out property to families or individuals drawing on social service benefits). But how many properties a particular landlord owns, or which properties are owned by Asians (even, which properties are rented rather than owner-occupied) remains unknown and invisible in surveys of Asian entrepreneurship. Like market trading, this is another subterranean economy. A.B., a rental property landlord who originates from a Karachi industrialist family, arrived in Britain penniless after the Bhutto nationalization of his family’s textile factories. A financial expert, although he never completed his degree, he succeeded over a period of 25 years, through clever manipulations of loans and mortgages from different sources, to acquire rental properties with a combined equity of one million pounds. In 1999, he was divesting himself as quickly as possible of his Manchester properties and investing in rental property near Oxford, in the London outer commuter belt where his son now lives. He also plans to go into the holiday rental property market. His office is based in his suburban home and, like most other Asian property investors in Manchester, his identity as a businessman is hidden, although virtually all his properties are clustered in a single Manchester neighbourhood, some miles away. Even the taxi business has its invisible aspects. Throughout Britain, Asians and particularly Pakistanis have moved into taxi driving in large numbers, even though they regard this occupation as morally shameful (taxi drivers pick up drunks from pubs and may be subject to racial abuse). But because the business is built upon sub-contractual arrangements between taxi firms and drivers, who function as self-employed businessmen, it is often quite unclear who owns how many taxis and on what terms taxi driving is contracted out. Like other forms of business which attract immigrants, taxi driving requires very low start-up capital and allows for gradual investment and growth. This is equally true of the fashion and housing markets. All three are typical immigrant enclave economies. However, while beginnings may be modest, all three economies potentially promise very large profits.

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Overlapping spaces We may think of the fashion industry as a discrete ethnic enclave economy, or we may define the Asian ethnic enclave economy in Manchester as encompassing all four major industrial clusters which Asians have penetrated in large numbers: fashion, food, property and transport. The four are interconnected through a penumbra of ancillary and professional services: travel agents, accountants, solicitors and so forth. Each cluster has its spatial manifestations, depending on the product or service produced and marketed. In Lefebvre’s terms, social spaces interpenetrate, intertwine and overlap, attaining ‘real’ existence by virtue of networks and pathways, linked through invisible channels of trading and collaboration. Asians are increasingly involved in many other, diverse types of business. It is not fortuitous, however, that first generation immigrants tend to cluster in specific industries. They confront a racialized job market while having little capital and few useful formal qualifications. Once opportunities are uncovered or discovered, members of the group move into the enclave in increasing numbers. Trading networks facilitate credit and trust (for example, Light et al., 1993: 36–9) know-how, training and recruitment. Co-ethnic networks also produce the kind of work environment sympathetic to ethnic sensitivities and needs, particularly those of women (see, for example, Ram, 1994). Such networks, however, rather than being diffuse and generalized, are embedded in ethnic enclave economies in highly structured ways. Sub-contracting which is a crucial feature of the clothing industry, involves complex but predictable flows of goods, information, credit and work recruitment. It too generates spatial transformations. For example, labour shortages of machinists in Manchester have compelled manufacturers to sub-contract the making up of garments to Asians living in outlying small towns in the North West of England, in Lancashire and Yorkshire, who still have access to a ready pool of female labour among friends and relatives. Hence the clothing enclave now encompasses a wider region than in the past. As ethnic firms grow and diversify, and as a second or third generation takes over from the pioneers, the concentration in particular industries may begin to vanish. At this point ethnic firms stop being ‘ethnic’ in anything except the identity of their owners. The choices these new entrepreneurs make are dictated by the Financial Times or the Wall Street Journal, by the opening up of new technologies or the availability of low-interest state loans. The firms of second and third generation Asians may thus cease to be interconnected through trading networks or entrepreneurial chains. Nor do they necessarily share a distinctive culture of entrepreneurship that marks them apart from the rest of society. At this point it becomes valid to talk of Light’s ‘ethnic economy’, but this is also the point where the subject loses its fascination. Analyses of dispersed and disconnected businesses owned by members of a single ethnic group can shed little light on the generative processes that lead ethnic groups to monopolize whole industries or tracts of city space and to produce ‘Asian’ or ‘Jewish’ or ‘Cuban’ or ‘Irish’ or ‘Black’ millionaires and distinctive urban commercial spaces. Conclusion The ethnic enclave economy hypothesis proposed that ethnic enterprises tend to form expanding clusters and that working within the enclave improves the lot of ethnic workers and their prospects for social mobility. The reasons for this advantage stemmed, it was

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argued, from the integrative features of the enclave and the opportunities for further expansion which it generated. The challenge to the hypothesis came from those denying that integration occurs, or that it creates such advantages. Drawing on industrial cluster theory, the present chapter has challenged the current consensus that the hypothesis is both redundant and misguided, best abandoned in favour of new concepts such as the ethnic ‘economy’ or ‘niche’. The whole debate, I have demonstrated, has been marked by misconceptions and misreadings of what an ethnic enclave economy is, which have obscured the original insights attached to the hypothesis. The challenge has been to theorize what ethnic enclave economies really are, beyond the determinative spatial metaphor in which the hypothesis was first grounded, and to explore how and why such enclaves may emerge. Using the penetration of South Asians in Manchester, UK, into the clothing and textile industries as an example, the present chapter has demonstrated that ethnic enclave economies enhance opportunities but also make ethnic groups highly vulnerable to macro-economic and demographic changes. Second, I proposed that different Asian industrial clusters in the city, fashion, housing, food and transport, are interlinked symbiotically or via an expanding Asian service sector. To investigate ethnic enclave economies, the need is to probe beneath the visible; to uncover the invisible social processes that produce spatial clusters. This can only be achieved through economic models and methods of research that start from hidden transactions in particular goods and the social networks these generate. The ethnic enclave economy hypothesis, recast to theorize these invisible networks of object/persons expanding across, rather than circumscribed by, space, is the basis, I suggest, for fruitful insights into ethnic social mobility. These do not need to rely on essentialist notions of ethnic values apparently conducive to successful entrepreneurship (Werbner, 1999), but, above all, the hypothesis avoids simplistic individualistic models of ethnic firm success in favour of collective models which encompass individual agency within a broader theory of expanding ethnic socio-economies composed of interrelated, small and medium-sized enterprises. References Basu, Dipannita and Pnina Werbner (2001), ‘Bootstrap capitalism and the culture industries: a critique of invidious comparisons in the study of ethnic entrepreneurship’, Ethnic and Racial Studies, 24(2), 236–62. Callon, Michael and John Law (1995), ‘Agency and the hybrid Collectif’, The South Atlantic Quarterly, 94(2), 481–508. Cohen, Abner (1969), Custom and Politics in Urban Africa, London: Routledge and Kegan Paul. Knorringa, P. (1999), ‘Agra: an old cluster facing the new competition’, in H. Schmitz and K. Nadvi (eds), ‘Industrial clusters in developing countries’, special issue of World Development, 27(9), 1587–604. Latour, Bruno (1993), We Have Never Been Modern, trans. C. Porter, London: Harvester Wheatsheaf. Lefebvre, Henri (1991) [1974], The Production of Space, trans. Donald Nicholson-Smith, Oxford: Blackwell. Light, Ivan and Carolyn Rosenstein (1995), Race, Ethnicity and Entrepreneurship in Urban America, New York: Aldine de Gruyter. Light, Ivan, Parminder Bhachu and Stavros Karageorgis (1993), ‘Migration networks and immigrant entrepreneurship’, in Ivan Light and Parminder Bhachu (eds), Immigration and Entrepreneurship Culture, Capital and Ethnic Networks, New Brunswick: Transaction Publishers, pp. 25–50. Light, Ivan, Georges Sabagh, Mehdi Bozorgmehr and Claudia Der-Martirosian (1995), ‘Ethnic economy or ethnic enclave economy?’, in Marilyn Harter (ed.), New Migrants in the Market Place, Boston, Mass: University of Massachusetts Press, pp. 23–42. Portes, Alejandro and R. Bach (1985), Latin Journey, Berkeley: University of California Press. Portes, Alejandro and Leif Jensen (1987), ‘What’s an ethnic enclave? The case for conceptual clarity’ (Comment on Sanders and Nee), American Sociological Review, 52, 768–71. Portes, Alejandro and Leif Jensen (1992), ‘Reply: disproving the enclave hypothesis’, American Sociological Review, 57(3), 418–20.

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Ram, Monder (1994), Managing to Survive: Working Lives in Small Firms, Oxford: Blackwell. Sanders, J.M. and Victor Nee (1987), ‘Limits of ethnic solidarity in the ethnic economy’, American Sociological Review, 52, 745–73. Sanders, J.M. and Victor Nee (1992), ‘Comment: problems in resolving the enclave economy debate’, American Sociological Review, 57(3), 415–18. Schmitz, Hubert and Khalid Nadvi (1999), ‘Clustering and industrialization: introduction’, in ‘Industrial clusters in developing countries’, special issue of World Development, 27(9), 1503–14. Soja, Edward W. (1997), ‘Six discourses on postmodernism’, in Sallie Westwood and John Williams (eds), Imagining Cities: Scripts, Signs, Memory, London: Routledge, pp. 19–30. Waldinger, Roger D. (1986), Through the Eye of the Needle: Immigrants and Enterprise in New York’s Garment Trade, New York: NYU Press. Waldinger, Roger D. (1993), ‘The ethnic enclave debate revisited’, International Journal of Urban and Regional Research, 17, 444–52. Waldinger, Roger D. (1996), Still the Promised City? African-Americans and New Immigrants in Post Industrial New York, Cambridge, Mass: Harvard University Press. Werbner, Pnina (1984), ‘Business on trust: Pakistani entrepreneurship in the Manchester garment trade’, in Robin Ward and Richard Jenkins (eds), Ethnic Communities in Business: Strategies for Economic Survival, Cambridge: Cambridge University Press, pp. 189–210. Werbner, Pnina (1987), ‘Enclave economies and family firms: Pakistani traders in a British city’, in Jeremy S. Eades (ed.), Migrants, Workers and the Social Order, ASA Monographs 26, London: Tavistock, pp. 213–33. Werbner, Pnina (1990a/2002), The Migration Process: Capital, Gifts and Offerings among British Pakistanis, Oxford: Berg, republished in paperback with a new preface. Werbner, Pnina (1990b), ‘Renewing an industrial past: British Pakistani entrepreneurship in Manchester’, Migration, 8, 7–41 (reprinted in Migration: The Asian Experience edited by Judith M. Brown and Rosemary Foot (1994), Macmillan). Werbner, Pnina (1999), ‘What colour “success”? Distorting value in studies of ethnic entrepreneurship’, Sociological Review, 47(3), 548–79. Wilson, Kenneth L. and W. Allen Martin (1982), ‘Ethnic enclaves: a comparison of Cuban and Black economies in Miami’, American Journal of Sociology, 88(1), 135–60. Wilson, Kenneth L. and Alejandro Portes (1980), ‘Immigrant enclaves: a comparison of Cuban and Black economies in Miami’, American Journal of Sociology, 86(2), 295–319. Wong, Bernard P. (1982), Chinatown: Economic Adaptation and Ethnic Identity of the Chinese, New York: Holt, Rinehart and Winston.

25 Access to finance by ethnic minority entrepreneurs in the UK David Smallbone, Monder Ram and David Deakins

Introduction The context Discrimination is a staple issue in debates on ethnic minority entrepreneurship, particularly in relation to finance. Although the debate has reached an advanced stage in the USA, there still does not appear to be a settled view on whether certain ethnic minority groups, notably African-Americans, are treated unfairly by the banking system. Certain similarities are discernible in the UK, although informed debate has been hampered by a lack of a comprehensive and systematic investigation of the experiences of ethnic minority communities and the banks. In its 1999 review, the Bank of England concluded that ‘there is little documented evidence of ethnic minority businesses (EMBs) suffering discrimination by finance providers in the UK, although there is evidence that some EMBs perceive they are treated adversely’ (Bank of England, 1999, p. 17). It also concluded that further research was required to elucidate the nature of the relationship between banks and EMBs in the UK. It was in this context that the study on which this paper is based was commissioned by the British Bankers Association, the Bank of England and the Department of Trade and Industry in 2000, in response to the Bank of England (1999) report.1 The study represents the most comprehensive investigation of access to finance by ethnic minority-owned businesses in the UK to date, as well as looking at their access to business support (Ram et al., 2002). According to the 2001 Census of Population, members of black and minority ethnic communities in the UK constituted approximately 8.6 per cent of the total population. As Table 25.1 shows, African–Caribbean makes up the largest group, followed by Indians, Pakistanis, Chinese and Bangladeshis (ONS, 2001a). The table also shows that the black and minority ethnic population represents a growing share of the total population: from 5.9 per cent in 1991 to 8.7 per cent in 2001. Each of the black and minority ethnic groups included in the Census have increased their share of the total population during this period, although at varying rates. The highest rates of increase can be seen among Chinese, Other Ethnic, Bangladeshis and Pakistani groups. Table 25.1 describes the national picture, but the tendency for members of ethnic minorities to concentrate in the larger urban areas means that the spatial distribution of ethnic minority people, and ethnic minority businesses, across the UK is very uneven, with particular concentrations in London; the West Midlands, focusing on Birmingham; and the East Midlands (for example, Leicester). As a consequence, ethnic minorities represent some 25 per cent of the total population in London, for example, and ethnic minority businesses make up a significant and growing element of the capital’s business population. As far as involvement in business is concerned, it is widely recognized that EMBs represent an increasingly significant segment of the small business population in the UK, 390

Ethnic minority entrepreneurs in the UK Table 25.1

391

Population by ethnic group

Ethnic group

1991 Population

2001 Population

1991 Percentage

2001 Percentage

White African–Caribbean Bangladeshi Indian Pakistani Other Asian Other Ethnic Chinese

46 937 861 884 374 161 701 830 205 455 363 192 930 281 381 146 462

47 520 866 1 139 577 280 830 1 036 807 714 826 241 274 661 034 446 702

94.1 1.8 0.3 1.7 0.9 0.4 0.6 0.3

91.3 2.2 0.5 2.0 1.4 0.5 1.3 0.9

Total

49 890 277*

52 041 916*

100

100

Note: * The total in the 1991 census excludes those born in Ireland, whilst that of the 2001 census excludes those who declared themselves as Welsh. Source: ONS, Census of Population (1991, 2001).

although the absence of large-scale business databases that include the ethnicity of the owner makes it impossible to paint a completely accurate picture. However, EMBs are reported to be disproportionately represented among the self-employed, compared with their white counterparts. For example, the self-employment rate for Pakistanis and Bangladeshis is 19 per cent, 18 per cent for Chinese, 15 per cent for Indian and 7 per cent for African-Caribbeans, compared with 12 per cent for the white population (ONS, 2001b). These figures indicate the importance of small business ownership for many ethnic minority groups, but they also draw attention to the increasingly divergent experiences of ethnic minority groups in business. The Global Entrepreneurship Monitor report for the UK confirmed that EMB groups have a substantial entrepreneurial potential (GEM, 2002). Unlike some other European countries, where the emphasis tends to focus on immigrant entrepreneurs, the UK’s ethnic minority business population includes a significant number of second and third generation, as well as first generation, migrants. At the same time, previous research has drawn attention to some of the distinctive characteristics of EMBs, which have potential implications for their ability to access finance (see, for example, Bates, 1998, 2001; Ram and Jones, 1998; Ram and Smallbone, 2001). These include their small average size, with a disproportionate propensity to be microenterprises; and an over-concentration in low value added, low entry threshold activities, such as retailing, restaurants and clothing sectors (Ram and Jones, 1998). In combination, the size and sectoral concentration of EMBs may help to explain some of the financial constraints that are often reported. At the same time, there is some evidence that generational change is contributing to diversification of business activity in some ethnic minority communities, into emerging sectors such as IT, consultancy and the creative industries. For example, a recent study in London described the contribution of young Asians to creative industries in the capital, demonstrating the potentially positive links between (ethnic) diversity, creativity and competitiveness (Smallbone et al., 2005a).

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Continued political enthusiasm for encouraging entrepreneurship in the UK has resulted in increasing interest in the business support needs of EMBs. The Small Business Service (SBS), which is the government agency charged with encouraging enterprise and facilitating access to business support by small firms in England,2 has a remit to ‘promote enterprise across society and particularly in under-represented and disadvantaged groups’ (http://www.sbs.gov.uk, 24/1/02). This may be justified on the basis of the potential contribution of diversity (of which ethnic diversity is part) to competitiveness, as suggested above, as well as on the basis of social inclusion, since Britain’s ethnic minorities remain substantially marginalized economically (Barrett et al., 2001). In this context, selfemployment and small business ownership is seen by government as one of the ways of increasing social inclusion among disadvantaged groups and communities. The key issue addressed in this chapter is whether EMBs have similar or different experiences with respect to accessing finance, compared with similar white-owned businesses, together with the nature of their experiences. Although, in a perfect market, discrimination should not exist, in reality, credit markets involve direct personal interaction between a financial institution and an applicant for finance, leaving scope for discrimination. The specific questions to be considered in the chapter are, firstly, whether or not discrimination exists and, if so, for whom; secondly, what the nature of that discrimination is and how it can be explained. It should be noted that, during the period covered by the study between 2000 and 2002, the UK business banking market was oligopolistic in nature, with six main banks. Part of the investigation was to see whether or not variations in policy and practice between banks, such as in terms of centralized versus localized decision making, had implications for lending to EMBs. Previous research evidence It is widely recognized that the process of raising external finance is difficult for many small firms, regardless of the owner’s ethnicity, reflecting a combination of demand- and supplyside factors (Storey, 1994). In terms of debt finance specifically (such as bank loans), difficulties in assessing risk in the case of small firm loan applicants leads financial institutions to use secured lending and credit-scoring systems to control their exposure to risk. In the UK, this approach has been described by a number of writers as a capital-based rather than an income-based approach, with an emphasis on gearing and financial assets in risk assessment (for example, Binks and Ennew, 1996; Berry et al., 2001). Since security is usually based on the assets of the borrower, the amount of security available is clearly a constraint on borrowing for many small firms. Other constraints include the limited ability of loan applicants to develop and present a business plan in the formal format and detail required by bankers, which they typically require from new ventures. At the same time, previous research has suggested that members of ethnic minority communities face additional barriers to accessing finance, compared with other entrepreneurs, particularly at start-up. For example, based on a study some ten years ago, of some 403 enterprises (232 EMBs and 171 white-owned firms), both African and Caribbean (ACB) and South Asian-owned businesses demonstrated a higher propensity to report problems in accessing bank finance at start-up than their white counterparts (39 per cent, 29 per cent and 21 per cent of loan applicants, respectively) (Jones et al., 1994). This was either because their applications had been refused or because conditions were imposed that were considered by the applicant to be unjustifiably stringent. Other studies have

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confirmed that applicants from certain ethnic minority communities appear to experience greater problems than others in accessing external finance at start-up. For example, Curran and Blackburn’s study of 76 EMBs from the Turkish–Cypriot, Bangladeshi and African Caribbean groups, showed the latter two groups to be much more likely to report problems in finding sufficient start-up finance than their Turkish–Cypriot counterparts (Curran and Blackburn, 1993). The particular problems experienced by ACB entrepreneurs in accessing finance were apparent in the first systematic interview survey of the relationship between ACBs and their banks in the UK, more than two decades ago (Ward and Reeves, 1980). One of their most significant findings was a widespread perception of discrimination, with numerous aggrieved respondents claiming to have been rejected for business loans despite, in most cases, being able to offer the required capital and references. Confirmation of these findings has been repeatedly provided since then, with researchers usually attributing the acute under-representation of African–Caribbeans in self-employment to credit barriers and a consequent lack of access to capital (for example, Barrett, 1999; Jones et al., 1989). Ram and Deakins (1995) showed that ACBs have a particularly low propensity to access bank finance at start-up, typically relying instead on personal savings and trade credit. Some studies have suggested that African Caribbean entrepreneurs have a lower propensity to apply for bank loans than ‘white’ business owners, perhaps because of an expectation of less favourable treatment. In the case of South Asians, the picture emerging from previous literature with respect to finance is less clear-cut. In contrast to African Caribbeans, by the 1980s, South Asian immigrants into the UK had established a reputation as being entrepreneurial, which was reflected in their significant over-representation in self-employment. At the same time, the available evidence suggests that, rather than necessarily reflecting a superior ability to access bank lending, their stronger business presence was associated with their ability to tap into sources of finance outside the formal market system (Dahya, 1973; Lyon, 1973; Werbner, 1984). As with other well-documented cases such as the Chinese in the USA (Light, 1972), South Asian enterprise in the UK was said to be largely self-financed through the social capital of family and community (for example, Flap et al., 1999). The use of informal, non-market transactions based on personal trust, which in turn is based on networks of mutual trust based on loyalty, has been identified as one of the strengths of Asian enterprise in the UK (Werbner, 1990). Further reinforcement is lent by persistence within Asian communities of strong extended family networks (Sanders and Nee, 1996). Similar arguments have been advanced with respect to the Chinese community in Britain, although this particular minority community has tended to attract rather less academic attention, until recently. By the same token, the alleged absence of family and community institutions among Africans and Caribbeans has been identified as one of the factors accounting for that community’s underachievement in business terms in the UK (Soar, 1991). While noting the findings of these earlier studies, the Bank of England report emphasized their limitations with respect to small sample size, as well as to the possible changes that may have occurred since the recession of the early 1990s, when there was general dissatisfaction with the financing arrangements offered to small firms, by banks in particular (Bank of England, 1994, p. 17). As a consequence, it was concluded that ‘there is little comparative evidence on the extent to which financing constraints on EMBs at start-up

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have changed since 1992’ (Bank of England, 1999, p. 7). The study on which this chapter is based was commissioned largely to seek to answer this question. Inter-ethnic differences in access to finance justify further and more detailed examination because of the potential implications for the nature and extent of the involvement of different minority groups in business ownership, as well as for subsequent business performance. Issues concerned with the relationship between finance from formal and informal sources and the reasons why there appear to be differences in the experience of members of the different groups with regard to accessing bank finance has practical, as well as social, implications. As well as acting to suppress the formation of businesses in certain ethnic minority groups, it can contribute to under-funding among those businesses that do get off the ground and can pose serious constraints on their scale, type and growth potential (Barrett et al., 2001; Jones et al., 1989; Rafiq, 1985). A shortage of capital means that the majority of ethnic minority firms remain confined within a narrow range of loworder activities, often dependent on local neighbourhood (and low income) markets and a high proportion of co-ethnic customers (Jones et al., 2000). Under-capitalization can also lead to firms seeking to compensate through the use of labour-intensive practices, involving unacceptably long working hours for business owners and their families (Jones et al., 1994). Breaking out into better rewarded activities is an obvious solution, but can itself be constrained by a shortage of financial as well as human capital. Data sources and methodology The methodology employed in the study comprised a number of complementary elements, which combined qualitative and quantitative data from the demand (that is, businesses) and supply sides (that is, potential sources of finance). The main source of quantitative data was two large-scale telephone surveys of EMB owners, together with a control group of ‘white’-owned firms. The initial ‘baseline’ survey, of 856 EMBs and a white control group, was undertaken in July/August 2000, with a second survey undertaken 12 months after the first. The second survey comprised a total of 948 businesses (781 EMBs and 167 white ‘control’ firms), including 463 that had been previously surveyed in 2000, thereby giving an opportunity to investigate the experience of this sub-set of firms longitudinally. The EMBs were drawn from the five largest ethnic minority groups in the UK, namely African–Caribbean, Indian, Pakistani, Bangladeshi and Chinese. As well as gathering basic profile data on the businesses and their owners, the baseline survey focused on the sources and types of finance sought and used, together with the level of awareness and use of external business support, both at start-up and during the 12 months prior to the interviews. The second survey concentrated on the experience of firms with respect to finance and business support during the 12-month period since the first survey. Case studies of growth-oriented EMBs operating in non-traditional (EMB) markets were also undertaken, many in emerging sectors of ethnic business activity. Semistructured, qualitative interviews were conducted with the owners of 32 business owners in 2000 and repeated again in 2001. In addition, on the supply side, in-depth interviews with bankers were undertaken, at different levels of management in the main banks. The aim was to identify bank policies with regard to EMBs by interviewing senior bank executives, as well as lending practices by interviewing bank managers experienced in dealing with loan applications from EMBs. Interviews were also conducted with business support providers, dealing with EMB clients. The interviews with both bankers and business

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support providers were concentrated in the main areas covered by the demand-side survey, thereby giving some scope for triangulating the results from the different elements. The rest of the chapter summarizes some of the main evidence with respect to the experience of EMBs of different types in accessing finance, drawing on the different elements in the project methodology. The aim is to review the evidence to see whether or not discrimination appears to exist in the market for finance among ethnic minority-owned businesses in the UK. Discrimination in the market for finance for ethnic minority businesses? Survey evidence Analysis of access to start-up finance presented here is based mainly on the baseline survey undertaken in 2000. This is because the second survey focused on the experiences of surveyed firms during the previous year, rather than the start-up. All business owners/managers interviewed in the 2000 survey were asked if they had attempted to obtain external finance when they started their business and, if so, what their experience had been. This included both formal sources (such as banks, leasing companies, venture capital partners, loan funds and grant-awarding bodies) and informal sources such as family and friends. It should be noted, however, that, since surveyed firms were mainly established enterprises at the time of the study, their experience with respect to accessing finance at start-up was not necessarily recent. As Table 25.2 shows, as a group, EMBs do not appear to have been disadvantaged in accessing start-up finance compared with white-owned firms, either from all formal sources, or specifically from banks. At the same time, there was significant variation between ethnic minority groups, ranging from the Chinese at one extreme, to ACBs at the other, with Bangladeshi and Pakistani-owned firms also below average in this respect. Detailed analysis shows that, among firms that were successful in accessing external finance from formal sources, this typically accounted for about half of total start-up capital, with little difference between either white-owned firms or EMBs, or between EMB groups themselves. In fact, the median percentage of total start-up finance raised from Table 25.2 External finance from formal sources at start-up (i.e. finance other than from own savings, family and friends) (2000 survey) Firms obtaining external finance

ACB Pakistani Indian Bangladeshi Chinese All EMBs White-owned All firms

Firms obtaining bank finance

No.

%N

No.

%N

No of Respondents (N)

55 57 74 44 84 314 93 407

31 35 41 34 51 39 39 39

38 55 67 43 81 284 82 366

21 34 37 33 49 35 34 35

177 162 179 131 164 813 240 1053

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formal sources by these firms was 50 per cent in all EMB groups and also in the white control group. One of the themes emerging from the analysis of the use of formal sources of finance is that ACBs appear to have certain distinctive characteristics, in comparison both with the other EMB groups and also with the white control firms. They show the lowest propensity to have accessed bank finance at start-up and an above average tendency to access start-up capital from loan funds, grants and other ‘non-bank’, formal sources, which are mainly sources of ‘last resort’ finance. It should also be noted that the age of ACB-owned firms was the lowest of the six groups in the study (that is, five ethnic minority and the white control groups), which means that their experience with respect to accessing start-up finance is the most recent. Not surprisingly, perhaps, there was considerable variation between sectors in the propensity of firms to access bank finance at start-up: relatively high in restaurants/ catering and retailing (both at 41 per cent), but lower in professional services and ‘other services’. As a consequence, the success rates of EMBs and white-owned firms that sought bank finance in each of the five sector groups have been compared. The results show that, in the restaurant and retailing sectors, EMBs show a slightly higher (but statistically insignificant) propensity to access bank finance at start-up than firms in the white control group and a similar propensity in manufacturing and professional services. However, in the ‘other services’ sector (such as personal services, hair and beauty, media and cultural industries), EMBs show a significantly lower propensity to access bank finance than white owned firms: 13 per cent compared with 35 per cent (0.05 level). This helps to explain the poor performance of ACBs, because of their over-representation in this sector. Additionally, in retailing, ACBs showed a significantly lower propensity to raise start-up finance from banks than all other firms, but, in the manufacturing and restaurant/catering sectors, ACBs did not appear to be disadvantaged. In other words, the disadvantage experienced by ACBs is particularly concentrated in ‘other services’ and retailing. One of the questions our data enables us to examine is the extent to which the ability of EMBs to access external finance at start-up is increased if they seek and receive external advice. In fact, although firms seeking external finance from formal sources were significantly more likely to access external advice than those firms not seeking external finance (0.001 level) (with little difference between EMBs and white control firms), accessing external advice at start-up did not appear to make any difference to the chances of receiving funds, in either group. At the same time, Chinese-owned firms showed by far the highest propensity to use some form of external advice or guidance at start-up (58 per cent, compared with 29 per cent of all EMBs and 27 per cent of the white control group), which was associated with them showing the highest propensity of any ethnic group to access external finance at this stage. They typically combined help from informal sources (such as family and friends), with assistance from banks and accountants, although they made very little use of public or quasi-public support agencies. Case study evidence reveals that informal networks are used to find accountants to act as advisers, who, although professionally qualified, are typically members of the Chinese community, themselves. This suggests that Chinese minority entrepreneurs recognize the value of professional assistance to help them to access bank finance, although their selection of advisers is based more on personalized trust than on trusts in accountants as an institution (Smallbone et al., 2005b).

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Previous research has suggested that one of the ways in which EMBs in some ethnic groups compensate for the difficulties they face in accessing finance from formal sources is to use funds drawn from within their own personal and community-based networks. However, there is a lack of unanimity concerning the extent to which this is consistent between ethnic minority groups. Our survey evidence shows that EMBs were significantly more likely to draw on finance from family and friends at start-up than white-owned businesses: 45 per cent compared with 25 per cent (0.001 level). However, once again, there is considerable variation between the ethnic groups, confirming that this type of finance is a particular feature of EMBs in the Asian communities, but less common in the ACB and Chinese cases. With respect to the Chinese-owned firms, the result reflects a lower need to turn to informal sources because of their degree of success in raising finance from formal sources. By combining the responses to a number of questions, we are able to identify those firms that were completely reliant on their own finance at start-up (that is, with no contribution from either formal or informal sources). Total reliance on self-financing was significantly more common among white-owned firms than among EMBs (0.001 level), reflecting the lower propensity of white-owned firms to draw on informal sources from within their communities. However, there was also variation between ethnic groups, from about one in three of Chinese and ACB owners to about one in five of Pakistanis who were totally self-financed. Possible discrimination in financial markets was also investigated with respect to established EMBs. Respondents in the two surveys were asked if they had attempted to obtain any external finance from banks or other formal sources during the 12 months prior to the interviews (other than for start-up). In practice, only 17 per cent of all firms (established for at least a year) had sought finance from one or more of these sources during 1999–2000 and 14 per cent (or four out of five that applied) actually received some. Moreover, there was little difference between EMBs and the white control group in the propensity to seek finance and only a small difference in their propensity to receive some. At the same time, the success rates of EMBs were considerably lower than those of whiteowned firms: 76 per cent compared with 85 per cent. Significantly, however, ACBs had the lowest success rate of any of the ethnic minority or white control groups and a higher propensity to seek finance than the other groups. Banks were an even more dominant formal source of external finance for established firms than they were at the start-up stage, accounting for 91 per cent of cases where firms were successful. The rest were accounted for by sources such as leasing and hire purchase companies, loan funds, venture capitalists and grant bodies. However, in total, these only accounted for 9 per cent of firms that raised some external finance from formal sources during this period, or just 1 per cent of all established firms responding to the survey. Somewhat surprisingly, perhaps, our survey revealed very little use of ethnic minorityowned banks by established EMBs. Results from the second survey undertaken in 2001, broadly confirm those from the baseline survey.3 Approximately one in seven of all firms surveyed in 2001 (13 per cent) had attempted to obtain external finance from some source during the previous 12 months, with no difference between EMBs (as a group) and the white ‘control’ firms. The main point to note is the significantly higher proportion of ACBs that sought some form of external finance (26 per cent) compared with Pakistani, Indian (11 per cent each), Bangladeshis and Chinese-owned firms (9 per cent each). It reflects the lower level of success of ACB

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businesses previously, combined with a lower level of internal resources available to this group. Although a higher proportion of ACBs raised bank finance than other ethnic minority groups in the 2001 survey, their success rate is still one of the lowest (at 59 per cent). Overall, the results from the second survey confirm those from the first in showing that ACBs were the most active in seeking bank finance, but the least successful in raising it. Evidence from case studies Further insight into the attitudes and behaviour of EMBs with regard to banks can be obtained from the qualitative case study interviews with EMB owners. The case evidence complements that obtained from the survey, since the case studies comprise businesses that are owned by comparatively youthful entrepreneurs, most of whom had been born and educated in the UK. Two rounds of interviews were held with 32 business owners in 2000 and 2001.4 The case study firms were selected with two purposes in mind. The first selection criterion was business owners who had expressed an interest in ‘growing’ their enterprise. It was anticipated that growth-oriented business owners would be more likely to seek external sources of finance than non-growth-oriented owners. For this reason, survivaloriented enterprises were not investigated. Second, although the sample contained businesses from both traditional and emerging sectors, few if any were engaged in the kind of low order retail/service niches often associated with ethnic minority enterprise. Evidence from the USA indicates that these types of enterprises are likely to be run by well-educated second-generation members of ethnic minorities (Bates, 2001). Some previous British research has suggested that problems which ethnic minority entrepreneurs experience with banks stem largely from ‘business-related’ reasons, notably a lack of appropriate expertise or difficulties arising from highly competitive market sectors (Curran and Blackburn, 1993). A key question addressed through the case studies was concerned with the extent to which this holds true for firms in ostensibly more promising niches The case material provided evidence of ethnic minority entrepreneurs avoiding bank finance generally and a tendency to reduce dependency on bank credit over time. It also provided evidence that confirmed a reluctance of African–Caribbean entrepreneurs, in particular, to approach banks to access formal finance. For example, an African– Caribbean media entrepreneur’s view was that ‘there’s no point in me asking them for credit as they wouldn’t give it’. A further finding from the case material was evidence of perceptions of discrimination, reinforcing the reluctance to approach commercial banks. A significant number of respondents believed themselves to be subject to unfair treatment that, in their eyes, was based on their perceived ‘racial’ identity. For example, in two cases, perceived discrimination has led to entrepreneurs taking their custom away from the banking system entirely. One African–Caribbean entrepreneur was convinced that his experiences were entirely typical of a financially excluded black community: ‘99 per cent of the black businesses in London will tell you the same story’. From the evidence presented by the case study respondents, three broad conclusions can be drawn. First, despite the conspicuously advanced and mainstream orientation of most of these firms, external sources of finance continue to play a rather minor role, raising questions about whether the trend towards breakout and diversification is being impeded by shortfalls of capital. Second, it is clear that, although much of this can be explained in terms of a voluntary preference for alternative informal sources, this preference is influenced by their attitudes and perceptions towards banks, which in some cases

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was based on their own direct experience. A significant number of respondents (13 out of 32 in the first round interviews) alleged discrimination at the bank, which was sufficient to warn us that the well-documented dysfunctions in the relationship between bank and ethnic minority entrepreneur have not yet been eradicated. Although this is based on perception rather than on prima facie evidence, perception has a major influence on business behaviour. At best, these results can be taken as evidence of poor communications between bankers and some successful ethnic minority entrepreneurs. On the question of low uptake of bank credit, it is evident that this applies widely, even to ethnic minority firms that are growing vigorously and attempting successfully to diversify away from traditional activities. On occasion, however, respondents attempting to access the banking system have been faced by obstacles, which included outright rejection of their proposals in some instances, in others an insufficiency of funding or a tardy response. While in some cases, loan proposals may be undermined by a weak track record and an inadequate business plan, such problem firms are not typical of the case study subsample, most of whom are far removed from the traditional ethnic business norm in terms of growth orientation, focus and mode of operation. Moreover, as predominantly Britishborn and frequently highly educated and middle-class in background, their owners are less likely to be hampered by a lack of communications skills than the stereotypical EMB. Since these are precisely the type of business-owners who would be expected to attract funding, it is all the more disturbing that so many of them invoke racial discrimination as an explanation for their banking difficulties. However, even in these cases, complaints do not amount to clear proof. As recent studies in the US suggest, such evidence can only be secured by pinning down the processes at the point that loan outcomes are made, although to do this requires more sophisticated surveys and detailed case studies on the supply side of the market for small business finance. Nevertheless, since the general tenor of complaints noted here replicates that reported in numerous previous studies, such views cannot be disregarded. Evidence from interviews with bankers The supply-side interviews with bank managers confirmed many of the findings from the demand-side surveys and case studies. These include confirmation that sectoral characteristics cannot entirely explain differences between EMB groups and their experiences with respect to accessing bank finance. The reported difficulties faced by EMB owners in the case studies is not accounted for, in general, by equity and gearing requirements of the banks, although there was some variation between ethnic minority groups. For example, bank managers considered that Asian EMB owners did not have the same difficulties as African–Caribbean owners in meeting such requirements. There was a perception by bankers that South Asian EMB owners could effectively ‘borrow’ funds from their community to meet bank equity requirements, whereas African–Caribbean owners typically find it more difficult to access such informal sources, confirming survey evidence. The advent of credit scoring was viewed positively by bank managers, as far as EMBs are concerned, suggesting that, if anything, it tended to support more marginal cases. It was considered that there were benefits to EMBs from the advent of systems of credit scoring, especially behavioural scoring, which should favour established EMBs. However, bank managers considered that the need for an acceptable credit history could lead to rejection or difficulties for some otherwise acceptable new EMB applications. Personal

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credit history could be important for new business applications, if there was evidence of previous problems. There was little evidence that credit scoring disadvantages or creates additional difficulties for EMBs. Interviews with bank managers confirmed that the formal information requirements with bank decision-making processes created some difficulties for EMBs over and above those for small business customers generally. Getting full financial information required as part of the formal banks’ decision-making process was an issue with some EMB applications, although how individual bank managers dealt with this varied. Some managers were able to do more business, and process more successful applications, through their experience of working with EMBs, or through additional time spent with EMB applicants, indicating that there should be benefits from sharing experience in the way EMB applications were dealt with. The interviews with bank managers also revealed that the level and intensity of the experience with EMBs and with ethnic minority communities, the extent of bank manager involvement in the community, and the extent to which bank managers were able to learn and educate themselves on trading practices within ethnic communities, affected their approach to decision making with EMBs. More experienced managers, with a relatively large portfolio of EMB customers, typically demonstrated a distinctive approach, particularly with respect to the way they dealt with the informality of trading, which characterizes many EMBs. While it is recognized that much of bank manager learning concerning EMB applications and customers is experiential, the banks could benefit from additional guidance to managers on EMB issues. Bank managers seemed well aware of the importance of intermediaries as potential sources of referrals, and of word-of-mouth recommendations for getting new business in ethnic minority communities. Most managers were keen to develop networks and profile as a result, although these networks were largely in South Asian communities. While evidence existed of some very good networking and links with Asian communities, there was little evidence of good links with African–Caribbean communities or with African–Caribbean businesses. This may partly be explained by the less well developed network of relevant professionals in the ACB communities. The benefits to EMBs of centralized or localized decision making, operated by different banks, was not clear-cut, since there were advantages and disadvantages with both systems of decision making. The crucial difference, in determining the effect on EMBs, depended more on individual bank manager practice and knowledge of EMBs and their trading practices, than on the organizational decision-making model adopted by their individual bank. Either system was influenced by knowledge, understanding and practice of individual managers, particularly in preparing EMBs for the informational requirements of either system of decision making. Conclusions A number of conclusions can be drawn from the study, which has implications for the policies and practices of banks, as well as for public policy makers. 1 There are many similarities between ethnic minority and comparable white-owned businesses, with regard to the problems they face in accessing external finance, particularly at start-up.

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Existing research points to many similarities between ethnic minority and white-owned businesses with respect to finance. Evidence from the different elements of the study supports this view in a number of important ways. The two large-scale surveys suggest that, as a group, EMBs are not disadvantaged in terms of start-up capital from banks and other formal sources, compared with a matched sample of white-owned businesses. This applies to their propensity to raise some finance, as well as to the typical percentage of total startup capital raised. At the same time, in interpreting these results, the high propensity of EMBs to be micro-enterprises, and to be concentrated in low value-added activities, needs to be continually emphasized, alongside our evidence that ‘breakout’ into mainstream markets is often achieved without recourse to bank finance. The control group comparison, on which the quantitative element of the study was based, can be used to answer questions about disadvantage, based on ‘like-for-like’ comparison, but on its own may mask deeper, structural issues facing EMB development in the UK. The case study findings similarly highlight important areas of commonality, notably the bypassing of bank finance and reliance on informal sources of funding, although EMBs have a higher propensity to use such sources than their white counterparts. Supplyside evidence drawn from interviews with bank managers also suggests many similarities. The level of decision making in banks (that is, local or centralized), the advent of creditscoring and issues concerned with levels of required security, were not considered to have distinctive effects when applied to EMBs, in comparison with other small firms. 2 Underfunding is a continuing constraint facing many EMBs, even those that are growing and operating in emerging types of economic activity. Although, statistically, EMBs may not appear disadvantaged in comparison to similar white-owned firms, the case study evidence shows that a lack of access to external sources of finance continues to be difficult, even for EMBs that are growing and attempting to diversify away from low-order activities. This is an important issue because of the need for EMBs to diversify into higher value-added activities. The fact that the great majority of the owners of case study firms are well-qualified, entrepreneurial high achievers, serves to underline the point, since so often success has been attained without any significant input from the banking system. This reinforces earlier research showing that underfunding remains one of the most intractable problems facing ethnic minority small business owners, although the problem is not simply a result of supply-side factors. 3 There are considerable variations in the nature and extent of relations between ethnic minority businesses and banks in practice, which emphasize the important role of the individual bank manager. The key theme to emerge from supply-side interviews with bank managers was the variation in practice, not just between banks, but also between managers within the same bank. Regardless of the particular system of decision making in place, the role of individual bank managers was crucial in determining relations with EMBs. There was variation in practice by individual bank managers in preparing applications by their EMB clients. Some managers were able to do more business and process more successful applications,

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because of their good understanding of EMBs, or through additional time they were willing to spend with EMB applicants; indicating that there should be benefits from sharing experience in the way EMB applications are dealt with. Bank managers were well aware of the importance of intermediaries and word-ofmouth recommendations for getting new business in ethnic minority communities. Most managers were keen to develop networks and profile as a result, although these were largely in Asian communities. Given some of the demand-side results from this study, it may be that African–Caribbean networks are less developed and consequently more difficult to access for bank managers. It was recognized that, in terms of both policy and practice, the development of manager and bank networks in local ethnic minority communities is important for developing trust and relationships and gaining new business. A further area of divergence between policy and practice was in the relationships with external business support organizations. Not surprisingly, given the recognition of variable quality across different support agencies, a diverse set of relationships was identified, depending on the perception of quality by different managers. There was also variable involvement with other agencies, such as Chambers of Commerce and similar organizations. 4

Inter-group diversity of experience is a consistent theme.

Another key emerging theme is the diversity of experience between ethnic minority groups. Although many similarities between ethnic minority and white-owned businesses were evident, the survey evidence in particular clearly demonstrates the diversity of experience that exists between ethnic minority groups with respect to raising external finance. For example, whilst Chinese-owned businesses demonstrated a significantly higher propensity to access start-up finance from formal sources, such as banks, than whiteowned firms, the proportion of African and Caribbean businesses to do so was below that of the white control group and significantly below with respect solely to bank finance. In line with previous research, reliance on informal sources of finance was found to be a particular feature of South Asian-owned businesses. Much more so than existing studies, the findings provide a stark picture of the extent of African–Caribbean disadvantage in respect of finance. This was notwithstanding the fact that they had by far the highest proportion of second/third generation migrants of all groups included in the survey (37 per cent) and the highest proportion of owners/managers with formal management qualifications and/or management training. In terms of start-up finance, ACBs appear to have less success in accessing bank loans than either their white or other ethnic minority counterparts, a higher propensity to turn to non-bank formal sources of start-up finance (including various sources of last resort lending) and a below average propensity to access informal sources of start-up capital (at least in comparison with other ethnic minority groups). As a consequence, ACBs showed the highest propensity to rely entirely on self-financing at start-up of any of the ethnic minority groups, although lower than white-owned businesses. Significantly, ACBs showed the highest propensity to access external advice or guidance at start-up, from a public or quasi-public agency, of any group, although this was not reflected in their ability to raise finance, as we have seen. Once established, ACBs also experienced lower success rates in accessing external finance compared with other established firms

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and a much higher propensity to report future financial needs than other EMBs or white control firms. Some supply-side evidence also indicated that African–Caribbeans were at a particular disadvantage, in comparison with other groups. Equity and gearing requirements were found to affect different EMB owners in different ways. It was suggested that Asian owners did not have the same difficulties as African–Caribbeans in meeting such bank requirements. The view was that Asian EMB owners could effectively ‘borrow’ funds from their community to meet bank equity requirements, whereas African–Caribbean owners were often deemed to lack this facility to the same extent. 5

Are ethnic minority businesses discriminated against?

Some of the difficulties that ACBs face can be explained by their concentration in particular types of business activity (such as personal services, arts and cultural industries), although the comparative evidence provided by the large-scale survey evidence demonstrates that sector is not a determining influence. Moreover, both the survey and case study data show that the difficulties that ACBs (and some other EMBs) experience in accessing external finance cannot be explained in terms of the lower educational or management qualifications of entrepreneurs. For example, case study EMB respondents were mostly well supplied with human capital and have taken focused, purposeful and carefully thought out decisions on the question of which market segment to enter. Detailed case study evidence shows that, in cases where banks have been approached, there continues to be a high incidence of grievance concerning the way they were treated, which many perceived to be related to their ethnicity. While we are unable to prove that discrimination exists, there is clear evidence of disadvantage for ACBs, which cannot be satisfactorily explained in terms of other characteristics of the businesses or their owners. This is a particular concern since almost two out of every five ACBs in the baseline survey were second or third generation migrants, where greater convergence of experience with the mainstream might be expected. Moreover, the general tenor of complaints reported by case study businesses shows the continued gap that exists between EMBs, beyond the ACB group, and suppliers of finance. It reflects a strong perception of discrimination among younger, growthoriented EMB owners, which must be a concern, for banks as well as for public policy makers. Notes 1. An earlier version of the paper was presented at the Babson College-Kaufmann Foundation Entrepreneurship Research Conference, Babson College, June 2003. 2. At the time of writing, Scottish Enterprise, the Welsh Development Agency and Enterprise Ireland have a responsibility to support business in Scotland, Wales and Northern Ireland respectively. 3. Note that 463 of the 948 firms surveyed in 2001 were the same as in 2000. The remaining 485 were additional firms, selected broadly to match those that it was not possible to re-interview. 4. The number interviewed in 2001 was 25, primarily owing to non-response or lack of availability.

References Bank of England (1994), ‘Finance for small firms report’, Bank of England, January. Bank of England (1999), ‘The financing of ethnic minority firms in the UK: a special report’, London, Bank of England.

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Barrett, G. (1999), ‘Overcoming obstacles? Access to bank finance for African–Caribbean enterprise’, Journal of Ethnic and Migration Studies, 25, 303–22. Barrett, G., T. Jones and D. McEvoy (2001)‚ ‘Ethnic minorities and (de)-regulation: retailing and consumer services in the UK’, paper to the third meeting of the thematic network ‘Working on the Fringes’, Liverpool, 22–25 March. Bates, T. (1998), ‘Minority business development: identification and measurement of discriminatory barriers’, in M. Fix and M. Turner (eds), A National Report Card on Discrimination in America: The Role of Testing, Washington: The Urban Institute. Bates, T. (2001), ‘Minority business access to mainstream markets’, Journal of Urban Affairs, 23(1), 41–56. Berry, A., P. Grant and R. Jarvis (2001), ‘Can European banks plug the finance gap for UK SMEs?’, paper presented to the 24th ISBA National Small Firms Policy and Research Conference, November, Leicester, UK. Binks, M. and C. Ennew (1996), ‘Growing firms and the credit constraint’, Small Business Economics, 8, 167–78. Curran, J. and R. Blackburn (1993), ‘Ethnic enterprise and the High Street bank’, Kingston Business School, Kingston University. Dahya, B. (1973), ‘Pakistanis in Britain: transients or settlers’, Race, 14, 241–78. Flap, H., A. Kumcu and B. Bulder (1999), ‘The social capital of ethnic entrepreneurs and their business success’, in J. Rath (ed.), Immigrant Businesses: The Economic, Political and Social Environment, Basingstoke: Macmillan. GEM (2002), ‘Global Entrepreneurship Monitor (GEM): UK report 2002’, Babson College/London Business School. Jones T., J. Cater, P. De Silva and D. McEvoy (1989), ‘Ethnic minority business and community needs’, report to the Commission for Racial Equality, Liverpool Polytechnic. Jones, T., D. McEvoy and G. Barrett (1994), ‘Raising capital for the ethnic minority small firm’, in A. Hughes and D. Storey (eds), Finance and the Small Firm, London: Routledge, pp. 145–81. Jones T., G. Barrett and D. McEvoy (2000), ‘Market potential as a decisive influence on the performance of ethnic minority business’, in J. Rath (ed.), Immigrant Businesses: The Economic, Political and Social Environment, Basingstoke: Macmillan, pp. 37–53. Light, I. (1972), Ethnic Enterprise in America, Berkeley: University of California Press. Lyon, M. (1973), ‘Ethnicity in Britain: the Gujerati tradition’, New Community, 2, 1–11. ONS (2001a), ‘Census of population 2001’, Office for National Statistics. ONS (2001b), ‘Labour market trends’, Office for National Statistics. Rafiq, M. (1985), ‘Asian business in Bradford: profile and prospect’, Bradford Metropolitan Council, Bradford. Ram, M. and D. Deakins (1995), ‘African-Caribbean entrepreneurship in Britain’, University of Central England Business School, Birmingham. Ram, M. and T. Jones (1998) ‘Ethnic minorities in business’, Milton Keynes, UK, Small Business Research Trust. Ram, M. and D. Smallbone (2001), ‘Ethnic minority enterprise: policy in practice’, report to the Small Business Service, Research Report: RR001/01, Small Business Service, Sheffield, June. Ram, M., D. Smallbone and D. Deakins (2002), ‘Ethnic minority businesses in the UK: access to finance and business support’, British Bankers Association, London, September. Sanders, J. and V. Nee (1996), ‘The family as social capital and the value of human capital’, American Sociological Review, 61, 231–49. Smallbone, D., M. Bertotti and I. Ekanem (2005a), ‘Diversification in ethnic minority business: the case of Asians in London’s creative industries’, Journal of Small Business and Enterprise Development, 12, 1. Smallbone, D., F. Lyon and Li Xiao (2005b), ‘Trust, co-operation and networking in an immigrant business community: the case of Chinese-owned businesses in the UK’, in H.H. Hohmann and F. Welter (eds), Trust and Entrepreneurship: a West–East Perspective, Cheltenham, UK and Northampton, MA, USA: Edward Elgar. Soar, S. (1991), ‘Business development strategies’, Training and Enterprise Council Conference Report, Home Office Ethnic Minority Business Initiative, Warwick University. Storey, D. (1994), Understanding the Small Firms Sector, London: Routledge. Ward, R. and F. Reeves (1980), West Indians in Business in Britain, London: HMSO. Werbner, P. (1984), ‘Business on trust: Pakistani entrepreneurship in the Manchester garment trade’, in R. Ward and F. Reeves (eds), Ethnic Communities in Business, Cambridge: Cambridge University Press. Werbner, P. (1990), ‘Renewing an industrial past: British Pakistani entrepreneurship in Manchester’, Migration, 8, 17–41.

26 Ethnic minority business and the employment of illegal immigrants in Birmingham Trevor Jones, Monder Ram and Paul Edwards

Introduction In current British political discourse, the issue of illegal immigration ranks high on the list of great sore points of the day. In a fearful age, when distrust of foreigners has been cranked up several notches by perceived terrorist threats coupled with perceptions of swamping by bogus asylum seekers, those who sneak into the country in defiance of rules and regulations are especially demonized. Despite the urge to mock, it must be acknowledged that tabloid outrage actually feeds on certain global events which are not purely mythical. Given that much undocumented migration is orchestrated via the global criminal economy (Castells, 2000) and that, by the turn of the millennium, people trafficking had overtaken drug trafficking as a multi-billion pound a year ‘industry’, the occasional note of media hysteria is not altogether surprising. Even among those who highlight the positive benefits – not to mention the economic inevitability – of international labour migration, there are commentators like Munz (1996), who recognize that the perceived threat is at one level understandable, grounded as it is in plausible fears of the undermining of cultural integrity, of law and order and of the jobs and social resources of the incumbent population. According to Munz (1996, 222), a completely laissez-faire approach to immigration would be a recipe for ‘an ethnically divided two-tier society’. At one level, the present chapter is an exercise in cooling temperatures and soothing fevered brows. It is based on in-depth case-histories derived from interviews with 20 undocumented South Asian immigrant workers, and from the 20 co-ethnic entrepreneurs based in the West Midlands who employ them. Such a small sample clearly cannot be used for number-crunching generalizations, but our emphasis upon qualitative depth helps to ensure sensitivity to the kind of nuances, which tend to be missed by mass tick-box questionnaire surveys. In any case, mass surveys are almost by definition virtually impossible to set up when the target interviewees do not officially exist and wish to remain invisible. From the testimony of these respondents, it is clear that, far from criminal parasites preying on an unsuspecting host, they are highly industrious contributors to both local and national economies, indeed the very epitome of flexible production. Between them, the 20 firms interviewed support over 180 jobs for members of their own communities, a vital contribution given that admonition that many sections of the South Asian population ‘remain mired in poverty’ and subject to unemployment rates well above the current norm (Kundnani, 2002, 70). Alongside this, they produce at highly competitive prices a range of clothing goods and catering services much valued by non-Asian consumers. For Sassen (1991), such ethnic minority entrepreneurs should be cherished for their active contribution to economic and urban regeneration. We shall also demonstrate the truth of the proposition that illegal immigration results, not so much from the autonomous impulses of deviously motivated individuals, as from 405

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a structural contradiction of a very high order. The very fact that our respondents’ valuable economic efforts can only take place by recourse to subterfuge is in itself a surreal expression of this contradiction. Though not for one moment portraying migrants and their employers as unwitting automatons, we insist that their decisions do not take place in a vacuum but must be seen in a context of all manner of predisposing, shaping and limiting conditions, which in the case of illegals are unusually fraught. Having examined the motivations and behaviour of our respondents in the light of these externally generated tensions, we end on a more positive note with a consideration of possible policy measures which could readily be applied to easing structural tensions and the exploitation and criminality arising from them. As we shall see from the case histories, our respondents are far from the sinister bogey-men of popular demonology. Essentially, both the employer and the worker case histories tell a tale of ingenious and often self-sacrificing personal survival strategies in the face of onerous pressures generated by a perverse political–economic environment. Before any of this, however, we need to examine the changing global conditions that underpin this entire problem. Irresistible force, immovable object: the global context and its local impact Reducing the problem to its bare bones, it is now customarily argued that illegal immigration is largely created by the tensions of intensifying globalization. On the one hand, the world’s population has never been as migratory as in the present day; on the other, never have there been so many barriers erected in the path of international human movement. Exhaustively reviewing the myriad forces creating this heightened international mobility, Martin (1999) notes strong economic growth and rising affluence in the advanced economies as a magnet for those displaced by the ‘misery’ of the Third World and post-Soviet Eastern Europe (Castells, 2000, 176), a rising tide of economic inequality, urbanization, ethnic conflict, civil war and environmental degradation (see also Castles, 2000; Timur, 2000; Zlotnik, 1999). In itself, of course, the mere existence of a steepening global quality of life gradient is a necessary but not sufficient condition for international mass migration, which often needs further enablers to activate it. In the recent post-industrial phase, these have taken the form of cheaper and more diverse international travel and communications, supplying both information about potential destinations and a feasible means to get there. Alongside this, Favell (1998) notes the role of the Third World diaspora communities already settled in the destination countries, which prepare a beaten path ready for successor migrants from their home countries. As sources of information, these ‘personal networks’ (Staring, 2000) act as motivators for co-nationals to migrate and as suppliers of shelter in which to acclimatize on arrival. In the case of illegal entrants, ‘shelter’ takes on a more literal meaning, with the ethnic community a ready means of going underground beyond the gaze of authority. Certainly our own migrants are virtually unanimous on the role of their ethnic communities as a refuge, providing not only accommodation but also an information grapevine that enables them to find employment. Of all the various forms of support, a means of livelihood is paramount in the long run and our respondents certainly bear out Staring’s (1999, 188) observation that the marginalization of illegal immigrants renders them ‘increasingly dependent on co-national employers’. In the case of our own sample, all ten of the illegal clothing workers are Indians employed by Indians, a pattern

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replicated by the ten Bangladeshi immigrants employed by Bangladeshi restaurateurs. To all intents and purposes, they have nowhere else to go. Globalization has not only raised the sheer volume of international migration but it has also profoundly changed its character, in ways entirely in keeping with a shift from Fordism to post-industrialism. In contrast to the early post-war phase of labour migration from periphery to core, which was heavily dominated by male manual muscle power, post-industrial migration is much more diverse in composition. In the first place, a significant component – asylum seekers, family re-unifiers – has little to do with economic and labour market conditions and more to do with political and historical considerations. Secondly, the economic component itself is far less dominated by unskilled males, containing now a much higher proportion of female workers and professionals and skilled workers of both sexes (Castles, 2000; Zlotnik, 1999; for application to the UK, see Coleman and Salt, 1992; Home Office, 2000). Significantly, however, this restructuring is by no means exclusively driven by market change. This is clearly seen in the British case, where the crisis of de-industrialization and rising unemployment beginning in the late 1960s led to a drastic shrinkage in the demand for unskilled workers and a parallel tranche of restrictive immigration legislation designed, in effect, to halt the long-established inflow of such workers from the New Commonwealth. Consequently, primary immigration from the former colonies had been virtually ended by legislation as early as 1971, reminding us that, ultimately, the tap of manual worker immigration was turned off by the hand of the state rather than the market. It is at this point that we confront the structural contradiction referred to in the previous section. In a nutshell, an unprecedently mobile world population is confronted with equally unprecedented legal barriers to its movement across frontiers, a crisis almost inevitably resulting in rising levels of illegal movement, since for most purely economic migrants there is no alternative. Indeed, it is difficult to disagree with Staring (2000), when he argues that illegal immigrants are essentially a ‘legal construct’, an artificial category that can only exist as a result of legal (re)-definition. In a powerful parallel with alcohol prohibition in pre-war USA, there remains an insatiable demand for the product – in the present case immigrant labour – but now no legitimate means of obtaining it. As Castells (2000, 176) observes, history repeats itself, with immigration prohibition providing ‘an exceptional opportunity for criminal organisations to tap into an immense market’. When considering the British immigration regime, this clash of opposing objectives became transparently obvious only relatively recently. During the 1970s, and probably most of the 1980s, it could be plausibly claimed that political and economic imperatives were reasonably well synchronized, with draconian immigration barriers the logical response to a dwindling demand for low-skilled workers. While British immigration policy has been roundly criticized (and rightly so in our opinion) for its racist bias (Sivanandan, 2001), it could be less immediately faulted for its economic logic. This impression of harmonization with market trends is heightened by subsequent policy developments like the establishment of a work permit system, used in practice to admit mainly high-skilled, professional and other key workers (Home Office, 2000; Salt and Clark, 2000). Crucially, however, while post-industrial growth in high-level services and hi-tech manufacturing certainly has set up an unprecedented demand for educationally qualified, specialized and highly-skilled workers, it has also generated a parallel demand at the bottom end of the labour market, an important trend to which policy makers have reacted somewhat

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belatedly. From Sassen (1991, 1996), we learn that post-industrial growth in the great cities of advanced capitalism is an acutely polarized process, in which rising affluence and gentrification can only take place if supported by an expanding army of low-level workers in consumer, domestic and personal services, where abject wage levels ensure an increasing reliance on immigrants from low-wage economies (Leman, 1997). In parallel to this, there is also a process of defensive restructuring in traditional declining industries like clothing manufacture, much of which has been out-sourced abroad to low-wage economies but with an important portion remaining in the UK on the basis of drastic cost cutting (Ram et al., 2003). Because of the requirement to cut labour costs to the bone in order to survive, both low-level services and sweated manufacturing are compelled to rely heavily on immigrant workers, whose wage expectations are significantly below those accustomed to British norms and standards (Ram et al., 2002a). Given the legal block on the free entry of such workers, it is virtually inevitable that almost the entire recruitment process should be forced underground, with all the malpractices and human suffering thereby entailed (CARF, 1997). With precisely these considerations in mind, our own sample is divided equally between owners and workers in the Asian restaurant trade and those in clothing manufacture. In many respects, the curry house trade is the living embodiment of Sassen’s new and rapidly mushrooming service sector, springing up in response to post-industrial prosperity to offer opportunities for the cash-rich time-poor to enjoy simultaneously both food and an atmospheric leisure experience at extremely competitive prices (Ram et al., 2002a). By contrast, the Asian-owned clothing industry exemplifies the sunset industry, struggling to stay alive by dint of agonizing cost cutting. While these two activities represent sharply contrasting aspects of the post-industrial revolution, they share one cardinal feature: both operate in hyper-competitive sectors of the economy, where for most firms returns are actually non-economic by the normal standards of capitalist accountancy. It is no exaggeration to say that, according to conventional economic theory, most of them ought not to exist at all. That they continue to do so is mostly due to their willingness to cut regulatory corners, specifically the evasion of statutory minimum wage and working time requirements and the employment of invisible workers at wages below even the paltry levels customary in these trades. As we shall see, the use of illegal workers cannot be simply dismissed as wilful criminality or exploitative profiteering. For almost all the employers interviewed here, illegals are a highly regrettable but vitally necessary element in their precarious struggle for entrepreneurial survival. Research evidence To demonstrate how all this works in the real world, we now report on 40 interviews with illegal immigrant workers and their employers (20 interviews with each) conducted in the West Midlands during summer 2001 (for details of the methodology, see Ram et al., 2002a). The interviews were split equally between workers and employers in the restaurant/ takeaway trade, where respondents are in every case Bangladeshi and male, and the clothing manufacturing industry, where all respondents are Indian. Our emphasis here is on depth rather than breadth, setting out to create detailed case histories on the basis of taperecorded testimony, allowing interviewees to offer evidence in their own words. Hence much of the factual evidence is presented in the form of direct quotations, with comments on certain major issues presented in boxes separate from the main text.

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The catering trade The illegal worker sample: motivations and mode of entry As suggested by commentators like Sivanandan (2001) and Vos (1995), migration motives tend to be diverse, with economic and political forces sometimes intertwined, as exemplified by our respondent W1 (Box 26.1). Others, such as W2, W3 and W5, are to all intents and purposes political refugees fleeing from violent party politics in Bangladesh but, once having gone underground in Britain, have been faced with the problem of material survival. In most other cases, however, our respondents seem to view their own reasons for uprooting themselves in fairly straightforward terms, with simple economic motives and the desire for self-betterment uppermost notably among the Indian workers. Indeed, apart from the three Bangladeshi restaurant workers who were forced to flee under political pressure, the interviewees can be seen as largely reflecting the classic push–pull forces operating across the gradient of acute economic disparity.

BOX 26.1 W1

W2

W3 W4

W5

W6 W7

W8 W9 W10 W11

UNDOCUMENTED WORKER SAMPLE: MOTIVES FOR MIGRATING TO BRITAIN

‘The situation in Bangladesh is not good, no employment, lots of theft and robbery, too many people in the area, no political stability . . . a way out is to go abroad and everybody finds it easy to get to Britain because of family connections.’ ‘I support a rival party and when the Awami league came to power . . . I arranged some meetings, there were fights, bombs and I was beaten up a few times. After that I went to my party leaders who suggested I should leave the country.’ ‘I was involved in politics, supported the BNP party and there was a case against me, so the party sent me over.’ ‘Because there are a lot of Sylheti people already here, you get to hear a lot about the country and wish you could come too. Bangladesh is a Third World country, there are problems with the way we live, money, food etc.’ ‘I had no intention of coming to this country but I was kidnapped by supporters of the Awami league . . . it was very bad, so my father sent me to my Aunt’s where I met the man who arranged everything.’ ‘Economic reasons, why else? There is a good life here . . . those of us who have not managed to come to UK envy those who have.’ ‘Everyone in a poor country like Bangladesh wants to improve their financial position by working in a richer country . . . I heard so much about this country.’ ‘My initial intention was just to visit this country. I changed my mind because of the extraordinary difference in pay.’ ‘I came because I had heard so much about England and the rest of my family are here and I wanted to join them.’ ‘I had heard so much about it and wanted to see for myself.’ ‘I came on the death of my mother-in-law.’

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W12 W13 W14 W15 W16 W17 W18 W19 W20

‘It’s the easiest place to be in Europe.’ ‘I came over mainly to earn money so that I could send it back to my family.’ ‘To get work and make money.’ ‘I heard a lot of good about this country.’ ‘I have many relatives that live here.’ ‘In India there are no opportunities to get work, it all depends on who you know.’ ‘To earn money.’ ‘To earn money and I have relatives here.’ ‘There is little work in India, you just about survive.’

As noted earlier, economic disparity alone does not explain everything and many of the above quotes verify the vital influence being of the ‘beaten path’ effect, where immigration is orchestrated by the presence of co-ethnic networks in the West Midlands. Evidently, availability of an information channel about the receiving country has acted as a major stimulus for several in the sample, who cite this as a primary reason for moving and perhaps would have stayed put in the absence of information. Crucially, too, in the special case of illegals, it acts as a form of asylum in itself and a pathway into housing and employment (Staring, 2000). As W10 assures us, ‘I feel secure now, there is a high Asian community in the area and I feel part of it.’ Pressures to hire undocumented workers Perhaps no other recent social trend illustrates Sassen’s polarized urbanism more graphically than the rise of eating out, stimulated by income growth and lifestyle changes at the top end but operating on the back of a poorly paid labour force subject to onerous conditions and long, unsocial hours. In Britain over the past two decades or so, the rapid shift towards consuming food outside the home has established the restaurant and takeaway trades as among the fastest growing in the service sector, with ‘ethnic’ catering its fastest expanding specialism (Ram et al., 2002b). Unhappily, and despite the popularity of South Asian (‘Indian’) cuisine among affluent professionals, this buoyant demand does not guarantee rich pickings for more than a select few well capitalized and strategically located outlets. More generally, the South Asian restaurant trade is over-crowded, with excessive numbers of outlets, unsustainable competition and a great many technically unprofitable enterprises (Ram et al., 2002b). Partly as a result of this marginality, the trade suffers from a progressive dearth of workers, which shows signs of becoming truly acute if present trends continue. Our interviews with employers revealed complete unanimity on the difficulty of recruiting adequate numbers of suitable workers of all grades. For relatively large operators like E5 and E7, the specific problem is one of recruiting and retaining skilled chefs, a clearly crucial handicap which each of these respondents frankly admits is chiefly a consequence of low pay and the hard reality that their revenues are inadequate to support a higher wage rate. This of course is the nub of the matter. Burgeoning though the Asian catering industry may be, it is also a highly labour-demanding activity and one in which the modest prices that have become the norm do not allow a fair return. Hence the survival of the typical curry

The employment of illegal immigrants in Birmingham Table 26.1

411

Weekly pay in the restaurant sample (£)

Pay

Rise

Working week

£5–10 rise 6 monthly

60 hours 70 hours

E6 E7

Chef 250, waiter 150 Chefs 200 1st chef 350, 2nd chef 250, waiter 220, kitchen porter 100 Chef 250 Chef 250–300, kitchen porter 90–100 Chef 250, kitchen porter 100 Chef 250, waiter 150

E8 E9

Chef 200 Chef 250, kitchen porter 100

E1 E2 E3 E4 E5

£10 rise for all 6 monthly, Xmas bonus 30 £10 rise 6 monthly £10 rise 6 monthly £10 rise 6 monthly, free food, drink, transport £10 rise 6 monthly

60 hours 55 hours 50–55 hours 50 hours 40 hours 50 hours

house depends on long hours of work for pay that is distinctly meagre by national standards. In a very real sense, the modern British diner’s multicultural eating-out experience is being carried on the back of the substandard earnings of a small army of chefs, waiters and kitchen labourers, not to mention the owners themselves, many of whom are underrewarded in terms of accepted entrepreneurial yardsticks (Ram et al., 2002b). Normal practice is the payment of a fixed weekly wage rather than an hourly rate. Under this system, experienced chefs, the élite of the workforce, generally received only between £200 and £250 per week, while waiters’ wages were closer to £150 and kitchen porters’ £100 (see Table 26.1). Significantly, it is this last grade which accounts for most of the undocumented workers hired by restaurants. Even when we take account of the customary fringe benefits – free meals, Christmas bonuses of up to £50 and sometimes transport laid on – these can only be regarded as poverty wages in the present time and place. Consequently, it is little wonder that British-born youngsters are increasingly disinclined to seek out a career in this traditional Bangladeshi niche, especially when we consider that inadequate pay is compounded by the demands of long nocturnal hours. Moreover, since all but one of the restaurants interviewed operated a working week of at least 50 hours, many of their workers were by definition earning less than the National Minimum Wage (NMW), which at the time of interview was £3.70 per hour. For many kitchen porters, the rate was barely half the legal minimum and in one case (E2) even the chef was only earning £3.00 an hour for a 70-hour week. Indeed, according to their own evidence, only one of the interviewees was attempting to comply with the NMW, with respondent E1 summing up the general climate: ‘We are not affected by it, we let our accountant deal with the paperwork.’ Creative accountancy was also employed by E5: ‘our accountant works it out so we have less hours on the books’; E3: ‘on the books we have five staff when really there are twelve of us’; E6: ‘I don’t think many restaurants are aware or even concerned about it. Our accountant deals with these issues.’ According to E5, ‘We can’t abide by these new laws, they’re just not suitable for our line of business’, meaning that opening hours need to be so flexible that it is meaningless to compute hourly rates. A further inference might be that the NMW is simply uneconomic

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for most employers in a marginal business and that the Asian restaurant trade could not survive at anything resembling its present magnitude if it were forced to comply. Price rises to cover the cost of the NMW were also out of the question, given the intense competition arising from a surfeit of restaurant outlets and the tendency of customers to shop around (Ram et al., 2002b). Since for very many customers Asian restaurant cuisine is a readily substitutable lifestyle accessory, demand for it is far too elastic to grant owners any real degree of price latitude. Problematic in itself, this dilemma is compounded by a another. While sustainability might be threatened by compliance with the NMW, non-compliance is equally threatening since, as we have seen, low wages and long unsocial hours are compromising the supply of labour. As seen from the detailed comments of our employer respondents (Box 26.2 opposite), the labour supply crisis has been triggered above all by generational changes, with the rising generation of British-born Bangladeshis increasingly acculturated into British norms and expectations and hence increasingly unwilling to submit themselves to conditions which may have been unquestioned by the immigrant generation. There was a broad consensus among Bangladeshi restaurateurs that this was responsible for their recruitment difficulties and also that recourse to undocumented newcomers from Bangladesh itself is inevitable in these circumstances, offering them the only realistic lifeline available. As respondent E2 reminds us, ‘Other places have closed for lack of staff’ and, in this context, illegal immigrants represent a kind of last resort survival strategy, necessary though, at the same time, high-risk and a major headache in its own right for employers like E2: ‘You are scared of employing illegals but like I say there is no choice.’ The crux of the matter here is that, though restaurant work in Britain may now appear decidedly unattractive to a locally-born Bangladeshi, it may well offer undreamt-of possibilities to an ambitious young person in Bangladesh itself. Seen in this light, our employer-respondents would seem to be engaged in a practice of great mutual benefit by employing eager fresh newcomers from Bangladesh to perform the tasks which their own children and descendants deem unsuitable. With a nod in the direction of policy makers, many of our employers articulated a wish that this process might be regularized so that it could take place in an open, transparent manner, free from the hazards of the current hole-in-corner procedure. Typical comments here are ‘My illegal is a valuable member of the workforce but I fear being investigated’ (E5); ‘You are scared of getting caught’ (E2); ‘I prefer legal staff because if we get caught I think it’s a £5,000 fine’ (E7). In case it might be assumed that ethnic minority entrepreneurs in Britain are themselves part of an international worker-smuggling conspiracy, we cannot stress too strongly that not one of our respondents deliberately recruited undocumented workers. Rather, as E2 explains, they were recruited blindly: ‘Workers are not pre-arranged. I do not need to know their circumstances.’ While clearly welcoming the relief provided by such workers, all members of our employer sample were adamant that recruitment of undocumented labour was a haphazard hit-and-miss affair, with no formal machinery in place to recruit these workers directly from the sub-continent or indeed through middlemen in the UK. As E4 assures us, ‘There’s no system in place, no middlemen as far as I know’, and E5 concurs: ‘No business will pay travel expenses or anything else.’ This last comment serves to underline that the typical Asian small business in Britain is far too small and underresourced to act as a prime mover or even a pawn in a global-scale criminal enterprise, a

The employment of illegal immigrants in Birmingham

BOX 26.2 E1 E2

E3

E4 E5

E6

E7

E8 E9

413

BANGLADESHI RESTAURANT EMPLOYERS ON PRESSURES TO HIRE ILLEGALS

‘There’s always a shortage of good experienced workers. We recruit illegals when there’s no one else.’ ‘It’s very difficult to find workers. When you work in a restaurant, there is no social life, you just work and sleep. These days the youngsters want official jobs or they’re just into drugs and criminal activities. I only employ illegals because you can’t get anybody else.’ ‘The number of legal workers is dropping. They’re either retiring or starting their own businesses and the young ones are getting into other professions because of the unsocial hours and the bad image of restaurant work. Ideally, I would like to see more workers from Bangladesh who have work permits.’ ‘Younger generation are not interested in this type of work. Businesses are increasing in number, we won’t be able to cope unless a solution is found.’ ‘You can’t get the right people when you need them, there are more restaurants now than there are people to work in them. I guess the main reason must be low pay but if your business is not doing well you can’t afford to pay high wages. If I could get workers who were legal, I’d prefer to. We need a new system whereby we can get workers from Bangladesh legally, because the legal people no longer move into the restaurant business.’ ‘Asian cuisine is so popular now but there aren’t enough workers to go round. Working in this business is not good for family life. The younger generation look down on a restaurant job. I would prefer not to hire illegals but you don’t have a choice. Our people in this country are slowly turning away from restaurant work, the young ones just don’t want to work these hours. It would be good if we had a system where we could recruit from abroad.’ ‘There is a lot of competition between restaurants for skilled workers. The legal staff is just not there any more. Business would collapse without illegal immigrants. What choice do employers have?’ ‘It would be good to get skilled workers direct from Bangladesh.’ ‘Something needs to be done or else we’ll have to rely even more on illegal workers.’

point rammed home further by E1 who ‘wouldn’t have the time or money to encourage people from Bangladesh to come here and work’. Thus it would appear that no one purposely recruits illegals. Despite this, they may simply turn up in the net in the course of the general recruitment trawl and, as E3 puts it, ‘We assume job applicants are legal, workers do not advertise they’re not.’ Several researchers have noted that small Asian-owned firms tend to be completely informal in their recruitment procedures (Ram et al., 2001), a practice confirmed by every one of our respondents, who to a man would concur with E2: ‘I ask friends in the community, it’s just

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word-of-mouth’; and E4: ‘There’s no need to advertise at job centres or in the papers.’ This of course is a classic example of entrepreneurs tapping into their social capital, the mutual information networks based on the trust generated by a cohesive ethnic community (Ram and Jones, 2002). Undocumented workers are thrown up as an unintended by-product of this informal search process but, once hired, are rarely rejected, even after their illegal status comes to light. The position is clearly summarized by E3: ‘I ask my workers, friends and family if they know anyone wanting work. I didn’t know this worker was illegal until a few months ago. Until we ask for the paperwork, we don’t know whether he’s legal or not. Once we’d decided to keep him, I couldn’t change my decision.’ Also representative here is E6: ‘We just get information from people we know. You recruit illegals the same way, through connections of yours.’ This picture was validated by our worker respondents, none of whom, irrespective of entry mode, obtained his present job via any kind of professional facilitator, legal or illegal. In all cases, their first priority on arrival was to take shelter within the local Bangladeshi community and then to seek work through precisely the kind of informal channels outlined above. Of our ten worker respondents, four found their present jobs through relatives, three through the good offices of fellow Bangladeshis outside the family circle and three by directly contacting an employer thrown up by the communal grapevine. Once again this reflects the operation of chain migration processes and the vital importance to new migrants of having family and community already in place. Thus W1 obtained his present job because ‘I had a relative who used to work here, he phoned and helped secure me the job;’ W6 went straight into a job in his brother-in-law’s takeaway and W8 and W9 were recommended by relatives known to the prospective employer. Alongside this, co-ethnic links prove to be just as potent as kinship, with W2, W3 and W4 all securing jobs through fellow Bangladeshis previously unknown to them, but clearly prompted by feelings of communal loyalty. In the case of W2, his job was arranged by the individual who had initially given him shelter even though a complete stranger. Even those who had approached employers directly on their own initiative were fortified by inside knowledge, as with W1, who ‘got told about the restaurant, that they were short of a worker. I went to the boss and arranged it for myself’. Importantly, none of these respondents has been obliged to pay any kind of agent or fixer and W3 reflects the general opinion when he insists, ‘No one has exploited me.’ Nor had any of them been approached either by their present or by any other prospective employer before leaving Bangladesh, confirming that migration itself is the only defined objective in the first instance, with job seeking becoming a specific priority only once a foothold has been gained. For example, W5 says, ‘I had not planned any form of employment when I left Bangladesh, the man only arranged to bring me here.’ Workplace experiences of illegal workers While we would in no way contest the opinion of those like Sivanandan (2001) that the position of undocumented workers is inherently vulnerable and open to extreme exploitation, it is important to qualify this in practice by noting that detailed examination of individual experiences throws up a much more complex picture. This is particularly striking at the level of pay and conditions, where it is often difficult to disentangle generic factors in the catering industry itself from those stemming from the illegal status of workers. Certainly, no clear or consistent picture emerges of worker abuse, with most of our interviewed workers

The employment of illegal immigrants in Birmingham

415

expressing various degrees of satisfaction with their lot, though here again we need to set this against the lowly expectations of people only recently escaped from straitened circumstances and political instability in one of the world’s most impoverished economies. As W2 succinctly put it, ‘I am new here so I can’t tell whether they give me more or less.’ In many cases, too, outlooks are rose-tinted by all-round satisfaction at being in Britain, where ‘facilities and services are so much better’ (W4), ‘there is security, stability and freedom. I really love it here, I like clubs and drinking and the liberal attitudes’ (W7), and ‘law and order is consistent and not dependent on which party is in power’ (W5). For W9, ‘This is a dream come true.’ Nothing could highlight the yawning gap between native and immigrant perceptions more than this unabashed pleasure in the taken-for-granted fabric of British society. Returning to a more earthly plane, we note that many worker respondents feel that their pay and conditions are on a par with the rest of the workforce and that their vulnerable position has not cast them down into the role of cheap labour. For W6, pay ‘is the same as the wages a legal would have. We all work about a 55 hour week’, a sentiment echoed by W3, who thinks his pay is ‘fine, I like it here, I’m earning, there’s no hassle’, W9 who insists ‘Everyone is treated the same, I think I get paid at the same rate as any other kitchen porter’ and W1 who opines, ‘It’s fine, I think the restaurant is doing me a favour by employing me in the first place.’ W10 has no doubt that ‘illegals are treated the same as any other workers’. Respondents are also unanimous that there are no rifts or tensions between themselves and the ‘legal’ workforce: as W2 explains, ‘We get on fine, we’re all from the same country.’ Since all the other respondents express roughly the same sentiment, we may presume that there is no resentment over illegal workers undercutting wages or cheapening the rate for the job. At first sight, all this tends to validate those writers who portray industrial relations in the ethnic minority firm as harmoniously paternalistic and in this case the Asian-owned firm comes across as a safe and satisfying haven for invisible workers, rather than a site of exploitation. Were this the case, it would obviate at least some of the humanitarian concerns around the issue of illegal immigration. On closer examination, however, there is a hidden sub-text and cracks appear in this picture of ethnic brotherhood. In the case of W1, for example, despite his expressed satisfaction, he is earning only £100 per week for six days in the kitchen, he gets home at 1.00 a.m. on weekdays and 2.30 at weekends and, as he tentatively remarks, ‘I have no experience of this country, I do not know.’ Others know or suspect that they are paid less than their counterparts, as with W2, who says, ‘They think that person’s illegal, he won’t speak out from fear.’ Equally realistic is W4: ‘Naturally they pay you a little less because you are an illegal and can’t say anything, you have a weakness.’ Also paid at a lower rate is W5, whose ‘position is weak, I can’t demand anything but it’s as much as I need.’ Some respondents also comment on hours and conditions, which are ‘very hard work, physically demanding’, according to W9. Related to all this, and evoking a much more consistent note of grievance, is the question of freedom of choice – or lack of it. Trapped by the need for invisibility and by inability to speak English, undocumented migrants have virtually no room for manoeuvre in the job market. This is captured by W2: ‘restaurant work is the only option, without knowing the language or having a work permit’ and W4: ‘it is difficult to move on even for a factory job’. Having entered in 1991, this last respondent had lived long enough in Britain to aspire to a less grinding regime than his present job (at times it’s

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2 a.m. before we finish) but, as he says, ‘you don’t have a choice’. Despite ten years’ residence, he says, ‘I am still having to get by in broken English’, presumably a consequence of an encapsulated existence hidden within the Bengali-speaking enclave and a clear barrier to any kind of job move outside the Bangladeshi-owned economy. As we shall see in the next section, this very unfreedom confers certain additional benefits on their employers. Use of undocumented labour: employers’ perspective Whatever the truth about pay differentials, it is clear that restaurant owners themselves are not consciously interested in illegals as low wage labour per se. Employer E1 probably speaks for many when he says, ‘I think you have to pay good wages for quality workers regardless of whether they’re legal or not. If you want to keep them working for you, you’ve got to keep them happy.’ As we have seen, there is no purposeful recruitment of such workers and their principal role is seen simply as countering the chronic labour shortage in the industry, graphically expressed by E2: ‘you can’t get anybody else’. However, once hired, they are particularly valued for their quite exceptional compliance and loyalty (Box 26.3), a commitment which is engendered by sheer fear or, as W5 puts it, ‘I am very vulnerable here and I’m scared.’ From this we see that, to put it mildly, restaurant owners exert an unusually powerful leverage over these workers who, through utter lack of choice and fear of exposure, are placed in the position of virtual supplicants, completely reliant upon the good will or otherwise of an individual employer. The only exceptions are those who have accrued sufficient skills and experience to acquire leverage of their own, such as W7, a qualified chef who started off in 1998 with few options but now confidently proclaims, ‘I move on to places where there is more pay. I don’t need someone to put in a good word. The restaurants in the coastal areas are desperate for chefs.’ More often, especially for recent arrivals, the only option is kitchen portering, which comprises washing

BOX 26.3 E1 E3

E4 E5 E6 E7

EMPLOYERS’ COMMENTS ON THE ADVANTAGES OF UNDOCUMENTED WORKERS

‘Our illegal worker is hard-working, needs the job more and is more committed, he wants to keep his job.’ ‘You will pay less because you will not be paying National Insurance but the main comfort is that you have a worker who is reliable and will come to work on time . . . [illegals] . . . are more willing to work and are grateful for the opportunity.’ ‘Our illegal worker is reliable, mature, hard-working and good at time keeping.’ ‘Valuable member of our workforce.’ ‘The employer will get more for the money he pays them, they will work hard to keep the job.’ ‘It is beneficial to have workers who are so hard-working and reliable.’

The employment of illegal immigrants in Birmingham

417

up, sweeping and perhaps chopping vegetables for no more than £100 per week, a rate approximating to no more than £2 an hour in most cases and sometimes even less. Here we can appreciate that, though illegals may not necessarily be paid less for the job, they nevertheless gravitate towards the lowest paid occupations. It is in this enforced willingness to fill the least desirable jobs at the very bottom of the pile that their greatest utility lies. As our employer respondents explain, there is an inevitable logic behind this division of labour. Summarized by E3, the position is that ‘Normally illegal people will have no previous experience which means they will have to start in the kitchen. Language will also be a problem so they won’t be able to serve customers.’ Further confirmation comes from E8, whose employees are paid ‘according to what they do and how long they have been here, it is not a matter between legal and illegal’. A more hopeful note is sounded by E3, whose illegal worker is at the bottom of the ladder ‘because he is unskilled’ but ‘he is getting better and will be paid more soon’. Perhaps the subtleties of all this are best captured by the case of E5, who does not ‘take advantage of staff just because they are illegal’, but nevertheless pays only the going rate of £100 to his kitchen porter, who just happens to be illegal. The clothing trade Pressures to hire illegals Another now-customary niche for South Asian-origin entrepreneurs, clothing manufacture, replicates many of the features described above for restaurateurs and their employees, notably in respect of its reliance on co-ethnic labour recruited on an informal basis. At the same time, it differs decisively from the catering trade, in that it is a ‘sunset’ industry, one suffering from long-term decline due to intensifying competition in home and world markets from emergent industrial nations. As long ago as the mid-1980s, Mitter (1986) noted that its precarious survival in Britain rested largely on the presence of immigrant entrepreneurs competing on the basis of inordinately cheap and flexible labour from within their own communities. Since then, global competitive pressures have, if anything, become even more stringent (Ram et al., 2001), necessitating further cost-cutting among clothing Asian firms. In these circumstances, the role of illegal labour assumes even greater prominence, its use as a cheap substitute often rather more transparent than is the case in catering. Almost all our employer respondents make absolutely no bones about this, their attitude typified by E15, who employs undocumented workers entirely for cost reasons and invariably pays them less than their counterparts: ‘all the rest are paid at the NMW rate; if I paid them all the same, I might as well not employ illegal workers’. They can also be used flexibly in the most literal sense: ‘I can tell them not to come into work unless needed.’ Though he has ‘tried very hard not to employ illegals’, market circumstances dictate that ‘it’s the only way to be cost effective’. Throughout the employer sample, this theme of cost-effectiveness emerges as by far the major consideration for clothing manufacturers in their decision to make use of undocumented workers. Unlike the restaurant trade, the need to cut costs to the bone replaces absolute labour shortage as the principal motive for the use of illegal workers. Labour scarcity is only rarely a problem, arising when it does in the form of an occasional dearth

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of specific types, as in the case of E11, who complains of the difficulty of ‘recruiting good workers, especially experienced machinists and overlookers’, an anxiety echoed by E12: ‘it’s hard to find experienced workers’. At the same time, E12 also notes that ‘We always have workers coming to the premises for vacancies’, implying that there is no absolute labour scarcity per se. More typically, respondents note a constant surplus of Asian workers looking for employment. There is, as respondent E16 remarks, ‘no shortage of recruits, whether labourers or skilled machinists’, an experience replicated by E17, who gets ‘people regularly coming through the door looking for work’. According to E14, there are ‘no obstacles to recruiting, we can be selective’. If anything, then, there is in fact a surplus of labour for the clothing trade, a circumstance explained by E17 as a result of a rash of business failures and clothing factory closures in his locality. In itself this helps to highlight the direly straitened conditions in which the British Asian-owned clothing industry is now operating. It is, as E17 himself observes, ‘a cut-throat business . . . we are employing less workers all the time, the orders are not there any more, we can’t compete with the import market on price’. With the recent emergence of new competition from countries in the former Soviet bloc, who can compete on delivery time as well as undercut price, a further screw has been turned on an already precariously marginal set of small businesses. Coupled with the imposition of the NMW, this has driven many of them to extinction. Survival now depends on unprecedented cost-cutting measures, among them the use of undocumented immigrant workers at rates of pay which respondents candidly admit are less than those paid to their regulars (Box 26.4). From these comments, it becomes evident that the role of undocumented labour is nothing less than that of ensuring the very survival of the Asian-owned clothing industry in Britain. Over again, this is underlined by the use of such phrases as ‘downfall of the business’ and ‘just to stay in the trade’. Historically there is a certain irony in that this was the precise role of the original wave of Asian immigrants, whose cheap flexible labour lent a few extra years of life to dying industries such as textile manufacture. Now many of the Asian workers displaced by the final demise of those industries have become entrepreneurs in their own right depending for their survival on a fresh wave of migrants from their own homelands, the only difference being that now these are defined as persona non grata even though their economic contribution would seem to be as necessary as ever. Much as is the case with the restaurateurs, clothing manufacturers present the use of undocumented labour as an exercise reluctantly undertaken under severe constraint, a passive process which does not involve proactive recruitment or the use of middlemen either in the homeland or in the UK. They simply turn up unbidden, yet apparently are rarely turned away. Thus respondent E11, half of whose ten-strong workforce are illegals, says that these ‘have applied for political asylum or came as students’ and were already resident in Britain when they approached him. According to E13, an employer of 18 workers, his four illegals ‘came in off the street’. They ‘either come from the street or through family and friends’, says E12. In a further variation on this theme, E17 (11 employees, four of whom are undocumented) has ‘helped relatives who came illegally but I did not encourage them to come. There is an obligation to employ them’, an observation once more confirming the importance of kinship networks in chain migration. Perhaps this issue is best summed up by E15: ‘There’s no reason to get

The employment of illegal immigrants in Birmingham

BOX 26.4

E11

E12 E13 E14 E15

E16

E17

E18

E19

419

CLOTHING INDUSTRY EMPLOYERS ON PRESSURES TO HIRE UNDOCUMENTED LABOUR

‘There has been an immense impact from the NMW, because to survive we cannot afford to pay these wages. That’s where illegal workers have helped us to continue trading. This is a risk I have to take to keep my business running.’ ‘The whole point of employing illegal staff is to survive in this business. I don’t know how long I will survive if they keep putting up NMW.’ ‘The whole reason for employing illegal workers is to cut costs, so how can you expect me to pay the same as legal workers?’ ‘The NMW has meant we have had to start employing illegals.’ ‘We have tried very hard not to employ them but it’s the only way to be costeffective. We have to employ illegal workers just to stay in business . . . the majority of small businesses will have to employ them just to stay in this trade.’ ‘They are mainly employed to save costs but you can only employ so many illegals. The NMW has increased reliance on them. I hope this is short term, if not it could be the downfall of the business.’ ‘We employ illegals to cut down on costs. The NMW is one of the reasons we have to use them. It is a short term solution and is not the way forward or sustainable.’ ‘I use them for cost reasons and also there is less paperwork and regulations. The way the clothing industry in this country is going there is a need to employ these workers. It is not a practice that I want to sustain. More has to be done by the government to help businesses like mine. The government should subsidise the NMW.’ ‘Illegal workers are employed to cut costs and we also have relatives that come over from India. The NMW has been handled by employing more illegal workers who are really subsidising the other workers’ wages so that the business can keep running.’

involved in bringing people over, there are already large numbers of illegal workers we can employ.’ Use of illegal workers Across the sample there are expressions of concern about the NMW, which is seen as the final straw breaking the fragile back of Asian clothing industry competitiveness. No fewer than seven of the nine respondents mention the impact of minimum wage legislation, stating or implying that it is this which has pushed them into increased deployment of illegals. In effect, undocumented labour is being used to subsidize the NMW. In contrast to the rather veiled processes at work in the catering trade, Asian clothing manufacturers

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Table 26.2 E11 E12 E13 E15 E16 E17 E18 E19

Employer respondents: the legal–illegal pay gap (£) Standard rate 30–35 30 35–45 30 30 35–45 45 45

Illegals 20 per day 20 30–35 20 20–25 20 25 30

simply pay their undocumented workers less than the going rate and are completely open about it (Table 26.2). From the data presented above, we note an emphatic gulf between the two categories. In all cases the standard rate for regular workers is fixed to conform to at least the NMW minimum, with the invisible workers used to cut the average wage bill back to a level which business owners deem affordable. A clear case in point is E15, who pays his illegals at £20 per day, whereas ‘all the rest are paid at the NMW’. Voicing a common sentiment among his peers, he says, ‘If I paid them all the same, I might as well not employ illegals.’ As in the restaurant trade, the pay gap is partly justified by a system in which illegals are frequently used in low-grade labouring work, ‘to stock up rails and hanger the garments’ (E13). Language barriers and lack of skills once again confine many of them to those occupations which carry the lowest pay, irrespective of who is performing them. They are, as E17 confirms, ‘only used for easy jobs’. As E12 expresses it, ‘We get away with paying less to illegal immigrants,’ admitting feelings of unease but also hinting at a kind of flawed logic which reasons that their legal nonexistence provides a form of justification for paying them at a sub-normal rate. There is also a kind of sheep-for-a-lamb effect, whereby, having transgressed by employing an undocumented worker, the owner feels it hardly matters if he then ignores the NMW. Far from being confined to the above respondent, the moral and practical dilemmas surrounding the use of officially proscribed labour is quite widespread, much as it is among the restaurateurs. Several would doubtless concur with E17, who confesses, ‘I personally do not like to employ illegal workers’, but immediately resolves any doubts by arguing, ‘It works both ways, we get cheap employees, they get work. Most of them are happy with £100 a week because they convert that to rupees, then it seems like a reasonable wage.’ Once more the point is rammed home that the efficacy of any cheap migrant labour system depends on the existence of a culturally determined gap in norms and expectations. This being the case, illegals can generally be relied on to bear their lot contentedly. As E17 rationalizes it, ‘They have come from poverty and realise this is their one chance they can do something about it.’ On the rare occasion when a pay grievance is voiced, ‘once you tell them the risks involved in employing them, they tend to understand’ (E18). Only the gentlest of armtwisting is needed in this situation. Unsurprisingly, respondents remark on the extreme pliability of their unofficial workers, an added bonus beyond their sheer cheapness. E18 finds them ‘eager to impress’, E15 sees them as ‘more respectful’. Driven by fear of exposure,

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illegal immigrants tend to be unusually dedicated and several employers note the productivity benefits that can derive from this. For E11, they are ‘always willing to put in extra time when an order needs urgent dispatch’, while E12 maintains that ‘illegal immigrants tend to keep themselves to themselves, thereby producing more output’, a bonus also noted by E14: ‘their output is better’. Allied to this, invisible workers confer an extraordinary degree of flexibility. In most cases they are employed on an entirely casual day-to-day basis, their employment entirely contingent on cyclical fluctuations in the firm’s order book, a vital buffer role described succinctly by E16: ‘If there are no orders, we know it’s easier to tell the illegals not to come in for a few weeks’. In a trade characterized at the best of times by sharp ups and downs, this system is of incalculable benefit to its users – and doubtless incalculable distress to the used. In our view, it is important to refrain from a judgemental stance on the issues raised here. While it is undoubtedly true that the practices described above are both illicit and exploitative, it is necessary to reiterate that they result from an intense, indeed desperate, struggle for survival on the part of small marginal ethnic minority entrepreneurs faced with a host of external threats. All this will be more fully addressed in the section on policy implications. Even at this stage, however, the need for some kind of governmental response on a great many levels is already becoming palpable. Experiences of illegal clothing workers: policy implications On immigration policy, the state in many European countries is currently caught in an acutely painful no-win situation, pressurized by public opinion to control the uncontrollable and, in doing so, exposing itself to charges of offences against fundamental democratic principles, since ‘spatial mobility is a key feature of open societies’ (Munz, 1996, 24), and of actually producing the conditions of existence for a new subterranean sub-class of ‘modern day slaves’ (CARF, 1997, 89), who are in effect non-persons. Given the present British government’s commitment to tackling problems of social exclusion, this encouragement of exclusion in its most extreme form is clearly a painfully unintended consequence of immigration control. As Salt and Clarke (2000) remind us, controls create all manner of unanticipated side-effects, sometimes contradictory to the general aims of immigration policy itself, such as undocumented migration itself and permanent instead of temporary settlement (Castles, 2000) or to aims in other areas of the policy remit, such as sectoral labour shortages, socially excluded groups, threats to the survival of certain sectors which may be making a valuable economic, social and cultural contribution to the life of the nation. In the case of Britain, these general tendencies may well be heightened by the complexity of an immigration regime constructed by a series of ad hoc negative reactions to events rather than a proactive approach to anticipating and controlling events (Coleman and Salt, 1992). Further to this point, Salt and Clarke (2000) point to a general dissatisfaction throughout Europe and North America with existing policy regimes and they urge a radical rethink of the overall approach: ‘Governments should seek to manage migration flows by swimming with the tide rather than against it’ (Salt and Clarke, 2000, 326). Essentially this would imply an acknowledgement of the unstoppability of the globalization tide and a positive search for means to harness its energies to the advantage of all stake-holding parties. As Castles (2000) observes, a cynical practice of turning a blind eye

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to illegal immigration creates advantages for the receiving society by oiling the wheels of the economy without incurring social welfare costs, but this is clearly politically and ethically unacceptable. Our aim must be to harmonize the interests of migrants and the receiving society by, if possible, eliminating the need for undocumented entry. As we have seen, the dilemma to be resolved is one between an economically irresistible force and a politically immovable object. On the economic side of this equation, a flexible labour supply is one of the conditions of the new post-industrial economy, but there are limits to the capacity of the existing labour force to furnish this. Much of the demand for flexible labour entails low-level ill-paid jobs and, in the case of Britain, the problem of filling these is exacerbated by their location for the most part in London and other major urban centres where housing and other living costs are high. It is this which helps to fuel the demand for unskilled immigrant workers and, simply from considerations of national economic self-interest, it is evident that the work permit scheme needs to be broadened to take account of this. Though as Castles (2000) observes, simply turning a blind eye to illegal immigration serves as a line-of-least-resistance means of ensuring labour supply, it also inevitably encourages an escalation of regulation flouting and presents itself as a surrender of the state’s territorial authority. Though mostly writing from a libertarian and humanitarian stance, the great majority of expert commentators in the field of international migration would reject the notion that Britain and similar economically advanced countries should simply cease immigration controls and open their borders indiscriminately to foreign workers. Probably representative here is Munz (1996, 22), who sees the laissez-faire approach as a certain recipe for an ‘ethnically divided two-tier society’. Instead he favours a pragmatic approach, with three main elements: quota-controlled entry, integration measures, and influencing the climate of opinion via positive signals (cf. Canada). The idea here is to construct immigration as of positive benefit, with the government proactively setting its own agenda rather than being passively dragged along by the tabloid agenda. Our own evidence helps to identify what are the key questions to be asked and what might be the likely repercussions of particular changes in immigration policy – and indeed other impinging and overlapping policy areas. In the case of the Asian-owned catering and clothing sectors, with their growing reliance on illicit labour, the starting point ought to be an evaluation of their contribution to national life. Put bluntly, their existence at their present magnitude is seriously threatened by problems of labour supply and/or costs and some kind of evaluation of the probable consequences of their decline or even demise needs to be undertaken. Even more bluntly, the question needs to be posed, is their preservation and encouragement worth it in the national interest? In economic terms, the main national economic contribution of clothing manufacture is one of import-substitution and job creation. In a global context of intense competition and a flood of cheap imports, it ensures that at least a proportion of the home market is supplied by home production. Alongside this, it offers considerable employment mainly (but not exclusively) to members of the various South Asian communities, among whom Bangladeshis and Pakistanis rate as two of Britain’s most disadvantaged ethnic groups, with unemployment rates persisting well above the national average. Considering the inner city location of most of these factories, there is also an inescapable area-regeneration dimension to this. Moreover, the industry represents a major entrepreneurial niche for individuals with ambitions for self-employment and here it must be said that South Asian

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entrepreneurs have, since the 1970s, helped to rescue what was a dying industry in Britain by dint of hard work and ingenuity. We would argue that this against-the-odds achievement alone merits serious consideration. As our employer respondents emphasize, however, their survival is threatened by a combination of heightening global competitition and rising wage costs via the NMW, which they clearly fear could prove lethal. In their view, there is no officially accepted means of salvation from this and they are compelled to resort to irregular means, notably the use of subterranean labour. While this is clearly unsatisfactory and cannot be condoned, outright condemnation needs to be avoided, since in some senses our employer respondents come across as more victim that villain. Moreover, there are precedents to suggest that any attempt to enforce a crack down on these illicit practices could be counterproductive in other ways. The example of the Turkish-dominated clothing industry in Amsterdam during the late 1990s is instructive. Between 1980 and 1987, the Dutch clothing industry emerged from a period of decline, largely due to the role of Turkish immigrants in Amsterdam. Government toleration of illegal practices in the sector, and a protectionist trade policy were important factors. However, between 1993 and 1997, the sector collapsed dramatically; only 50 contractors remained in 1997. Liberalization of trade and a sharp downturn in demand were contributing factors. But equally, stricter enforcement of rules and regulations regarding immigrant work made the main asset of immigrant entrepreneurs – the recruitment of cheap and flexible immigrant labour through their own social network – obsolete. As a consequence, immigrant contractors disappeared again from the streets of Amsterdam (Raes et al., 2002). A similar débâcle in Britain would presumably have a trade balance impact and would bring about significant disemployment in deprived urban areas, with all manner of knock-on effects. Assuming that the loss or further diminution of this industry is deemed to be in no one’s interest, constructive changes are called for. Though it is tempting to consider broadening the work permit allocation, it is by no means certain that, of itself, the undisguised entry of a rationed quota of immigrant clothing workers would ease the circumstances of these employers. This is because the main benefit currently derived from unofficial workers is the ease of paying them at unofficial rates. Instead, it would be more constructive to begin with a re-examination of the minimum wage legislation, perhaps the feasibility and desirability of subsidizing the NMW for certain categories of small employer (a suggestion prompted by one of our respondents). Simultaneously, or alternatively, support for investment in new technology, training and other productivity-enhancing measures might be considered. Perhaps it is not too far-fetched to suggest that effective measures to underwrite competitiveness might reduce the very need for immigrant workers in the industry. While total elimination of this need is highly unlikely, future entry of workers ought to be entirely above-board and organized through the auspices of the work permit system for employers who can demonstrate a genuine need. Turning to restaurants, we see that, as well as making an important job-creation contribution, they now have a vibrant role in national cultural life, one of its priceless assets. ‘Indian’ cuisine is now essentially part and parcel of the urban fabric, a spectacular element in urban leisure, night life and, in certain cities like London, Bradford and Birmingham, tourism. Nor should we forget that some people even go to them just to eat. Beneath the facade of slightly contrived exoticism, however, there are strong hints of economic crisis. Much like their counterparts in clothing, Asian restaurateurs are faced with

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hyper-competition (this time from within rather than without), with lean profit margins and consequent pressures to cut wage costs. In turn, low wages have led to an absolute dearth of labour, which has been met by the hiring of illegals. Acknowledgement This research was funded by the Department of Trade and Industry’s Central Unit. References CARF (Campaign Against Racism and Fascism) (1997), ‘Commentary’, Race and Class, 39, 85–95. Castells, M. (2000), End of Millennium: Vol III, The Information Age, Economy, Society and Culture, Oxford: Blackwell. Castles, S. (2000), ‘International migration at the beginning of the twenty-first century’, International Social Science Journal, 165, 269–82. Coleman, D. and J. Salt (1992), The British Population: Patterns, Trends and Processes, Oxford: Oxford Univesity Press. Favell, A. (1998), ‘Introduction to special issue, The European Union: Immigration, Asylum and Citizenship’, Journal of Ethnic and Migration Studies, 24, 605–12. Home Office (2000), Control of Immigration Statistics UK 1999, London: HMSO Cm 4876. Kundnani, A. (2002), ‘The death of multiculturalism’, Race and Class, http://www.irr.org.uk/2002/april/ ak000001.html. Leman, J. (1997), ‘Undocumented migrants in Brussels: diversity and the anthropology of illegality’, New Community, 23, 25–41. Martin, M. (1999), ‘Fortress Europe’ and third world immigration in the post-Cold War context, Third World Quarterly, 20, 821–37. Mitter, S. (1986), ‘Industrial restructuring and manufacturing homework’, Capital and Class, 27, 37–80. Munz, R. (1996), ‘A continent of migration: European mass migration in the twentieth century’, New Community, 22, 201–26. Raes, S., J. Rath, M. Dreef, A. Kumcu, F. Reil and Aslan Zorlu (2002), ‘Stitched up: the rise and fall of the Turkish garment industry in Amsterdam’, in J. Rath (ed.), Unravelling the Rag Trade: Immigrant Entrepreneurship in Seven World Cities, Oxford: Berg Publishers. Ram, M. and T. Jones (2002), ‘ “Making the connection”: ethnic minority business and the family enterprise’, in D. Fletcher (ed.), Understanding the Small Family Business, London: Routledge. Ram, M., P. Edwards and T. Jones (2002a), ‘The employment of illegal immigrants in SMEs’, DTI Central Unit Research Report. Ram, M., M. Gilman, J. Arrowsmith and P. Edwards (2003), ‘Once more into the sunset? Asian clothing firms after the National Minimum Wage’, Government and Policy (Environment and Planning ‘C’), 21, 71–88. Ram, M., T. Jones, T. Abbas and B. Sanghera (2002b), ‘Ethnic minority enterprise in its urban context: South Asian restaurants in Birmingham’, International Journal of Urban and Regional Research, 26, 24–40. Ram, M., T. Abbas, B. Sanghera, G. Barlow and T. Jones (2001), ‘ “Apprentice entrepreneurs”? Ethnic minority workers in the independent restaurant sector’, Work, Employment and Society, 15(2), 353–72. Salt, J. and J. Clarke (2000), ‘International migration in the UNECE region: patterns, trends, policies’, International Social Science Journal, 165, 313–26. Sassen, S. (1991), The Global City: New York, London, Tokyo, Princeton, New Jersey: Princeton University Press. Sassen, S. (1996), ‘New employment regimes in cities: the impact on immigrant workers’, New Community, 22, 579–94. Sivanandan, A. (2001), ‘Refugees from globalism’, Race and Class, 47, 87–91. Staring, R. (2000), ‘International migration, undocumented immigration and immigrant entrepreneurship’, in J. Rath (ed.), Immigrant Businesses: The Economic, Political and Social Environment, London: Macmillan. Timur, M. (2000), ‘Changing trends and major issues in international migration: an overview of UNESCO programmes’, International Social Science Journal, 165, 235–69. Vos, J. (1995), ‘Illegal migrants in the Netherlands’, New Community, 21, 103–13. Zlotnik, H. (1999), ‘Trends in international migration since 1965: what existing data reveal’, International Migration, 37, 21–61.

27 Immigrant entrepreneurs in Austria Filiz Kurtoglu

Introduction In Austria, migration is generally understood and equated with labour migration that began in the early 1960s, when additional labour force was needed. In the early years of immigration, migrant workers guaranteed economic growth. The so-called ‘guest worker’ scheme was introduced, bringing a considerable number of mostly young, male workers from former Yugoslavia and Turkey to Austria, who were supposed to leave the country after a few years on a basis of rotation. However, this concept did not work: the majority decided to stay longer and bring their families to Austria. During the 1980s and 1990s, the number of foreign residents rose considerably in the wake of the fall of the Iron Curtain and the war in ex-Yugoslavia, but also as a result of the economic upswing and the need for foreign manpower. This increase in immigration also had effects on the Austrian immigration law. In the early 1990s, the former ‘guest worker’ scheme was replaced by a yearly quota system for new residence permits, which reduced the net immigration into Austria. Moreover, the different legal status of foreign workers vis-à-vis nationals introduced a social and economic stratification new to Austria, leading to a deterioration of equity in many different aspects. From an economic point of view, not only the large numbers but above all the composition of the inflows became a matter of concern. Immigration to Austria has changed its character from a guest worker programme to one of immigration proper. Today, the majority of foreign workers have become permanent residents; many have become naturalized and are an integral part of the Austrian population. Along with this history of immigration, research bears out the impression that Austria’s population has become even more diverse in recent years. According to the 2001 census, of Austria’s roughly eight million inhabitants, more than 730 000 (or 9.1 per cent) were foreign residents, with 62.8 per cent of them coming from the successor states of the former Yugoslavia and from Turkey. Between 1985 and 2001, over 254 000 foreigners were naturalized. Austria’s proportion of foreign-born residents in 2001 was even higher than that of the United States, reaching a level of 12.5 per cent. However, the official line remains that Austria is not a traditional country of immigration, and recent immigration policies reflect that ambivalence. Traditional labor migration and family reunification programs have been severely curtailed in the wake of widespread public discontent over levels of immigration in the early 1990s. Since then, new integration measures have been introduced, the country’s accession to the European Union (EU) has brought more open borders, and thousands of temporary seasonal workers have been admitted. How these conflicting policies are to be reconciled remains an unanswered question. Historical patterns of labor migration Austria’s post-World War II economic boom led to a growing demand for labor and an important shift in immigration policy. As Germany and Switzerland had already done in the 1950s, Austria began to forge bilateral agreements with southern and southeastern 425

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European states in the 1960s. These pacts were designed to recruit temporary workers. Agreements with Turkey (1964) and Yugoslavia (1966) were quickly followed by the establishment of recruitment offices in these countries, and over time led to the settlement of significant numbers of these workers and their families in Austria. In 1969, the number of foreign workers from Turkey and Yugoslavia stood at 76 500. By 1973, numbers had almost tripled, to 227 000, 178 000 of whom came from Yugoslavia and 27 000 from Turkey. The oil crisis and ensuing recession in 1973 radically reduced the demand for guest workers, a phenomenon repeated after the second oil shock in 1981. As a response to the recession in the early 1970s, recruitment was ended, the access of foreigners to employment restricted, and a new law – the Aliens Employment Act – passed in 1975. This law remains one of the primary control mechanisms of foreign employment. As a consequence, the numbers of foreign employees (and residents) dropped to a point where, by 1985, the employment of Yugoslav and Turkish citizens in Austria was half the level of 1973. When the economy recovered, many former migrants from Yugoslavia returned. While active labor recruitment was stopped, other forms of migration (family reunification, spontaneous labor migration and, by the late 1980s, clandestine migration and asylum) became more important. However, labor migration initiated in the 1960s clearly had lasting effects on both the current composition of the foreign resident population in Austria and subsequent migration inflows. In 2001, 62.8 per cent of the total foreign resident population came from the two recruitment regions, the former Yugoslavia and Turkey. Challenges and changes in the 1990s As Austria entered the 1990s, profound political and economic changes were transforming Europe. The fall of the Iron Curtain triggered widespread fears of massive migration flows from Eastern Europe, and the violent disintegration of Yugoslavia sparked huge inflows of refugees from areas to Austria’s southeast. These flows came in addition to a rapidly rising number of asylum seekers. An economic boom in the late 1980s had created renewed labor shortages in the construction and export-oriented industries. Employers had filled these slots from their traditional sources of labor from southeastern Europe. They relied on informal channels of recruitment and, more importantly, the large supply of labor from Yugoslavia, which was in turn due to the profound economic crisis affecting that country in the late 1980s. The political crisis in the disintegrating Yugoslavia after 1990 and the beginning of the war in 1992, again increased the number of Yugoslavs residing in Austria. Also there are strong indications that immigrants and their family members already present in Austria and formerly excluded from employment managed to gain access to jobs as a result of the boom. For some, this access also stemmed from a regularization of the employment status (so far, a unique step by Austria’s policy makers) of hitherto illegally employed foreigners in 1990. The employment status of 29 100 persons was regularized in that process. As a result of the rising numbers of Yugoslavs and a fair number of Eastern Europeans that entered the country in this period, the number of non-nationals in Austria doubled, from 344 000 in 1988 to 690 000 in 1993, while the share of foreign workers of all employed people rose from 5.4 per cent to 9.1 per cent. In response to these developments and, not least, to the growth of the Freedom Party (FPÖ), which called for ‘zero immigration’, the government initiated a series of legislative

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reforms. These covered all areas related to immigration, including entry, residence, employment and asylum. In 1990, a quota for the employment of foreigners was introduced, defined as a maximum share of foreign workers in the total workforce. The quota was initially set at 10 per cent and was lowered to 9 per cent after Austria’s accession to the European Economic Area (EEA) in 1994, which in turn led to the exemption of immigrants from the EU/EEA from most immigration controls. In 1992, a new Aliens Act tightened up regulations on the entry and residence of foreigners. A second law introduced in 1993, the Residence Act, established contingents for different categories of migrants. In contrast to the quota used for the issuing of work permits, the contingents for residence permits defined the absolute number of permits that would be issued in any single year. By the mid-1990s, still another round of immigration legislation reforms was under way, resulting in the passage of the 1997 Aliens Act. The act merged the 1992 Aliens Act and the 1993 Residence Act into a single law. The stated aim of the reform was to promote the integration of aliens already present in Austria, in the place of new immigration. This concept was called ‘integration before immigration’, and the law became known as the ‘integration package’. The most important factor introduced by the law was the principle of ‘successive’ consolidation of residence in increments of five, eight and ten years. An immigrant with fully ‘consolidated residence’; that is, an immigrant continuously residing in Austria for ten years, would have a legal status (except in terms of political rights) very similar to that of an Austrian citizen. Only convictions for major criminal offences would allow the state to take away the residence right of such a migrant. At the same time, new restrictions were imposed. This was particularly true regarding the employment rights of migrants who had arrived as family members, making them subject to a waiting period of eight years of continuous residence, later lowered to four years, at which point access to employment would be granted. Finally, a new Naturalization Act was passed in 1998 that retained the core elements of the previous regulations. These include the principle of jus sanguinis and a regular waiting period of ten years for naturalization. The new law shifted the burden of proof to the individual immigrant, who now has to show that he or she is sufficiently integrated into Austrian society. Most importantly, the migrant has to prove that she or he is economically self-sufficient, that is, not in need of social assistance, and sufficiently proficient in German. Also, even minor criminal offenses now constitute reasons for denial of citizenship. A migrant may now acquire citizenship after a period of 15 years on grounds of good integration. Still, in the majority of cases, Austrian citizenship is awarded on a discretionary basis, possible after ten years of continuous residence. Since 1998, largely for demographic reasons (most migrants who entered Austria in the period of high immigration between 1988 and 1993 are now eligible for citizenship on a discretionary basis), the number of naturalizations has continued to increase, from 17 786 in 1998 to 31 731 in 2001. Immigrant entrepreneurs Immigrants from less-developed countries moved to advanced economies, embodying the complex process of globalization in a very palpable sense. They start businesses in their countries of settlement and become ‘self-employed’ or ‘immigrant entrepreneurs’.

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In socio-economic terms, for a long time these immigrants were largely viewed as workers. Immigrants were predominantly depicted as suppliers of cheap low-skilled labour in advanced economies. More recently, attention has shifted towards immigrants from lessdeveloped countries who start their own businesses. By becoming self-employed, immigrants acquire roles quite different from immigrants who become workers and also different from mainstream entrepreneurs. By starting their own business, immigrant entrepreneurs create their own jobs. This enables them to circumvent some of the barriers they may encounter in looking for a job. Immigrants from less-developed countries are especially likely to come up against these barriers. They may lack or be felt to lack educational qualifications, they may not have sufficient access to relevant social networks for transmitting information on vacancies, or local employers may simply discriminate against them. Becoming self-employed does not mean all these barriers have become irrelevant – banks may still discriminate against immigrants when they ask for business loans – but entrepreneurs are less vulnerable. If they are successful, immigrant businesses can create jobs for others as well. This can benefit relatives, friends and acquaintances and, more generally, co-ethnics, as social networks are often interfaces for information on the recruitment of new workers by small firms. Creating jobs then helps alleviate unemployment among immigrants. Immigrant entrepreneurs can also contribute different forms of social capital than immigrant workers to the immigrant communities. Because of their links to suppliers and customers, immigrant entrepreneurs can be useful in constructing bridges to other networks outside the inner circle, thus improving chances of upward mobility. Moreover, immigrant entrepreneurs often act as self-appointed leaders for their communities. Most importantly, they show that immigrants from less-developed countries are not necessarily restricted to filling vacancies on the job market; they can be active agents and shape their own destinies by setting up their own businesses. Even if they are confined to lines of businesses with little promise, they are still actors in a very literal sense. From a geographical perspective, migrant entrepreneurs can add vitality to particular streets or even neighbourhoods in cities. If streets are deserted by indigenous businesses and replaced by foreign entrepreneurs, deterioration can be reversed. As owners of local businesses, they have a clear stake in the prosperity, accessibility and safety of the street or neighbourhood. In many cases, these businesses are also where members of local social networks gather. They are thus an important component of the social fabric sustaining civic society at the grassroots level. Analogous to the last point, immigrant entrepreneurs can be instrumental in giving certain sectors a new lease on life. In some industries, because of their specific skills, knowledge or social capital, immigrant businesses can be at a comparative advantage. The garment industry is a case in point. In this sector, immigrants bring skills no longer reproduced on a sufficient scale in most advanced economies. In addition, they are willing to work long hours and use their social capital and networks to reduce production and transaction costs. Immigrant entrepreneurs are concentrated in the small retail, especially food retail, and the catering sector. Thus 56 per cent of all Turkish and 45 per cent of all entrepreneurs from former Yugoslavia have set up their businesses in one of these two sectors. Both sectors can be characterized, however, by disadvantageous working conditions and low barriers to entrance such as initial investment requirements and the ability to transfer knowledge by learning on the job.

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Among the total of foreign entrepreneurs, former Yugoslavs have also a high share of the construction business. They represent 40 per cent of all foreign entrepreneurs engaged in this sector, whereas Turks have a share of more than 50 per cent of all ethnic entrepreneurs in the garment industries. Overall, about 20 per cent of all Turkish self-employed are in the production sector, in contrast to only 9 per cent of former Yugoslavian entrepreneurs. For decades the declared aim of the government was to increase the number of employees, while supporting employers had no priority. At the beginning of the 1990s, when the problems of Austria’s labour market were already obvious, the urgency of stimulating entrepreneurship was seen. What has been criticized most of all is the high degree of personal effort and time that are needed to overcome bureaucratic barriers. Although several ideas for supporting entrepreneurship have been discussed, the situation has only been improving slowly. The Austrian system of self-employment is generally characterized by very restricted access. Specific licences are required for the different kinds of enterprises. A very complex legal framework regulates the conditions that have to be fulfilled before a business can be started. Holders of foreign citizenships have to obtain a so-called Gleichstellung which puts them in a position equal to Austrians who want to set up their own business. According to the law, the Gleichstellung is given by the local authority only when the applicant shows that the proposed business will support the Austrian national economy and does not interfere with Austria’s public interests. In practice this means that, firstly, the business must not be in a sector that is over-represented in the local economy, and secondly, that the applicant must not have a criminal record. The Gleichstellung, which stands in the way of the immigrant entrepreneur, is often avoided through the establishment of some form of corporation. Because of the fact that so few immigrants possess a higher education, and the fact that so few have experience as top management employees, they often cannot fulfil the application requirements for a business license. Forming a corporation is often chosen as the only alternative. While most Austrians establish businesses as sole-proprietors, the forming of a corporation is the most common type of business among immigrants. Guidance and counselling for starting up a business is offered by the Chamber of Commerce and by several organizations associated with it. As a matter of fact, no information about setting up or running a business is available in Austria in any other language than German. All the business centres offer guidance and advice in German and sometimes in English, but not in another foreign language. This situation leads to a strategy in which immigrant entrepreneurs seek help and advice from other immigrants. Immigrant entrepreneurs are therefore very often misinformed and make decisions which reduce their chances of success, very often as early as the start-up phase. Opportunities for financial support for business start-up do exist, but they are found in many scattered places, which are difficult to sort out. Explanatory variables 1 Demand for ethnic products and services For any business to emerge, there must be a demand for the products and services that it supplies. Thus the initial market for immigrant entrepreneurs arises within the ethnic community itself, since immigrant populations have specific needs and preferences that can be

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satisfied more easily by those who know them intimately, that is, the members of the same ethnic community. This explains why ethnic businesses develop first in areas such as groceries, butcher shops, pubs, restaurants, book stores and video stores, among others. Survey results show that immigrant firms were set up to satisfy specific demands from the immigrant community. About 76 per cent of the enterprises set up by immigrants in Austria are in retail trade and catering, while 45 per cent of these firms have mainly immigrant customers. Immigrants also have specific problems due to the burden of settlement in a foreign country. Consequently, those businesses that specialize in the problems of adjustment (travel agencies, translation services, and the like) are yet another avenue for independent activity. All of these businesses require direct ties with immigrants as well as knowledge of the preferences and problems of immigrants. Additionally, as these markets are composed predominantly of small enterprises, they pose low entry barriers to immigrants with poor skills and limited financial resources. These factors explain why small firms easily find a niche in the immigrant population. 2 Market structure The structure of markets in the host country is an important element for new businesses to arise. New firms are unlikely to emerge in industries characterized by extensive scale economies and high entry barriers. By the same token, even in highly developed economies there are niches for small enterprises, even outside ethnic communities. The core of urban centers, for example, is usually undersupplied or abandoned by the natives, yet these urban centers are the places where large ethnic communities and poorer natives are concentrated. This is why urban centers provide favorable conditions for small retail shops to arise and develop easily. As a consequence, ethnic businesses tend to arise first in open markets with low economies of scale. 3 Group characteristics Some predisposing social and cultural characteristics of the ethnic communities established in Europe are also worth mentioning. Because of a preference for familiarity and security as well as the distance from the host society’ structures, immigrants rely heavily on co-ethnic connections and find themselves in residential and occupational ethnic ghettos. In many urban areas, large ethnic communities originate from the same country and even town. Hence, they have large and well-established family connections and can rely on mutual support. These strong social ties are particularly important for immigrant entrepreneurs to mobilize financial and human capital. Surveys conducted in Germany and Belgium show that most ethnic businesses have been established thanks to the financial and human support of the family. For instance, almost all ethnic firms are small-scale family enterprises. Another important finding is that workers who migrate seem to be more inclined towards risk than those who stay at home. They usually migrate with a strong desire for social advancement and are thus more likely to take risks and accept long working hours in their own business. 4 Reaction to labor market conditions As noted before, industrial restructuring in Europe has profoundly affected immigrant workers, as they were concentrated mainly in traditional labor-intensive sectors. At

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present, immigrant workers are facing many obstacles in the labor markets of EU countries which make it difficult for them to have stable career opportunities. Chief among these obstacles are poor or inadequate skills, insufficient language abilities, discrimination, and the decline of traditional industries in Europe. Unemployment is now substantial among immigrant workers, and the high level of long-term unemployment leaves little hope of finding a job in traditional industries or services. It is therefore no surprise that an increasing number of immigrants have tried to create income opportunities for themselves by branching out into businesses of their own. Also, given their initial low income in their home country, ethnic entrepreneurs tend to be less reluctant to go into businesses with a low rate of return. Problems of immigrant entrepreneurs However, ethnic minority entrepreneurs are also faced with a number of problems when starting and trying to expand their businesses. Many of these problems are, of course, the same as for any entrepreneur. But some problems are specific to ethnic minority entrepreneurs or affect ethnic minority entrepreneurs more. Ethnic minority businesses, in general, are very small and only seldom grow into larger firms. They are also often concentrated in low-entry threshold activities and face difficulties in shifting to more advanced and profitable business fields. The mortality rate of these businesses also tends to be above average. As a result of this situation the full economic potential of ethnic minority businesses has so far gone largely untapped. The problems can be divided into four areas that have been identified either as specifically related to, or having a deeper impact on, ethnic minority entrepreneurs. The first of the four areas to be treated is the rather interesting phenomenon that many ethnic minority entrepreneurs tend to rely almost exclusively on co-ethnic social networks when starting their businesses. These networks provide access to markets, customers, finance, advice and labour, and thereby facilitate the start-up process for many ethnic minority entrepreneurs. Their great value in this respect should definitely not be underestimated. However, these networks also tend to become very socially closed, with little circulation of new information from the business community outside. Exclusive reliance on such networks can therefore constitute a limitation for the development of businesses, especially when these businesses try to extend their activities into mainstream markets. A second problem is that of involvement of ethnic minority entrepreneurs in political dialogue. So far, there seems to be an absence of ethnic minority entrepreneurs in the political dialogue in Austria, and most certainly at European level. The next problem is the tricky issue of access to finance. This is a challenge for all entrepreneurs; however, ethnic minority businesses face additional constraints. Their business initiatives tend to be small, which makes them less attractive to mainstream banks. This can be further complicated by cultural inhibitions. Many ethnic minority businesses therefore rely on co-ethnic networks for initial financing. Micro credit schemes might provide an alternative solution, but are not sufficiently developed. Access to mainstream banking services is particularly important when ethnic minority entrepreneurs wish to break out of their co-ethnic groups and expand their businesses. The last area deals with access to support services. As was said earlier, ethnic minority entrepreneurs tend to rely very much on co-ethnic social networks. As a result of this, they are often not aware of the publicly available support services. And, even if they are aware

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of these, there seems to be a lack of understanding of the types of services offered and the relevance of these services. Perceived discrimination when addressing support service providers is unfortunately also part of the problem. At the same time, many of these public support services are not fully equipped to deal with ethnic minority entrepreneurs, either through their mindset or from their specialized knowledge. Conclusion The immigrant firms set up in EU countries in the late 1970s and 1980s were all limited to the ethnic sphere. Although they responded to the specific demands of the immigrant population, this niche was too small and had limited potential for growth. Furthermore, immigrant entrepreneurs have had serious problems in launching and managing their businesses. They seldom have the training specific to their market and they lack entrepreneurial experience. Moreover, they are generally not aware of and do not use the facilities offered by the host governments. Another major problem facing ethnic entrepreneurs in Europe is their insufficient knowledge of foreign languages. These constraints explain why so many immigrant companies are driven out of business and why their owners change so frequently. Indeed, competition has increased sharply with the proliferation of firms in the EU market, and a great number of these firms have run into bankruptcy as a result. In the future, the only development possibility for immigrant entrepreneurs in Austria is to go beyond ethnic frontiers and expand their activities into other lines of business, competing or associating with native businessmen in their own markets. But this new challenge will call for new skills and new resources. Recent developments point in this direction. For example, immigrant entrepreneurs now seem to attach less importance to ethnic ties in business, and many of those who reside in Austria have begun to establish associations in order to build improved contacts with other immigrants and European private and public institutions. Bibliography Austrian Forum for Migration Studies (OeFM), ‘Statistics on Austria’s foreign population as well as links to other migration-related institutions’, http://www.oefm.org/findit.html. Bauboeck, Rainer (1999), ‘Immigration control without integration policy: an Austrian dilemma’, in Grete Brochmann and Tomas Hammar (eds), Mechanisms of Immigration Control. A Comparative Analysis of European Regulation Policies, Oxford, New York: Berg. Bayar, A.H. and Z.N. Koçak (1995), ‘Turkish ethnic business in Brussels’, paper presented at the ‘Seventh International Conference on Socio-Economics’, SASE, Washington, D.C., 7–9 April. Fassmann, Heinz and Rainer Muenz (1995), ‘Einwanderungsland Oesterreich-Historische Migrationsmuster, aktuelle Trends und politische Massnahmen’ (Immigration Country Austria-Historical migration patterns, current trends and political measures), Vienna: Jugend & Volk. Haller, William J. (2004), ‘Immigrant entrepreneurship in comparative perspective: rates, human capital profiles, and implications of immigrant self-employment in advanced industrialized societies’, Center for Migration and Development, Princeton University. Homepage of Wirtschaftsforschungsinstitut Austria, http://www.wifo.at. Homepage of European Migration Network, http://www.emn.at. Organisation for Economic Cooperation and Development Continuous Reporting System on Migration (SOPEMI), Trends in International Migration (various editions), Paris: OECD Publications.

28 Turkish immigrant entrepreneurs in Finland Östen Wahlbeck

Introduction This chapter discusses the experiences of self-employed immigrants from Turkey in relation to their economic and social integration into Finnish society. The aim is to discuss the experience of self-employment from the point of view of the entrepreneurs themselves. The results are based on in-depth interviews with Turkish entrepreneurs and their Turkish employees in Finland. Immigrants from Turkey were chosen for this case study because this group displays a high rate of self-employed entrepreneurs. These entrepreneurs are mainly active in the restaurant and fast food sector. Finland is a highly developed welfare state with a relatively short history of immigration. Immigration has mainly occurred since the late 1980s. In Finland, immigrants often experience marginalization and exclusion in the labour market, which is reflected in a high rate of unemployment (cf. Forsander, 2002a, 2002b; Valtonen, 2001). The unemployment rate among foreign citizens was 31 per cent by the end of the year 2001, while the rate was 12 per cent in the total population. Among Turkish citizens the unemployment rate was 32 per cent (Statistics Finland, 2003, 25). Self-employment can therefore be regarded as a positive alternative to unemployment. Previous studies of immigrant and ethnic businesses in other countries indicate that a lack of employment alternatives often is a major motivation for the establishment of independent businesses (for example, Light, 1972, 1984; Light and Bonacich, 1988; Phizacklea, 1990; Najib, 1994; Khosravi, 1999). However, if immigrants are forced into self-employment because of their disadvantaged position in the labour market, then the question is whether self-employment really indicates a positive integration into society at large, or whether it only constitutes another form of marginalization of immigrants. This chapter strives to discuss to what extent, and in what ways, self-employment can be regarded as a way to a positive integration into the receiving society. However, the aim of this chapter is not to provide an exact measurement of the degree of integration of the Turkish entrepreneurs in Finland; instead the key aim is to give a picture of their own understanding of their situation. This study largely builds upon research and discussion about immigrant entrepreneurs in the neighbouring Scandinavian countries, especially in Sweden. Although Sweden displays a different history of immigration, the Swedish case provides similarities to the Finnish case concerning the structure of the welfare state and the highly regulated labour market. Interestingly, there has been a discussion in Sweden about whether immigrant businesses should be regarded as a road to positive integration or be seen as just another type of exploitation and marginalization (for example, Khosravi, 1999; Najib, 2000; NUTEK, 2001; Pripp, 2001; Ljungar, 2002). Similar discussions of ethnic businesses have also occurred in Germany (for example, Özcan and Seifert, 2000) and Denmark (for example, Rezaei and Bager, 2003). Previous research has used a wide variety of quantitative and qualitative methods to study and measure integration, and the conclusion about the extent of integration usually 433

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depends on how ‘integration’ is defined. This chapter seeks to depict the Turkish immigrants’ own understanding of their situation, rather than to provide an exact measurement of the degree of integration or marginalization. Thus a more inductive methodology and qualitative interview methods have been employed. There is a long-standing and vast discussion about ‘integration’ and related concepts within migration research. The concept of integration has referred to a structural process whereby immigrants become part of the receiving society (cf. Wahlbeck, 1999, 11–15). In this sense, integration is largely related to work; how you make a living does not only influence your integration into the economy of society, it also provides an identity and social position in the country of settlement. Self-employment is, here, a specific case, which might provide immigrants with a specific social status as entrepreneurs. For example, the classical literature of middleman minorities (Bonacich, 1973), as well as the concept of ethnic economy that derives from it, indicate that ethnic entrepreneurship has both specific economic and social characteristics at the same time, as it is connected to a specific reaction of the surrounding society (Bonacich and Modell, 1980; Light and Gold, 2000). Within this framework, our aim is to study the experiences of entrepreneurship among Turkish immigrants in Finland and discuss integration and marginalization from the point of view of the entrepreneurs themselves. Turkish immigrants and entrepreneurs in Finland Self-employment is not very common in Finland. In 2001, 12 per cent of the employed in Finland were self-employed and, excluding those working in agriculture, the selfemployed only constitute 9 per cent (Statistics Finland, 2004).1 Information about the number of self-employed in different immigrant groups is not readily available, but previous research has clearly indicated that a remarkably large number of the Turkish immigrants in Finland are self-employed. In Annika Forsander’s study of immigrants of working age who arrived in Finland in the years 1989–1993, in total, only 4 per cent were self-employed by the end of 1997. However, among the Turkish citizens in the study, 22 per cent were entrepreneurs, which constituted the highest proportion of entrepreneurs in all nationality groups (Forsander, 2001, 257–8). The percentage of entrepreneurs among all Finns, of the same age distribution as the immigrants in the study, was only 8 per cent. Furthermore, 92 per cent of the Turkish entrepreneurs in the study worked in the restaurant business (Forsander, 2002b, 169–70). Likewise, in Tuula Joronen’s study of immigrant entrepreneurs in the Helsinki area, Turkish entrepreneurs constituted the most prominent group (Joronen et al., 2000, 47; Joronen, 2002, 141). My study of Turkish immigrant entrepreneurs is based on semi-structured interviews,2 conducted in 2001–2002, with 27 Turkish entrepreneurs and 11 Turkish employees in firms run by Turkish entrepreneurs. Qualitative interview methods were employed in order to get a broad picture of the entrepreneurs’ own understanding of their situation. All the interviewees were either Turkish citizens or born in Turkey. None of the interviewees were born in Finland and they can therefore be accurately regarded as immigrants. In the context of this study, for purely practical reasons, the interviewees and their businesses are described as ‘Turkish’, although the interviewees also included Kurds and other Turkish minorities.3 The focus of the study was in Southwest Finland (Varsinais-Suomi), where, in total, 31 interviews were conducted, which included almost 90 per cent of the Turkish entrepreneurs in the region. In addition, seven interviews were conducted in

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Helsinki. Thus, both the capital region, with a large concentration of Turkish immigrants, and the (surprisingly widespread) regional dispersal of Turkish businesses were under study. The interviews were complemented by a complete study of the information available in the Finnish Trade Register concerning all businesses run by Turkish entrepreneurs in Finland. Any discussion of Turkish businesses in Finland must take into consideration the fact that the Turkish history of migration is different in Finland, compared to most other countries in Europe. Finland has never experienced a labour migration from Turkey of the same scale and magnitude as has been experienced in other Western European countries. The size of the Turkish community in Finland is therefore small compared to most other European countries. Because of Finnish immigration rules and practices, chain migration has been difficult. In addition, not many asylum seekers from Turkey have arrived in Finland, and those who have arrived have found it difficult to find political asylum there (cf. Wahlbeck, 1999). Immigration has instead largely occurred in conjunction with marriages between Turkish men and Finnish women. Most of the Turkish immigrants in Finland have arrived in the country relatively recently, predominantly since the late 1980s. According to Statistics Finland (2004), there were in total 2146 Turkish citizens living permanently in Finland on 31 December 2002. A striking feature of the group is that there are far more men and than women (1565 men and 581 women). The official statistics also show that the number of people born in Turkey living permanently in Finland was 2614, of which 1994 were men and 620 women. These figures reflect the fact that there are Turkish-born people who have acquired Finnish citizenship.4 The integration of Turkish entrepreneurs in Finland The Finnish Trade Register provides detailed information about the Turkish businesses in Finland. For the purpose of this study, I examined the information available in the autumn of 2001. The register revealed that there were between 250 and 300 firms established by entrepreneurs with Turkish names. This is a high proportion considering the small number of immigrants from Turkey. The information in the Trade Register indicates that a clear majority of the Turkish businesses are active in the service sector, mainly in restaurants and fast food outlets. Both my fieldwork and my survey of the trade register indicate that selling kebabs and pizza is the major business activity. Most of the Turkish business owners and entrepreneurs are men, but there are also female Turkish entrepreneurs in the Register. Although most of the Turkish businesses are small businesses in the service sector, there are also a few companies active in trade with import and export. However, regardless of business sector, the Turkish firms are usually small-scale enterprises without regular employees. In Sweden and Germany during the 1960s and 1970s, the Turkish migrants were employed in factories and by the public sector. It was only after the increase in the unemployment rate in these sectors that Turkish immigrants moved into self-employment. An enabling factor for Turkish businesses in Sweden and Germany was the existence of a large Turkish enclave economy, and many businesses were originally established mainly in order to serve the Turkish community (Hjarnø, 1988; Morokvasic, 1993; Abadan-Unat, 1997; Pripp, 2001). This type of enclave economy does not exist in Finland and immigrant entrepreneurs immediately have to compete with Finnish businesses.

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My interviews with Turkish entrepreneurs indicate that the first kebab businesses in Finland were established in the mid-1980s. The first business pioneers were Turkish men who had lived in Finland for some time, usually married to a Finn and fluent in Finnish. The idea of starting businesses came from Germany and Sweden, where numerous kebab shops were established in the early 1980s. In more recent years, the example set by immigrants who had arrived in Finland earlier has been crucial for those arriving later on. Usually, a Turkish kebab owner has previously worked as an employee in a kebab shop owned by another immigrant (usually Turkish). After some time, the employee establishes his own shop, or, in some cases, he buys the shop where he has been employed. This pattern, where co-ethnic employees become self-employed later, suggests that there is reason to speak of an ‘ethnic economy’ (cf. Bonacich and Modell, 1980; Light and Bonacich, 1988). Employees often agree to work for a small salary, since they are able to learn the trade and establish useful connections which can be used in future business. A surprising result of my study was that none of the interviewees had worked in a kebab shop in Turkey before arriving in Finland. A Turkish man explained how he ended up as an entrepreneur in the early 1990s: Starting a business was not at all my intention when I came to Finland. My original intention was to study. My brother lived here and suggested a school for me, but it did not turn out very good and I left the school. But when I came to Finland, the restaurant sector, the whole kebab business, was going very well. That is where I got the idea. But, actually, I did not have any alternative; I became unemployed and there were no other jobs available [. . .] I became somewhat familiar with kebab restaurants in Finland after I moved here. I was helping a few times in kebab shops, and that is where I got the idea. In the beginning, this was a new and interesting product and there were not many kebab places around, and business was going relatively well in Finland, or, in other words, it was better than unemployment. I had been working in other Turkish places, helping out before I opened my own place. Hence, I became familiar with the business sector before I decided to try it myself. (Interview no. 32)

To establish fast food outlets quickly became popular among Turkish immigrants. The work was easy to learn and a kebab shop required minimal capital investment. The investment needed was time, a commodity which immigrants in Finland had an abundance of in the 1990s, owing to the unemployment situation. This was also one of the few business sectors where it was possible to compete with Finnish entrepreneurs by working longer hours than the Finns. In the late 1980s and 1990s, the earnings might have been greater than today, the competition was not as fierce as it became later in the 1990s, when the number of immigrants increased and many of them started their own kebab and pizza businesses. A kebab shop owner explained the development: Foreigners do not have any other option than to start a business in this sector. There are no alternatives. The number of foreigners grows year by year and the more foreigners there are, the more places like this are born. Naturally, the share of the cake that you pick up gets smaller and there is not enough for all of us. (Interview no. 18)

Fast food kebab and pizza restaurants form a suitable economic niche for immigrants, since the initial economic capital needed is not substantial. The equipment is not expensive and the restaurant is often situated in places where the rent is affordable. Nevertheless, there is usually a need to borrow some money when a business is established. A common problem for many Turkish immigrants has been the difficulties of getting a bank loan. A

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number of Swedish studies have emphasized that Turks often have a good opportunity to borrow money from one another, thanks to their extensive ethnic and social networks (Berg, 1994; Pripp, 2001). This happens in Finland as well. However, in Finland’s case, there is reason to emphasize the importance of the role played by the Finnish spouses in the establishment of businesses. A large part of the male Turkish entrepreneurs have Finnish wives who have helped their husbands financially, or who have been able to act as guarantor for bank loans.5 In addition, the bookkeeping of the Turkish businesses is, almost without exception, organized with the help of professional Finnish bookkeepers who provide the advice and expertise needed (Wahlbeck, 2004b). Furthermore, the customers and the whole business environment can be regarded as Finnish. The Turkish fast food outlets have clearly adapted their products and premises to the Finnish market and Finnish customers. Antoine Pécoud (2004) describes similar processes among Turkish businesses in Berlin, where Turkish entrepreneurs consciously shape the cultural dimension of their business and target a non-Turkish clientèle. The kebab is originally a Turkish dish, but the kebabs you buy in Finland only remotely resemble the kebap you find in Turkey (a case in point is the spelling of the term).6 It is highly doubtful that kebab shops in general can rightly be called ‘ethnic’ or ‘Turkish’ in any sense of the terms. The ‘culture’ of these Turkish businesses cannot be regarded as something that is ‘imported’ from Turkey. On the contrary, this particular business niche and its commercial products largely seem to be the outcome of a Finnish context. Consequently, the Turkish businesses in Finland can be seen as integrated into Finnish society. Self-employment can be regarded as an alternative avenue for immigrants to achieve economic advancement in Finland. From the point of view of the Turkish entrepreneurs, some form of integration is obviously the case, but is it possible to regard selfemployment as an example of positive integration into Finnish society? As described below, there is much that suggests that it is more appropriate to talk about marginalization than about integration when we describe the economic and social situation of many Turkish entrepreneurs. The marginalization of Turkish entrepreneurs in Finland My interviews clearly indicate that the major reason why the interviewees started their own business was unemployment. None of the interviewees had arrived in Finland because of an intention to start a business. The reason for moving to Finland was always connected to personal reasons, or attributed to complete coincidences. The idea of establishing a business usually came after some time spent in Finland, often associated with a period of unemployment. You cannot stay idle forever. You have to do something. In addition, you want to try your own luck, because there is a hope deep inside you. But after you have started this job, only a few – a very minor share – get what they want. The rest barely make a living. (Interview no. 18) It is so and so. There is certainly a lot of work and the competition is intense. The prices are really not what they should be, they are too low. You just about get paid for your work, nothing more. But there are not many alternatives, so you have to endure. To be unemployed is shit, really, when you are used to working you cannot stand it for more than two weeks. Even if I would sell this firm . . . Actually, I have on-going plans for a new firm, bigger than this, again together with a couple of friends, a big restaurant and bar and everything . . . Even if I would sell this firm, I would soon be back doing this job. (Interview no. 35)

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Clearly, there is usually an expectation that, by becoming an entrepreneur, you will improve your income. However, my findings suggest that the kebab and pizza business of today is not a very profitable business. There is often a fierce local competition that keeps the prices low. Non-Turkish immigrant groups have also increasingly started to establish pizza and kebab shops. Today, immigrants from Turkey only run a small minority of the kebab shops in Finland. This development has further increased competition and made it difficult for the businesses to succeed. The actual earnings and turnover of the companies have not been the object of this study, but the interviewees often described the expectations they had about the future successes of their companies. The Turkish entrepreneurs have seldom been able to expand their businesses into the mainstream economy.7 However, some businesses have been successful; there are even a few very successful businessmen. These cases obviously constitute role models for other immigrants, but are clearly exceptional cases. Most pizza and kebab businesses find it difficult to expand since the entrepreneurs cannot afford to pay the salary of an employee. Even in those cases where the business is so successful that it is able to employ more people, the entrepreneurs have found in difficult to find suitable employees. The entrepreneurs would prefer to import labour from Turkey, but have not obtained the right to do so. A successful businessman told me: A lack of suitable employees is the problem. You cannot recruit a Finnish worker, in order to employ them . . . Well, it does not work. We used to employ foreigners, but those who find a suitable place for business will go and establish their own shop, and you will be left without employees. You cannot leave your shop to an unknown employee, because they might not give good service, they do not serve customers well. This will lead to losses. The employment office gave us the right to recruit an employee from Turkey or from abroad, but the Directorate of Immigration did not give us the permission. They have given permission to everybody else, but not to us. Our matters are not always working the way they should do. We have a huge lack of employees. We do not have a social life. These are problems facing us foreigners. (Interview no. 6)

Despite the quotation above, it is not very common to find success in business. The low income, debts and economic uncertainty that most Turkish entrepreneurs experience cannot really be regarded as positive integration. Nevertheless, many entrepreneurs prefer to work very long hours for minimal pay instead of being unemployed. As the quotations below indicate, most kebab entrepreneurs stated that they worked exceptionally long hours: I work six and half days a week, I am usually the whole day at work. ÖW: How many hours does it make? Well [. . .]. Usually, I am at work from early morning and until late at night on the days the shop is open. I do not count my hours. (Interview no. 32) We open at 11 in the morning and close at 23. Well, it is 12 hours, seven days a week. I do not have any holidays; in this situation it would be very difficult. (Interview no. 5)

Turkish employees often might be in an even worse situation than the Turkish entrepreneurs. The employees are often bound by their specific relationship to the employer and work under bad working conditions, hoping one day to be able to start their own business. The ethnic ties that help people find a job might also bind an employee to a business, despite possible poor working conditions. A former employee in a kebab shop told me about his working conditions and how difficult he personally found it to leave the job:

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From the other place, I quit, because I was working six days a week and I think I was at work 13–14 hours every day. The salary was about 10 Finnish marks an hour [1.70 euro], but I had promised the employer that I would work the period we had agreed. However, I got a [serious medical condition]. [. . .] And I thought, since the salary also was very small, that I had to quit the job. I told the employer about the [medical condition]. In addition, the salary was very small, although I do acknowledge that the business was recently established. [The employer] got slightly offended, but in the end I quit the job. (Interview no. 19)

As the size of the salary of the employee in the quotation above suggests, the working conditions for employees in the fast food outlets might in some cases be very poor. In this particular case, the salary seems to have been less than the minimum wage in Finland. The reason why the employee did not object to this salary was the fact that the employer probably got even less out of the business himself. In any case, to be employed in a kebab shop does not constitute a very attractive job. In context, however, the alternative, to remain unemployed, does not look very bright either. Thus, most Turkish employees wish one day to establish a shop of their own. The long hours and poor working conditions in the kebab shops might also hamper the social contacts with Finns and the general social integration into wider society. A study of the Chinese ethnic economy in Toronto (Fong and Ooka, 2002) suggests that working in ethnic economies hampers participation in the social activities of the wider society. Although previous research has documented that employment in the ethnic economy is an alternative avenue for immigrants to achieve economic advancement in a new country, this Canadian study suggests that the social cost is substantial. My interviews clearly show that the Turkish entrepreneurs do not have much time for anything else besides the business, a circumstance that is highly likely to hamper social contacts with Finns, except for the ones that happen over the counter in the kebab shop. The long working hours probably also have a profound negative effect on the family lives of the Turkish entrepreneurs in Finland. This is an issue that would deserve a separate study of its own, but in my interviews there are some suggestions about the extent of the problem. I have counted [my working hours] sometimes. If I also count Thursdays, I work almost 300–400 hours a month. It is usually a big problem to organize a holiday. (Interview no. 26) This is better than unemployment. The business runs in case you don’t take any days off, and do not visit any places. In that case the income is enough. (Interview no. 6)

The entrepreneurs’ own understanding of their position This study of Turkish entrepreneurs indicates that the Turkish immigrants in Finland usually do not have any other option than to become self-employed. Since there are no other realistic opportunities available for immigrants, the structure of the Finnish labour market forces many immigrants into self-employment. Thus self-employment seems to be based on a choice among only bad alternatives, and can hardly be regarded as a good integration into Finnish society. To the extent that there is reason to talk about integration it seems to be integration into marginalization. However, when we look more closely at the entrepreneurs’ own understanding of their situation, a more nuanced picture emerges. Despite the negative experiences described above, most of the interviewees in this study indicated that they were happy with the ‘choice’ they had made. The freedom and sense

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of purpose which is connected to self-employment was regarded as far more positive than unemployment, which in practice is the only alternative to self-employment. I regard this business as my workplace. The purpose is not to make a profit or to suffer a loss, only to provide employment for myself. It makes no difference whether the income is big or small. The business employs you. You do not look at it in any other way. We are content with the income it has provided. (Interview no. 10) There are negative aspects connected to self-employment, but you are able to influence the content and quality of your own work. You do not have to take orders from anyone. Therefore, I am happy with the choice I have made. (Interview no. 2)

In order to discuss whether a positive integration is the case, there is clearly a need to consider also aspects other than the obvious economic aspects of self-employment. As Alejandro Portes argues in his overview of the research field, ‘the motivations for engaging in independent enterprise are manifold, and the results are not limited to a simple escape from destitution’ (Portes, 1995, 25). Likewise, in Sweden, Bengt Johannisson (2001) has pointed out that an exclusively economic perspective on entrepreneurship might be misleading. Money is often falsely seen as both the main purpose and means of entrepreneurship. However, according to Johannisson, there is reason to question this simplistic picture, especially in the case of small and newly established businesses. He argues that the main reason why entrepreneurs establish small businesses in Sweden is not financial, but related to a wish freely and independently to build up something of their own. Obviously, personal independence is a key driving force behind all entrepreneurs, irrespective of ethnic identity or immigrant history. However, among ethnic minorities and immigrants the alternatives to self-employment might be more limited than among the majority population. Furthermore, Johannisson (2001, 266–7) points out that true entrepreneurship even requires a kind of marginalization in thoughts and action. Entrepreneurship requires that an individual have a wish to act independently, have new ideas and be ready to take risks. Independent action might be easier in the case where you already play the role of an outsider in society, as outlined by Simmel (1950) in his classical article about the ‘stranger’. The ‘stranger’ is an organic member of a group but still regarded as an outsider. According to Simmel (1950, 402–3), throughout the history of economics the sociological form of the ‘stranger’ appears as the trader. The types of interaction that a ‘stranger’ has with society are especially suitable for economic transactions. An often quoted article by Edna Bonacich (1973) about ‘middleman minorities’ presents similar ideas more explicitly. Middleman minorities have their roots in another country and a ‘stranger’ status in the society of settlement. They are involved in small enterprises in the trade and service sector, rather than in primary production or in capital-intensive sectors. Thus they occupy an intermediate rather than a classical low-status position. ‘They play the role of middleman between producer and consumer, employer and employee, owner and renter, elite and masses’ (Bonacich, 1973, 583). However, hostility from the surrounding society is also part of the position of a classical middleman minority (Bonacich and Modell, 1980). Although the underlying dynamics of the middleman minority theory has been criticized (for example, Waldinger, 2000), it still provides a powerful image of the social position of ethnic minority entrepreneurs.

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In Erik Ljungar’s (2002) study of ethnic entrepreneurs in Sweden, he comes to the conclusion that it is not easy to answer whether ethnic businesses provide a solution to the problem of integration in Swedish society. If a consequence of self-employment is that the entrepreneur feels that he or she has achieved a better life, then self-employment is a positive thing, otherwise it is not. According to Ljungar, positive or negative experiences of selfemployment are closely connected to how close or far the business is from the entrepreneur’s original education. This leads into what can be called existential questions. Feiwel Kupferberg (2002) has argued that entrepreneurship is basically an existential type of action, rather than an action guided by economic or social factors. Among immigrants, entrepreneurship might constitute an avenue to achieve a positive self-understanding and social status, in a society where other means of achieving this are either blocked or not available. A good social status is obviously not only a question of self-understanding; entrepreneurs also want to achieve a good status in the eyes of the Finnish majority population: Because we are foreigners, we are picked on [. . .] I think that all Turks are very skilful. Instead of being idle, I think that everybody can do something. Everybody should do something. If that would be the case, I think that there never would be any problems. If I work from 8 in the morning until 10 in the evening, I think there will not be any problems, because nobody will see me in any other place than at work. (Interview no. 26) I have [Finnish] friends. It is actually easier to be with Finns when they know that you are an entrepreneur and that you pay taxes. They look at you in a different way. When you visit the Municipal Health Centre, the response changes when you tell them that you are an entrepreneur; they surely look differently at those who claim all kinds of benefits. [. . .] It is understandable that Finns have two different ways of looking at foreigners, those who work and are taxpayers, and those who live on benefits. At least, you know yourself that it feels better inside, when people look at you. (Interview no. 35)

Entrepreneurship clearly provides immigrants with a social status and a positive selfunderstanding. Interestingly, this positive effect of entrepreneurship finds a counterpart in other types of activities among immigrants. Studies of refugee communities have indicated that a diasporic political activism, common among refugee groups, often serves the function of reinforcing an identity and a sense of order and purpose in the fragmented lives of the refugees (cf. Povrzanovic´ Frykman, 2001; Al-Ali and Koser, 2002; Wahlbeck, 2002). Immigrants invariably face existential dilemmas in their new country of settlement. To create a place or a project of one’s own might provide a solution to these dilemmas. Entrepreneurship is here one possibility and, for many, the first that comes to mind and the only one available. If it also provides an income, it is of course an even better solution. However, the problem for Turkish immigrants is that they do not necessarily achieve a good status in the eyes of all members of the majority population: even as entrepreneurs, immigrants might face hostility: There are a lot of problems that immigrant entrepreneurs face in Finland. [. . .] If you buy a car, people ask where did you get it. But I do have a job. I have not stolen it. I have never done anything wrong and never visited the social services [to claim benefits]. In other words, this is jealousy. (Interview no. 6)

Consequently, however an immigrant behaves, some members of the majority might find fault. If an immigrant is unemployed, he or she will be picked on for using social benefits.

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If an immigrant successfully becomes self-employed, he or she might face jealousy and hostility because of his success. Thus a marginalization of the minority might be sustained by a hostile majority society. Summary Self-employment among the Turkish immigrants in Finland provides a solution to unemployment. There do not seem to be many real alternatives to unemployment available, except for self-employment in small kebab and pizza restaurants. The working conditions in this economic sector are far from satisfactory. In this sense, self-employment can hardly be regarded as an example of positive integration. However, the businesses are, of course, integrated into local economic and social contexts. Although most entrepreneurs find it hard to make ends meet, there are also some successful and thriving businesses. Thus the Turkish entrepreneurs might be regarded as constituting a middleman minority economically integrated into society. However, to the extent that integration has taken place, it has been into a marginal position in Finnish society. Self-employment can nevertheless constitute a stepping-stone that immigrants can utilize in order to achieve economic and social integration. The social status connected to entrepreneurship might contribute positively to social integration. Still, social and economic marginalization is a continuous danger. Future development largely seems to depend on the attitudes as well as economic and social structures of the majority society. Finally, this chapter has argued that it is important to look more closely at the entrepreneurs’ own understanding of their position. This viewpoint extends the focus beyond purely economic issues. Social and ‘existential’ issues connected to entrepreneurship clearly come into focus in the entrepreneurs’ own understanding of their situation. Most of the self-employed immigrants from Turkey were happy with the ‘choice’ they had made. The freedom and social status connected to self-employment were highly valued. Selfemployment provides a positive self-understanding and social status, which the immigrants find it difficult to achieve by any other means in Finnish society. Entrepreneurship is thus often a positive experience, despite the social cost and economic hardship it entails for most entrepreneurs. Notes 1. The data refer to the total population aged 15–74 years (Statistics Finland, 2004). 2. The interviews were based on semi-structured interviews, which were later transcribed in order to facilitate the analysis. A majority of the interviews were carried out in Turkish by a Turkish-speaking researcher who later translated the tape-recorded interviews into Finnish. I am very grateful for the help and expertise provided to me by Dr Zeki Kütük, without whom this project would not have been possible. 3. Obviously, there might be a few people in Finland who define themselves as ‘Turkish’, although they are neither Turkish citizens nor born in Turkey (see the discussion below about native language). Furthermore, a large proportion of Turkish citizens or people born in Turkey might also define themselves as Kurdish (for a closer discussion about these, occasionally overlapping, ethnic identities and proper terminology, see Wahlbeck, 1999). However, for practical reasons, I need to have a concise and easily recognizable term that describes the way my study is delimited. In this study, I have chosen to use the term ‘Turkish’, because this is a term that all my interviewees, to a greater or lesser extent, can identify with. 4. The official population register in Finland also includes information about native language. The size of the Turkish-speaking group in Finland is even larger than the number of those born in Turkey. In total, 2864 persons (2040 men and 824 women) indicated Turkish as their native language on 31 December 2002 (Statistics Finland, 2004). In addition, there are about 500 Kurdish-speaking among those born in Turkey (Wahlbeck, 2004a). Despite the short history of immigration from Turkey, there is already today a ‘second generation’ who were born in Finland and have Finnish citizenship. However, most of these are far too young

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to be involved in business. There are also a small number of Turkish-speaking immigrants from other countries than Turkey, such as Turkoman minorities from Iran. It is also possible that a small number of Finnish citizens belonging to the old Tatar minority (speaking a northern Turkish dialect) have indicated ‘Turkish’ as their native language. A Tatar minority of Russian origin has existed in Finland since the early nineteenth century. The Tatars have lived in Finland for many generations and they constitute a well-integrated minority of about a thousand people with few contacts with the more recently arrived immigrants. In any case, this study is limited to the group of people who are either Turkish citizens or born in Turkey. 5. A high rate of intermarriage with Finns is not only characteristic of Turkish entrepreneurs. The fact that many immigrant entrepreneurs are married to Finns is also discussed by Joronen (2002, 152). Furthermore, Forsander’s (2002b, 170) study shows that self-employment is common among national groups characterized by marriage-related immigration. It is possible that the proportion of immigrants married to Finns is higher among entrepreneurs than among other immigrants in Finland, although no exact data are available. 6. In Turkish, the spelling is ‘kebap’. However, the term is almost without exception spelled ‘kebab’ in Finland, even by the Turkish entrepreneurs themselves. Finnish kebabs are döner kebabs made of ordinary (nonhalal) beef and seldom contain lamb, since lamb is relatively expensive. The Turkish entrepreneurs usually buy deep-fried ready-made kebab meat from the Finnish wholesale market. The meat is usually produced in Finland. 7. For a discussion about the problems that immigrant entrepreneurs experience in relation to expansion of the businesses into the mainstream economy, see Najib (1999, 2001) for the case of Sweden, and Rezaei and Bager (2003) for the case of Denmark.

References Abadan-Unat, N. (1997), ‘Ethnic business, ethnic communities, and ethno-politics among Turks in Europe’, in E. Ucarer and D. Puchala (eds), Immigration into Western Societies: Problems and Policies, London: Pinter, pp. 229–51. Al-Ali, N. and K. Koser (eds) (2002), New Approaches to Migration: Transnational Communities and the Transformation of Home, London: Routledge. Berg, M. (1994), Seldas andra bröllop (Selda’s Second Marriage), Gothenburg: Department of Ethnology, Gothenburg University. Bonacich, E. (1973), ‘A theory of middleman minorities’, American Sociological Review, 38(October), 583–94. Bonacich, E. and J. Modell (1980), The Economic Basis of Ethnic Solidarity, Berkeley: University of California Press. Fong, E. and E. Ooka (2002), ‘The social consequences of participating in the ethnic economy’, International Migration Review, 36(1), 125–46. Forsander, A. (2001), ‘Immigrants in the Finnish labour market: is there ethnic segmentation?’, in E. Heikkilä (ed.), Muuttoliikkeet vuosituhannen vaihtuessa – halutaanko niitä ohjata?, Turku: Institute of Migration, pp. 240–66. Forsander, A. (2002a), ‘Glocalizing capital and labour: old structures, new challenges’, in A. Forsander (ed.), Immigration and Economy in the Globalization Process: The Case of Finland (Sitra Reports Series 20), Helsinki: SITRA, pp. 81–118 (available at http://www.sitra.fi/Julkaisut/raportti20.pdf; accessed 2 July 2004). Forsander, A. (2002b), Luottamuksen ehdot: Maahanmuuttajat 1990-luvun suomalaisilla työmarkkinoilla (Conditions of Trust: Immigrants in the 1990s Labour Market), Helsinki: Väestöliitto, Population Research Institute. Hjarnø, J. (1988), Invandrere fra Tyrkiet i Stockholm og København (Immigrants from Turkey in Stockholm and Copenhagen), Esbjerg: Sydjysk universitetsforlag. Johannisson, B. (2001), ‘Såsom i en spegel – invandrarföretagande att lära av’ (‘As in a mirror: immigrant entrepreneurship to learn from’), in Marginalisering eller integration – Invandrares företagande i svensk retorik och praktik, Stockholm: NUTEK, pp. 265–81. Joronen, T. (2002), ‘Immigrant entrepreneurship in Finland in the 1990s’, in A. Forsander (ed.), Immigration and Economy in the Globalization Process: The Case of Finland (Sitra Reports Series 20), Helsinki: SITRA, pp. 119–74 (available at http://www.sitra.fi/Julkaisut/raportti20.pdf; accessed 2 July 2004). Joronen, T., M. Salmenkangas and A. Ali (2000), Maahanmuuttajien yrittäjyys Helsingin seudulla (Immigrant Entrepreneurship in the Helsinki Area), Helsinki: City of Helsinki Urban Facts. Khosravi, S. (1999), ‘Displacement and entrepreneurship: Iranian small businesses in Stockholm’, Journal of Ethnic and Migration Studies, 25(3), 493–508. Kupferberg, F. (2002), ‘Entreprenörskap som existentiell handling’ (‘Entrepreneurship as existential act’), Sociologisk forskning, 39(2), 68–103. Light, I. (1972), Ethnic Enterprise in America: Business and Welfare Among Chinese, Japanese, and Blacks, Berkeley: University of California Press.

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Light, I. (1984), ‘Immigrant and ethnic enterprise in North America’, Ethnic and Racial Studies, 7(2), 195–216. Light, I. and E. Bonacich (1988), Immigrant Entrepreneurs: Koreans in Los Angeles 1965–1982, Berkeley: University of California Press. Light, I. and S.J. Gold (2000), Ethnic Economies, San Diego: Academic Press. Ljungar, E. (2002), ‘Invandrare som företagare i Sverige’ (‘Immigrants as entrepreneurs in Sweden’), in G. Ahrne and R. Swedberg (eds), Ekonomin i samhället – ekonomsociologiska perspektiv, Lund: Studentlitteratur, pp. 273–303. Morokvasic, M. (1993), ‘Immigrants in garment production in Paris and in Berlin’, in I. Light and P. Bhachu (eds), Immigration and Entrepreneurship: Culture, Capital, and Ethnic Networks, New Brunswick: Transaction Publishers, pp. 75–95. Najib, A. (1994), ‘Immigrant small businesses in Uppsala: disadvantage in labour market and success in small business activities’, Uppsala: Department of Social and Economic Geography, University of Uppsala. Najib, A. (1999), Myten om invandrarföretaget (The Myth of Immigrant Businesses), Stockholm: Svenska EU programkontoret. Najib, A. (2000), ‘Invandrarföretagande. Livsverk eller påtvingad lösning?’ (‘Immigrant businesses: life-time project or forced solution?’), in E. Olsson (ed.), Etnicitetens gränser och mångfald, Stockholm: Carlssons, pp. 123–55. Najib, A. (2001), Invandrares företagande i Sverige (Immigrant Self-employment in Sweden), Stockholm: NUTEK. NUTEK (2001), Marginalisering eller integration – Invandrares företagande i svensk retorik och praktik (Marginalization or Integration: Immigrant Self-employment in Swedish Rhetoric and Practice), Stockholm: NUTEK. Özcan, V. and W. Seifert (2000), ‘Selbständigkeit von Immigranten in Deutschland – Ausgrenzung oder Weg der Integration’ (‘Self-employment of immigrants in Germany: marginalization or a road to integration’), Soziale Welt, 51(3), 289–302. Pécoud, A. (2004), ‘Entrepreneurship and identity: cosmopolitanism and cultural competencies among German–Turkish businesspeople in Berlin’, Journal of Ethnic and Migration Studies, 30(1), 3–20. Phizacklea, A. (1990), Unpacking the Fashion Industry: Gender, Racism, and Class in Production, London: Routledge. Portes, A. (1995), ‘Economic sociology and the sociology of immigration: a conceptual overview’, in A. Portes (ed.), The Economic Sociology of Immigration: Essays on Networks, Ethnicity, and Entrepreneurship, New York: Russell Sage, pp. 1–41. Povrzanovic´ Frykman, M. (ed.) (2001), Beyond Integration: Challenges of Belonging in Diaspora and Exile, Lund: Nordic Academic Press. Pripp, O. (2001), Företagande i minoritet: Om etnicitet, strategier och resurser bland assyrier och syrianer i Södertälje (Minority Entrepreneurs: On Ethnicity, Strategies and Resources among Assyrians and Syrians in Södertälje), Botkyrka: Mångkulturellt centrum. Rezaei, S. and T. Bager (2003), ‘Immigrant businesses in Denmark. Captured in marginal business fields?’, in A. Forsander and M. Similä (eds), Cultural Diversity and Integration in the Nordic Welfare States, Helsingfors: Swedish School of Social Sciences, Helsinki University, 149–78. Simmel, G. (1950), ‘The stranger’, in K.H. Wolff (ed.), The Sociology of Georg Simmel, Glencoe, IL: The Free Press, pp. 402–8. Statistics Finland (2003), Foreigners and International Migration 2002, 8, Helsinki: Statistics Finland. Statistics Finland (2004), StatFin – Online service (available at http://www.stat.fi/; accessed 22 June 2004). Valtonen, K. (2001), ‘Cracking monopoly: immigrants and employment in Finland’, Journal of Ethnic and Migration Studies, 27(3), 421–38. Wahlbeck, Ö. (1999), Kurdish Diasporas: A Comparative Study of Kurdish Refugee Communities, London: Macmillan. Wahlbeck, Ö. (2002), ‘The concept of diaspora as an analytical tool in the study of refugee communities’, Journal of Ethnic and Migration Studies, 28(2), 221–38. Wahlbeck, Ö. (2004a), ‘Kurds in Finland’, in M. Ember, C.R. Ember and I. Skoggard (eds), Encyclopedia of Diasporas: Immigrant and Refugee Cultures Around the World, New York: Kluwer Academic/Plenum Publishers, pp. 1006–12. Wahlbeck, Ö. (2004b), ‘Turkish immigrant entrepreneurs in Finland: local embeddedness and transnational ties’, in M. Povrzanovic Frykman (ed.), Transnational Spaces: Disciplinary Perspectives, Malmö: Malmö University Press, pp. 101–22. Waldinger, R. (2000), ‘The economic theory of ethnic conflict: a critique and reformation’, in J. Rath (ed.), Immigrant Businesses: The Economic, Political and Social Environment, London: Macmillan, pp. 124–41.

29 Immigrant entrepreneurs in Germany Maria Kontos

Introduction Immigrant entrepreneurship in Germany emerged within the framework of a specific migration and self-employment regime, related to the overall structure of the economy and the dominating model of ‘industrialism’ coupled with large industrial organizations and the ‘normal work relationship’ (Mückenberger, 1985; Osterland, 1990). Long-term comparisons reveal a one-sided industrial development in Germany that led, until recently, to the dominance of the industrial paradigm, whereas in other industrialized countries in Europe and North America the service sector developed earlier and more rapidly (Baethge, 1999; Baethge, Rock et al., 1999). Under the influence of industrial development, selfemployment rates decreased continuously up to the end of the 1970s (Bögenhold, 2000, p. 33). Today, self-employment rates in Germany are amongst the lowest in Europe.1 Selfemployed work was considered a residual category that would continue to diminish. This trend led to the focus of research interest primarily on managerial issues instead of entrepreneurial activity (Wu, 2000). The latter has been ignored by social policy and research for a long time. Despite the obvious erosion of the ‘normal dependent work relationship’ (Mückenberger, 1985), in the aftermath of industrialism, the future of work has been mainly conceptualized in the dependent work relationship. In the 1990s, the discourse on combating economic crises discovered that the new entrepreneurs could function as agents which could foster the restructuring of the German economy along the lines of a ‘knowledge society’. However, entrepreneurial activity as the motor of economic restructuring has been considered only in relation to privileged starters, those supplied with class resources, especially human capital, and active in the technologically advanced sectors of the economy (new economy start-ups, bio-technology and IT businesses). Only in the last few years, has the entrepreneurial activity of migrants been discovered by social policy. This chapter addresses the emergence and development of ethnic business in Germany. The interactive model of immigrant enterprise development of Waldinger, Aldrich and Ward (1990) will serve as a foil for the conceptualization of this development. This model emphasizes the changing opportunity structures confronting immigrants as well as the distribution of resources and the terms on which they are available to ethnic minorities. The authors emphasize that ‘immigrant economic activity is an interactive consequence of the pursuit of opportunities through the mobilization of resources through ethnic networks within unique historical conditions’ (ibid.: p. 14). Opportunity structures consist of market conditions (ethnic consumer products or open markets) as well as conditions of access to ownership (business vacancies, competition for vacancies and government policies). Opportunity structures interact with group characteristics, such as predisposing factors (blocked mobility, selective migration, aspiration levels) and resource mobilization (close ties to co-ethnics, ethnic social networks, government policies) (ibid.: p. 22). In the first section of the chapter I will discuss the impact of institutional regulations concerning migration and self-employment, as well as the general culture of entrepreneurship, 445

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on the emergence of ethnic business in Germany. I will highlight the embeddedness of migrant entrepreneurship in mixed barriers: the migration and self-employment regulations that entirely exclude some categories of migrants from enterprise, or aggravate the selfemployment of migrants in certain regulated sectors of the economy and channel the selfemployment of migrants into marginalized sectors of the economy. In the second section I will outline four strains of discourse on migrant self-employment in Germany today which reflect competing positions on ethnic businesses. In the third section I will outline the phenomenon of self-employment of migrants in Germany today, its quantitative dimensions, its sector distribution and its developmental trends and organization in trade associations. The interplay of opportunity structures and group characteristics will be the focus of the discussion of the emergence and development of ethnic economies. Gender-specific factors related to ethnic resource mobilization will be discussed. Finally, I will discuss new approaches towards understanding the entrepreneurial activities of migrants and their significance for understanding the specific German context. 1 Policy as a barrier and resource for ethnic entrepreneurs The migrant populations that are currently subject to scientific research and social policy are migrants who were recruited from the 1960s up to the halt in recruitment in 1973 from countries in southern Europe, North Africa and Turkey, and their descendants. Furthermore, the migrant populations in Germany include populations who entered the country as asylum seekers and political refugees, as well as the new wave of ethnic Germans resulting from the dismantling of socialist regimes in former socialist countries.2 The latter have received German citizenship but are still being confronted by severe problems regarding social and economic integration resulting from high unemployment levels. The discourse on migration processes in Germany is characterized by the ‘appellative denying and practical accepting of the immigration fact’ as formulated in the Sixth Family Report of the Federal Government on ‘Families of Foreign Origin in Germany’ (Bundesministerium für Familie Senioren Frauen und Jugend, 2000). It is therefore rather uncertain to speak about migrants in Germany, as German policy recognizes foreigners and not migrants, and subsequently the statistical data refer to foreigners and not to migrants. In effect, those migrants who have received German citizenship become statistically invisible. The scientific community in Germany has ignored migrant entrepreneurship for a long time, owing to little academic interest in self-employment in general and in particular the self-employment of non-privileged groups such as migrants. On the other hand, migration in Germany was, during the first decades after the World War II, a labour migration. Migrants were recruited for work in dependent industrial work positions.3 The Foreigner’s Law regulating the residence and social rights of foreigners in Germany coupled the permit for residence (and work) with dependent employment, so self-employment was not permitted for migrants with a temporally limited permit of residence. The expectation of a steady rotation of labour migrants was a central motive for this policy, and selfemployment was thought to promote a permanent stay (Kanein, 1988; Kontos, 1997). The steady rotation would enable the utilization of foreigners employment as a means of steering the labour market and would provide a buffer for economic cycles (Nikolinakos, 1973; Dohse, 1981; Hollifield, 1992). However, the model of rotating labour migrants could not be generalized in the long run. In recent decades, despite a steady flow of foreign residents

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back to their countries of origin, more and more migrants have opted for a longer stay in Germany. Employers have also resisted engaging the rotation model because of the high costs associated with fluctuation and training (Constant and Massey, 2002). Many migrants became entitled to unlimited residence permits and, with this, the right to establish a business. Additionally, as a result of European law (EEC-Contract)4 and successive EU enlargement, a large number of migrants, first the Italians and, since 1988, the Greeks, Spaniards, and Portuguese, now being citizens of EC-countries, have attained equality with nationals with respect to the right for self-employment. According to the Foreigners Law, the nature of the entitlement to reside regulates the right to enter self-employment. Migrants from outside of the EU are not allowed to enter self-employment if not in possession of a permit of residence, including the ‘right to reside’ (Aufenthaltsberechtigung). The ‘right to reside’ can be acquired only after eight years of legal residency, while limited residence permits prohibit self-employed work. This regulation can be circumvented through exceptional allowances that can be granted by local authorities in cooperation with the local Chamber of Industry and Commerce under the condition that special local needs would be met by the entrepreneurial project (Wilpert, 2003, p. 237; Pütz, 2004, p. 81). In 2002, only 38 per cent of the 7 335 592 registered foreign residents in Germany had a residence permit that allowed self-employment (Beauftragte der Bundesregierung für Migration Flüchtlinge und Integration, 2004, p. 87). The barriers set up by the Foreigners Law forced some migrant entrepreneurs to engage a ‘straw boss’, a person of confidentiality who would formally run the business under his/her name, while the real entrepreneur would not appear to be the owner. This frequently led to complicated questions of ownership and undesirable dependencies (Stavrinoudi, 1991). Migration policies affect not only migrant start-ups but also migrant enterprise, as they can restrict the ability to recruit specially trained employees, for instance cooks who are experts in the cuisine of their country of origin, as is the case with the Chinese (Leung, 2003) and Yugoslavian restaurant owners.5 In contrast, enterprising EU citizens are free to recruit cooks and employees for their restaurants from their countries of origin. In addition to the barriers to entrepreneurial activity inherent in the Foreigners Law, significant barriers arise when migrants aspire to set up businesses in professions classified as crafts. According to the Crafts Code, in order to enter this sector, one has to be registered in the Crafts Listing. For this one needs to have the certification of one’s professional competency in the form of the ‘master craftsman’ certification (Meisterbrief). Most first generation migrants do not possess formal certification that would be recognized as being equivalent to the German master craftsman certification, as formalized vocational training in the countries of origin was rare until recently. Migrants without such a certificate are only entitled to settle in vocations that are classified as ‘similar to crafts’ such as textile mending, in contrast to tailoring which is a craft profession (Wilpert, 2003; Pütz, 2004). In this way, the Crafts Code considerably shapes the opportunity structure for migrant entrepreneurs, and causes a concentration of migrants in ‘similar to crafts’ professions. Current shifts in migration and self-employment policies However, in both immigration and self-employment policy in Germany there has been a considerable change since the turn of the century. Demographic development and the lack of highly qualified and specialized manpower led to a change in migration policy. The

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Independent Commission for Immigration (Unabhängige Kommission, ‘Zuwanderung’, 2001) acknowledged for the first time that Germany has to accept the fact that it is an immigration country and that it has to develop a flexible policy for a steered immigration, in order to cope with the challenges of globalization (ibid.: pp. 11, 48). Continuing high unemployment also brought about a turning point in the hostile atmosphere regarding self-employment in Germany. The call to strengthen the cultural value attached to entrepreneurship has become louder in recent years and is now a central aspect of the discussion concerning the reform of the welfare state. The responsibility of the individual for the processes of social inclusion and the demand for the active contribution of the individual to the creation of his/her own job through self-employment, implied in the recently launched active labour market policy (Speckesser, Schmid et al., 2001) came into focus during the discussion surrounding the fight against high unemployment. This led to stronger support for the self-employment activities of the unemployed, first through the ‘bridging allowance’ (Überbrückungsgeld) (Hinz and Jungbauer-Gans, 1999) and, since 2004, the introduction of more comprehensive instruments for fostering self-employment of unemployed persons such as the so-called ‘Me, Inc.’ (Ich-AG), an instrument introduced during the last reform of unemployment regulations (Hartz et al., 2002, p. 45). This development generalizes the principle of entrepreneurial activity regardless of personal preconditions. At the moment, industrialism seems to give way to an ideology of entrepreneurialism that would motivate the unemployed to open small shops and come up with the idea of long working hours and exhausting work. The new spirit of entrepreneurialism, together with the timid recognition of Germany as an immigration country made migrant entrepreneurship for German policy visible. The report of the Independent Commission for Immigration (2001) contained a chapter on migrant entrepreneurship in which the inclusionary effects of migrant self-employment are outlined. The Commission draws the conclusion that the self-employment of migrants is an indication of their successful social integration, as self-employed migrants have a better income structure than the dependently employed. Moreover, the creation of jobs through the self-employed migrants makes migrant entrepreneurship a positive factor for general economic development and the labour market situation, whereas migrant businesses would entail a great potential in apprenticeships for young people. The Commission explicitly recommends the support of migrant entrepreneurship as well as the alleviation of the immigration of self-employed (ibid.: pp. 225–7) (see also Beauftragte der Bundesregierung für Ausländerfragen, 2002).6 In the Immigration Act, valid as of 1 January 2005, the immigration of self-employed individuals from non EU countries is made possible, although under rather severe conditions.7 The Federal Minister of Economics and Labour launched the ‘pro mittelstand’ campaign in January 2003, aimed at simplifying the efforts of enterprise. In this context, at the turn of the year 2003/2004, the Crafts Code was amended to restrict the requirement for ‘master craftsman’ certification to the group of 41 crafts classified as ‘danger prone’, with respect to health and the life of others, such as gas fitters and electrical engineers. The entry to 53 other craft trades was liberalized by requiring six years of experience in the craft as an entrance precondition.8 The embeddedness of migrant entrepreneurship in institutional frames is a restriction, but it can also provide a resource as there is a range of policy measures for the support of entrepreneurial activities, including loans, consultation and training, in practice by the

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Chamber of Commerce, the Loan Bank KfW, the Labour Offices, and the Associations for the Support of Economic Activity. Migrants, however, do not take sufficient advantage of this support. A better dispersal of information and integration of migrant entrepreneurs into these activities is not undertaken, as the officers in these institutions assume that migrant entrepreneurs are not in need of institutional consultation, as they get sufficient support from ethnic networks and entrepreneurial training in the ethnic economy (Kontos, 2003a). Indeed, migrant entrepreneurs get financial capital for entrepreneurial activities through personal loans from family members and friends and are less likely to seek bank loans (Gitmez and Wilpert, 1987; Stavrinoudi, 1991; Pichler, 1992a, 1992b; Stavrinoudi, 1992). Concerning Chinese entrepreneurs, there is no evidence that the system of rotating credit associations would be here in force (Leung, 2003). For the second generation of migrants, entrepreneurial activity is in many cases financed by the savings of the prior generation (Kazakos, 1995). While the shifts in policy evoke the expectation of a change in the self-employment policy towards migrants, we should not forget that migrants were neglected in policies promoting self-employment among the unemployed. The participation rates of migrants in the bridging allowance scheme have varied between 1987 and 2002 between 2 per cent and 5 per cent. Considering the dynamic growth in self-employment and the rapidly increasing unemployment rate among migrants (the unemployment rate of foreigners in May 2003, according to micro-census data, was 19.22 per cent), the percentage of migrants in the bridging allowance scheme should be evaluated as very low. Also, targeted policies for non-privileged groups starting self-employment have neglected migrants. However, in the framework of European Equality Policies, some local support measures have been conducted for the support of female migrants seeking self-employment (Kontos, 2003a). Migrant women’s organizations (ISI in Berlin and BENGI in Kassel) offer local training, consultation and support for migrant women starting businesses. In recent years, however, more efforts have been undertaken to promote migrant selfemployment, especially through the operationalization of the EU Initiative EQUAL. In this programme, organizations which offer support for migrant start-ups established a nation-wide association (AG ‘Gründungen von Migranten/innen’) promoting migrant self-employment. 2 The ethnic business discourse The discourse on migrant entrepreneurship in Germany developed within the framework of ideology regarding industrialism which is macro and structurally oriented. It has been broadly influenced by the polarized model developed by Bögenhold (1987, 1989) which differentiates between two main types of self-employment, one acting out of the economy of need or desperation, and the other out of the economy of self-realization. Migrant selfemployment has been regarded as the prototype of self-employment out of the economy of desperation, while self-employment out of self-realization has been assumed to be characteristic of such activity among the well educated as well as women in general. Migrants are thought to be people pushed into self-employment through social conditions they can rarely influence and consequently they are implicitly thought to be lacking in agency. The self-employment of non-privileged social groups is thought of as a pathway to proletarization. Different perspectives have developed here, which can be bundled along four main discussion lines.

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The social disadvantage line The main question that has occupied the debate on ethnic business in Germany has been whether entrepreneurship has an inclusionary or exclusionary effect on migrants. WolfDieter Bukow (1993) argues that ethnic business is a product of ethnic discrimination and starting a business is the effect of discrimination in the labour market, high unemployment of migrants and a strategy of withdrawal into the ethnic community. Ethnic entrepreneurs are confronted with considerable discrimination in the market and by institutional actors of the receiving society, such as banks, housing policies and the potential native clientèle. All these provide barriers to their effort to break out of the ethnic niche. Therefore, they are forced to address a largely ethnic clientèle and are subject to growing ghettoization through ethnic structures and stabilized segregation. Migrant selfemployment leads thus to a cementing of social discrimination, social exclusion and ethnic segregation. Similarly, Blaschke and Ersöz (1986, 1987) regard Turkish migrant businesses in Berlin as products of an ‘economy of poverty’, which can only be sustained through a high degree of self-exploitation and exploitation of family members. The migrant entrepreneurs are a sort of ‘lumpen bourgeoisie’ in the ethnic community, and migrant businesses are considered merely to be a phenomenon of transition, as they show a high degree of fluctuation. This strain of discourse is based on a ‘simple disadvantage’ concept (Light and Gold, 2000, p. 197). Disadvantage seems to be the basis of motivation for migrants to enter self-employment and disadvantage seems to be the effect of their self-employment. This argument is accompanied by the assessment that migrant entrepreneurs should have rather low earnings (Pütz, 2004, S. 75). Other researchers confirm that migrant entrepreneurs work more hours per week than salaried workers and selfemployed Germans; however, they rejected the thesis of low earnings. To the contrary, self-employed immigrants earn more than their salaried counterparts, and even more than self-employed Germans.9 However, these analyses stress also that migrant entrepreneurs have, despite high earnings, a low occupational prestige (Constant, Shachmurove et al., 2003, p. 14). This reflects the social construction of migrant entrepreneurship as a pathway to exclusion. The social integration and social mobility line A different argument has been developed by the Centre for Turkish Studies.10 Their publications take an optimistic perspective concerning the effects of entrepreneurial activity for the social integration of migrants. Faruk Sen and Andreas Goldberg (1996) evaluate migrant entrepreneurship as a basis of empowerment for migrants and an opportunity for upward social mobility. Entrepreneurship is instrumental in the creation of a foreign/Turkish middle class and the normalization of the social composition of migrant groups (Aygün and Baz, 2002). According to the authors, migrant entrepreneurs do address the German public and are not confined to an ethnic niche. The authors stress the diversification of the sectors in which foreigners are successfully selfemployed. Especially in recent years, second and third generation migrants have been able to break out from the sectors typical of migrant self-employment, gastronomy and retail trade, and enter other sectors such as the freelance professions that have been until recently only in the hands of Germans (Zentrum für Türkeistudien, 1995; Sen and Goldberg, 1996).

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The social utility of ethnic entrepreneurship Hans Dietrich von Loeffelholz, Arne Gieseck and Holger Bruch (1994) developed a similarly positive perspective. Impressive development of turnover, additional job creation, taxes levied and the availability of apprenticeships through these businesses are able to confirm the thesis that a considerable contribution has been made by migrant entrepreneurs to the development of the economy and social cohesion (von Loeffelholz, Gieseck et al., 1994). Moreover, ethnic business has been discussed by geographers, urban sociologists and urban planners regarding its impact on urban development. Ethnic entrepreneurship has revitalized inner cities and neighbourhoods in decline by encouraging communication and enabling exchange and the supply of services, and have also closed the supply gap that resulted from the exodus of native supermarkets and grocery shops from the inner cities. Ethnic entrepreneurs restore quality of life in areas that seemed for a while to be condemned to decline, and which could be reanimated through mixed populations ranging from migrant families to students and young professionals engaged in central sectors of the economy (Hatz, 1997; Häußermann and Oswald, 1997). Ethnic entrepreneurs provide inner cities areas with an exotic charm that adds value to their character as a tourist attraction and contributes broadly to the local economy (IHK Frankfurt). In the wake of the increasing shortage of apprenticeships for young people, the issue of the creation of apprenticeships in businesses run by migrant entrepreneurs gained in interest for social policy makers. According to a survey by the Centre for Turkish Studies, most Turkish entrepreneurs (64 per cent) declared that they would be willing to offer apprenticeships, as did 38 per cent of the Greeks and 31 per cent of people from countries of former Yugoslavia, most of them with their own children in mind (Goldberg, 1996, p. 71). A main problem here is that most migrant entrepreneurs lack the formal preconditions for training young people: a master craftsman certification or a certificate from the Chamber of Industry and Commerce on their competency to train young people. In order to attain the latter, entrepreneurs have to undergo a test by the Chamber of Industry and Commerce. The deconstructivist line This fourth strain in the migrant entrepreneurship discourse aims at the deconstruction of the ‘ethnic’ in the concept of ethnic business by questioning the difference between an ethnic and non-ethnic economy. Are only the ‘others’ ethnic? The argument developed around the observation that religion and culture are also influential in normal businesses (Schmidt, 2000; Pütz, 2004). 3 The development of migrant businesses in Germany The rather small number of migrant entrepreneurs at the beginning of the 1970s (40 000)11 increased considerably in recent decades (in the year 2000, to about 300 000).12 The selfemployment rate among migrants was 2 per cent in 1970 (Seifert, 2001) and increased in 2000 to almost 9 per cent. Several factors were at stake: conditions in the labour market deteriorated, high unemployment reduced the chances of finding dependent work positions, and an increasing number of migrants became entitled to enter self-employment. There are significant differences between the ethnic groups in regard to self-employment activities. In May 2003, migrants from the EU countries, with 14.35 per cent, had a higher, while non-EU migrants, with 9.27 per cent had a lower self-employment rate than the

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Germans, with 10.42 per cent (Statistisches Bundesamt, 2004). The Turks comprise the highest number of entrepreneurs, as they are the largest ethnic group; they have, however, a rather low self-employment rate, with 5.83 per cent in 2003, compared to Italians with 13.06 per cent and the Greeks with 14.88 per cent. The latter have the highest self-employment rate of the ethnic groups under consideration. Post-war migration flows to Germany were mainly migration flows to industrial work. The research on immigrant entrepreneurs in Germany refers mainly to cases of transition from industrial worker to self-employed. However, apart from worker migration, there have also been migrations of entrepreneurs, as in the case of Chinese migration. This migration embraces entrances in the 1960s in the form of the politically motivated recruitment of restaurant entrepreneurs in Taiwan as well as employees for these entrepreneurs. The migration of Chinese into other European countries has also been motivated by the plan to set up businesses in the restaurant sector (Leung, 2004). However, there are no statistical data on the entrepreneurial activities of Chinese, as they comprise a rather small population for the micro-census estimations. A question that occupies many researchers in ethnic business research in Germany is how to explain the variations in the entrepreneurial activity of ethnic groups, as these cannot be explained entirely through different types of access to the right of selfemployment (Wilpert, 2003, p. 242), nor through differences in cultural background, as Greek migrants affine to entrepreneurial activity (Stavrinoudi, 1991). A factor that has not yet been considered in the discussion is that Greek migration has been a family migration, starting with the large immigration waves in the 1960s and 1970s as both spouses migrated to Germany (Geck, 1979). In comparison, the other populations were strongly dominated by male only emigration. Most of the Turkish migrant women entered Germany after the end of recruitment in 1973. Many researchers have stressed the presence of both husband and wife in migration as a central factor for starting and maintaining businesses (Light and Gold, 2000). Indeed, according to the micro-census, in 2003, among the Greeks there is a higher number of assisting family members (6000) than among the other migrant populations (both Italians and Turks, 5000) although the total of Greek entrepreneurs does not surpass that of the Italians and Turks. The distribution of migrant entrepreneurs from the recruitment countries in the economic sectors varies considerably from the distribution of German entrepreneurs. Migrants concentrated in the food sector, 44.4 per cent are engaged in restaurants, in comparison to 5.5 per cent of Germans. Another sector with a high concentration of migrants is retail, with 19.4 per cent. (Unabhängige Kommission, ‘Zuwanderung’, 2001, p. 226). Self-employment of migrants emerge in economic sectors highly exposed to cyclical fluctuations and in which outsourcing processes are common, especially when specific ethnic groups are dominant among the employees and can in this way control entrance into this sector, thus building ethnically controlled economies (Light and Gold, 2000). This is the case in the construction field, where Turks and Yugoslavs have entered entrepreneurship as subcontractors for the dominant firms. Similarly, in the cleaning industry, a domain of Turkish employment, Turkish entrepreneurial activities have been relevant since the late 1980s. Migrants also entered sectors in which vacancies occurred as a result of withdrawal and upward mobility on the part of the native entrepreneurs, such as the taxi driver sector in which Turks, Moroccans and Greeks are active, or textile mending and shoe repair. The entrance to certain sectors, like clothing and shoe repair, meant the

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utilization of the opportunity not only to enter a vacant position in the market, but, in the case of the first generation migrants, also to rediscover and reanimate dormant skills, as many migrants were originally craftsman, tailors, shoemakers and cobblers. According to the Journal Eurotürk (Sept. 2003), published by the Turkish department of the Federal Association of German Retail, in 2003 there were 56 800 Turkish enterprises in Germany; 21 800 in retail, 3800 in wholesale, 12 500 in restaurants and fast food; craft undertakings numbered 5100, construction 1100, manufacturing 1500 and other services 11 000. The regional distribution of migrant entrepreneurs is similar to the distribution of migrant workers, being concentrated in big agglomerations. However, there have been autonomous regional movements of migrant entrepreneurs, so that regions without migrant businesses are rare. After German reunification in 1990, Turkish and Greek restaurant and fast-food shop owners started opening shop in the new Federal States in eastern Germany (von Loeffelholz et al., 1994). However, in the following years there was a withdrawal of migrant entrepreneurs from eastern Germany (Pütz, 2004), which can be explained by the specific economic situation in these regions and the increase in right-wing racist attacks against foreigners living there. The diversity of migration flows and migrant entrepreneurship In addition to the structurally oriented analyses presented in the second section, there is a range of analyses oriented either towards ethnic economies in Berlin (Gitmez and Wilpert, 1987; Stavrinoudi, 1991; Pichler, 1992a, 1992b; Stavrinoudi, 1992; Kapphan, 1997; Pichler, 1997a, 1997b; Leung, 2002, 2004) or nationwide ethnic economies (Leung, 2002, 2004) which capture the development of these ethnic economies as case studies by employing mainly qualitative methods, such as the narrative biographical interview, oral history, participant observation and document analysis. These analyses outline ethnic economies and show how these are articulated within German society and evolve as an interactive process influenced by institutional and legal regulations and the dynamics of migration flows. They also show that ethnic economies evolve in a complex set of ethnic community dynamics characterized by cultural, religious and social diversity of the ethnic groups, informal networks, chain migrations, different ideologies and social conflicts in the country of origin. Phenomena that have been overlooked in the quantitative analyses of labour migration, such as selective migration, seem to be of interest when qualitative methods are used to investigate the emergence of ethnic economies from labour migration. These analyses show that the entrepreneurial activity of migrants is embedded in the historical traditions of migrating entrepreneurs, which date back to times long preceding the era of post-war migration. As far back as medieval times, Italian stucateurs and artisans worked in middle European regions, in the construction of buildings for the local aristocracy, bringing in skills developed in the Italian peninsula and lacking in Germanic regions. Similarly, many Greeks have settled in these regions as early as the fifteenth century as merchants and manufacturers in the tobacco industry and were also active in the fur trade (Stavrinoudi, 1992; Irmscher, 2000). During post-war migration, similar migration flows were also present, taking advantage of the recruitment system or the free movement allowed within the European Community. For instance, the fur traders from Kastoria in North Greece utilized the recruitment procedures in order to migrate to Germany where they soon opened traditional workshops, mainly in Berlin and Frankfurt a.M. (Kazakos, 1995).

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Italian migrants started businesses in construction in Berlin, using their specific artisan skills (Pichler, 1997a, 1997b). The emerging ethnic economies were therefore diverse, related to these entrepreneurial motivated migrations and the specific skills and traditions that these migrants brought in. Even the recruitment of migrant workers as ‘Gastarbeiter’ was not free of entrepreneurial migration. First, it embraced migrants from different social backgrounds and different vocational experiences. The migration flows from Turkey included, in addition to farm workers and day labourers, professionals, teachers, small shop keepers, artisans and lower civil servants (Gitmez and Wilpert, 1987). Similarly, the migration flows from Greece included professionals and artisans (Stavrinoudi, 1992). Second, a widespread feature was the expectation of upward social mobility after the return home through self-employment, as the economies of the countries of origins in the 1960s and 1970s were characterized by a low industrialization grade and high self-employment rates.13 Moreover, significant in this context is the considerable proportion of intellectuals among the migrants, as many of them had been political activists in their country of origin and were politically socialized in the culture surrounding the left-wing movement. Some of these intellectual migrants were students that came to Germany in order to study at German universities. Some of them, being from poor economic backgrounds, used the recruitment procedures in order to earn money and then start their studies.14 These students, having access to the work place, soon took over mediating roles, such as intervening between the migrant workers and the German foremen, or even took over the role usually played by social workers. In this way, they soon received informal leadership positions in the ethnic communities and had a valid overview of the market demands created by the needs of the migrants that could not be satisfied by the local markets. Analysing the Greek and Turkish ethnic economies in Berlin, Stavrinoudi (1991, 1992) and Gitmez and Wilpert (1987) outline the role played by these students and intellectuals as ethnic business took hold in Berlin. Being forced to earn their own money, and being excluded from academic jobs, these students started self-employment projects in the restaurant sector, sometimes in a collective form, and frequently remained in this sector instead of utilizing it merely as an interim strategy (Gitmez and Wilpert, 1987; Stavrinoudi, 1991). Often the restaurant businesses of these intellectuals were also a means of establishing forums for political communication serving those struggling for democratization in the societies of origin. The food sector and ethnic businesses The food sector was an important domain for migrants starting businesses. The restructuring of the food sector in Germany favoured the presence of migrant entrepreneurs in this field. Low profitability and hard working conditions motivated native entrepreneurs to leave this sector, enabling migrant entrepreneurs to fill the emerging vacancies. At the same time large fast food and supermarket chains were also entering this sector, while the supermarkets successively left the inner cities and settled in the suburbs. The migrants could also fill these vacancies, securing supply for inner city populations (Hillmann and Rudolph, 1997; Rudolph and Hillmann, 1997). Today, the restaurant sector in Germany is highly dominated by migrant entrepreneurs. According to estimates made by the German Association of Hotel and Restaurant Owners, almost one-third of all restaurants are owned by migrants.

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The ethnic food sector emerged as the concentration of ethnic groups created markets of consumer demands that could not be met by local native traders, and thus created a niche economy (Goldberg and Sen, 1997). Greek and Italian restaurants initially developed in response to the needs of their countrymen (Stavrinoudi, 1991, 1992) but soon reached the local German clientèle, to a large degree thanks to the globalization of taste through tourism. The first country in which the Germans travelled after the war as tourists was Italy; Greece soon followed. Migration flows of intellectuals in the 1980s had considerable effects on changes in the Italian restaurant business. The new Italian restaurants developed a more cultural tone, addressing the new consumer demands of upwardly mobile native social groups. However, the Turkish food economy emerged by answering the need for halal meat and other halal products. Because of the difficulty most Turks had in gaining access to the right to self-employment, wholesalers developed their own retail chains in this large market. These chains were soon related to Islamic factions and offered a range of missing social and cultural services, such as café houses, casinos, travel agencies, sport activities and Qur’am courses. They thus became an arena for the struggle among conflicting conservative religious–ideological fractions (Gitmez and Wilpert, 1987). Turkish business developed in the markets that emerged in response to the needs of a large Muslim population, concentrated in specific city areas. The opening of Turkish restaurants and fast food places to the German public was not only a result of increased tourism to Turkey, which flourished in the last decade and from which Turkish migrant business in the travel sector has benefited considerably. It can rather be attributed to the increase in the consumer taste for the exotic. In the mid-1990s, there were 10 000 döner shops in Germany and, with 3600 million Deutsche Mark, they had a higher turnover than McDonald’s and other fast food chains operating in Germany (Seidel-Pielen, 1996, pp. 11–13). Cultural and sector diversification of migrant businesses The situation facing the ethnic food sector today is characterized by the economic crisis that hit service-oriented restaurants, while fast food, and take-aways, such as döner shops, could further expand.15 These opposing tendencies are accompanied by shifts in the ethnic business sectors. Today, one speaks of a hybridization of the food sector, and a creolization of ethnic food (Pang, 2003) as ethnic entrepreneurs try to utilize products from other ethnic groups in order to best meet market demands and frequently offer a mix of different ethnic food, such as Italian (Pizza) and Turkish food (döner). In this effort, ethnic succession processes seem to have come in force, opening up a hard competition among ethnic groups for the control of specific ethnic food niches. As Iranian and Turkish entrepreneurs started to make inroads in the pizzeria sector, the Association of Italian Restaurant Owners ‘Ciao Italia’ tried to defend this ethnically Italian market segment. Public disputes in the media have accompanied the struggle for the pizzeria sector. It is rather obvious that these processes of succession have became possible through the transfer of skills from Italian entrepreneurs to Iranian or Turkish employees. Italian entrepreneurs had to employ Iranians and Turks in the pizzerias as these populations became available after young Italians engaged in upward mobility processes and moved on to the white-collar professions (Apitzsch and Kontos, 2004). Today, migrant entrepreneurship in the food sector does not set the course only for the ethnic segment, but also for the nonethnic one, as it offers vacancies and opportunities that can be utilized by migrants. These

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new trends underline the instrumental character of culture in doing business, especially in the development of an ethnic product for sale in a market in response to demand (Werbner, 1999). Thanks to the existence of second and third generations in migrant families, a diversification of the sectors in which migrants start self-employment is looming. Migrants are not only to be found in sectors characterized by low entrance barriers, but are able to break into high-barrier sectors such as the free professions (medicine, law). An analysis by the German Socio-Economic Panel showed that, among immigrant entrepreneurs, 19 per cent were freelance professionals, such as lawyers, doctors, teachers and computer specialists – enough, compared to 24 per cent among the German self-employed population (Constant, Shachmurove et al., 2003, p. 17).16 Moreover, there is evidence that second generation members engage in the arts and IT businesses, as well as those sectors favoured by the first generation. Setting up trade associations The clustering of ethnic businesses in specific sectors encourages vertical and horizontal integration and the emergence of ethnic enclaves; that is, ethnic enterprises at different levels of the production chain which could maximize the economic benefits for the ethnic entrepreneurs involved (Light and Gold, 2000, p. 12). In the food sector, the enclave economy developed around restaurants, grocery suppliers and wholesalers, as well as the import and large-scale manufacture of ethnic food, such as the production of Döner spits (Seidel-Pielen, 1996). At the same time, there is a movement towards the organization of ethnic entrepreneurs in trade organizations. Ethnic entrepreneurs generally entered the existing trade organizations in their sector, such as the German Association of the Hotel and Restaurant Entrepreneurs (DEHOGA). Despite having a high presence in the restaurant sector, migrant entrepreneurs remain rather marginal in the DEHOGA (Apitzsch and Kontos, 2004). In other organizations, an ethnic subsidiary developed, as was the case in 1999 as the Federal Association of the Turkish Wholesale and Retail (BTGE) department of the Main Association of German Retailing was founded (Bundesministerium für Wirtschaft und Arbeit und Beauftragte der Bundesregierung für Migration Flüchtlinge und Integration, 2003). Autonomous ethnic associations of entrepreneurs emerged, such as ATIAD – Association of Turkish Entrepreneurs and Industrialists in Europe, and the TIDAF – Association of Turkish-European Entrepreneurs associations. Also present were autonomous ethnic organizations in specific economic sectors, like Ciao Italia, an organization of the Italian restaurant owners in the Italian diaspora or UNITEIS, an association of ice cream parlour owners of Italian origin. In this way ethnic entrepreneurs organized in order to obtain market power, effected the improvement of the enterprise conditions, organized buying and secured political power and ideological influence. Some of them, for instance the organization of the Italian ice cream parlour owners UNITEIS, take on the form of a guild structure, as it counts almost all Italians active in the field as members (Pichler, 1997a, 1997b). Female migrant businesses Migrant businesses, especially those in the food sector, are for the most part family businesses strongly relying on the labour of female family members, as well as the cooking skills of wives (Anthias, 1992). Pütz estimated that, in 2002 in Berlin, half of the Turkish

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migrant enterprises relied on family labour; in retail, this figure is two-thirds (Pütz, 2004, p. 70). The labour of female family members as a central resource for the entrepreneurial activities of male migrants has been addressed by feminist researchers in the last decade (Anthias and Mehta, 2003). It has been argued that the women bear a lot of the work burden of the family businesses in addition to traditional family and care issues, but are marginally recognized with respect to formal ownership and decision-making processes (Anthias, 1992; Stavrinoudi, 1991). In cases of separation, divorce or widowhood, this division of labour and ownership rights has disadvantageous effects on the economic situation of these women. Migrant women as entrepreneurs have not been perceived, as ethnic economies have been broadly structured and perceived, as male economies with the labour and skills of women being a core resource for businesses (Anthias, 1992; Light and Gold, 2000). However, the number of migrant women entrepreneurs has increased in the past years, from 2.72 per cent in 1985 to 6.39 per cent in the year 2000 (see Table 29.1). It is feminist research that made this category visible (Morokvasic, 1988; Westwood and Bhachu, 1988; Morokvasic, 1991; Anthias and Mehta, 2003; Apitzsch and Kontos, 2003). However, there are no reliable figures on the ethnic distribution of female migrant entrepreneurs. Data on ethnic categories are too low to allow for reliable estimations in the micro-census, or the German Socio-Economic Panel (Constant et al., 2003, p. 10). However, there is evidence that, while the first generation of migrant women entrepreneurs cluster in services like textile mending and travel agencies, and in retail, especially groceries, the female migrant entrepreneurs of the second and third generation show a greater diversity of economic sectors than male migrant entrepreneurs. They are credited with the development of new ideas in the service sector (Hamam wellness centres, laundry services, catering services) (Hillmann, 1998). This highlights the parallels between migrant female entrepreneurs and native female entrepreneurs, since native women also tend to establish small businesses in the service industry (Leung, 2004; Wilpert, 2003). The question as to whether female migrant entrepreneurship would differ from male entrepreneurship has been reaffirmed by research done by Felicitas Hillmann (1998) who interviewed self-employed Turkish men and women in Berlin. She isolated different gender patterns of entrepreneurial strategies concerning the utilization of ethnic and family resources. While men tend to utilize the informal labour of the family members for their businesses, this was not the case with the women, who explicitly denied such strategies. Thus, also here, the assumption of men’s and women’s unequal access to ethnic resources within immigrant communities and the assumption of different resources available to women that would lead to different businesses has been confirmed (Light and Karageorgis, 1994, p. 663). 4 Understanding ethnic entrepreneurship as embedded in biographical processes The rough conceptualization of the ethnic entrepreneurship discourse revealed two distinct perspectives: first, the structuralistic top-down perspective coupled with the disadvantage theory, and, second, the agency thematicizing bottom-up thesis related to the perception of integration and empowerment through self-employment. It is not surprising that the latter has been mainly developed by researchers stemming from the ethnic groups, be it the parallel student migration, or the second generation educated in Germany. Common to both of these discourses is the perspective of ethnic groups that

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conceptualizes ethnic entrepreneurship as a collective achievement. The seminal finding of ethnic business and economic sociology research on the embeddedness of entrepreneurship and particularly the ethnic aspect of social relationships, however, has been distorted, as the enterprising actor in these analyses becomes invisible in favour of the ethnic group of which he is a member. Even the agency perspective eventually argues in terms of the success or failure of ethnic groups entering business. The main interest of these analyses is ethnic group-oriented, with the Turkish group being of the utmost interest for both researchers and policy makers, as there is evidence that this group has a broader sector distribution than Italians or Greeks, who dominate the restaurant sector and whose selfemployment rates seem, owing to clustering in this sector, to have reached saturation point. At the same time, consultants and policy makers expect a steep rise in the selfemployment rate of the Turkish group in coming years (ATIAD – Verband türkischer Unternehmer und Industrieller in Europa e.V. (1996), Wilpert, 2003, p. 255). The biographical approach in ethnic business research aims at going beyond the collective approach of comparing ethnic group achievements and shifts the focus from the group to the enterprising actor. This approach investigates the specific biographical background of the entrepreneurial activity of migrants, the genesis of motivation towards entrepreneurship, the strategies migrants develop in coping with multiple barriers and mobilizing resources, and the interrelationship between the enterprising actor and his or her social networks (Apitzsch and Kontos, 2003). The biographical approach enables one to investigate the interaction of opportunity structure and group characteristics as a complex process and to gain insights on the dynamics of this interaction in a specific historical context. From this perspective, a dominant motivational pattern arises in the form of a struggle for recognition emerging from a range of negative experiences in multiple social fields: society as a whole, the educational system, the labour administration, but also the person’s family or ethnic group. For the second generation, the experience of disdain can be intensified through an evaluation of life, where the migrant parents are perceived in the margins of the host society. In this way, the theory of disadvantage as a motivational basis for ethnic entrepreneurship can be reformulated and coupled to the empowerment theory, as ethnic entrepreneurship can indeed rely on experiences of exclusion and disdain. However, being a product of a struggle for recognition and an effort to repair harmful experiences associated with injured identities, ethnic entrepreneurship is at the same time a method to overcome the experience of exclusion and to gain self-esteem and empowerment. In this context, ethnic resources can have an ambivalent meaning, precisely when the entrepreneurial activity of female migrants is a struggle to gain recognition within ethnicfamilial networks. In these cases, the female migrants tend to utilize resources other than ethnic ones (Kupferberg, 2003; Kontos, 2004). The finding of ethnic business research, that men and women have unequal access to ethnic resources for enterprise, can be further elaborated: women not only have less access to ethnic resources, they also experience ethnic resources as male-dominated and therefore relate their efforts at emancipation from male or familial dominance to the autonomization from what could be ethnic resources. Moreover, concerning the motivation related to migrant enterprise, it came out that, while for many of the ethnic entrepreneurs enterprise was the most probable path towards the realization of a pragmatic vocational interest, enterprise itself turns out to be a socializing field and shapes the attitude of the entrepreneur to his/her work. Out of the pragmatic interest in self-employment, an emphatic relationship towards entrepreneurship develops,

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as emergent experiences of the growth in competencies confer a source of empowerment and self-development (Kontos, 2003b). Self-evaluations reveal that there is rarely a latent wish to give up the enterprise and take a dependent job, as assumed by the advocates of the disadvantage theory, even if the entrepreneurial activity was initially associated with the pragmatic interest of avoiding and overcoming unemployment. Self-employment in most cases is evaluated as a terrain of autonomy and self-development. Furthermore, the biographic analysis enabled insights on the processes and pathways used to activate entrepreneurial activity. In particular, gender-specific aspects of well underpinned theories, such as the theory of socialization towards ethnic entrepreneurship of Bailey and Waldinger (1991), could be outlined. Bailey and Waldinger identified employment of co-ethnic migrants in an ethnic economy as an informal training terrain for ethnic entrepreneurship, as the employees are socialized to entrepreneurship and receive the skills and network accesses needed for enterprise. This theory refers to male ethnic entrepreneurs, given that migrant women’s entrepreneurial activities remained invisible to migration researchers for a long time. Analyses of biographical narrations by self-employed migrant women showed that the theory of ethnic economy as an informal training terrain for entrepreneurship can be applied to female migrants too. The main difference is that female migrants are mainly involved in the business as assisting family members and not as employees, and that the path to entrepreneurship is in some cases related to inner family conflicts and autonomization processes. Four main paths could be reconstructed in the transition from assisting family member to being self-employed.17 a.

The conflict-rife separation from the family business and the start of one’s own business. b. The mutation to co-entrepreneur through expansion of the family business and creation of more business units. c. The transition to entrepreneur in the framework of intergenerational business succession. d. The failure of escaping self-employment through integration in the dependent labour market owing to failed educational strategies. Thus the increasing number of female migrant entrepreneurs in the last decades in Germany can also be explained through the socialization of the second generation to entrepreneurship within enterprising migrant families. Taking the perspective of the biographical process, the analysis can deepen the understanding of the role of social capital for enterprise, revealing various forms of social capital that emerged within a specific historical situation, such as the framework of political organizations or religious groups. Also the central role played by human capital for the pioneers of ethnic enterprise becomes obvious, as does the role of ‘intellectual’ migrants, be it the students, or political activists, in any case those who could cope with the foreign language and the new social and economic rules in setting up the first businesses. In this sense, knowledge about migrant entrepreneurship in the historical context, and the interrelationships between ethnic business, ethnic leadership and community structures, can be deepened. Also in this approach, membership of ethnic groups remains central for understanding entrepreneurship, as enterprise arises and operates within the framework of ethnic networks and can target markets in ethnic communities. However,

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the structure of the biographic context of enterprise is, instead, anchored in the ethnic context. The ethnic aspect becomes an object of investigation instead of an independent variable, as the question is how the entrepreneur utilizes ethnicity, instead of asking how ethnicity produces entrepreneurship. An analysis of the statistical data on migrant entrepreneurship and assisting family members shows that ethnic entrepreneurship in Germany can less and less rely on ethnic labour, and in particular on family labour. The problem of access to ethnic resources that has been implied for women can now also be pointed to for men, even if it is to a lower degree. The development of the numbers of assisting family members in relation to selfemployment numbers shows that migrant entrepreneurship is being less and less conceptualized as a family business. Individualization processes take place and the female members in families of ethnic entrepreneurs are more and more likely to pursue their own projects and not to subordinate their life plans to those of the family. The upcoming entrepreneurialism, despite the problems that it may entail and which cannot be discussed in this chapter, could offer hope that the participation of migrants in policy support increases may compensate for the decrease in ethnic family resources, for both male and female migrants. Notes 1.

2.

3. 4. 5.

6.

7.

8. 9. 10.

11.

In 2000, according to the data of the European Labour Force Survey, only in Denmark was the selfemployment rate, with 8.17 per cent, lower than that for Germany, with 10.07 per cent. The UK had a selfemployment rate of 11.31 per cent, Sweden 10.61 per cent, Italy 24.23 per cent and Greece 32.36 per cent (Apitzsch and Kontos, forthcoming). After the war, seven million ethnic Germans from East European countries and later from the GDR came to Germany. These populations were soon socially and economically integrated. The new wave of ethnic Germans from the countries of the former Soviet Union comprises more than two million people (Beauftragte des Bundesregierung für Migration, Flüchtlinge und Integration, 2004, p. 33). Recruitment agreements were made by the Federal Republic of Germany with Italy (1955), Greece (1960), Spain (1960), Turkey (1961), Portugal (1964), Tunisia (1965), Morocco (1966) and Yugoslavia (1968). The EEC Contract entailed the right of settlement for EEC citizens in EEC countries. This contract materialized in Germany through the ‘Law for Entry into the country and the residence of citizens of the European Economic Community’ from 22.7.1969 (von Loeffelholz et al., 1994, p. 30). According to information from the director of the German Association of Hotel and Restaurant Owners in Frankfurt, restaurant owners from the Federal Republic of Yugoslavia are confronted with bottlenecks in relation to supply of their restaurants with appropriate specialized cooks, as they are not eligible to recruit specialized cooks from their country of origin. Similarly, the Commissioner of the Federal Government for the Issues of Foreigners (Beauftragte der Bundesregierung für Ausländerfragen, 2002, pp. 308–9) recommends in her report of September 2002 the support of migrant entrepreneurship. A similar position is taken in the 6th Report on Families of the Federal Ministry for Families, Seniors, Women, and Youth (Bundesministerium für Familie, Senioren, Frauen und Jugend, 2000). A residence permit will be granted if the migrant invests at least a million Euros and creates ten workplaces. If this is not the case, a permit of residence can still be given once a positive assessment is made of the workability of the underlying business idea, the experience of the migrant as an entrepreneur, the level of capital invested, the effects on the employment and the training situation and the possible contribution to innovation and research. (See Beauftragte der Bundesregierung für Migration, Flüchtlinge und Integration, 2004, p. 12.) See www.bmwa.bund.de/Navigation/Service/English/small-business-policy.html. Analysis of the data for the year 2000 in the German Socio-economic Panel, conducted yearly since 1984 by the German Institute for Economic Research (DWI). Because of the steel and mine industries, there is a high concentration of migrants in the Federal State of North Rhine-Westphalia. In the wake of large-scale deindustrialization processes and high unemployment, the number of migrant entrepreneurs in this region has increased. Several ministries in this state supported the establishment of and work done by the Centre for Turkish Studies which has conducted research on foreign-run, in particular Turkish, entrepreneurship. The numbers are taken from the micro-census as reported by von Loeffelholz et al. (1994, p. 32).

Immigrant entrepreneurs in Germany 12. 13. 14.

15. 16. 17.

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Micro-census data, as reported by the Expert Commission of the Ministry of Family, Seniors, Women and Youth (Bundesministerium für Familie, Senioren, Frauen und Jugend, 2000, p. 151). Still in 2000, the self-employment rate in Greece was 33 per cent and in Italy 24 per cent (Apitzsch and Kontos, forthcoming). Germany was a favourite place for university studies among Greek students, as one could work occasionally in the expanding industry to cover costs of studies. The social and class background of Greek students was diverse as they also came from non-privileged families in the urban and rural regions. Greek students comprised the largest foreign students group attending German universities in the late 1960s and the 1970s. The migration wave of Greek students was strong until the end of the 1980s. In 2000, there were 1308 restaurants registered in Frankfurt am Main; in 2002, the number had decreased to 1116. In contrast, the number of take-aways increased from 406 in 2000 to 437 in 2002 (IHK Frankfurt am Main, 2003, p. 8). Interesting is that the German Socio-Economic Panel discriminates between migrants of foreign citizenship and migrants of German citizenship. However, it is difficult to formulate hypotheses on the relationship between German citizenship and freelance profession. The interviews were conducted in the framework of the EU-project ‘Self-employment activities of women and minorities; their success or failure in relation to social citizenship policies’. The project was conducted under the leadership of Ursula Apitzsch.

References Anthias, F. (1992), Ethnicity, Class, Gender and Migration: Greek Cypriots in Britain, Avebury: Aldershot. Anthias, F. and N. Mehta (2003), ‘The intersection between gender, the family and self-employment: the Family as a resource’, International Review of Sociology, 13(1). Apitzsch, U. and M. Kontos (2003), ‘Self-employment, gender and migration. Introduction’, International Review of Sociology, 13(1). Apitzsch, U. and M. Kontos (2004), ‘The chances of the second generation in families of ethnic entrepreneurs’, RTD Project, Second Annual Project Report, Frankfurt a.M. Apitzsch, U. and M. Kontos (eds) (forthcoming), Self-employment Activities of Women and Minorities, Wiesbaden: VS-Verlag. ATIAD – Verband türkischer Unternehmer und Industrieller in Europa e.V. (ed.) (1996), Türkisches Unternehmertum in Deutschland. Die unsichtbare Kraft: Bestandsaufnahme 1996 und Perspektiven für das Jahr 2010, Düsseldorf: ATIAD. Aygün, S. and A.F. Baz (2002), Ganz Oben. Türken in Deutschland, Wiesbaden: Wirtschaftsverlag. Baethge, M. (1999), ‘Warum tun sich die Deutschen mit der Dienstleistung so schwer? Über die Hartnäckigkeit des industriellen Denkens und die Konturen einer anderen Arbeitsgesellschaft im 21. Jahrhundert, Frankfurter Rundschau, 8. Baethge, M., R. Rock et al. (1999), ‘Dienstleistungen als Chance: Entwicklungspfade für die Beschäftigung. Im Rahmen der BMBF-Initiative “Dienstleistungen für das 21. Jahrhundert” ’, Göttingen: SOFI. Bailey, T. and R. Waldinger (1991), ‘Primary, secondary, and enclave labor markets: a training system approach’, American Sociological Review, 56(4), 432–45. Beauftragte der Bundesregierung für Ausländerfragen (2002), Bericht der Beauftragten der Bundesregierung für Ausländerfragen über die Lage der Ausländer in der Bundesrepublik Deutschland, Berlin. Beauftragte der Bundesregierung für Migration Flüchtlinge und Integration (ed.) (2004), Migrationsbericht der Integrationsbeauftragten im Auftrag der Bundesregierung, Berlin. Blaschke, J. and A. Ersöz (1986), ‘Die türkische Ökonomie in Berlin’, Forum – Zeitschrift für Ausländerfragen und Kultur, 1, 58ff. Blaschke, J. and A. Ersöz (1987), Herkunft und Geschäftsaufnahme türkischer Kleingewerbetreibender in Berlin, Berlin: Express Edition. Bögenhold, D. (1987), ‘Selbständige im Beschäftigungssystem’, Soziale Welt, 5, 317–33. Bögenhold, D. (1989), ‘Die Berufspassage in das Unternehmertum. Theoretische und empirische Befunde zum sozialen Prozeß von Firmengründungen’, Zeitschrift für Soziologie, 4, 263–81. Bögenhold, D. (2000), ‘Limits to mass production: entrepreneurship and industrial organization in view of the historical school of Schmoller and Sombart’, International Review of Sociology, 10(1), 57–72. Bukow, W.-D. (1993), Leben in der multikulturellen Gesellschaft. Die Entstehung kleiner Unternehmer und der Umgang mit ethnischen Minderheiten, Opladen: Westdeutscher Verlag. Bundesministerium für Familie Senioren Frauen und Jugend (2000), ‘Familien ausländischer Herkunft in Deutschland, Leistungen-Belastungen-Herausforderungen, Sechster Familienbericht’, Berlin: Bundesministerium für Familie, Senioren Frauen und Jugend. Bundesministerium für Wirtschaft und Arbeit und Beauftragte der Bundesregierung für Migration Flüchtlinge und Integration (2003), Tag des türkischen Mittelstandes in Deutschland, 17. Sept. 2003, Berlin.

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Constant, A. and D.S. Massey (2002), ‘Return migration by Germany guestworkers: neoclassical versus new economic theories’, International Migration Review, 40(4), 5–38. Constant, A., Y. Shachmurove et al. (2003), ‘What makes an entrepreneur and does it pay? native men, Turks, and other migrants in Germany’, IZA Discussion Paper no. 940, November. Dohse, K. (1981), Ausländische Arbeiter und bürgerlicher Staat. Genese und Funktion von staatlicher Ausländerpolitik und Ausländerrecht, Königstein. Geck, H.M. (1979), Die griechische Arbeitsmigration, Königstein: Atheneum. Gitmez, A. and C. Wilpert (1987), ‘A micro-society or an ethnic community? Social organization and ethnicity amongst Turkish migrants in Berlin’, in J. Rex, D. Joly and C. Wilpert (eds), Immigrant Associations in Europe, Aldershot, Brookfield USA, Hong Kong, Singapore, Sydney: Gower Publishing Company Limited. Goldberg, A. (1996), ‘Unternehmensgründungen von Ausländern in der Bundesrepublik Deutschland’, in F. Sen and A. Goldberg (eds), Türken als Unternehmer. Eine Gesamtdarstellung und Ergebnisse neuerer Untersuchungen, Opladen: Verlag Leske & Budrich, pp. 47–80. Goldberg, A. and F. Sen (1997), ‘Türkische Unternehmer in Deutschland. Wirtschaftliche Aktivitäten einer Einwanderungsgesellschaft in einem komplexen Wirtschaftssystem’, in H. Häußermann and I. Oswald (eds), Zuwanderung und Stadtentwicklung, Leviathan, Sonderheft 17/1997, Opladen, Wiesbaden: Westdeutscher Verlag, pp. 63–84. Hatz, G. (1997), ‘Die Märkte als Chance für Ausländer – Ausländer als Chance für die Märkte’, in H. Häußermann and I. Oswald (eds), Zuwanderung und Stadtentwicklung, Leviathan, Sonderheft 17/1997, Opladen, Wiesbaden: Westdeutscher Verlag, pp. 170–91. Hartz, P., Norbert Bensel et al. (2002), Moderne Dienstleistungen am Arbeitsmarkt. Vorschläge der Kommission zum Abbau der Arbeitslosigkeit und zur Umstrukturierung der Bundesanstalt für Arbeit, Berlin. Häußermann, H. and I. Oswald (eds) (1997), Zuwanderung und Stadtentwicklung, Leviathan, Sonderheft 17/1997, Opladen, Wiesbaden: Westdeutscher Verlag. Hillmann, F. (1998), ‘Türkische Unternehmerinnen und Beschäftigte im Berliner ethnischen Gewerbe’, WZB discussion paper FS I 98-107, Berlin: Wissenschaftszentrum Berlin für Sozialforschung. Hillmann, F. and H. Rudolph (1997), ‘Redistributing the cake? Ethnisation processes in the Berlin food sector’, WZB discussion paper FS I 97-101, Berlin: Wissenschaftszentrum Berlin für Sozialforschung. Hinz, T. and M. Jungbauer-Gans (1999), ‘Starting business after unemployment: characteristics and chances of success’, Entrepreneurship & Regional Development, 11, 317–33. Hollifield, J.F. (1992), Immigrants, Markets, and States. The Political Economy of Postwar Europe, Cambridge, MA, London: Cambridge University Press. Irmscher, J. (2000), ‘Die Griechenkolonie in Dresden’, in E. Konstantinou (ed.), Griechische Migration in Europa. Geschichte und Gegenwart, Frankfurt and New York: Verlag Peter Lang. Kanein, W. (1988), Ausländerrecht: Ausländergesetz, materielles Asylrecht, Asylverfahrensgesetz sowie arbeitsund sozialrechtliche Vorschriften, Munich: Verlag C.H. Beck. Kapphan, A. (1997), ‘Russisches Gewerbe in Berlin’, in H. Häußermann and I. Oswald (eds), Zuwanderung und Stadtentwicklung, Leviathan, Sonderheft 17/1997, Opladen, Wiesbaden: Westdeutscher Verlag, 121–37. Kazakos, P. (1995), Greeks in the Countries of the European Union, Athens: GGAE (in Greek). Kontos, M. (1997), ‘Von der Gastarbeiterin zur Unternehmerin. Biographieanalytische Überlegungen zu einem sozialen Transformationsprozeß’, Deutsch Lernen, 22(4), 275–90. Kontos, M. (2003a), ‘Erwerbswirtschaftliche Selbständigkeit von Migrantinnen. Motivation und Lernprozesse’, in U. Apitzsch and M. Jansen (eds), Migration, Biographie und Geschlechterverhältnisse, Münster: Verlag Westfälisches Dampfboot, 111–42. Kontos, M. (2003b), ‘Self-employment policies and migrants’ entrepreneurship in Germany’, Entrepreneurship & Regional Development, 15(2), 119–36. Kontos, M. (2004), ‘Considerations on the biographical embeddedness of ethnic entrepreneurship’, in P. Chamberlayne, J. Bornat and U. Apitzsch (eds), Biographical Methods and Professional Practice, Bristol: The Policy Press, pp. 57–72. Kupferberg, F. (2003), ‘The established and the newcomers: what makes immigrant and women entrepreneurs so special?’, International Review of Sociology, 13(1). Leung, M.W.H. (2002), ‘From four-course Peking duck to take-away Singapore rice. An inquiry into the dynamics of the ethnic Chinese catering business in Germany’, International Journal of Entrepreneurial Behaviour & Research, 8(1/2), 134–47. Leung, M.W.H. (2003), ‘Beyond Chinese, beyond food: unpacking the regulated Chinese restaurant business in Germany’, Entrepreneurship & Regional Development, 15(2), 103–18. Leung, M.W.H. (2004), Chinese Migration in Germany. Making Home in Transnational Space, Frankfurt a.M., London: IKO Verlag für Interkulturelle Kommunikation. Light, I. and S.J. Gold (2000), Ethnic Economies, San Diego, San Francisco, New York, Boston, London, Sydney, Tokyo: Academic Press.

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Light, I. and S. Karageorgis (1994), ‘The ethnic economy’, in N.J. Smelser and R. Swedberg (eds), The Handbook of Economic Sociology, Princeton, New York: Princeton University Press, Russell Sage Foundation, pp. 647–71. Morokvasic, M. (1988), Minority and Immigrant Women in Self-employment and Business in France, Great Britain, Italy, Portugal and Federal Republic of Germany. Paris/Brussels, Report to the EEC. V/1871/88. Morokvasic, M. (1991), ‘Roads to independence: self-employed immigrants and minority women in five European states’, International Migration, 3. Mückenberger, U. (1985), ‘Die Krise des Normalarbeitsverhältnisses’, Zeitschrift für Sozialreform, (7-8). Nikolinakos, M. (1973), Politische Ökonomie der Gastarbeiterfrage. Migration und Kapitalismus, Reinbek bei Hamburg: Rowohlt. Osterland, M. (1990), ‘Normalbiographie’ und ‘Normalarbeitsverhältnis’, in P. Berger and S. Hradil (eds), Lebenslagen, Lebensläufe, Lebensstile, Göttingen: Verlag Otto Schwartz & Co., pp. 351–62. Pang, C.L. (2003), ‘Belgium: from proletarians to proteans’, in R. Kloosterman and J. Rath (eds), Immigrant Entrepreneurs. Venturing Abroad in the Age of Globalization, Oxford, New York: Berg, pp. 195–212. Pichler, E. (1992a), Italienische Migration und Kleingewerbe. Entwicklung und Chancen kleiner und mittlerer Betriebe in der Bundesrepublik Deutschland, Berlin: Edition Parabolis. Pichler, E. (1992b), Ökonomische Nischen, ethnische Ökonomie und internationale Vernetzung. Die italienischen Gewerbetreibenden in Berlin, Berlin: Edition Parabolis. Pichler, E. (1997a), ‘Migration und ethnische Ökonomie: das italienische Gewerbe in Berlin’, in H. Häußermann and I. Oswald (eds), Zuwanderung und Stadtentwicklung, Leviathan, Sonderheft 17/1997, Opladen, Wiesbaden: Westdeutscher Verlag, pp. 106–20. Pichler, E. (1997b), Migration, Community-Formierung und ethnische Ökonomie. Die Italienischen Gewerbetreibenden in Berlin, Berlin: Edition Parabolis. Pütz, R. (2004), Transkulturalität als Praxis. Unternehmer türkischer Herkunft in Berlin, Bielefeld: Trascript Verlag. Rudolph, H. and F. Hillmann (1997), ‘Döner contra Boulette – Döner und Boulette: Berliner türkischer Herkunft als Arbeitkräfte und Unternehmer im Nahrungsmittelsektor’, in H. Häußermann and I. Oswald (eds), Zuwanderung und Stadtentwicklung, Leviathan, Sonderheft 17/1997, Opladen, Wiesbaden: Westdeutscher Verlag, pp. 85–105. Schmidt, D. (2000), ‘Unternehmertum und Ethnizität – ein seltsames Paar’, PROKLA, 30(3), 353–62. Seidel-Pielen, E. (1996), Aufgespießt. Wie der Döner über die Deutschen kam, Hamburg: Rotbuchverlag. Seifert, W. (2001), Berufliche Integration von Zuwanderern in Deutschland. Gutachten für die Unabhängige Kommission ‘Zuwanderung’ beim Bundesministerium des Inneren, Düsseldorf: März. Sen, F. and A. Goldberg (eds) (1996), Türken als Unternehmer. Eine Gesamtdarstellung und Ergebnisse neuerer Untersuchungen, Opladen: Verlag Leske & Budrich. Speckesser, S., G. Schmid et al. (2001), ‘Does active labour market policy matter? An aggregate analysis for Germany’, in H. Mosley and J. de Koning (eds), Labour Market Policy and Unemployment. An Evaluation of Active Measures in France, Germany, the Netherlands, Spain, and Sweden, Cheltenham, UK and Northampton, MA, USA: Edward Elgar, pp. 77–114. Statistisches Bundesamt (2004), Bevölkerung und Erwerbstätigkeit. Stand und Entwicklung der Erwerbstätigkeit. Fachserie 1/ Reihe 4.1.1. Ergebnisse des Mikrozensus 2003. Band 2 Deutschland, Wiesbaden. Stavrinoudi, A. (1991), Das ethnische Kleingewerbe in Berlin am Beispiel der griechischen Gastronomie, Berlin: Edition Parabolis. Stavrinoudi, A. (1992), Griechische Gewerbetreibende in Berlin. Entstehung, Entwicklung und internationale Vernetzung einer ethnischen Ökonomie, Berlin: Edition Parabolis. Unabhängige Kommission ‘Zuwanderung’ (2001), Zuwanderung gestalten Integration fördern, Bericht, Berlin. von Loeffelholz, H.D., A. Gieseck et al. (1994), Ausländische Selbständige in der Bundesrepublik unter besonderer Berücksichtigung von Entwicklungsperspektiven in den neuen Bundesländern, Berlin: Duncker & Humbolt. Waldinger, R., H. Aldrich, Robin Ward et al. (eds) (1990), Ethnic Entrepreneurs: Immigrant Business in Industrial Societies, Newbury Park: Sage. Werbner, P. (1999), ‘What colour “success”? Distorting value in studies of ethnic entrepreneurship’, The Sociological Review, 47(3), 548–79. Westwood, S. and P. Bhachu (eds) (1988), Enterprising Women. Ethnicity, Economy, and Gender Relations, London and New York: Routledge. Wilpert, C. (2003), ‘Germany: from workers to entrepreneurs’, in R. Kloosterman and J. Rath (eds), Immigrant Entrepreneurs. Venturing abroad in the age of globalization, Oxford, New York: Berg, pp. 233–60. Wu, S.-Y. (2000), ‘On the changing nature of entrepreneurship’, International Review of Sociology, 10(1), 41–56. Zentrum für Türkeistudien (ed.) (1995), Nur der Wandel hat Bestand. Ausländische Selbständige in Deutschland, Essen: Centre for Turkish Studies.

30 Migrant entrepreneurship in Germany Maggi W.H. Leung

A short tour in a German city Welcome! Standing at the entrance of the central train station, you see a large ‘Chinese’ restaurant across the street. If you turn left (or right, it does not matter), you will find a few Turkish döner kebab shops. Or would you rather enjoy your lunch at an ‘Italian’ pizzeria?1 There are also a few around the corner. After a light snack or a fabulous lunch buffet, you may like to pick up a delicious sundae from an Italian ice cream parlour to round off your meal. Then you are set to cruise around the city. You will find many greengrocers, kiosks and convenience stores, tea houses, delicatessen shops, clothing repairs and tailoring, video rental, travel agencies etc. operated by migrants. If you hop in a taxi after your exploration, it is also likely that you will meet a non-German-looking driver . . .

The story could go on much longer. The tourist would come across a collage of migrant businesses of different nature in this German city, some (such as retail and restaurant trade) visible at the street level and some not (such as construction and other commerce businesses). Between 1980 and 2000 the self-employment rate of migrants had increased by about 30 per cent, as compared to a less than 1 per cent increase among German nationals (Kontos, 2003). Entrepreneurship is increasingly perceived to be a way out for migrants in Germany who face, more often than their non-migrant counterparts, finding meaningful jobs in the formal labour market. The German nationals are also supposed to learn from the example. The German state now identifies self-employment and entrepreneurship as solutions to the nagging high unemployment rate that are relatively inexpensive and technically simple. Wolfgang Clement, the Federal Minister of Economics and Labour, recently also called for ‘a new culture of independence’ (‘eine neue Kultur der Selbständigkeit’) in his country. The turning of the political culture regarding independent economic activities has aroused more interest in academic circles. Social scientists, researchers in economics, geography, migration studies and urban studies have recently become active in their investigation into the nature, structure and importance of migrant businesses and ethnic economies (Blaschke, 2001; Blaschke et al., 2000; Bögenhold, 1989; Floeting and Henckel, 2003; Gitmez and Wilpert, 1987; Goldberg and Faruk, 1999; Hillmann, 1999, 2001; Jung and Abaci, 2005; Kontos, 2003; Leung, 2004; Lohmann and Luber, 2004; Pütz, 2000, 2003; Reize, 2004; Welter, 1999; Wilpert, 1999, 2003). Many of the studies are based upon the concepts and assumptions of their pioneers in North America and the UK, where the phenomenon has been a dynamic research topic since the 1950s and 1980s, respectively. This chapter provides an overview and analysis of migrant entrepreneurship in Germany and pays special attention to the impact of the macro-institutional framework and specific policies regulating immigration, self-employment and entrepreneurship on the emergence, development and daily practices of migrant self-employment and businesses. Specifically, the chapter will begin with a brief background on international migration in Germany in the post-World War II period. The changing discourse on self-employment 464

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and entrepreneurship will then be introduced. The next section will pay attention to the relevant characteristics of the welfare regime that have impact on (migration) entrepreneurship. Following the macro-level analysis, specific policies regulating entrepreneurship will be discussed in details focusing on the related legislations implemented as part of the ‘Agenda 2010’ since 2003. After the more general discussion, the chapter will turn to the case of Asian migrant businesses to illustrate how the welfare regime, together with an array of specific policies, interact with the opportunity structures on the one hand, and the socio-cultural capital of the migrants on the other, to produce the dynamic landscape of entrepreneurship in Germany. Particular references will be drawn from my research conducted on the Chinese migrant-operated restaurants, computer hardware trading firms and travel agencies (Leung, 2004) to illustrate how policies of different nature and spatiality work to mould the entrepreneurs’ locational and businesses strategies. Germany: a historical immigration country Labour migrants have played a significant role in the economic development of Germany for centuries. As early as the end of nineteenth and early twentieth century, Germany was the destination of large numbers of Polish workers who were imported to work in the mining sector. During World War II, millions of foreign workers from Nazi-occupied territories were forced to work in the German heavy manufacturing sector. In post-war Europe, Germany (along with France and the UK) became one of the most prominent immigration countries. Today, over 7.3 million people without German nationality officially live in the Federal Republic (Figure 30.1), comprising almost 9 per cent of the total population. Migrants in Germany are composed of three groups: the Ausländer (foreigners) who are predominantly Gastarbeiter (‘guest-workers’), asylum seekers and ‘Aussiedler’ (ethnic German settlers). As opposed to the former two groups of migrants, Aussiedler are considered officially and perceived primarily as Germans and not as foreigners. They also enjoy certain privileges that are established to foster their integration into the society and labour market. These include assistance with language training, employment and welfare that have not been as available for the other migrant groups. Owing to this difference in legal status, this chapter will focus on non-Aussiedler migrant entrepreneurs.2 Significant increase in in-migration of non-Aussiedler began in the second half of the 1950s as a result of a labour shortage prompted by rapid economic recovery. Germany signed a series of bilateral recruitment agreements and opened its gate to the so-called ‘guest-workers’. These agreements were arranged first with Italy in 1955, then with Spain (1960), Greece (1960), Turkey (1961), Portugal (1964) and Yugoslavia (1968). As the German government had adopted an exclusionist policy to prevent workers from Asia and Africa settling in Germany, contract workers from origins other than the above-mentioned ones were minimal. Only in the latter stage of the recruitment drive were contract workers from Morocco (1963) and Tunisia (1965) accepted. In the 1970s, and 1980s, a limited number of South Korean and Filipino nurses were also recruited. The demand for workers fell in 1973, when a period of economic recession began in Germany. The government declared a ban on the recruitment of foreign workers, but, by that time, a large proportion of ‘guest’-workers had already acquired residence permits of a longer or permanent duration. As Max Frisch’s famous expression has it, ‘Wir wollten Arbeiter und es kamen Menschen’: Germany did not expect humans to come when they recruited contract

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51 61 7 8 9 0 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8 9 0 1 2 3 19 19 196 196 196 197 197 197 197 197 197 197 197 197 197 198 198 198 198 198 198 198 198 198 198 199 199 199 199 199 199 199 199 199 199 200 200 200 200 Year

Figure 30.1

Number of non-German nationals in Germany (1951–2003)

Data source: Statistisches Bundesamt.

Persons (in thousands)

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workers. Beyond the plan of the workers’ recruitment, many of these ‘guests’ did not return to their home countries. Rather, their families made the journey to join them in Germany. In-migration due to family reunification balanced out approximately the number of workers returning home. The number of foreigners thus stayed more or less constant throughout the 1980s at between 4 and 4.5 million, though with lower labour force participation. Soon after reunification, Germany once again relaxed the ban on foreign workers recruitment and temporary contract workers were hired from Central and Eastern European countries, in particular Yugoslavia, Hungary and Poland. Guest-workers receive temporary residence and work permits ranging from three months for seasonal workers to a maximum of two years for contract workers. In 2002, a total of 374 000 temporary work permits were granted. Among these workers, about 50 per cent of the contract workers and 85 per cent of the seasonal workers were Polish citizens. In addition, around 20 000 ‘Green Card’ computer specialists, among whom about half came from India, were recruited from 2000 to 2004 to ease the labour shortage then in the information technology sector. Changing geopolitics and instability in Europe led to dramatic increases in the number of people seeking asylum in Germany. The peak was recorded in 1992 when almost 440 000 asylum seekers filed applications. As a result of the geopolitical development as well as a more stringent asylum application requirement, the number of asylum seekers declined steadily. In 2004, asylum applications totalled 35 600, the lowest since 1984. In general, Ausländer have often been represented in the press and media reports as undesirable and a problem, and used as scapegoats for socio-economic problems, such as persistent unemployment, rising criminality and a lack of economic growth, especially since the mid-1970s. To counter-argue against this kind of claims which are also common in other Western European countries, migrant experts of the Organisation for Economic Cooperation and Development (OECD) refute the ‘foreigner equals welfare burden’ stereotype by pointing to the fact that, for every unemployed foreigner, eight more legal migrants work and provide jobs for other Europeans. The Rhine-Westphalia Institute for Economic Research in Germany also pays tribute to migrants in Europe for their economic contribution. It was estimated in 2000 that non-nationals in the European Union earned at least US$461 billion a year and paid US$153 billion in taxes: far in excess of the estimated $92 billion migrants receive in welfare benefits (Weiss, 2000). Casting the public eye upon the economic productivity of migrants can have political implications. Business Week published a cover story in 2000 about economically successful migrant entrepreneurs in Western Europe at a time when Europe was marked by a rise in right-wing politics. The authors argue that underscoring the contribution of migrants to the European economy would be ‘[a] kind of hard-core economic argument [that] provide[s] one of the Continent’s best weapons against the anti-immigrant rhetoric of politicians such as Haider (Echikson et al., 2000)’.3 Old business in new package: a new image for entrepreneurship Self-employed (selbstständig or freiberuflich) in Germany refers to a heterogeneous group of workers of a wide range of occupations, including entrepreneurs and small business proprietors, professionals and craft workers, and unskilled manual and non-manual workers. Relative to other European countries, Germany has one of the lowest rates of self-employment among the advanced economies (Figure 30.2).4 With its traditionally

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5

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Per cent Nationals Non-nationals

Note: *Percentage of self-employed persons of total of employed persons. Source: Heinz (2003), based on Eurostat Labour Force Survey.

Figure 30.2

Self-employment rates* in EU states (2000)

strong manufacturing base, relatively high wage level and the fact that entitlement to social security payments is based on one’s previous participation in the work force, paidemployment has generally been a preferred way of livelihood. Between 1950 and 1980, the self-employment rate decreased from 16 to nine per cent (Bögenhold, 1989) when Germany was undergoing an economic boom. The labour market began to change in the age of intensified globalisation. In order to maximise profit or stay afloat in the global market, corporations have substituted labour with capital and technology, and shifted production to lower-cost locations, causing waves of corporate downsizing, similar to other countries throughout Europe and North America. With a rate of 9.4 per cent in 2003, Germany had the highest unemployment rate among OECD countries, only to be surpassed by Poland, the Slovak Republic and Spain (Figure 30.3). In addition to conventional tactics such as vocational training and re-education, the German state began recently to dress self-employment up with a glossier gown, hoping that a ‘new culture’ of self-employment would offer a solution to this persistent problem (Reize, 2004). More detailed analyses of the various policies adopted by the German state in creating this new culture will be provided in a latter section of this paper. From the 1970s to the end of the 1990s, the total number of self-employed individuals in Germany had grown by 78 per cent, while small enterprises with few employees had

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Data source: Reize (2004), p. 21.

Figure 30.3

Number of unemployed and self-employed in Germany

also increased in number by 38 per cent in two decades (Welter, 1999). According to official data extracted from the micro-census in 2000, published by the Federal Statistical Office, there were almost 257 000 self-employed non-nationals in Germany, accounting for 7.25 per cent of the total non-national working population (8.39 per cent for males and 5.26 per cent for females) (Table 30.1). Using another set of data from the European Labour Force Survey in 2000, Kontos (2003) calculated a self-employment rate of 8.81 per cent (10.21 per cent for males, and 6.39 per cent for females). As shown in Table 30.2, the self-employment rate of nationals had increased slightly between 1980 and 2000 (from 9.53 per cent to 10.19 per cent), while the self-employment rate of migrants had increased by about 30 per cent. The most striking increase was achieved by the self-employed female migrants, with an increased rate of almost 235 per cent. At present, almost 300 000 firms in Germany are owned by migrants (Jung and Abaci, 2005), representing about 6 per cent of all the self-employed/entrepreneurs in Germany. Migrant businesses in Germany, similar to the situations in many other countries, began as ethnic niche businesses set up to satisfy the demands of their ethnic peers. Small firms or businesses of this kind were established as early as in the 1960s, mainly by the Italians, Turks and Greeks. Green grocery shops, import–export firms, tea houses, cafes, restaurants

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Table 30.1

Development of self-employment in Germany (thousands) 1991 Female

Total population Total working population Total German nationals Total working population (German nationals) Total non-german nationals Total working population (non-german nationals) Self-employed (total) Self-employed (German nationals) Self-employed (non-german nationals)

1995

2000

Male

Female

Male

Female

Male

41 281 38 548 16 862 231 254 38 746 35 443 15 885 21 183

41 900 17 15 38 703 15 900

39 670 22 929 35 757 20 528

42 080 17 649 39 463 16 355

40 080 22 677 36 285 20 425

2 535 977

3 105 1 942

3 197 1 254

3 913 2 401

3 345 1 294

3 795 2 252

780 739 41

2 257 2 124 133

880 827 53

2 456 2 270 186

1 012 944 68

2 631 2 442 189

Data source: Federal Statistical Office micro census, with author’s calculations.

Table 30.2

Self-employment rates of migrants and non-migrants in Germany Nationals

Migrants

Year

All (%)

All (%)

Male (%)

Female (%)

1985 1990 1995 2000

9.53 9.16 9.47 10.19

5.77 6.43 8.05 8.81

7.34 7.20 9.52 10.21

2.72 4.86 5.27 6.39

Source: Kontos (2003), based on European Labour Force Survey.

and fast food/take-aways as well as specialized tourist bureaus are some common examples of these niche businesses. On the other hand, some of the migrants businesses cater mainly for German customers. For example, alteration tailoring and some restaurants and fast food shops have been set-up or adapted strongly to meet the consumption demand of German customers. In the course of time, migrant businesses have grown and occupied practically the entire trade in alteration tailoring and small, single-outlet green grocery retailing. In addition to the ‘traditional’ ethnic businesses mentioned above, increasing number of media firms (for example, publishers, printers, television broadcast stations), entertainment businesses (for example, discothèques, video rental stores), banks and insurance companies, real estate agents, driving schools, removal firms and so on can also be found. Ethnic economies are spatially varied but generally urban phenomena. While, in some places, migrant entrepreneurs cater for the general majority society, those in other locales focus on their co-ethnic clientèle. The spatial concentration of migrant populations generally stimulates the emergence of ethnic economies at neighbourhood levels. Turkish

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shops are examples par excellence, having profited from being clustered in certain neighbourhoods in large urban areas such as Berlin, Cologne, Frankfurt/Main, Düssburg and Essen. Having mentioned that, it is also important to highlight that ethnic businesses are not necessarily local in nature. Blaschke (2001; p. 9), for example, describes Berlin as having developed from ‘locally structured entities into a supra-regional form of economy operating beyond the borders of Germany and the European Union’, and become the ‘Mecca of döner kebab production’, providing customers throughout Europe with their products. Though much more modest in scale, my study of the Taiwanese-owned computer wholesale and retailers as well as Chinese travel agencies in Germany have also pointed to the transnational characteristics of migrant businesses today (Leung, 2004). Reflecting the general make-up of the migrant population, the Turkish migrant economy is the biggest in Germany. According to official statistics, the number of selfemployed Turkish migrants more than doubled in Germany, rising from 22 000 to nearly 60 000 between 1985 and 2000. While shops and restaurants account for the majority of businesses owned by these migrants, increasing numbers of them are offering professional services such as accounting, medicine and information technology in recent years, rising from 16 per cent in 1997 to about 22 per cent in 2003. Businesses owned by Turkish migrants together employed nearly 300 000 workers in 2003, had a turnover of 26 billion Euros, and invested some 6.5 billion Euros in Germany. According to a study conducted by the Association of Turkish Businessmen and Industrialists in Europe, together with the consultancy KPMG, the number of entrepreneurs of Turkish descent in Germany is expected to double again this decade, rising to 106 000 by 2010 (German Embassy, Washington D.C., 2003). Governing from macro scale: impact of the welfare regime on self-employment In the late 1990s, Dutch scholars Kloosterman et al. (1999) introduced the ‘mixed embeddedness approach’ to the study of migrant entrepreneurship, which has subsequently gained much popularity amongst researchers. Their argument is simple, namely the logic that, for a comprehensive understanding of any case of (migrant) businesses, a broader framework that pays attention to the social, economic and institutional contexts is necessary. The authors contend that a migrant group’s level of participation in entrepreneurship at a specific place and time results from the interplay between the socio-economic and ethno-social characteristics of the particular group and the opportunity structure in which it is embedded. This latter is a function of the state of technology, costs of production, nature of the demand for the products or services as well as the institutional framework (ibid.: p. 253). In spite of its obvious significance in shaping the opportunities for migrant entrepreneurs, analyses on the political-institutional framework have hitherto been peripheral to the scholarship. Pioneer Esping-Andersen (1990, 1993, 1996) argues that different welfare regimes lay down conditions for variable economic opportunity structures through their distinct ways of structuring the labour market, thus affecting the incentives and opportunities one has in becoming self-employed. As Kloosterman (2000) also confirms, a combination of migration regulations, social benefits, economic policies towards small businesses, the availability of venture capital and legal hindrances imposed on migrant entrepreneurs may all influence the self-employment rate among migrants to an observable degree. In his earliest essay on this topic, Esping-Andersen (1990) distinguishes three types of welfare regimes, namely (i) the American neo-liberal welfare state, (ii) the continental

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European or conservative welfare state, and (iii) the Scandinavian or social-democratic welfare state. Each regime in his typology is characterized by a certain level of market control through institutions, laws, rules and regulations. The German welfare state belongs to the second group, which is marked by a high level of state intervention in the market, income re-distribution and provision of services. Within this political framework, the author maintains, labour is strongly decommodified as a result of the high and easily accessible social welfare benefits, the presence of high minimum wages and strict labour regulations. The high level of welfare benefits and wages accounts for the general preference for paid jobs rather than self-employment. The relatively high amount of social benefits to which persons with legal status are entitled has often been perceived as a magnet for attracting migrants from poor countries. Freeman and Ögelman (2000) criticize this misperception by highlighting the fact that most migrants are primarily motivated by the desire to work, and that welfare programmes, such as pensions, health insurance and housing subsidies, might not be major incentives for job seekers and small-scale business owners. For those who consider themselves to be short-term residents, it is more important to maximize their savings for remittance, partly by avoiding the high payroll deduction for future social benefits. In Germany a formally employed person has to pay, in addition to income tax, a contribution for the reconstruction of Eastern Germany, national health insurance, pension insurance and redundancy insurance (contributions to the unemployment benefit plan). These could in some cases amount to almost half of one’s earnings. It is also important to note that many employers, especially those in small businesses, caught in sectors with intensifying competition, seek different ways to reduce expenses, such as eliminating social benefits for their employees. Thus, even if a migrant worker wishes to find a job in the formal market that provides legal rights and benefits, the opportunity is not always available. As Freeman and Ögelman (2000) conclude, deductions for future welfare benefits together with the taxation rates are more effective at pushing migrants into the informal economy than drawing them into formal employment. As opposed to the less-educated and less-trained migrants in neo-liberal welfare state regimes like New York and London (Sassen, 1991) where they have found providing personal services, such as child-care or housework assistance as a viable option, the high minimum wage level in conservative welfare regimes such as Germany hampers the expansion of this service sector. This is also related to another characteristic of the conservative welfare regimes, namely a lower female participation in the formal labour market. The relative ease for mothers to temporarily leave their jobs to rear a child to a large extent explains the retention of social reproduction within households in most continental European countries. Hence the demand for personal services in these economies is lower than in the neo-liberal welfare regimes. This partially accounts for the pre-eminence of entrepreneurship as an option among migrants in these societies (Kloosterman, 2000). Specific policies regulating (migrant) self-employment and entrepreneurship Beyond the macro-scale institutional welfare and political–economic framework, an array of policies has been established to control the terrain of entrepreneurship. The bundle of regulations has become more lenient following the implementation of the ‘Agenda 2010’ – ‘a key instrument’ in the fight against unemployment by reducing taxes and subsidies, loosening rigid labour market regulations and streamlining the country’s health care and

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pension systems – proposed by Chancellor Gerhard Schröder in March 2003. Before I turn to illustrate the impact of Agenda 2010, let me briefly outline the regulatory framework and effects in the previous policy era. Credentials are of extreme importance in Germany. They govern a person’s entry to a certain sector, including self-employment and entrepreneurship. To be a self-employed professional, one needs to have completed tertiary education. Similarly, to be a self-employed craftsperson in many craft trades, a Meisterbrief (master’s certificate), that verifies one’s passing of an examination following vocation training and several years of work experience, is required. The necessity of proofs of credentials such as a certificate from a tertiary educational institution or a master’s certificate has blocked the paths of many, especially migrants, who aspired to become self-employed as a professional or craftsperson. These two strictly regulated sub-groups of self-employed comprised as much as 40 per cent of all self-employed people in Germany, with craftspeople making up about 20 per cent and professionals about 17 per cent of the total self-employed workforce (Lohmann and Luber, 2004). Specific training is needed before the master’s certificate can be issued. The necessary training can be quite expensive, as much as 10 000 Euros. Even though the approval procedure has eased in recent years (Pütz, 2000; Wilpert, 1999), the legal requirement of proving their qualifications has still prevented many interested individuals from setting up their businesses. Some opt to pay a ‘partner’ with German citizenship merely for the use of his or her name to skip this hurdle.5 The master’s certificate regulation worked in tandem with the owner’s principle, whereby the owner of a craft trade business had to be the master him- or herself. Otherwise, only legal persons (joint stock companies) were allowed to establish craft trade businesses or take them over without having a master’s certificate themselves. According to the German regulation before the advent of Agenda 2010, setting up clothing repair shops, grocery stores and restaurants does not require written substantiation of the applicant’s training. This explains, to a large extent, the high concentration of migrant entrepreneurs in these sectors. The level of regulation of migrant self-employment and entrepreneurship differs, depending on the migrant’s nationality, his or her duration of stay in Germany and the kind of business planned. Since 1970, all EU citizens officially have the same right as German citizens to set up a business in Germany. Despite these policies, there have also been cases in which EU citizens encountered problems because the officials dealing with these issues were not well informed. In one case, a Spanish woman in Hannover, who applied for a permit to be a self-employed free-lancer, was required to produce a business licence which would have been necessary only for translators or lawyers, but not for freelancers. In addition, it took her six years to receive the permit to become self-employed even though she was an EU citizen. For non-Germans from outside the EU, there are more restrictions. Those who have a right-of-abode residence permit (Aufenthaltsberechtigung), which is usually obtainable after eight years of legal residency, face no legal restrictions to self-employment. Otherwise self-employment is not allowed for holders of other residence permits. It is, however, possible in some cases to apply for permission to set up a business. Depending upon a whole array of factors, such as the economic contribution of the proposed business as well as the applicant’s nationality and his or her marriage to a German citizen, the application is accordingly processed by the Chamber of Industry and Commerce or Chamber of Craft Trades. Studies have commented upon the fact that the decision process is discretionary (Evangelisch-lutheranisches Industriepfarramt, 1999).

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An important message conveyed by Schröder’s Agenda 2010 is the desire to raise the level of economic independence, especially among the unemployed. Some changes have been made to the Craft Trades Law, aiming to boost entrepreneurship in this sector by removing barriers to market entry. According to the new legislation that came into force in January 2004, 53 of the 94 official craft trades have been taken off the master’s certificate requirement list. The master’s certificate requirement remains for those craft trades where risk to life and limb for third parties can arise, including electrical engineers, vehicle builders and opticians. Those moved off the list include people who lay tiles and parquet flooring, interior decorators, tailors, music instrument makers and textile cleaners. Interestingly, occupations of an arguably similar skill level, such as bakers, painters and varnishers, carpenters and hair-dressers, stay on the list. Under certain preconditions, skilled workers without the certificates are allowed to lead a business even in the listed crafts. They must have at least six years of experience in the profession, four of which must have been in a senior, fully-responsible or management position. Furthermore, the owner’s principle has also been abandoned. Someone without a master’s certificate can now open or take over a craft trade business. Within the specified craft trades, it is sufficient if an operating manager with the master’s certificate or an exemption certificate is appointed. The relaxation of the old system removed a few serious obstacles and is expected to boost the number of businesses established, thus creating additional employment. Those aspiring to be self-employed in these trades can also apply for the funding from the state either through the ‘Bridging Allowance Scheme’ (Überbrückungsgeld) or the ‘Ich-AG’ programme. Since the implementation of Agenda 2010 in 2003, 680 000 people have been funded by either one of these programmes. The federal government announced recently that these initiatives are enjoying ‘sustainable success’ (Bundesregierung Online, 2005). The Bridging Allowance Scheme was first introduced under the Work Promotion Law (Arbeitsförderungsgesetz) in 1986 to help unemployed people to start their own businesses. Since its introduction, the scheme has been amended several times, switching from liberal and restrictive conditions.6 This active labour market policy instrument involves the payment of a bridging allowance to unemployed people who set up a business. The allowance is available for the entrepreneurs for up to six months. The value of the bridging allowance is equivalent to the level of unemployment benefits and the social insurance costs of the business-owner. In order to receive this allowance, applicants must submit a business plan and win a positive evaluation from an independent authority, such as the Chamber of Industry and Commerce, the Trusteeship of Rationalization (an association of medium-sized enterprises) or other consultants. Since Agenda 2010 was launched, up to February 2005, 378 600 entrepreneurs have started their businesses with a bridging allowance. Figure 30.4 illustrates the number of entrepreneurs supported by the scheme from 1986 to 2000. The financial commitment made by the German state to run these support schemes is considerable. In 2000, the German government spent an average of approximately 15 800DM per unemployed person who became self-employed, which was almost three times more than in 1986 (Figure 30.5). In addition, the worsening unemployment problem and improvement in promotion in the early 1990s has led to an increase in the number of self-employed being supported by the Bridging Allowance Scheme, shooting up from 13 000 in 1991 to almost a million cases by the end of the 1990s. The sharp increase in the

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Figure 30.4

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Figure 30.5

Amount of Bridging Allowance per recipient (DM)

number of recipients and the rise in per head support made up an annual budget of about 1.5 billion DM around year 2000 for the Bridging Allowance Scheme (Figure 30.6). Compared to other strategies adopted by the state to tackle the unemployment problem, however, the Bridging Allowance Scheme is relatively inexpensive. In 1996, the expenditure

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1600 1400 1200 1000 800 600 400 200 0

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Figure 30.6

Amount of Bridging Allowance distributed (millions DM)

for all active labour market policies – including the further training and job creation programmes – came to 41.2 billionDM. Only about one billion was spent on the Bridging Allowance Scheme, while almost 18 billion was spent on training measures (Reize, 2004). The ‘Ich-AG’ is one of Germany’s newest programmes to encourage self-employment and entrepreneurship with subsidies from the Unemployment Office (Arbeitsamt). An ‘IchAG’ is a company consisting of one person who is self-employed after a period of unemployment. The funding programme was brought into existence by the Commission, ‘Modern Services on the Labour Market’ (more popularly known as the ‘Hartz Commission’) in January 2003 to encourage self-employment among the unemployed. The Hartz Commission intended the Ich-AG concept to reduce unemployment, restructure the federal employment service, and reduce moonlighting by the unemployed. Those unemployed and receiving unemployment benefits or assistance, or those who have received work placement through the job creation programme (Arbeitsbeschaffungsmaßnahme) are eligible to apply. Recipients are entitled to up to three years of funding. In the first year the lump sum monthly allowance amounts to 600 Euros, in the next year 360 Euros and in the third 240 Euros. The subsidy is tax-free and does not have to be paid back. Applicants are not required to submit any business plan. By mid-March 2005, there were 257 000 Ich-AGs nation-wide, which accounted for just over 85 per cent of the total 300 000 firms established since the beginning of the programme. Reasons for entrepreneurs to depart from the programme can be two-fold: either they had given up and closed their firms or their annual income had exceeded the limit to be eligible for the funding, which is 25 000 Euros. How successful are the support schemes? Though being presented in a very positive light by the state, some observers question the effectiveness of these programmes. Comparatively, the Bridging Allowance Scheme seems to be more effective. According to the information exchange forum ‘ueberbrueckungsgeld.de’ (2005), among those who have

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established their businesses with bridging allowance, 70 to 80 per cent of those interviewed were still in business after three years of operation. Reize (2004) provides a more detailed analysis of the performance of the scheme. He concludes that bridging allowance has no impact on firm survival in Eastern Germany and a slightly positive effect in Western Germany. His study further concludes that the scheme’s direct goal of creating stable employment for the formerly employed is achieved, while the indirect aim of creating additional employment through the subsidized establishments is not, as these start-ups are recorded as having a lower employment growth rate compared to their non-subsidized counterparts. The situation is grimmer for the Ich-AGs. ‘Ueberbrueckungsgeld.de’ (2005) estimates that, by the end of 2005 – that is, within the first three subsidized years of their operations – more than 50 per cent of the Ich-AGs will have terminated their businesses. If the prognosis is correct, as many as 90 000 Ich-AGs will shut down in 2005 alone. This ‘horror’ scenario has prompted some critics to label the scheme a ‘flop’. It is argued that the requirement of a business plan is a contributory factor for the drastic difference in the sustainability of the businesses being supported by the two different funding programmes (ueberbrueckungsgeld.de, 2005). Have migrants benefited from these schemes? According to data provided by the German Labour Administration (Bundesanstalt für Arbeit), migrant participation rates in the Bridging Allowance Scheme have fluctuated between 2 and 5 per cent in recent years. Considering the increasing unemployment rate and the momentous growth in selfemployment among migrants, the participation rate among migrants in the programme can be considered very low. Using a biographical policy evaluation approach, Kontos (2003) identifies reasons for the low participation rate among migrants. She argues that the bridging allowance is intended for the unemployed who have a ‘normal’ biography organized around the ‘normal work relationship’; that is, having worked in dependent employment accompanied by social insurance. Migrants, more often than Germans, do not follow the ‘normal’ work biography. In essence, aspiring entrepreneurs among migrants are less likely to have registered as unemployed and to have contributed to the social insurance system; thus they are not eligible for the bridging allowance. Typical biographical paths to self-employment among migrants are as follows. First, many from other EU countries such as Italy and Greece migrated to Germany in the 1980s with the aim of starting a business. Since they were never employed or became unemployed, they are not eligible for support. The second group comprises those who have been engaged in entrepreneurial activities parallel to dependent employment as a sub-career, which then become their dominant occupation. Male migrants of the second generation entering entrepreneurship without first going through the dependent employment route are the third group who cannot apply for the assistance. Similarly, female would-be entrepreneurs who have previously been working in family businesses as assistants, planning to establish their own business (sometimes because of separation or divorce) are also ineligible for the allowance. Lastly, female migrant entrepreneurs who start their businesses after some years of child rearing are also excluded, as they have not contributed to the social insurance system as a wife and/or mother, or because their former dependent employment was conducted a long time ago, so that the acquired rights to unemployment benefits have expired. The same hurdles exist for the Ich-AG programme as the basic requirements for application for the funding are similar to those for the bridging allowance.

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In addition, Kontos also underlines the lack of institutional support in the form of consultation and professional assistance. The closure of these institutions to migrants can be explained by the ‘structures of prejudice and stereotypes’ commonly found among officers in charge of the allocation of funding. The author contends that migrant businesses are often presented as a phenomenon of inferiority and suspicion, connected to informality, criminality, mafia and exploitation in the public discourse, which perpetuate biases and prejudice against them. Moreover, common misperceptions that are highly gendered exist among administrators and officers. These include the view that migrant women were dependent and passive individuals who, on their own, were not suitable or capable of conducting entrepreneurial activities, or that migrants were all so well-informed and wellsupported through their social networks and ethnic associations that public assistance would be deemed unnecessary. Previous studies on migrant women entrepreneurs have shown otherwise. Goldberg and Faruk (1999) and Hillmann (1999), among other researchers, have concluded that Turkish women do not enjoy as many ethnic resources as their male counterparts, and sometimes prefer to avoid relying on co-ethnics when setting up a business or clientèle. Public support programmes have also been set up by agencies of different governance levels beyond the nation-state. Financial assistance and information support have been made available from the EU level, with the examples of programmes specifically catering for migrants, such as the HORIZON and INTEGRA. At the city level, a variety of schemes have also come into existence, often operated by the Chamber of Industry and Commerce or the Trusteeship of Rationalization. In Berlin, for instance, the immigration commissioner of the state has been promoting consultative services for ethnic startups and entrepreneurs since the beginning of the 1990s. The Association for Mutuality (Verein für Gegenseitigkeit e.V.), supported by the EU Social Fund, operated as a model project for the promotion of ethnic business start-ups in the capital city from 1996 to 1999. Also supported by the EU Social Fund since September 2001 is the ‘Entrepreneurs without Borders’ (‘Unternehmer ohne Grenzen’), a consultation unit located in the business start-up centre ‘Etage 21’ in St Pauli district of Hamburg, catering for young nonGerman nationals from St Pauli and Wilhelmsburg districts in the harbour city (Reinken, 2002). How successful are these programmes? A few scholars have expressed their reservations. Hillmann (2001) maintains that a lack of understanding of the structures and functional mechanisms of ethnic economies at the local level is a major hurdle for successful initiatives. She argues that such a knowledge gap might create unrealistic expectations in identifying migrant self-employment and entrepreneurship as an urban economic buffer or integration measures. Meager (1993) and Kontos (1997, 2003), for instance, consider that too little effort has been made specifically aimed at non-EU nationals despite their high rates of unemployment. They also point out the biases in these programmes where migrants, females and the less-qualified unemployed have in general experienced greater difficulties in receiving financial and other forms of assistance. To counteract these tendencies, some non-profit organizations have launched projects to serve the underserved. Examples include the Initiative of Self-employed Immigrant Women (Initiative Selbständiger Immigrantinnen e.V.) in Berlin and the Forum for German Women Business Founders (Deutsches Gründerinnen Forum e.V.) with the specific aim of assisting (migrant) women, who were under-skilled and lacked sufficient financial resources.

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Partly to counteract the obstacles posed by restrictive policies and the absence of state assistance programmes that cater to them, migrant communities have turned to developing social networks for support. In his study, Pécoud (2000) observed that the establishment of community business organizations within the Turkish, Italian, Greek and Vietnamese business communities in Berlin has not only served to provide support to the members. These self-organization initiatives have also contributed to their visibility and changed the way German business communities and policy makers think about migrants and their businesses. The salience of the mutual assistance sought through ethnic networking has unfortunately been used as a further excuse by policy makers or officials in state agencies for not providing them with public assistance. Having presented and analysed the macro-institutional framework and specific policies that apply to would-be migrant entrepreneurs in general, the following section will illustrate the lived experiences of a relatively small group of migrant in Germany, the Asian migrants. The focus will also be on the governed nature of their business operations. Asian migrant businesses By the end of 2003, there were almost 912 000 non-German nationals with Asian nationality residing in the Federal Republic. The most important countries of origin were Vietnam (88 208), Iran (81 495), China (76 743), Afghanistan (65 830), Lebanon (46 812), India (43 566), Sri Lanka (41 062) and Pakistan (35 081). Asian migrants have arrived in Germany under very diverse circumstances but generally ended up in Germany indirectly, for instance via the UK, France or the Netherlands. A more noticeable direct influx of Vietnamese arrived when Germany offered asylum to some 40 000 ‘boat people’ in the late 1970s (Migration News, 03/95). From 2000 to 2004, the state recruited about 20 000 ‘green card’ information technology specialists, about half of whom came from India. Immigration status and right to work As opposed to the major migrant groups who came as guest-workers, very few of the Asian migrants were recruited through a contract work arrangement. In the 1970s, and 1980s, a small number of Koreans and Filipinas came as nurses. What is particularly interesting and less remembered is a short-term state effort to recruit Taiwanese cooks in the mid-1960s. The scheme was primarily motivated by political rather than economic interests. Through this programme, the West German state invited 5000 cooks from Taiwan to establish Chinese restaurants in the Federal Republic. Each restaurant owner was allowed to hire five additional cooks as employees (Kaminer, 2000). This policy, together with the relatively large number of Hong Kong Chinese arriving, facilitated on the other hand by the then laxer passport policy of the British government, established a Chinese restaurant presence in the 1960s and 1970s. Another example that shows how immigration regulation can create self-employment is the case of Vietnamese migrants in the former East Germany. After German reunification in 1989, many of the Vietnamese migrants returned to Vietnam with a 3000DM subsidy from the German state. There was a substantial number, however, who could not or did not want to return to Vietnam, for political or other reasons. To regulate the situation, the German stated that only those Vietnamese migrants who could prove that they had enough income to provide for themselves and their families could receive a visa to stay in Germany after 1993. Faced with a rather closed formal labour market, declaring

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self-employed status was often the only way to receive a visa and remain in Germany (Hillmann, 2001). A study conducted in 1995 shows that about 50 per cent of the former Vietnamese contract workers were self-employed (Mehrländer, Ascheberg and Ueltzhöffer, 1996, cited in Wilpert, 2003). In a recent study on the Vietnamese communities in Berlin, Brandenburg and Sachsen, 84 per cent of the interviewees stated that they were self-employed (Trong, 1998, cited in Hillmann, 2001). As these Vietnamese work migrants are mainly less-educated and less-skilled, they tend to be channelled into labour-intensive sectors that require low capitalization for start-up (Chinese) restaurants, grocery or sewing and clothing repair shops are some of the popular ventures that these new entrepreneurs have considered. As opposed to this group of Vietnamese, many of the Asian migrants do not have the right to become self-employed because of their precarious legal status. Less than one-fourth of the Vietnamese, Afghan and Sri Lankan migrants hold an unlimited permit to stay in Germany. Many of them, therefore, do not have legal permission to work, and becoming self-employed is also restricted (van Naerssen et al., 2005). Restrictions of overseas labour recruitment State policies regulating overseas labour recruitment shape the business strategies of some sectors directly. The case of Chinese restaurant trade serves as a telling example. In 1997, the PR Chinese Ministry of Foreign Trade and Economic Co-operation (MOFTEC) and the German Central Employment Agency (Zentrale und Internationale Management- und Fachvermittlung für Hotel- und Gaststättenpersonal – ZIHOGA) reached an agreement that placed more rigid controls on the recruitment of chefs whose speciality was preparing Chinese cuisine. According to the agreement, a Chinese restaurant owner is eligible to hire from abroad either one or two chefs possessing proven certification from a training college, at least three years’ prior work experience as a chef, and German or English language proficiency. The hiring of more than two cooks (with a maximum of five) is only possible if a tax consultant attests that the gross annual turnover of the business per chef exceeds 75 000 Euros. In order to prevent these labour migrants from staying for a longer period in Germany, the work permit is first issued for one year with the possibility of a two-year renewal. A further extension is not allowed. Only after leaving Germany and waiting three years may the chefs once again apply for a work permit. Many Chinese restaurant owners consider this recruitment regulation frustrating and unfair. Instead of the established practice which restaurant owners preferred, whereby cooks were recruited through social networks mainly in China (which was legal before 1997), hiring now must be conducted through one of the 25 Chinese state agencies, which in theory provide training and perform assessment. Many restaurant owners consider these agencies to be a de facto licence for Chinese officials to extort money. While neither the MOFTEC nor ZIHOGA officially charge a fee for such recruitment service, chefs who use the required services of a certified Chinese educational agency have to pay a fee of 75 Euros per month during their contract period in Germany. The fee covers social insurance contributions in China, the provision of training programmes and the administrative fees of the Chinese authorities. There are also indications that additional fees are charged unofficially. Peng (2001a) reports that, in one case, a chef was requested to pay RMB30 000 (approximately 8500DM) for an assignment. In addition, extra fees are levied for the issue of a passport, visa, language courses and skills assessment. Before the advent of this recruitment system,

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employers in Germany were able to hire a chef in a few weeks. Now, the process takes at least three to five months and sometimes even longer. Some employers have also found that the ‘speciality chefs’ sent to Germany had apparently bought their certificates from corrupt officials and arrived without any prior cooking experience. The Chinese restaurateur communities in Germany have repeatedly initiated concerted efforts to have this system removed. Numerous petitions have been filed with MOFTEC and the Chinese Embassy. Repeated complaints and attempts since 1997 have so far been without success. The difficulty of finding qualified chefs was cited as a major problem in the business, particularly for those from Hong Kong, Taiwan or Singapore. A non-German restaurant owner is expected by the authority to establish a business that serves cuisine from his or her own country, thus necessitating chefs that come from the same place or have the same nationality. Consequently, a Hong Kong restaurant owner, for example, hiring a chef from China or Taiwan, will sometimes encounter difficulties. The arrival of Hong Kong Chinese in Europe dropped drastically when the UK stopped issuing ‘full’ British passports to Hong Kong citizens in 1962, making entry to the wider European continent more difficult. Furthermore, rising wage levels and living standards in the ‘Asian Dragons’, coupled with the restrictive German immigration policies, have made migrating to Germany a far less attractive option for skilled cooks from Hong Kong, Taiwan and Singapore. The difficulty of hiring trained staff has pushed many restaurateurs to alter their personnel and business strategies, causing them to resort to informal hiring and to adjust their menus so that the food served does not require skilled chefs. Many informants had no qualms about admitting that they had turned to selling ‘foreigner-cheating Chinese food’ for which a cook is not necessary as ‘[a]nybody can do that. Some rice, some veges, some meat and a bit of soy sauce’ would suffice to please ‘the customers who have no idea’. This explains, to a certain extent, the burgeoning ‘Chinese’ fast-food/take-away businesses in almost all German cities. As the Chinese restaurateurs face problems accessing skilled chefs from ‘home’, they turned to local migrants for labour. In recent years the German state has become more restrictive in granting work permits to asylum seekers who arrived after May 1997. The hiring of Vietnamese and Chinese asylum seekers, who had served as an important source of labour for Chinese restaurants when hiring from overseas, had become complicated and time-consuming, consequently creating problems. Some of my informants blame the policy systems of ‘forcing’ them into very stressful and sometimes illegal labour practice. It should be noted that many restaurant owners, seeking to cut costs rather than only reacting to difficulties in recruitment, have compounded the problem. Many owners of small restaurants consider it worth the risk to hire undocumented workers, which allows them to pay less than the minimum wage and avoid social welfare costs for these employees. As a matter of fact, informal personnel practice is not only limited to the hiring of undocumented workers. Because of the high level of taxation and social benefit contributions in Germany, which is a typical conservative welfare state, many workers possessing ‘papers’ also prefer to work without registering. This is a common practice among non-migrants as well. Faced with the difficulty of hiring trained employees, some of the elder generation have opted to retire earlier, while others turn to their family, relatives and friends for ‘help’. Law enforcement Drawing upon their understanding of migrant businesses in Dutch cities, Kloosterman et al. (1999) remind readers of the importance of observing how the various government

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agencies actually deal with these activities, as ‘law enforcement is not self-evident nor does it follow a fixed course’ (p. 256). The engagement of informal labour in many migrant (and non-migrant) businesses is well-known to the state agencies, who have the rôle of tightening or relaxing control, which in turn shapes the business tactics of entrepreneurs. A report in the community newspaper Chinesische Handelszeitung (Peng, 2001b) draws readers’ attention to the fact that check-ups for undocumented labour have been conducted more frequently and enforcement has been heightened. According to interviewed restaurateurs, control checks have always been performed, but violators were formerly ‘just’ fined to settle the dispute. In recent raids, undocumented workers were arrested and deported, which had not been the usual practice previously. In addition, fines charged to employers have increased drastically – in some cases, calculated by multiplying the daily wage of the worker and the number of days that the restaurant has been in business. This change in law enforcement, at least by some local authorities in Frankfurt and Berlin, has certainly made restaurant owners more guarded and, in some cases, caused them to refrain from hiring workers without work permits. Strict law enforcement can work to drive businesses away all together. My interviews with Taiwanese computer wholesalers in the late 1990s reflect this possibility. At that time, a number of these businesses had moved or were considering relocating to the Netherlands, not only because of the more attractive value-added tax system – VAT is not collected ‘up front’ in the Dutch system, as opposed to the practice in Germany, where distributors receive reimbursement only at the end of the fiscal year. Their business logic also considers the laxer perception of the Dutch authority which would allow more space for fraud and tricks in manipulating accounts to evade tax and the like. The impact of the ‘Goldfisch Aktion’ (‘Gold Fish Action’)7 incident in November 1996 helps to illustrate this point. The action involved police forces in Germany, France, Belgium and Italy joining hands to search thoroughly about 400 offices and homes of primarily Asian computerfirm owners; and employees were searched. Evidence was found that a few of these computer businesses had sold computer chips whose processing speeds were slower than that claimed; these chips might have damaged the computers in which they were used (Sagatz, 1996; Scherer, 1996; Hamburger Morgenpost, 27 Nov. 1996). A few of my informants acknowledged that the crackdown had driven a number of Taiwanese computer businesses away, to relocate to the Netherlands, for the Dutch are considered to be ‘more lenient and do not stick to the rule as much as the Germans do’. Venture capital Let us revisit the case of the Chinese catering trade. In addition to the relative ease of hiring suitable workers and their reduced market risk, fast food/take-aways and bistros are increasingly popular among new entrepreneurs also because of the difficulties presented by the need to raise large sums of start-up capital. Obtaining bank loans for a small-to- medium-sized food venture is very difficult in Germany, thus leaving family savings and private loans from friends as the main and most reliable sources of venture capital. Money clubs among co-ethnics for business set-ups (an ‘ethnic resource’ often mentioned in the literature) have become less important in recent years, particularly since the high sums needed to establish a fancy restaurant are less frequently sought. My informants confirmed that such money clubs among co-ethnics exist, but not as many as could be found in the 1970s and 1980s. The lending of money to co-ethnics, however, should

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not be attributed only to a special ethnic quality of benevolence. In addition to helping out co-ethnics, some of the money cycled through the community in the heyday of this credit system was, according to a few of my informants, ‘black money’, earned from smuggling and drug dealing in Germany and beyond (in the Netherlands, for example) which were then more common. Some restaurants (or other businesses) were established for money-laundering purposes; lending money to co-ethnics was yet another common way to ‘get rid of the money’. Repeatedly, different restaurant owners told me that the business had been ‘cleaned up’ after more stringent controls were put into place in the 1990s. The drastic decrease in vice activities performed under the cover of the catering business, and the general economic downturn of the European economy, have combined to reduce ‘free floating money’ available to the community. Money pools have consequently become less important as a source of capital for newcomers to the business sector. The increased difficulty in raising capital, coupled with a highly competitive business environment, favours the choice of small fast food outlets or bistros for those newcomers willing to chance the market while incurring minimal financial risk. This example illustrates how the enforcement of certain regulations, in this case the combating of drug trading, could indirectly shape the way in which a seemingly unrelated migrant business sector operates. While state financial support for the aspiring migrant restaurateurs is not available, some policies initiated by various federal states and cities in Germany have been designed to attract Asian investment. The city of Hamburg has been active in fostering foreign, including Chinese, investment. Since its set up in 1985, the Hamburg Business Development Corporation has assisted a few hundred firms from China and Taiwan, providing them with services and incentives, ranging from consulting to establishing contacts with local banks to arrange business loans to subsidizing office space for newcomers. Amongst their clients, most had recently arrived from East Asia, while fewer numbers had been in Germany for a period of time, either for work or studies. Düsseldorf is another city that has been active in tapping East Asian capital, especially from the Japanese and Taiwanese investors. Again, their service and benefits are catered for by potential investors yet to come, thus having little relevance to the Asian migrants who are already in Germany, especially those who are engaged and interested in venturing into the more ‘traditional’ and small-scale migrant businesses. Conclusions Reflected by the data, more and more migrants identify self-employment and entrepreneurship as a preferred occupation and a possible route for social mobility in Germany. Whether migrants interested in becoming self-employed succeed in entering the market place and thrive in the trade depends on a configuration of factors stretching across the policy, social, economic and cultural contexts in different geographical scales and space. This chapter focuses on the institutional aspect of migrant entrepreneurship in Germany. Such an emphasis complements studies which tend to examine either the ‘ethnic’/ ‘migrant’ aspect, on the one hand, or the ‘business’ part of the complex phenomenon, on the other. As Kloostermans and Rath (2001) remind us, a closer look at the institutional context is particularly important for the study of migrant businesses in Europe, because the scholarship has often reiterated the findings and theorization from the North American literature without paying enough attention to the specificity of the regulatory

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framework. In an earlier section of this chapter, the impact of the welfare regime on (migrant) entrepreneurship was demonstrated. As opposed to the neo-liberal system in the USA, the heavily regulated labour market, relatively high wage level and welfare benefits provision have traditionally discouraged self-employment and entrepreneurship in society and, contrary to many claims, promoted informal work among migrants instead of persuading them to become ‘welfare burdens’. A wide range of more specific policies shapes the emergence and evolvement of specific sector of migrant entrepreneurship. In retrospect, one realizes the importance of foreign temporary contract labour recruitment policies carried out throughout the 1950s to 1970s in the development of migrant businesses in the Federal Republic. The significance of credentials and reluctance in recognizing education and skills migrants attained from overseas have erected serious hurdles for aspiring migrant entrepreneurs. In addition, the nature, biases and impact of the two major business start-ups funding programmes, the Bridging Allowance Scheme and the Ich-AG, were also illustrated. Last, but not least, I have put some human faces into the account, by focusing the last section on the experiences of the Asian migrants, in particular among ethnic Chinese migrants whom I have studied using ethnographic methods. The illustrations reflect the rôle of immigration policies, foreign labour recruitment regulation and right of work for asylum seekers in shaping the business strategies of these establishments. The impact of policies is not only local in nature. As the chapter has revealed, some seemingly unrelated policies and regulations have had a high level of impact on certain trades. The change in the UK passport policies for colonial subjects, for instance, altered the demographic composition of the Chinese migrant population, and thus the pool of labour available for Chinese restaurants in Germany. The tightened enforcement of the legislation governing drug possession and trade in different parts of Europe, for another example, has reduced the volume of ‘ethnic capital’ available in the community, and, in an indirect way, made fast food/take-aways a more popular form of Chinese catering in Germany and Europe at large. The recent relaxation of citizens’ right to travel in China has also had a tremendous impact in the international tourism market. Chinese-operated travel bureaus work together with hotels, bus rentals, Chinese restaurants, freelance translators and the like, often across transnational space, establishing their niche market by creating efficient arrangements and a hospitable environment for the hundreds of thousands of co-ethnic tourists visiting Europe. Finally, I would like to conclude by highlighting the contribution of qualitative research methods to the study of migrant entrepreneurship. Kontos’s (2003) usage of a biographical approach in assessing the objectives and effectiveness of the Bridging Allowance Scheme is an excellent example to show how investigations beyond the presentation and modelling of numerical indicators (for example, how many recipients, how many Euros spent, how many per cent up and down and so on) can add novel and necessary angles to our understanding of this socio-economic phenomenon. Similarly, through my qualitative interviews with migrant entrepreneurs in various German cities, I learned about their issues, concerns, opportunities and challenges that a study based on predefined surveys would not have enabled. By digging into the intricate day-to-day concerns and operations tactics of migrant entrepreneurs and their businesses, I argue, researchers could arrive at a more human and realistic appreciation of the dynamic, complex and contextualized phenomenon of migrant entrepreneurship.

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Notes 1. ‘Chinese’ and ‘Italian’ are written in quotation marks to denote the phenomenon that many of the establishments are not operated by the expected ethnic group. A longitudinal survey reveals that, as Italians expanded into the delicatessen and specialities sectors, increasing number of pizzerias have been handed over or sold to Arab migrants from Palestine and Lebanon (Blaschke et al., 2000). Similarly, Vietnamese migrants seldom open Vietnamese restaurants or fast food/takeaways but prefer Chinese ones. Ethnic diversity is even more pronounced when one surveys the cultural background of the kitchen staff. It is not rare to find African migrants working in the kitchen of a Chinese restaurant in Hamburg, for example. 2. It is important to point out that official citizenship is no guarantee of successful integration into the society. Aussiedler, especially those who came since the mid-1990s, face serious economic and social integration problems. One of the determining factors is their poor knowledge of the German language. 3. The issue came out shortly after the electoral success of the Austrian politician Jörg Haider, whose politics are widely viewed as neo-fascist. He is infamous for his open statements implying support for the ideas of Nazism. Other European countries have also recently witnessed a rise to power of right-wing politicians. Examples include Anders Fogh Rasmussen in Denmark, Silvio Berlusconi in Italy and Jose Manuel Durao Barroso in Portugal, Ronald Schill in Hamburg and Jean-Marie Le Pen in France. 4. Depending on the data sources, definitions and calculation methods, the exact percentage presented in studies has varied. 5. This is also a common strategy practised in Austria, where permission to set up a business is severely restricted (Gitmez and Wilpert, 1987). 6. For a more detailed discussion of the Bridging Allowance Scheme, refer to Reize (2004, pp. 18–22). 7. To many Germans, ‘gold fish’ brings to mind an association with organized crime. By assigning this name to the crackdown on fraud, the police and media reinforced the slanderous stereotyping of Chinese or Asian businesses in the German public discourse. This echoes the image of illegality and exoticism associated with migrant businesses, as discussed by Kontos (2003).

References Blaschke, Jochen (2001), ‘Ausgrenzung und Integration in der ethnischen Ökonomie Berlins’, in Verein für Gegenseitigkeit e.V. im Europäischen Migrationszentrum (eds), Ethnische Unternehmen in Europa, ein Konferenzbericht, Berlin, pp. 9–25. Blaschke, Jochen, Ahmet Ers and Grit Ackermann (2000), Urban: City Renewal and Ethnic Entrepreneurs, Berlin: Edition Parabolis. Bögenhold, Dieter (1989), ‘Die Berufspassage in das Unternehmertum. Theoretische und empirische Befunde zum sozialen Prozeß von Firmengründungen’, Zeitschrift für Soziologie, 4, 263–81. Bundesregierung Online (2005), ‘Deutschland macht sich selbstständig: 680.000 geförderte Existenzgründer seit 2003’ (http://www.bundesregierung.de/Politikthemen/Agenda-2010-11898/Existenzgruender.htm). Echikson, William, Katharine Schmidt, Heidi Dawley and Anna Bawden (2000), ‘Unsung heroes: Europe’s immigrant entrepreneurs are creating thriving business – and thousands of jobs’, Business Week (International Edition, European cover story) 28 February, 20–24. Esping-Andersen, Gøsta (1990), The Three Worlds of Welfare Capitalism, Cambridge: Polity Press. Esping-Andersen, Gøsta (ed.) (1993), Changing Classes, London: Thousand Oaks. Esping-Andersen, Gøsta (ed.) (1996), Welfare States in Transition: National Adaptations in Global Economies, London: Thousand Oaks. Evangelisch-lutheranisches Industriepfarramt (ed.) (1999), Existenzgründung statt Arbeitslosigkeit, Ronnenberg: Evangelisch-lutheranisches Industriepfarramt. Floeting, Holger and Dietrich Henckel (2003), ‘Job nomads, moonlighters, and Arab pizza cooks: the “Futures” of urban labour markets?’, German Journal of Urban Studies, 43(2). Freeman, Gary and Nedim Ögelman (2000), ‘State regulatory regimes and immigrants’ informal economic activities’, in Jan Rath (ed.), Immigrant Businesses: The Economic, Political and Social Environment, Houndmills, Basingstoke: Macmillan Press, pp. 107–23. German Embassy Washington D.C. (2003), ‘Turkish entrepreneurs are German success story’ (http://www. germany-info.org/relaunch/business/new/bus_turkish_success_germany.htm). Gitmez, Ali and Czarina Wilpert (1987), ‘A micro-society or an ethnic community? Social organization and ethnicity among Turkish migrants in Berlin’, in John Rex, Daniele Joly and Czarina Wilpert (eds), Immigrant Associations in Europe, Aldershot: Gower, pp. 86–125. Goldberg, Andreas and Faruk Sen (1999), ‘Türkische Unternehmer in Deutschland’, IZA – Zeitschrift für Migration und soziale Arbeit, 1, 29–37. Hamburger Morgenpost (1996), ‘Großaktion gegen Gangster – Sie handelten mit verfälschten PCs. “Goldfisch” schlug zu’, 27 November.

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Heinz, Werner (2003), ‘The integration of immigrants into the labour markets of the EU’, IAB Labour Market Research Topics, no. 52, pp. 1–29. Hillmann, Felicitas (1999), ‘A look at the “hidden side”: Turkish women in Berlin’s ethnic labour market’, International Journal of Urban and Regional Research, 23(2), 267–82. Hillmann, Felicitas (2001)‚ ‘Struktur und Dynamik der Arbeitsmigration der ausländischen Bevölkerung in Berlin’, in Frank Gesemann (ed.), Migration und Integration. Wissenschaftliche Analysen und politische Perspektiven, Opladen: Leske & Budrich, pp. 185–208. Jung, Martin und Kazim Abaci (2005), ‘Migranten als Unternehmer in Deutschland’, Working paper of the VDG Verband Deutscher Gründungsinitiativen e.V., Berlin (http://www.vdg-forum.de/fachbeitraege/vdgmigranten1.pdf). Kaminer, Wladimir (2000), ‘Chinesischer Kalender’, Tageszeitung, 1 August, p. 19. Kloosterman, Robert (2000), ‘Immigrant entrepreneurship and the institutional context: a theoretical exploration’, in Jan Rath (ed.), Immigrant Business: The Economic, Political, and Social Environment, London: Macmillan, pp. 90–106. Kloosterman, Robert and Jan Rath (2001), ‘Immigrant entrepreneurs in advanced economies: mixed embeddedness further explored’, Journal of Ethnic and Migration Studies, 27(2), 189–201. Kloosterman, Robert, Joanne van der Leun and Jan Rath (1999), ‘Mixed embeddedness: (in)formal economic activities and immigrant businesses in the Netherlands’, International Journal of Urban and Regional Research, 23(2), 252–65. Kontos, Maria (1997), ‘Von der Gastarbeiterin zur Unternehmerin. Biographie-analytische Überlegungen zu einem sozialen Transformationsprozeß’, Deutsch lernen, 4, 275–90. Kontos, Maria (2003), ‘Self-employment policies and migrants’ entrepreneurship in Germany’, Entrepreneurship and Regional Development, 15(2), 119–35. Leung, Maggi (2004), Chinese Migration in Germany: Making Home in Transnational Space, Frankfurt/Main: IKO Verlag. Lohmann, Henning and Silvia Luber (2004), ‘Trends in self-employment in Germany: different types, different developments?’, in Richard Arum and Walter Müller (eds), The Reemergence of Self-employment: A Comparative Study of Self-employment Dynamics and Social Inequality, Princeton: Princeton University Press, pp. 36–74. Meager, Nigel (1993), ‘Self-employment and labour market policy in the European Community’, Wissenschaftszenrtum Berlin für Sozialforschung, Berlin, discussion paper. Mehrländer, Ursula, Carsten Ascheberg and Jörg Ueltzhöffer (1996), ‘Situation der ausländischen Arbeitnehmer und ihrer Familienangehörigen in der Bundesrepublik Deutschland’, Forschungsbericht 263, Bundesministerium für Arbeit. Migration News (1995), Davis, CA: University of California (http://migration.ucdavis.edu., accessed March). van Naerssen, Ton, Ernst Spaan and Felicitas Hillmann (2005), ‘Shifts in the discourse on migration and development: relevance for Europe–Asia transnationalism’, paper presented at International Conference on ‘Contemporary Migrations in Asia and Europe: Exploring Transnationalism, Multiple Linkages and Development’, Manila, the Philippines, 12–14 January. Pécoud, Antoine (2000), ‘Cosmopolitanism and business: entrepreneurship and identity among German-Turks in Berlin’, working paper of Transnational Communities Seminar, Oxford University, WPTC-2K-05 (www.transcomm.ox.ac.uk/working%20papers/pecoud.pdf). Peng, Xiaoming (2001a), ‘Zhongguo dangju de maiguo xieding shi guonei zhuanzhi yu fubai zai haiwai de yanshen’, Chinesische Allgemeine Zeitung, August, p. 20. Peng, Xiaoming (2001b), ‘Zhongguo chushi paiqian jiangyou chongda bianhua’, Chinesische Handelszeitung, 30 November, p. 9. Pütz, Robert (2000), ‘Von der Nische zum Markt? Türkische Einzelhändler im Rhein-Main Gebiet’, in Anton Escher (ed.), Ausländer in Deutschland. Probleme einer transkultuerllen Gesellschaft aus geographischer Sicht, Mainz: Mainzer Kontakt-studium Geographie 6, pp. 27–39. Pütz, Robert (2003), ‘Culture and entrepreneurship: remarks on transculturality as practice’, Tijdschrift voor Economische en Sociale Geografie, 94(3), 554–63. Reinken, Kurt (2002), ‘Beratung für ausländische Existenzgründer’, Claim – Die Zeitung für Existenzgründungen, 10 January. Reize, Frank (2004), Leaving Unemployment for Self-employment: An Empirical Study, ZEW Economic Studies 25, Heidelberg: Physica-Verlag. Sagatz, K. (1996), ‘Auf den Nachweis kommt es an – Verunischerte Kunden sollten sich beim PC-Kauf die Echtheit der Kompontenten bestätigt lassen’, Der Tagesspiegel, 3 December. Sassen, Saskia (1991), The Global City: New York, London, Tokyo, Princeton, NJ: University of Princeton Press. Scherer, P. (1996), ‘Illegaler Computer-Handel aufgedeckt – Bei der Operation “Goldfisch” durchsuchten fast 2000 Beamte rund 400 Gebäude in ganz Europa’, Die Welt, 27 November.

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Trong, Pham Duc (1998), ‘Vietnamesische Vertragsarbeitnehmer in der Bundesrepublik Deutschland: Probleme der Integration – Wege und Programme der Reintegration in der SRV’, dissertation, Humboldt Universität zu Berlin. ueberbrueckungsgeld.de. (2005), ‘Mehr als 50 Prozent aller Ich-AGs beenden die Förderung innerhalb der ersten drei Jahre’, Press release (http://www.ueberbrueckungsgeld.de/service/presse/pressemitteilungen/ pm_05_02_04_ich_ag_langversion.shtml). Weiss, Monique (2000), ‘Welcome to Europe!’, CSIS Prospectus 1(2) (http://www.csis.org/pubs/prospectus/ 00summerWeiss.html). Welter, Friederike (1999), ‘Self-employment: the quality of work in micro enterprise in Germany’, Report for ILO Action Programme: Enterprise Creation by the Unemployed – Microfinance in Industrialized Countries, Geneva: International Labour Organization. Wilpert, Czarina (1999), ‘A review of research on immigrant business in Germany’, paper prepared for Conference on ‘Working on the Fringes: Immigrant Business, Economic Integration and Informal Practices’, Amsterdam. Wilpert, Czarina (2003), ‘Germany: from workers to entrepreneurs’, in Robert Kloosterman and Jan Rath (eds), Immigrant Entrepreneurs; Venturing Abroad in the Age of Globalization, Oxford, New York: Berg, pp. 231–59.

31 Ethnicity, gender and entrepreneurship: Turkish entrepreneurs in Germany Robert Pütz, Verena Schreiber and Isabell Welpe

Introduction This study examines the situation of Turkish entrepreneurs in Germany by analysing the characteristics of their businesses. At the macro-analytical level the influence of legal framework conditions on the dynamic of Turkish business set-ups in Germany is supported, whereas the significance of the job market and ‘niche markets’ as strong explanatory factors is questioned. Furthermore, the significance of networks constructed by the entrepreneurs, the role of gender, the construction of nationally designated boundaries and the ‘strategic transculturalism’ perspective are introduced, analysed and discussed. The latter is based on using the term ‘culture’ in a meaningful and symbol-oriented way and has the capability to escape the pitfalls of essentialistic concepts of culture. The suitability of the concept is empirically proved by interviews with entrepreneurs of Turkish origin in Berlin. In 1961, Germany became an important destination for migration from Turkey. In 2007, approximately 1.95 million Turkish nationals live here, and of these more than a third were born in Germany. To this figure approximately 450 000 Germans with a Turkish–German migration background can be added. The employment structure of the migrants and their descendants has changed in the course of time. Particularly since the 1990s, increasing numbers of people of Turkish origin have become self-employed and have built entrepreneurial livelihoods. After a review of Turkish immigration to Germany, four questions are examined in the contribution of Berlin, the city with the most inhabitants without a German passport: ● ● ●

●

What dynamic do business start-ups by migrants from Turkey and/or their descendants have, and which macroanalytical statements can be forwarded to explain them? How can the relationship of gender, ethnicity and entrepreneurship be understood through theoretic concepts? What role does ‘ethnicity’ play in the entrepreneur’s action; that is, how are boundaries besides symbols, such as the nationally designated origin, established and what function do these demarcations have in respect of, for example, the accumulation of social capital? How is gender reproduced and made context-dependent in the entrepreneurial action by women with a migratory background?

1 Migration from Turkey to Germany The chronology of the migration to Berlin largely resembles the development throughout Germany and can be differentiated into three phases (see Figure 31.1). In the Federal Republic of Germany in the 1950s, the jobs in some industries could not be filled. As a result, commerce and industry, with the federal government’s support, began 488

Turkish entrepreneurs in Germany 489 Berlin

Germany

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Berlin Germany Source: Schwarz (1998), Statistisches Bundesamt, Satistisches Landesamt Berlin (2002).

Figure 31.1

Turkish citizens in Germany and Berlin, 1960–2003

recruiting employees from foreign countries with the so-called ‘recruit agreements (Anwerberabkommen)’, and from Turkey since 1961. Through this, the countries of origin gained an easing of their job market and a stimulus for later economic development through the return of skilled workers. After the building of the Berlin Wall and the halt to migration from the former GDR, the employment of foreigners grew rapidly. The goal of the recruitment lay in the elimination of what was regarded as temporary bottlenecks in the job market, which more than clarifies the connotation of the term ‘guest worker’, which was coined at that time. For persons who were brought to the country to work it meant, mostly, badly paid and unpleasant jobs for which no German applicants could be found. The immigrants therefore occupied the lowest positions in the social and occupational structure. Approximately two-thirds of the Turkish immigrants came from rural regions in which the mechanization of agriculture, enforced by the Menderes government, as well as the simultaneously rising population growth, favoured migration from the countryside. The Berlin senate first promoted recruitment of foreign workers in the mid-1960s. Since the immigration from Italy, Spain and Greece was at this time already abating, employees from, especially, Turkey and Yugoslavia were recruited in Berlin (Gesemann, 2001). The growth in the number of Turkish nationals in Berlin was clearly stronger than in the rest of Germany (see Figure 31.1). As a result of the economic downturn, which was primarily caused by the oil price shock, the German government imposed a recruitment moratorium, in November 1973. In conjunction with the recession, this led to emigration and a decrease in the Turkish

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population in Germany. In 1978, the migration balance again turned positive. Many migrants made up their minds to stay for the long term and brought back their families. The result was that the demographic structure changed: the proportion of children, parents and women increased, the average length of stay increased and the employment proportion clearly decreased. At the beginning of the 1980s, the migration movements changed and the reason for migrating and the social demographic structure of the immigrants were renewed. As a result of the military coup in Turkey, the number of political refugees grew for the time being. In 1980 alone, almost 60 000 asylum seekers came from Turkey to Germany, most of them from Kurdish territories. Since the mid-1980s, the migration balance has no longer been determined by the procession of children following their parents, but by the influx of spouses of those who are resident in Germany. Included are the asylum seekers from the Kurdish civil war areas. On the whole, Turkey has taken the third place in Germany’s immigration balance since the 1990s (Kapphan, 2001). In the course of time it has become increasingly clear that the migration movement is not a matter of ‘guest worker migrations’, but of immigrations. This is also apparent from the increasing number of children born of migrants in Germany. In the year 2001, 707 000, that is, almost 40 per cent, of the 1.9 million Turkish nationals living in Germany, were born in Germany (www.statistik-bund.de). This fact is not always realized in the public discourse. Apart from the immigration, both the higher birth surplus and the demographic structure contribute to Germany’s steadily increasing population of Turkish descent. The declining development since 1997 can be attributed to naturalizations, which are increasing rapidly as a result of the right of citizenship becoming easier to obtain. In particular this applies to Berlin’s liberal policy on foreigners. In 2001, besides the approximately 48 000 Germans with a Turkish–German migratory background, 126 000 Turkish nationals lived in Berlin. As in other German cities, the immigration to Berlin was accompanied by a strict segregation, although with local-specific intensification: at the end of the 1960s, it was planned to demolish great parts of Berlin’s older parts of town. In order to exploit the period between the departure of the first tenants and the demolition, the residences were rented to migrants, because housing corporations and municipal politicians thought that the ‘guest workers’ would return to their countries of origin after a while, and the residences would automatically become available again. Consequently, the foreign population was very soon concentrated in areas whose buildings were designated for demolition – although this plan was again abandoned later. At present, the Turkish population comprises more than 30 per cent of the population in parts of the districts of Kreuzberg, Neukölln and Wedding. Segregation thus corresponds to a concentration of poverty. The expected upswing through the reunification therefore failed to materialize. The disappearance of industry could not be stabilized by new jobs in the service industry sector, leading to an increase in unemployment. Neither did the upgrading through gentrification of districts situated within the inner city occur. On the contrary: the number of social support recipients and unemployed persons in these districts is increasing and the proportion of foreign population has increased since the reunification of Germany. Consequently, a cumulative intensification of the social–spatial marginalization occurs. The place in which the majority of migrants live accordingly becomes a source of social discrimination and stigmatization which becomes noticeable

Turkish entrepreneurs in Germany 491 in many and diverse ways. This also affects the entrepreneurs of Turkish origin who have established themselves here. In a survey of entrepreneurs, almost 60 per cent of them said that the main reason for their businesses’ financially strained situation ‘was the bad socioeconomic status of the district’. 2

Constituting events, characteristics and structural framework conditions of entrepreneurial businesses Germany-wide statistical information on the self-employment of the people of Turkish origin is almost entirely based on publications of the Centre for Studies on Turkey (CfST). In 2000, therefore, 258 000 foreign self-employed persons were counted in the Federal Republic (Statistisches Bundesamt, 2001); for 1999, the number of entrepreneurs of Turkish origin was estimated by the CfT as 55 000 (Zentrum für Türkeistudien, 2001). For 2002, a total of almost 60 000 businesses was assumed. Compared to these estimates, Berlin by comparison has reliable databases. Here business reports have been broken down according to nationality since 1981, which enables differentiation of the set-up events (Statistisches Landesamt Berlin, 1981; see Figure 31.2). This indicates that the increase in businesses was especially concentrated in the first half Business registration and deregistration per 1000 citizens* 16

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* Of respective citizenship; ** without Turkish citizenship.

Source: Pütz (2004): Statistisches Landesamt Berlin (1981).

Figure 31.2 Entry and exit of enterprises in Berlin, according to business register, 1991–2003

2003

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Family business*

7%

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household oriented services 15% (tourist agency, driving school, transport . . .) knowledge-intensive services 15% (office, advertising agency, consulting firm . . .)

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Follow-up foundations**

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One person business gastronomy

Multiple operations business

of the 1990s. The balance of registrations and cancellations, which in the 1980s came to about 220 businesses annually, increased by more than 500 businesses between 1991 and 1995 and, since 1997, has not exceeded 200 businesses. At present the business start-up percentage for Turkish nationals is double that for Germans, although twice as many undertakings are also abandoned. At this point it becomes clear that the Turkish entrepreneurs’ businesses are highly unstable. This ambivalent picture is confirmed by a detailed examination of the business structure (see Figure 31.3), which is based on an empirical study by Pütz (2004). Altogether there were about 5200 businesses of self-employed persons of Turkish descent in Berlin in 2002. This sectoral structure, moreover, resembles the pattern found in other cities: besides the retail and restaurant trade, industries that require a low capital layout and hardly any specialist or educational prerequisites are primarily chosen. Most undertakings are small businesses. Every seventh business is a one-man business and the average number of 2.4 employees is low. A good half only or mainly employ family members; twothirds of the businesses are in the household-oriented and retail trade. The high rate of

20% 39%

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household oriented craft (mending, tailoring . . .) production (grocery production, metal processing . . .) all entrepreneurs

Notes: * Businesses in which family members form more than 50% of the workforce (one-man businesses are excluded from the analysis); ** entrepreneurs who already owned other businesses. Source: Pütz (2004).

Figure 31.3 Businesses run by entrepreneurs of Turkish origin in Berlin: sectoral composition and business characteristics

Turkish entrepreneurs in Germany 493

4%

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8%

Women

business fluctuation is confirmed in that more than a third of self-employed persons already own other enterprises that do, however, fail. The widely-held concepts of a Turkish entrepreneur as a ‘snack bar owner’ or ‘greengrocer’ must be abandoned. A fifth of businesses are multi-business enterprises and accordingly have a successful expansion behind them. Some thereof own branches or supply companies in Turkey and thus span a transnational economic space. And almost an eighth of businesses is by now active in sectors that either require a comparatively high capital investment (production), or in those in which high prerequisites are required (knowledge-intensive service providers). The latter especially is typical of a 1990s development, in which members of the second or third generation, who had completed secondary study in Germany, decided on an entrepreneurial self-employment. An unlocking of the enterprise founders according to their migration background explains this trend (see Figure 31.4). Which explanatory stages at the macro-analytical level are available to reconstruct plausibly the dynamic of business set-ups? In the following paragraphs, three of the macro-analytical explanatory stages are forwarded that dominate the research of the topic ‘Immigrant Business’ (for an overview, see especially the contributions in Waldinger, Aldrich and Ward, 1990; Portes, 1995; Rath 2000). The influence of legal framework conditions, the significance of the job market and the existence of ‘niche markets’ (see Pütz, 2003a, 2003b).

first generation (came to Germany as adults before 1973)

7%

55

31%

47%

4%

second generation (before 1973) (came to Germany as children before 1973)

27%

39

49%

19%

13%

second generation (after 1973) 29% (came to Germany as children* after 1973)

34

43%

15%

7%

third generation (born in Germany)

16%

25

38%

5%

3%

2%

45

68%

0% 100%

other migrants (came to Germany as adults after 1973)

19%

39

25%

29%

14%

all entrepreneurs

16%

37

38%

21%

13%

educational migrants (came to Germany to study)

28%

Note:

* Until 1981, under 18 years; since 1981, under 16 years.

Source: Pütz (2004).

Figure 31.4 Entrepreneurs of Turkish origin in Berlin: generation and personal characteristics

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Explanatory factor: ‘legal framework conditions’ The legal framework has a considerable influence on the self-employment of foreign nationals in Germany. Since legally embodied norms limit the freedom of action of those without a German passport, they thus also restrict an entrepreneur’s possible strategies. The economic freedom thus only applies to Germans and citizens from EU countries. People of other nationalities are subject to the regulations of the laws pertaining to foreigners, which means that, in the first place, the freedom of entrepreneurial activities depends on their residence status. At the end of the 1960s, when the first migrants opened up their own businesses, these regulations were decidedly restrictive. Almost all of the Turks living in Germany were subject to the ban on self-employment. The first pioneer entrepreneurs therefore had to establish their businesses illegally with German figureheads. At the end of the 1980s, the legal situation of the majority of people of Turkish descent improved. Consequently, the number of those not subject to legal restrictions pertaining to foreigners wanting to start up businesses, increased too. On the one hand, the access to self-employment was eased; for example, the 1991 law pertaining to foreigners granted all foreigners with a right to residence the right to earn an independent living (Dienelt, 2001). On the other hand, more people acquired an indefinite residence permit. In 2001, they comprised approximately 56 per cent of the Turkish nationals resident in Germany. This improved legal position considerably promoted enterprise set-ups’ positive dynamic in the 1990s. On the other hand, one must point out that a third of the Turks residing in Germany still possess a residence permit according to which self-employment is either forbidden or is prohibited by the local departments pertaining to foreigners. Only in the past few years has an increasing economical and political interest in small businesses led to individual applications for the removal of the ban on independent self-employment jobs being more often considered positively. In addition, various career fields are regulated by specific legal regulations. These especially affect older people who did not pass through the German educational system. A master craftsman title is, for instance, a prerequisite for the independent practice of most trades. Educational qualifications acquired in Turkey are mostly not recognized, but formal educational aspects play a minor role in Turkey anyway. There, work-related skills are rather learnt informally through collaboration in a corresponding business. Such experiences, however, are not institutionally acknowledged in Germany. Consequently, numerous immigrants’ biographical resources become devalued as a result of their migration. Because of this, the sectoral structure of their enterprises was also influenced in the end, because the only option was to start up in an industry for which there were no preconditions, such as clothing alteration and shoe repair businesses. Explanatory factor: ‘job market’ Besides the conditions imposed by the legal framework, the job market is, from a macroanalytical perspective, a decisive structural moment, which influences the decision to become self-employed. As Bögenhold and Staber (1990) proved, the unemployment level has significant influence on the self-employment percentage: the higher the unemployment, the higher the proportion of self-employment. Likewise, the increase and decrease in self-employment in most industrial nations move contra-cyclically to the growth of the

Turkish entrepreneurs in Germany 495 Rate of unemployment 40% Total population Foreign population 30%

20%

10%

1990

2005

1990

Germany

2005 Berlin

Source: Statistisches Bundesamt; Statistisches Landesamt, Berlin.

Figure 31.5

Unemployment in Germany and Berlin

economy. Enterprise set-ups thus more frequently follow an ‘economics of need’ than an ‘economics of self-actualization’. A glance at Germany and Berlin’s labour market data clarifies that this general macro-economical trend is also applicable to the people of Turkish descent in Germany (see Figure 31.5): Foreign, and especially Turkish, nationals are affected to an aboveaverage degree by job market upheavals. Since the 1974 oil crisis, their unemployment has always been higher than that of Germans. Since most Turks were employed as unskilled labourers in ‘crisis industries’ such as the coal and steel industry, they were the first ones to be affected by rationalizations. And also the recent crisis on the job market, which was unusually intensely experienced in Berlin with the disappearance of industry as a result of the reunification of Germany, affected the Turkish people more than all the others. Apart from dismissals, a main reason for this is that people of Turkish origin have little chance to find (new) jobs. This is primarily due to their low work-related skills and especially their poor language skills. Children of Turkish immigrants who have grown up in Germany frequently only first come into contact with the German language at school and there (as a result of the high degree of segregation) are often taught in classes with a

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majority of fellow pupils who likewise speak poor German. A lack of language competency is thus often the cause of career discrimination: in Berlin, at the start of the new millennium, 20 per cent of the Turkish youth left school without a qualification (Germans: 8.8 per cent), and of ten Turkish unemployed persons only one had completed a vocational training (Ausländerbeauftragte, 2002a, 2002b). The unfavourable work-related prospects are again drastically intensified for those without long-term residence permits. Extension of residence permits can be denied them if they claim government benefits such as social welfare. This combination of discrimination on the foreign–legal segmented job market and the threatened loss of residence permits often leads to many only having recourse to an activity in the informal sector to ensure their livelihood. In fact, there are only two ways to do so: either as an illegal employee, frequently with personal networks to employers of Turkish origin (for the significance of such ‘ethnic labour markets’, see especially Hillmann, 2000, 2002), or else as ‘self-employed’ using the name of a third person who is mostly a family member in possession of the required residence permit. In view of the migrants and many of their descendants’ position on the German job market and the high unemployment percentage, it is no surprise that ‘unemployment’ and ‘being discriminated against in professional life’ are named by many Turkish entrepreneurs as decisive for their business start-ups. Furthermore, nearly half of the questioned self-employed persons in Berlin were out of work for a very long period before establishing a business, to be precise, for an average of 19.4 months. A large part of the enterprise set-ups can thus be characterized as a survival strategy in times of dramatic deterioration of the labour market conditions. Self-employment from pure need is, however, no good premise for success. For the majority it is comparable to a permanent struggle for financial survival (see Figure 31.6). A regular income while living at a subsistence level frequently means the loss of all entrepreneurial options regarding a course of action, such as being able to make investments or to start marketing a product. This especially affects industries such as small-scale retail trade and the restaurant trade, in which the competition pressure increased exceptionally in the 1990s owing to the numerous new set-ups. The economically poor position of the Turkish people, who form a large part of the customers, aggravates this negative trend further. ‘Self-exploitation’ of the entrepreneur and collaboration without pay by family members are thus frequently the only success factors with which to retain the business. For a major part of the entrepreneurs it must thus be stated that in the end they exchanged their marginalized position on the job market for a marginalized position as entrepreneur (Pütz, 2004). Explanatory factor regarding ‘niche market’ The assumption that ‘niche markets’ facilitate migrants’ independent start-ups was already early on an explanatory factor forwarded by research under the term ‘immigrant business’ (for example, Waldinger, Aldrich and Ward, 1990). The crux of the argumentation states that migrants, as a result of their consumption preferences, create a specific demand in the country of adoption and self-employed persons of the same origin, who possessed ‘cultural competency’, are able to fill the resulting market niche. In Germany, niche market argumentations are put forward in order to comprehend the causes of the first enterprise set-ups (for example, Goldberg et al., 1999). These causes appear plausible in the face of

Turkish entrepreneurs in Germany 497 Assessment of the financial situation ‘It is enough for the necessary expenditures’ (50.6%)

‘I have more than enough’ (1%) ‘I have more than enough for what I want to afford’ (18.6%)

‘It is not enough at all’ (29.8%) Sale development Increased

22%

Slightly increased

16.2%

Receded

27.7%

Heavily receded

34.1%

Source: Pütz (2004).

Figure 31.6

Economic situation of the entrepreneurs of Turkish origin in Berlin

the restricted sectoral gearing of the businesses at the time: food retail trade, travel agencies (negotiation of travels to Turkey), undertakers/funeral parlours (transfers, Islamic burials), translation agencies and the rest. From the current perspective, the value of the explanation of the niche market initiatives must be critically regarded. Thus the Berlin example showed that the structure of the businesses has, especially since the 1990s, out-differentiated itself. That, for example, a fourth of all entrepreneurs of Turkish origin are still in the restaurant trade, is not, as niche models suggest, related to a ‘cultural predisposition’ to perform such jobs particularly well or gladly. Rather, institutional framework conditions are reflected in which persons belonging to certain immigrant groups are enabled and others are not (see above). Furthermore, it indicates the powerful effect of discursive attribution, which hardly anyone can eradicate. In accordance with Häußermann and Oswald (1997), this can be clarified through a simple example: a female immigrant from Vietnam relatively rarely profits from her abilities to prepare good Döner (Turkish meat dish). Since, in a discourse that defines the labour fields ethnically, she cannot utilize these abilities economically, she has to be ‘man’ and ‘Turk’ – only then would her ability become a resource. So-called origin-determined ‘cultural resources’, as niche market models partially formed themselves, consequently prove themselves primarily as effects of an ethnicizing discourse. Nevertheless, this has considerable relevance regarding action: from the actors’ point of view, this allows enterprise set-ups to appear in specific industries as an economically more meaningful strategy than in others.

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3 Culture and ethnicity: theoretical considerations Investigations into the topic ‘immigrant’ and/or ‘ethnic’ entrepreneurship were formulated over many years from an essentialist understanding of culture – and often still are today. Admittedly, attributions such as ‘work harder’ or ‘save more’ have in such explicit formulations largely disappeared from the discussion since that time; however, implicitly, they still shape the basic concept of numerous lines of argumentation, as ‘cultural’ or ‘ethnic resources’ that foster or limit the entrepreneurship of certain groups. Such works form the basis of concepts suggesting that cultures existing side-by-side are clearly demarcated homogeneous units. The idea of culture becomes conceptionally linked to separate social collectives, which frequently comprise placing themselves territorially (‘Turkish culture’, ‘regional culture’). This, however, is not tenable, either as a theoretic construction or as a concept. Even if there had been homogeneous cultures, they can no longer be identified in the age of globalization and world-wide migration. There are no longer exclusive regionally embodied schemes of knowledge and, consequently, also no continuous regionally definable socio-cultural realms (Werlen, 1997). Likewise, from a socio-political point of view, reservations regarding essentialist cultural conceptions should be made known. Since research, which inquires after so-called characteristics, always detects difference, it is in danger of also promoting exclusion and discrimination through the construction of the Other. Contemporary cultural theories understand culture as the stock of knowledge, symbolic orders, or interpretative schemes that people necessarily have at their disposal, to make objects and actions, ‘world’, meaningfully accessible for themselves. The world first becomes comprehensible across ‘structures of signification’ (Giddens, 1984) and thus they are a condition for all social practices. Such interpretative schemes which, for example, let a raised arm become a ‘greeting’, or a shaking of the head a ‘negation’, are necessarily collectively shared. It would be incorrect to deduce from this that culture, as a reference relationship of symbols, is locked in itself and linked to a definable and secluded collective. As a result, however, there is a contradiction between the theoretical position of the non-existence of homogeneous cultures and everyday social practice in which precisely such essentialism is permanently (re)produced. Schemes of knowledge and meaning structures are in themselves always differentiated by classification schemes, which facilitate the classification of things and their comprehensibility for the actors, and reduce complexity. At the level of the actors, sense making is inseparably linked with classification. This means that, through certain symbols, such as language, origin and clothing, permanent exclusion and belonging are indicated and difference is established. Cultural boundaries are therefore continually being drawn, which symbolizes that ‘on the other side’ other interpretative schemes prevail which do not agree with the actor’s own scheme. So-called ‘cultural characteristics’ are consequently discursive constructions that nevertheless have concrete effects on action and action results. This is applicable to every action. Also supposedly pure ‘economic’ interaction situations do not take place without referring to shared symbolic orders and cannot be conceived without reference to knowledge schemes and interpretative schemes. Only in this manner is it possible to achieve a mutually satisfactory result, such as in a business agreement between two entrepreneurs if, in the assessment of those whose agreements are being settled and depending on how

Turkish entrepreneurs in Germany 499 forthcoming they are, similarity of meaning exists. In this sense, each economic action is always also cultural action. How can the relationship of culture and entrepreneurship be conceptualized without stumbling into the ‘essentialist’ trap? The concept of transculturalism, which Welsch (1992, 1999) developed, appears fertile in this context. With reference to the globalization debates, Welsch assumes that, as a result of many and diverse connections, territorial, homogeneous cultures can no longer be accepted. Transculturalism therefore implies the revocation of congruence from territory and culture. Simultaneously, Welsch shifts the theoretical position of cultural boundaries from an interpersonal to an intrapersonal level. In other words, the difference between inside and outside that is linked with each boundary is now conceptionally moved to the level of individual subjects. The subjects are, likewise, characterized by transculturalism and accordingly have different cultural reference systems at their disposal. With this, the concept of culture as a closed system of symbols becomes obsolete. At the same time, however, ‘cultural differences’ remain conceivable: as a construction according to symbols that designate belonging and exclusion. On the basis of the previous considerations, culture can be conceptualized for actionoriented empirical research. These considerations divert attention from questions on the expression of so-called homogenously existing cultures. Instead, they draw attention towards questions regarding the continuously undertaken ‘cultural’ practice of boundary drawing. Since boundaries create meaning, they separate the familiar, that which belongs to the ‘inside’, from the unfamiliar, that which does not belong, the ‘outside’. These perspectives of ‘transculturalism as practice’ (Pütz, 2004) are not only comprehensible as analysis concepts. They can equally be regarded as concrete action practices of real subjects. Through the shift of the inside–outside differences during the establishment of cultural boundaries at the subjects’ level, the multiple belonging of individuals is both conceptionally accepted and empirically tangible. People have action routines in the form of ‘everyday transculturalism’ at their disposal with which they can position themselves in different interpretation schemes. For example, they can re-establish similarity of meaning with business partners in economic interaction situations. If such interpretation schemes are reflexively accessible for the actor, and thus intentionally employable, ‘everyday transculturalism’ can become ‘strategic transculturalism’, as an ability, which positions itself reflexively in different symbol systems and is able to operate within them (Pütz, 2004). Cultural interpretative schemes can thereupon be regarded as giving meaning and provoking action, but as a menu which has various options for action ready and to which individuals can have a reflexive access. Categories such as ‘nationally designated culture’ or ‘ethnicity’ are therefore constructs in the interplay between describing the Other and the Self. As such, they unfold in the everyday entrepreneurial practice, although with considerable relevance for action. By transferring everyday essentialism and thus the everyday (re-)production of (ethnic) boundaries into scientific inquiry, scientists often stumble into the ‘essentialist trap’, where they are misled to inquire scientifically about the distinctive characteristics of a ‘Turkish entrepreneur’. Instead, the questions that should gain importance in future are these: how are ethnically or nationally designated boundaries and boundaries according to the gender category produced, and what function will they have in the entrepreneurial action?

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4 ‘Ethnicity’ and entrepreneurship First of all, the following questions are examined: what significance does belonging – in a quantitative respect – have for networks constructed by entrepreneurs of Turkish descent and how can this be interpreted? Secondly, an attempt will be made to comprehend the role of the construction of nationally designated boundaries for the accumulation of social capital. Thirdly, the ‘strategic transculturalism’ perspective is developed and introduced. Construction of nationally designated networks Interviews with Turkish entrepreneurs in Berlin clearly show the central role that social relations play in the exchange of information with business leadership. The grocery wholesaler Kaya (all names have been changed) at first describes a relationship with an amicably linked competitor (‘relational embeddedness’ in the sense of Granovetter, 1985, 1992), which he calls a helpful reference source and from which he expects a future quid pro quo (‘reciprocity’ in the sense of Portes and Sensenbrenner, 1993). When I these days telephone a supplier for green lentils, for example, he says: ‘I have some for 1,50 for you.’ Then I am also fair enough to call other wholesalers – also friends whom I know since the greengrocer’s shop, with whom I have collaborated for years – and say: ‘Listen, where do you buy your green lentils?’ If he says: ‘There and elsewhere for 1,95.’ I say: ‘I’ve got something. Call so and so, just mention my name and all will be okay.’ [. . .] One hand washes the other. And when some time something strikes him that could be useful to me, then he will also tell me. [. . .] He must not just help me with business, but can do so privately or some other way too.

After a short time he describes a situation in which an acquainted self-employed person loses regard and reputation. Therefore he also loses an economically relevant interaction partner, because an entrepreneur whom he damaged is bound through networks with other entrepreneurs (‘structural embeddedness’). Kaya explains: The rumor gets around very quickly if someone has large debts. One then hears everywhere: ‘Oh, he has debt or problems with suppliers, has to pay something.’ Then one is scared that he will not get anything, yes. Yes, then one gets problems there. This has to be stopped, because when he hears that ‘he has debts’, then he won’t give me any goods either. This always seesaws.

Kaya’s descriptions underline the perspective that no economic interaction can be understood outside the context of social relations. This point is important because economic interactions on the basis of trust and reputation, in which everyone should be trusting in their everyday actions, are not essentially linked to origin or ‘being Turkish’, even if this picture is frequently reproduced within the idea of an ethnic economy. If you, however, notice how Kaya introduced his account, this impression seems to change to the contrary: The Turk, he is everywhere. They know everything about one another. They help one another. I don’t know whether the Germans do so with one another, I don’t think so. And this the Turks do.

The membership of an imagined ‘Turkish community’ now promotes the decisive assumption in favour of benefiting from mutual help and trust. The construction of a nationally designated culture is an economically probate means according to which inclusion or

Turkish entrepreneurs in Germany 501 exclusion from social relations is decided and the choice of business partners is simplified. This boundary drawing is linked with a powerful discourse of the ‘Turkish entrepreneurs’, which is based on the central categories of honour, trust and solidarity. By referring to this discourse, entrepreneurs make these categories economically useful as social capital. Simultaneously, by using them, they stabilize the meaning structures. Constructions of nationally designated cultures are (re-)produced out of dominating ethnicizing discourses. These are institutionalized through laws and thus structurally hardened, but also gain relevancy in concrete interactions. This can be illustrated by means of the following example: Veli, who made himself independent with different firms in the insurance business, can be described as an ‘other German’ according to Mecheril (1997). For him, multiple belonging in the context of nationally designated cultures is not necessarily problematic. ‘Other Germans’ have their life focus in Germany and are often born and raised there. They deviate from the fictitious ‘German’ ideal, because they, their parents or their ancestors are regarded as ‘not belonging’ and are often also treated like this. The dominant discourse, being ‘Other’ and/or ‘Turkish’, comes from an interaction of the attributes attached to Self and Other, which can have similar consequences for the individual entrepreneur, for example, in the case of market orientation. There the sphere of activity, his market, is segmented and regionalized according to nationally designated origin. With his two partners Veli built an enterprise group in which nationally designated boundaries seemed to have no significance. In a decisive situation he was suddenly completely defined by his (so-called) origin: when the enterprise lost customers, the market was ethnically divided and Veli, ‘as a Turk’ (who knows Turkey primarily from holidays), was allocated the ‘Turkish structure’. In ’98 it then began to crumble, [. . .] started being nationally divided. I said: ‘Stop with the nonsense!’ No. Because at the meetings, weekly meetings, it was either the German or the Turkish structure: ‘I don’t want to split up! Particularly we three should not do this. No. We are responsible for one another.’ [. . .] But they then said: ‘Yes okay but Turkish clients have other needs [. . .] that doesn’t work, we must split up!’ And that is how it began. Until the end, when we just moved to Wedding, they stayed in Schönberg with two offices of the German structure.

Here it becomes clear that dominant ethnicizing discourses are conveyed and become relevant to action especially within the context of the asymmetry of power. Forcing Veli to take care of ‘Turkish’ customers, because of his Turkish origin (and not to take care of business insurance, which is his greatest competency), is nothing but the reproduction of a dominant ethnicizing discourse enforced across existing asymmetries of power and thus further cemented (Pütz, 2004). The above-mentioned examples confirm Schiffauer’s (1997) claim that ‘culture’ can be conceptualized as condition or as process. Thus the discourse of a so-called ‘Turkish entrepreneurial spirit’ is, to a large extent, based on constructions of honour or mutual help. In corresponding action contexts it can be activated and become an important source of accumulation of social capital. In that entrepreneurs refer to this discourse and the interpretative schemes that are associated with it, they also contribute to its stabilization. At the same time, however, entrepreneurs such as Veli can weaken such ethnicizing discourses, because they can, in the sense of ‘transculturalism as practice’, position themselves in different imagined communities (Pütz, 2003a, 2003b). In principle they possess

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the ability to refer to different symbolic interpretative schemes and deploy this in their actions. This confirms the point of departure that nationally designated boundaries are not a given, but constructs that are conveyed discursively and (re-)produced in action practices. Belonging is consequently no given size and thus, in principle, also changeable. This aspect is often ignored in economic and geographical works that refer to ‘cultural embeddedness’ and attach this to the so-called ‘shared norms and values’ of a collective. Strategic transculturalism When cultural boundaries are not ‘naturally given’ but discursively established, and also changeable, they are in principle also available to the individual actor. The accessible ‘transculturalism as practice’ would then be read not only as a concept of analysis, but also as concrete practices of concrete actors. This will be reconstructed in the following by Kevsan’s example (Pütz, 2004). Kevsan’s great-grandmother is a survivor of ‘Alevites-genocide’ in the 1930s. In the 1970s, her relatives were persecuted and murdered because of their religion and proKurdish political activities. Accordingly, the maintenance of a collective identity while simultaneously concealing this from the outside world, is a meaningful and continuous topic in this family’s everyday life. The demand to keep oneself reflexively apart by belonging to an imagined community is thus already applied in Kevsan’s family. They continue with this in their present entrepreneurial action. Three separate lines of conflict thus dominate: Kurdish–Turkish through language-denoted ethnicizations, Alevitic–Suni through attributions linked to religious orientation, and to the role of woman–man through gender-linked attributions. All three fields of discourse reveal vast interaction between appropriation and rejection of those identities attributed to them in their life history. From meetings with Turkish-speaking schoolfellows, Kevsan only learned after their migration to Germany that her family’s language (Kurdish) and religious (Alevitic) embodiment is the target of persecution in Turkey. It turned out that the discourse hegemonic in Turkey is also very powerful in Germany: in Berlin, Kevsan learned German and Turkish, but because of her Kurdish accent she was identified as ‘a Kurd’ in the school and forced into ‘being Kurdish’. She is thus subject to a double ethnicizing as a ‘foreigner in Germany’ and as ‘a Kurd amongst Turks’. She dealt with this through the development of two action strategies which she uses to the present day: on the one hand, the acquisition of knowledge and the acceptance associated with this; on the other hand, by changing her pronunciation of Turkish, which makes an encoding through language impossible. The attributions as an Alevitic family member of a ‘bad, impure’ group was also already conveyed to Kevsan as a child. Later the religious background of her family caused some of her relationships to end. She deals with this, among other ways, by concerning herself intellectually with her diploma thesis on ‘Alevites and Suni images of women’ and by reorienting herself anew through knowledge acquisition. Consequently, she places herself in a position that gives her access to reflection on different religions and the social practices and discourses associated with them. This can be regarded as a decisive precondition for the development of the ‘strategic transculturalism’ ability from which she will obtain value in her future entrepreneurial practice. Thus Kevsan, through the choice of her outward appearance – formal business look and perfect make-up – does not allow herself to be associated with an ethnic or religious

Turkish entrepreneurs in Germany 503 group by outward characteristics. Through these distinguishing characteristics she is easily recognized as a businesswoman and, as a result, gains respect and distance. Neither can she be ‘pinpointed’ through her use of language. Simultaneously she had, through reflexive explanation with powerful attributions, and in the dynamic between acquisition and rejection of the external identity positions applied to her, developed the ability to handle cultural encodings flexibly and to use them situationally. This ability, here denoted as ‘strategic transculturalism’ (Pütz, 2003c), can be appreciated as a resource that contributed substantially to Kevsan’s economic success. This is exemplarily revealed in an interaction situation in which the acquisition of a job is at stake: I go there, and introduce myself. [The client] is younger than I am, looks at me and says: ‘Good day, please take a seat.’ I took a seat, and simultaneously said: ‘What are we waiting for then?’ Then he says: ‘For your boss.’ I said: ‘Excuse me? I don’t have a boss.’ He replies: ‘The business must have a boss, surely?’ I said: ‘The firm does have a boss, and I’m her.’ And he looks at me as if to really say: ‘What? You?’ And he is so big, and I stand there and he points his finger at me: ‘You are the boss? No, then we don’t want you.’ Thereupon I asked: ‘Why don’t you want me?’ ‘No, this firm is led by a woman [. . .]’. I stood there and his woman came and greeted me with a nod, she was veiled.

In a conversation which is ‘pure business’, dealing with the negotiation of a job and a client acquisition, Kevsan finds herself repeatedly in a situation which is first and foremost not determined by economic parameters, such as costs and quality, but by ‘cultural’ meaning attribution. She sees herself confronted by traditional gender-specific role concepts. Neither her outstanding professional references, which she can use additionally as an effective means of job acquisition, nor the outward characteristics of her behaviour as a businesswoman, are accepted as symbols of specialist and professional capability. She must redefine the cultural interpretative schemes which are valid in the negotiation situation and, with the aid of two symbols, she adapts herself: on the one hand she takes up the disparaging remarks of the family man and his referral to a corresponding traditional discourse on the woman’s role, on the other hand the outward characteristics of his wife’s veiling. As a result she uses other interpretative schemes and coding rules in her approach: He remarked: ‘Yes, if a company is led by a woman. In addition your company is very new. I don’t know if it’ll go bankrupt and a woman can’t really lead a company.’ I then said: ‘Do you know, if your problem is that I’ll go bankrupt, I can tell you that I have very good backing. My brother also has a company. I will never go bankrupt while he will help me over the dry spell.’ [. . .] Then he softened, and he asked very loftily: ‘Who then is your, who then is your brother who is supporting you?’ I thought: either I can leave this house or I can stay. But I said: ‘Companies x and y are my brother.’ Whereupon he replies: ‘Ah, yes, the one that is in Mehringdamm. Of course. That one I know. Then there’s no problem.’

Economic action is always also ‘cultural’ action in the sense that, as in the enterpriserelevant interaction situation (as in all), ‘client acquisition’ is from the very beginning negotiated as the valid interpretive scheme. At the same time Kevsan recognizes that the symbolism, ‘educated, qualified expert’, has no effect. She identifies another field of discourse as defining the situation and adapts herself to the valid coding rules. It becomes clear here that questions of power, understood as abilities that enforce their interpretive schemes, are central to the contemplation of the cultural aspects of entrepreneurial action. Therefore Kevsan refers to representative tools that, in the acquisition situation,

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increase and reproduce across the interpretative schemes enforced by asymmetry of power, and thus simultaneously stabilize the corresponding discourse. She devalues her professional qualifications and abilities and uses codes in which she obtains her qualities exclusively through her older brother’s position, which is what the person opposite her expects. Thus the drawing of boundaries, which separate inside from outside and therefore establishes communities, is also always an act of identity construction. Hence difference is produced across symbolic markings, and the ‘I’ is placed in relation to the Other. Such (self-)positioning processes must be regarded as an essential element when the cultural aspects of entrepreneurial action are being examined. Entrepreneurs move (like all acting subjects) in a field in which permanent identity positions are negotiated. As Kevsan’s example shows, the concept of an ‘essential’ identity should therefore be abandoned, as should the concept of an ‘essential’ belonging to a community. The term ‘positioning’ appears rather more adequate than the term ‘identity’, since in it the act (to position oneself), the attribution effect (being positioned) and the situational nature (positioning as an always recontextualized phenomenon) flow together. These three aspects are constitutive of the construction of identity positions (Pütz, 2004). The positioning aspect is central to understanding the actors’ actions in so-called purely ‘economic’ interaction situations. If transculturalism is regarded as concrete action practice, it can be positioned in various imagined communities. In principle it therefore has the ability to refer contextually to different symbolic schemes of interpretation and to deploy them in its action. As far as transculturalism is concerned, all entrepreneurs can adopt everyday competency, because in each economic interaction the interpretative schemes are ‘negotiated’ (mostly unspoken). On the level of the single actor, transculturalism can be further differentiated (Pütz, 2004): everyday transculturalism describes the routine redrawing of schemes of interpretation which can, for example, produce similar meanings with interaction partners in interaction situations. Such routines, following Giddens (1984), can be terminologically anchored in the ‘practical consciousness’ and in a reflexive monitoring and are generally not available to those who act. However, strategic transculturalism describes a purposeful reflexive positioning. Negotiated interpretative schemes can also be anchored in the ‘discursive consciousness’ and can therefore be readily available for the actors. That gives the single actor the opportunity to handle identity coding flexibly and, depending on the situation, to adapt himself and intentionally adjust to different reference systems. Strategic transculturalism, which Kevsan’s example illustrated, is thus an economically useful resource which expands the scope for action in market dealings and makes participation in varying social relations possible for the entrepreneur. 5 ‘Gender’, ethnicity and entrepreneurship Through Kevsan’s example it has become clear that not only ethnic ascriptions regarding significance are at work in entrepreneurial action. Also gender attributions influence the entrepreneur’s real actions. Both the interpretative schemes, ethnicity and gender, consequently form two central schemes of knowledge within the culture sense-making system and cannot be analysed individually (Schreiber, 2003). International studies on immigrant business have for some years taken gender aspects into account (for example, Phizacklea, 1988; Dallalfar, 1994; Berg, 1997; Strüder, 2002). The scientific interest in female enterprise

Turkish entrepreneurs in Germany 505 activity can be traced to women increasingly establishing their own enterprises. In Berlin, women head a fifth of businesses (see Figure 31.4). Simultaneously these studies pursue the goal of conquering the ‘gender blindness’ in immigrant business research. Also in the German-speaking space the gender category is integrated in the conception of theory (for example, Kontos, 1997; Hillmann, 1999) while two lines of argument dominate. 1.

2.

Conditions determined by the structural framework: the point of departure of these studies is that labour markets are segregated along gender lines and hierarchically, whereby women generally have fewer chances on the job market. In addition, there is the ‘double socialization’ (Knapp, 1990): women experience their socialization in both the private sphere of the family and also in their work, which is associated with numerous difficulties for female entrepreneurs. ‘Female’ self-employment: the background to these studies is in the different initiatives regarding feminist theories. This, in accordance with Butler (1990), was grounded in the assumption that belonging to a natural-given sex produces a gender identity. People belonging to the same sex – and the same origin – consequently form a unit. The axis of the sex difference would be the boundary line along which innumerable essential distinctions between man and woman were stretched. When applied to Turkish female entrepreneurs this means revealing two dominant cores: a gender and an ethnic core. Accordingly, they disposed of common characteristics and, consequently, produced a specifically female action model – founded on biological ‘facts’.

In most works on ‘immigrant business’, a dominating topic was the emphasis on the differences between male and female terms of employment and ability. This was certainly in danger of continuing the discourse on the difference between male and female. The quest for ‘female’ characteristics and the ‘tracking down’ of different action strategies in careers forces boundaries to be drawn around the ‘other’ gender – and thereby it also forces exclusion. Through simultaneous differentiations according to the category origin, the drawings of boundaries are even increased. Various constructivist initiatives in gender research (Kessler and McKenna, 1978; West and Zimmerman, 1987; Butler, 1990) draw attention to deducing causes from and the dangers of such erroneous conclusions: a given collective’s gender and ethnic action models. From this conception, gender is, like ethnicity, a continuous social achievement of interacting individuals. It is, without exception, produced in each action. West and Zimmerman (1987) have described this programmatically as ‘doing gender’. The interpretative scheme of gender therefore does not exist before the knowledge is used in everyday action. With the re-establishment of gender, actors sooner fall back on interpretive schemes that permanently classify all people into two gender. Biological characteristics are essential signs of ‘gender’ (Kessler and Mckenna, 1978). Gender as ‘moral fact’ (Garfinkel, 1967, p. 122) consequently forms an unquestioned background of perception and action. This idea can be applied to the immigrant business research: like gender, ethnicity forms a scheme of knowledge in entrepreneurial action. Both interpretive schemes provide female entrepreneurs with two ways of looking at the meaningful construction of their reality and are interwoven in their everyday life. Gender and ethnicity can therefore not be analysed in isolation of each other (Gutiérrez Rodríguez, 1999).

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In the following conception of ethnicity, gender and entrepreneurship, the gender research’s constructivist initiatives should be integrated and their significance for the explanation of entrepreneurial action be highlighted. Here two aspects are central. On the one side, the female entrepreneurs reproduce gender connotations, since they revert to those interpretive schemes in everyday action and, through persistent repetition, remain caught in this discourse. On the other side, females consciously produce gender, making flexible use of female- or male-connoted action practices. On the one hand, the female entrepreneurs consequently allow themselves to be interpreted as bearers and reproducers of symbolic gender discourses. On the other hand, in the form of a purposeful management, the activities of the everyday ‘doing gender’ interest multiple gender identities. Consequently, the concept of ‘strategic transculturalism’, which was developed in line with the ethnicity example, can be extended with the gender categories (Schreiber, 2003). Construction of ‘femininity’ in entrepreneurial action Aynur is a female lawyer who successfully heads an office. Her orientation to two spheres – career and family – clearly explains that the structural splitting into women and men’s worlds is no longer self-evident. Nevertheless, she is confronted by the attributions of ‘being a woman’ every day. At the same time she reproduces society’s discourse of gender, in that the life of the ‘successful German female entrepreneur’, which she represents, contrasts with the lifestyle of ‘a typical Turkish housewife’: For me it’s not about money. Really. Yes, everyone wants to earn money. But now, in this phase, it’s not about money for me. For me it’s about that which I have built up, for which I have sacrificed so much, is also maintained. And the responsibility, that they obviously can’t at all comprehend, those housewives. [. . .] And in certain areas one notices of course that one can’t talk to them, that’s it. Because one has changed oneself, because one is different. One has certain preference, they still have their ideas of being a woman. They still have their ideas of a family, and if I were to tell them what I think about that, that would not be so good (Laughs).

Aynur splits ‘female-ness’ into ‘housewife’ and ‘female entrepreneur’ according to the professional qualifications required of each. This boundary drawing goes hand-in-hand with a classification with ‘traditional spheres of feminine activity’ which are situated at home. Female entrepreneurial activities she associates with rather male action principles, such as, for example, ‘earning money’ or ‘building something up’. Conversely, the home sphere is perceived as inferior owing to a lack of professional specialization and to her relative arbitrariness. It becomes a symbol of ‘female backwardness’, whereas entrepreneurial activity represents change and progress. Hierarchy formation resulting from the re-establishment of difference is consequently not only conceivable with a boundary between women and men. The drawing of boundaries is also possible within the collective theme ‘woman’. The differentiation of ‘female entrepreneur’ and ‘housewife’ is intensified since Aynur’s ideas run parallel to gender and ethnicizing discourses Yes, yes under a typical Turkish man, one has, I have, society, precisely, has man who want a housewife, a woman who is there for the housework, for the children and who will bear children, who likes housework, who supports the husband in his work. Who always stays in the background and always pushes the man to the front. And with my husband that was rather different. [. . .] He accepted that he would stay in the background and his wife has a career.

Turkish entrepreneurs in Germany 507 When Aynur picks up the social discourse on ‘feminine’ competencies and refers to her Turkish environment, she, on the one hand, produces and cements stereotyping of ‘female-ness’. On the other hand, she creates a ‘male Turk’ gender identity, which indicates how social categories such as gender or ethnicity are interwoven with one another. The construction of gender inequality is thus only completed when it tries to free itself from gender allocations by emphasizing its activity. Making gender identities flexible Gender, like ethnicity, insists on being taken into account in each interaction, but can also be deliberately neutralized: for example, in favour of economic success. In this respect, Hirschauer (1994) speaks of ‘undoing gender’, ignoring the usually routine gender differentiations. The neutralizing of the belonging to a gender is as much an establishing process as ‘doing gender’ itself. In this case, women and men present themselves against the demarcation of their gender as ‘unfeminine’ or ‘unmanly’. They consequently construct their gender, in that, in its assessment, it remains unnoticed by the other gender. In male-dominated career sectors, in particular, women are expected to perform a constant balancing act between ‘doing gender’ and ‘undoing gender’ to be professionally recognized, which is also described as ‘gender management’ by Heintz and Nadai (1998) in acknowledgement of Goffman. Such a flexible use of gender identities can be understood as a further element of ‘strategic transculturalism’. It means the ability to reflect gender interpretive schemes and also applying it in a context-dependent manner. Gender and ethnicity can thus be conceptualized as two interwoven resources in entrepreneurial action (Schreiber, 2003). In the example of the female architect Derya, it becomes clear that it is possible for the female entrepreneurs to revise norms and to deploy codes of gender and ethnicity flexibly. As a female architect, Derya must assert herself in a career field in which mainly men are employed. Although her capability implies a certain hierarchy, she is confronted by exclusion. She sees herself inevitably confronted by ideas of a specific female pattern of behaviour that ignores her individual qualifications: For example, a woman on a building site is as hard as nails, because that is a hard as nails business. And that is because one is confronted by very many labourers who do not accept women at all. [. . .] Furthermore if this is a woman who is quite small and not very sturdily built, then the men will even more so think that such a woman can’t have anything to tell me about how I should be building now. She can at best tell me which colour to use but she can most certainly not tell me how I should be building this.

The building site proves to be a place where the interpretation of gender is being fought out. Derya seizes a male-connoted leadership style that is a meaningful way to assert herself in her working environment: As a woman one really has to say: Away with being nice. One always has to keep a good distance, yes, and always let them clearly know: People you work for me. Yes, I am the one who says what should be done. I say where, how it should be done. And I don’t allow myself to be persuaded.

In entrepreneurial action, Derya has ‘gender management’ ability. This permits her to deploy gender identities flexibly. Female- and male-occupied patterns of action can consequently be understood as elements of a repertoire that, depending on the context, can

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be applied. The female dentist Melike has indeed succeeded in manipulating the perception of her gender identity to such a degree that, in interaction with Turkish men, she is no longer regarded as a ‘Turkish woman’: They also talk to me as they do with a man. However, in their eyes I am then rather the (female) doctor, but not the woman. They make a clear distinction here. [. . .] Many also call me ‘Mr doctor’ which is more male for them (Laughs).

Gender differentiations reveal their effects in different contexts. When entering a space filled with male symbolism (such as chambers, practices and building sites) the female entrepreneurs fall back on a scheme of knowledge, in this case on the gender dualism, which makes an action appear meaningful in its particular context. The representation of a gender identity is therefore not bound to the assumed sex affiliation, but dependent on the place in which the subject interacts with others. The comments of the female entrepreneurs have shown that boundaries are drawn according to categories such as ethnicity and gender and are never natural, but are constructed socially and discursively. In the application of both interpretive schemes in entrepreneurial practice these are, on the one hand, reproduced, but are also simultaneously interpreted and newly negotiated. Accordingly, it is possible for the individuals to use ethnic and gender codings for each particular field of action. As ‘strategic transculturalism’, this is initially developed in keeping with the original model and subsequently expanded to the category gender. Conclusion The findings suggest that the legal framework has a considerable influence on the selfemployment of foreign nationals in Germany, while at the same time questioning the value of ‘niche market’ initiatives as an explanation. The study emphasizes the central role that social relations play in economic interaction and also reveals that nationally designated cultures’ constructions are not only perpetually ‘automatically’ (re-)produced but come also from the dominating ethnicizing discourses. The findings suggest that, similar to the concept of an ‘essential’ belonging to a community, the concept of an ‘essential’ identity should be abandoned and replaced by the term ‘positioning’. The findings generally provide support for the concept of ethnicity, gender and entrepreneurship as interdependent elements. This is best illustrated by female entrepreneurs who reproduce gender ascriptions, because they revert to these interpretative schemes in everyday action and, through persistent repetition, are trapped in this discourse. They also consciously produce gender, making flexible use of female- or male-connoted action practices. This study identifies ‘strategic transculturalism’, a purposeful reflexive positioning, as an economically useful resource which expands the scope for action in entrepreneurial contexts by making varying social relations possible for the entrepreneur. In that sense, flexible use of gender and ethnic identities can be understood as elements of ‘strategic transculturalism’ and as two interwoven resources in entrepreneurial action. References Ausländerbeauftragte des Senats von Berlin (2002a), ‘Bericht zur Integrations- und Ausländerpolitik in Berlin 2000’, Berlin.

Turkish entrepreneurs in Germany 509 Ausländerbeauftragte des Senats von Berlin (2002b), ‘Protokoll des gemeinsamen Pressegesprächs des TBB mit der Ausländerbeauftragten am 26.3.2001 (unveröffentlicht)’, Berlin. Berg, N.G. (1997), ‘Gender, place and enterpreneurship’, Entrepreneurship & Regional Development, 9, 259–68. Bögenhold, D. and U. Staber (1990), ‘Selbständigkeit als ein Reflex auf Arbeitslosigkeit?’, Kölner Zeitschrift für Soziologie und Sozialpsychologie, 42(2), 265–79. Butler, J. (1990), Gender Trouble. Feminism and the Subversion of Identity, New York, London. Dallalfar, A. (1994), ‘Iranian women as immigrant entrepreneurs’, Gender & Society, 8(4), 541–61. Dienelt, K. (2001), Aktuelle Fragen zum Aufenthaltsrecht türkischer Staatsangehöriger, Neuwied. Garfinkel, H. (1967), Studies in Ethnomethodology, Englewood Cliffs. Gesemann, F. (2001), ‘Einleitung: Migration und Integration in Berlin’, Wissenschaftliche Analysen und politische Perspektiven, Opladen, 11–30. Giddens, A. (1984), The Constitution of Society. Outline of the Theory of Structuration, Cambridge. Goldberg, A., Y. Ulusoy et al. (1999), Der türkische Lebensmitteleinzelhandel in Deutschland: Erfolgsgeschichte und Zukunftsperspektiven, Essen. Granovetter, M. (1985), ‘Economic action and social structure: the problem of embeddedness’, The American Journal of Sociology, 91, 481–510. Granovetter, M. (1992), ‘Economic institutions as social constructions: a framework for analysis’, Acta Sociologica, 35, 3–11. Gutiérrez Rodríguez, E. (1999), ‘Intellektuelle Migrantinnen – Subjektivitäten im Zeitalter von Globalisierung. Eine postkoloniale dekonstruktive Analyse von Biographien im Spannungsverhältnis von Ethnisierung und Vergeschlechtlichung, Geschlecht und Gesellschaft, 21, Opladen. Häußermann, H. and I. Oswald (1997), ‘Zuwanderung und Stadtentwicklung’, Leviathan (Sonderheft 17), 9–29. Heintz, B. and E. Nadai (1998), ‘Geschlecht und Kontext. De-Institutionalisierungsprozesse und geschlechtliche Differenzierung’, Zeitschrift für Soziologie, 27(2), 75–93. Hillmann, F. (1999), ‘A Look at the “Hidden Side”: Turkish women in Berlin’s ethnic labour market’, International Journal of Urban and Regional Research, 23, 267–82. Hillmann, F. (2000), ‘Ethnisierung oder Internationalisierung? Ethnische Ökonomien als Schnittpunkte von Migrationssystem und Arbeitsmarkt in Berlin’, Prokla, 30(3), 415–32. Hillmann, F. (2002), Positionierung und Bedeutung ethnischer Arbeitsmärkte, Berlin. Hirschauer, S. (1994), ‘Die soziale Fortpflanzung der Zweigeschlechtlichkeit’, Kölner Zeitschrift für Soziologie und Sozialpsychologie, 46(4), 668–92. Kapphan, A. (2001), ‘Migration und Stadtentwicklung. Die Entstehung ethnischer Konzentrationen und ihre Auswirkunen. Migration und Integration in Berlin’, Wissenschaftliche Analysen und politische Perspektiven, Opladen, 89–108. Kessler, S. and W. McKenna (1978), Gender: an Ethnomethodological Approach, New York. Knapp, G.-A. (1990), ‘Zur widersprüchlichen Vergesellschaftung von Frauen’, in E.-H. Hoff (ed.), Die doppelte Sozialisation Erwachsener. Zum Verhältnis von beruflichem und privatem Lebensdrang, Augsburg, 17–52. Kontos, Maria (1997), ‘Von der Gastarbeiterin zur Unternehmerin. Biographieanalytische Überlegungen zu einem sozialen Transformationsprozeß’, in Deutsch Lernen, 4S, 275–90. Mecheril, P. (1997), ‘Zugehörigkeitserfahrungen von Anderen Deutschen. Eine empirische Modellierung’, Soziale Welt (Sonderband 12), 293–314. Phizacklea, A. (1988), ‘Entrepreneurship, ethnicity and gender’, in S. Westwood and P. Bhachu (eds), Enterprising Women. Ethnicity, Economy and Gender relations, London, New York, pp. 21–33. Portes, A. (1995), ‘Economic sociology and the sociology of immigration: a conceptual overview’, in A. Portes (ed.), The Economic Sociology of Immigration. Essays on Networks, Ethnicity, and Entrepreneurship, New York, pp. 1–41 Portes, A. and J. Sensenbrenner (1993), ‘Embeddedness and immigration. Notes on the social determinants of economic action’, The American Journal of Sociology, 98(6), 1320–50. Pütz, R. (2003a), ‘Kultur und unternehmerisches Handeln – Perspektiven der “Transkulturalität als Praxis” ’, Petermanns Geographische Mitteilungen, 147(2), 76–83. Pütz, R. (2003b), ‘Kultur, Ethnizität und unternehmerisches Handeln’, Berichte zur Deutschen Landeskunde, 77(1), 53–70. Pütz, R. (2003c), ‘Culture and entrepreneurship–remarks on transculturality as practice’, Tijdschrift voor Economische en Sociale Geografie, 94(3), S. 554–63. Pütz, R. (2004), Transkulturalität als Praxis. Unternehmer türkischer Herkunft in Berlin, Bielefeld. Rath, J. (ed.) (2000), Immigrant Businesses. The Economic, Political and Social Environment, Houndmills. Schiffauer, W. (1997), Fremde in der Stadt, Frankfurt am Main. Schreiber, V. (2003), Geschlecht im Transit. Perspektiven von Geschlechtlichkeit in Lebensgeschichten türkischstämmiger Unternehmerinnen, Mainz (unveröffentlichte Magisterarbeit). Statistisches Bundesamt (2001), Ausländer nach Familienstand, Staatsangehörigkeit und Beteiligung im Erwerbsleben, Bonn.

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Statistisches Landesamt Berlin (1981), Gewerbeanzeigen Berlin, Berlin. Strüder, I. (2002), ‘Migrant self-employment in a European global city – the importance of gendered power relations and performances of belonging for Turkish women in London’, Research Papers in Environmental and Spatial Analysis, 74, London. Waldinger, R., H. Aldrich and R. Ward (eds) (1990), Ethnic Entrepreneurs: Immigrant Business in Industrial Societies, Newbury Park et al. Welsch, W. (1992), ‘Transkulturalität. Lebensformen nach der Auflösung der Kulturen’, Information Philosophie, 2, 5–20. Welsch, W. (1999), ‘Transculturality: the puzzling form of cultures today’, in M. Featherstone and S. Lash (eds), Spaces of Culture, London, pp. 194–213. Welte, H.-P. (2000), Ausländerrecht, Baden-Baden. Werlen, B. (1997), Sozialgeographie alltäglicher Regionalisierungen. Band 2: Globalisierung, Region und Regionalisierung, Stuttgart ( Erdkundliches Wissen 119). West, C. and D. Zimmerman (1987), ‘Doing gender’, Gender and Society, 1(2), 125–51. Zentrum Für Türkeistudien (2001), Die ökonomische Dimension der türkischen Selbständigen in Deutschland und in der Europäischen Union, Essen.

32 Immigrant entrepreneurs in Hamburg Nikolinka Fertala

Introduction In this research we explore whether homophily as an organizing principle affects the performance of immigrant entrepreneurs in Germany. The objective of the study is, therefore, to investigate how the venture’s team structure is formed and, on the other hand, how the current structure influences the economic performance measured by indicators such as volume of sales and cumulative employment. We argue that the forming process follows the principle of homophily and the latter leads to stable work teams over time, whose members communicate effectively. Does effective communication due to a ‘similar-to-me’ hypothesis cause better economic performance among immigrant entrepreneurs in Germany? If this is not the case, we refer to the phenomenon as a homophily paradox. The empirical analysis in this chapter is based on a detailed survey of 500 immigrant entrepreneurs from Afghanistan, China, Former-Yugoslavia, Iran, Poland and Turkey. The survey was conducted during the period September–October 2002 in Hamburg city by means of face-to-face interviews using a detailed questionnaire to study various aspects of immigrant entrepreneurship in Germany. The questionnaire consists of 40 questions divided into the categories general, capital and investment concerns, consulting prior to foundation, obstacles regarding the German authority, hindrances subsequent to the foundation, employment and country of origin, as well as a rich set of background variables related to the immigrant entrepreneurs. Two different econometric specifications are estimated: first, we concentrate on founders’ main characteristics, and second we consider the homophily’s impact on ventures’ performance. The main finding suggests that the process of composing a working team within a venture is likely to follow the principle of homophily. Working teams with male dominance are more common than mixed gender teams. In 84.31 per cent of the companies included, the founder and the greater part of the employees are male. Moreover, the gender-based homophily raises significantly the volume of sales, by 8.31, while increasing the male dominance by 10 per cent. The nationally homogenous working teams are the regular case in our study. In 72.3 per cent of the companies, the working team is composed mainly of employees from the same country of origin as the entrepreneur. Surprisingly, the thus formed team structure causes decline in the sales per employee of 5.14 per cent, while increasing the dominance of co-nationals by 10 per cent. Additionally, cooperating mostly with co-nationals as suppliers improves the economic performance of immigrant entrepreneurs by 4.78 per cent. In contrast, serving mainly German customers increases significantly the volume of sales per employee. In total, the patterns of homophily among the immigrant entrepreneurs are remarkably robust over those varying types of relations investigated in the study. As a consequence, we can conclude that the principle of homophily does lead to stable working teams within a company with respect to gender and nationality, but do not necessarily improve the economic performance of immigrant entrepreneurs in Germany. 511

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‘Birds of a feather flock together’ is the phrase that summarizes the phenomenon known as homophily, the tendency of individuals to be similar to one other in various attributes, such as demographic variables, beliefs and values. The existence of homophily has been repeatedly confirmed in psychology and hardly incorporated into behavioural economics or management studies. One of the first to analyse systematically this phenomenon was the social psychologist Byrne. He proposed a ‘similar-to-me’ hypothesis (Byrne, 1971) according to which individuals rate other people more positively the more similar they are to themselves or the more similar the rating expert believes they are. Similarities between individuals along specific dimensions have often been used to demonstrate and predict structures, like dyads and triads, in various kinds of groups (McPerson and Smith-Lovin, 1987; Marsden, 1988). However, the pervasive fact of this phenomenon means that cultural, behavioural, genetic or material information that flows through networks will tend to be localized. Furthermore, homophily implies that distance in terms of social characteristics translates into network distance, the number of relationships through which a piece of information have to travel to connect two individuals within. It also comprehends that any social entry that depends to a substantial degree on networks for its transmission will tend to be localized in social space, and will obey certain fundamental dynamics as it interacts with other social entities in the ecology of social forms. The literature on these ecological phenomena is spread through the studies of social networks, voluntary associations, social capital (at the individual and community levels), social movements, culture, organizations, and a variety of substantive topics that are affected by network processes. Because the principle of homophily is so central to the operation of these systems, we use it as our organizing concept. In this chapter we explore whether homophily as an organizing principle affects the performance of immigrant entrepreneurs in Germany, in particular in Hamburg, which is one of the cities with a higher proportion of immigrants. The objective of the study is, therefore, to investigate how the structure of the working team in a particular firm is composed and, on the other hand, how the current structure influences the economic performance measured by indicators such as volume of sales and cumulative employment. We argue that the process of composing follows the principle of homophily and the latter leads to stable work teams over time, whose members communicate efficiently. Does efficient communication due to a ‘similar-to-me’ hypothesis cause better economic performance among immigrant entrepreneurs in Germany? If this is not the case, we refer to the phenomenon as a homophily paradox. In other words, do homophily and economic performance breed together? Finally, this chapter makes three contributions, which to the best of our knowledge are new additions to the literature. First, we propose a new model of understanding how homophily as organizing principle interacts with economic performance in general. Second, we provide an econometric formulation of the model that enables the researcher to estimate the extent to which the homophily play a decelerating role for immigrants’ entrepreneurial success. Third, we estimate the model using a sample of 500 self-employed immigrants in Hamburg city interviewed during the period September–October 2002. Estimates are obtained to the extent to which immigrant entrepreneurs increase their prosperity given particular team composition within the firm, and we go on to discuss the empirical results obtained.

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The rest of the chapter is organized as follows. Section 2 addresses theoretical and empirical concerns of homophily and entrepreneurial performance. Section 3 describes data and variables. Section 4 is about the patterns of immigrant entrepreneurship. Section 5 outlines the model specification. Section 6 presents the research outcomes. Section 7 covers discussion, and section 8 concludes. Theoretical framework Homophily as a basic organizing principle Well established fields of research with roots in the classical psychology examine how physical proximity, similarity of beliefs and attitudes, amount of interaction, and affective ties are interrelated. For instance, in parallel streams of work, Friedkin and Johnsen (1990, 1999) and Carley (1991) have developed network models of the way communication among individuals influences one another in producing homogeneity of beliefs. A special case of the work on social proximity is the homophily theory (see, for a review, McPerson et al., 2001). The mechanism of homophily explains team compositions in terms of the similarity of members’ characteristics. In particular, these characteristics may refer to social identities that are attached to individuals, such as ascribed characteristics such as age, gender and nationality, or to internal circumstances regarding values, beliefs or norms (Lazarsfeld and Merton, 1954).1 In either case, the similarity of individuals disposes them towards a greater level of interpersonal magnetism, trust and understanding – and as a consequence to a greater level of social affiliation – than would be supposed among dissimilar ones. This tendency toward homophily should be especially visible in groups such as organizational founding teams, which require substantial investments of time and other resources considered (Bird, 1989). Although homophily may be analysed in terms of ascribed characteristics, achieved characteristics or internal psychological states, we limit our operational definition of homophily to ascribed characteristics, for several causes. Firstly, by excluding achieved characteristics such as education, occupation and income, we avoid arguments regarding homophily from slipping into functional arguments regarding the effectualness of a social group. This is especially relevant for groups that are task-oriented, such as entrepreneurs. Second, the similarity of group members in terms of psychological states is often endogenous to the group-formation process itself. Moreover, homophily in this context may result as much from the misattribution of shared understandings among affiliated individuals as from actual shared understandings, because individuals tend to assume that others with whom they have structural bonds think as they do (McPerson et al., 2001). One of most widely studied ascribed characteristics fostering homophily is gender. Gender homophily has been identified in a variety of task-oriented settings, including work establishments (Kalleberg et al., 1996), voluntary organizations (McPerson and Smith-Lovin, 1987) and managerial networks (Ibarra, 1997). Although representative data for founding teams are sparse, researchers have found that men’s business networks include few women and thus contribute to gender homophily (Aldrich, 1989; Carter, 1994). Women’s business support groups, often formed as a reaction to male dominance in entrepreneurial activities, may further enhance homophily. Insofar as gender is a highly

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visible ascribed characteristic driving attributions of similarity and differences in establishes companies, we propose the following hypothesis: Hypothesis 1 Company’s teams with male or female dominance will be more common than will mixed gender teams. A second ascriptive dimension that generates strong network homophily is nationality versus ethnicity (Marsden, 1987; McPerson et al., 2001). Studies of many task-group settings such as workplaces (Reskin et al., 1999) and classrooms (Schofeld, 1995) reveal substantial homogeneity in ethnic composition, especially among white ethnic majorities. For entrepreneurial founding teams, the literature also tended to emphasise solidarity within ethnicities, but primarily among minority and immigrant groups (Aldrich and Waldinger, 1990). Variation of in-group preferences across ethnicities may result from a number of factors, including ecological constraints on the availability of other entrepreneurs with a common ethnicity, discriminatory status expectations and unmeasured network effects. With respect to baseline expectations, however, the existing literature supports the proposition: Hypothesis 2 Nationally homogenous working teams will be more common than will mixed-nationality teams. In total, the ‘similar-to-me’ hypothesis has been confirmed for many situations outside business life, ranging from the closest ties of marriage (see review in Kalmijn, 1998) and the strong relationships of ‘discussing important matters’ (Marsden, 1988) and friendship (Verbrugge, 1983) to the more circumscribed relationships of career support at work (Ibarra, 1992, 1995). There are some subtle differences but in general the patterns of homophily are remarkably robust over these widely varying types of relations. Consequently, we can conclude that the principle of homophily does lead to stable working teams within a company in a dynamic perspective. Homophily and entrepreneurial performance In opposition to the principle of homophily, many functionalist theories of task-group composition argue for the importance of diversity among members, especially with respect to achieved characteristics such as leadership skills and task expertise. This may be true for founders and founding teams. For instance, subsequent research and theorizing on organizational founding teams has explored the extent to which entrepreneurs draw on diverse, complementary skills that may lie beyond the abilities of any individual founder, especially in high-technology industries (Vesper, 1990). Moreover, Eisenhardt and Schoonhoven (1990) linked team diversity to functional performance, noting that organizational growth among semiconductor firms was higher for organizations with heterogeneous founding teams. At a more micro level, Ancona and Caldwell (1992) reported benefits of functional diversity for communication and innovation in their study of product teams. In this study, we are not concerned about how the founding team will affect the economic performance of the firm in the future. Our objective is to investigate in the immigrant entrepreneurship context how members of staff within an established company, and

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in particular their structural composition regarding ascribed characteristics (demographics such as nationality, age and gender), will influence the firm’s outcome. On the other hand, we search for empirical evidence on whether employee–customer versus employee– supplier homophily will lead to improved economic performance measured by business sales among the immigrant entrepreneurs. Employee–customer homophily Most research on the employee–customer relation is based on the importance of homophily. Various related theories suggest that the similarity between employee and customer with respect to ascribed characteristics can improve the economic performance of the firm. In this context, social identity theory (Tajfel and Turner, 1986), similarity-attraction theory (Tsu, Egan and O’Reilly, 1992), social-categorization theory (Tajfel and Turner, 1985) and Becker’s theory of customer discrimination (1957) require special attention. In these studies, familiarity – the desire to consider similar individuals as holding worthwhile characteristics – and preferences to be close to those they consider the ‘in-group’ lead to preferences for doing business with similar others. A higher level of homophily regarding ascribed characteristics may also improve the employees’ understanding of customers’ preferences and how the latter vary in dynamic perspective. Additionally, members of staff can also attract customers using their social network within the community (Cox, 1993; Ibarra, 1995). As a result, an employee’s social ties often provide support in bringing customers to the workplace, thus increasing the volume of sales. Moreover, Jennifer Lee (2001) has identified, for instance, two additional motives for storeowner to hire employees possessing characteristics similar to customer’s demographics in her study of retail stores in predominant black neighbourhoods. She found that white and Korean shopkeepers face disputes that can quickly escalate and take on a racial tinge. Consequently, storeowners in her inner-city sample prefer to hire at least one black as a member of stuff who is competent to resolve a tense situation without overtones of race. In addition, owners prefer at least one black employee to be visible all the time, so that customers feel that the store offers something back to the community where it is located. The employee–customer homophily with respect to ascribed features may lead to declining communication costs. Speech pattern, slang and jargon all vary by demographic groups. Even among native speakers, diverse nationalities and gender differences often make communication among them difficult. These objections concerning communication costs grow in importance when a large number of potential customers do not speak the language of the host country well. Although most immigrants learn English rapidly (Friedman and DiTomaso, 1996), for instance, in many cities big immigrant enclaves contain a substantial number of people who cannot or prefer not to speak English. All these motivations can encourage profit-maximizing employers to desire a workforce that is demographically similar to its customers. In spite of the many theories supporting this idea, the evidence for this effect is weak in general and documents two essential issues. First, previous research in this area provides only a little evidence, and what we have is mixed evidence as to whether customers prefer to be served by similar others in retail and service occupations, although the evidence is more consistent in other spheres. Second, employers often act as if customers have this preference.

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Besides the lack of consistent conformation, proponents of diversity routinely claim that employers have to hire a dissimilar workforce in order to attract diverse customers. Empirical proof can be found in trade publications, including those serving marketing departments, stock brokerages (Lee, 2000), voluntary associations (Baker, 1999), restaurants (Lieberman, 1998), real estate (Liparulo, 1998), healthcare providers (Chyna, 2001) and numerous others. With respect to baseline expectations, however, the existing literature supports the following proposition: Hypothesis 3 Employee–customer homophily with respect to ascribed characteristics has a positive impact on the economic performance of a company. Workplace homophily Even if diversity does not affect entrepreneurial performance through customer preferences, we need to investigate whether it still has direct productivity effects by affecting the way employees work with each other in groups or teams. In this section, we document that both the theory and empirical evidence on the way employees’ similarity to each other affects performance show mixed results.2 First, theories of diversity emphasize that heterophily can have both positive and negative influence on firm’s economic performance. Studies indicate that diverse teams can improve performance because they are more likely to have the information needed to solve any given problem (Lazear, 2000), come up with more creative solutions than do homogeneous groups (Thomas and Ely, 1996; Nemeth, 1985) and are more likely to have employees with insights into the needs of customers (Thomas and Ely, 1996). At the same time, heterophily can increase the costs of communication within the workforce (Lang, 1986; Zenger and Lawrence, 1989), lower group cohesiveness (Pfeffer, 1983), increase employee turnover (O’Reilly et al., 1989; Jackson et al., 1991) and reduce incentives for cooperation (Greif, 1993). Given the contradictory theories and the mixed evidence surrounding diversity’s effects, it is crucial to examine directly how homophily affects the economic performance of immigrant entrepreneurs in Germany, measured by volume of sales. We propose the following: Hypothesis 4 Workplace homophily with respect to ascribed characteristics (nationality) affects significantly the economic performance of a company. The expected impact is positive. Data and variables Sample design The empirical analysis in this chapter is based on a detailed survey of 500 immigrant entrepreneurs from Afghanistan, China, Former-Yugoslavia, Iran, Poland and Turkey. The motive for questioning only natives of the above-mentioned six countries is the fact that they show the highest propensity to establish a firm in the city of Hamburg. The survey was conducted during the period September–October 2002 by means of faceto-face interviews using a detailed questionnaire to study various aspects of immigrant entrepreneurship in Germany. The questionnaire consists of 40 questions divided into the categories general, consulting prior to foundation, capital and investments, foundation

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obstacles concerning the German authority, problems subsequent to the foundation, employment and country of origin, as well as a rich set of background variables related to the immigrant entrepreneur. Measures of immigrant entrepreneurial performance The dataset used in the empirical analysis provides two measures of economic performance. The first one deals with volume of sales and is equated to the turnover realized in 2001. The second measure employed is the cumulated employment created since enterprise foundation. While business volume is mainly an individual versus work team matter, the employment generated by an entrepreneur can be considered as a society performance measure. In this chapter we concentrate only on the business volume realized per employee as a determining economic indicator. Determinants of entrepreneurial performance Based on the firm founders’ detailed questionnaire, we derived possible determinants of immigrant entrepreneurial performance as set out in Table 32.1. The variables are grouped horizontally by measure of specificity, and vertically by the form of capital. Controls and variables measuring the degree of homophily within the firm are also incorporated in the analysis. We include in the present analysis three human capital variables: occupational experience, years of schooling and age. The immigrant entrepreneur’s experience is computed as occupational experience accumulated in Germany as well as in the country of origin. Additionally, we argue that this experience obtained in the country of origin might be less valuable in the host country; thus effect on the economic performance should be of minor relevance for the current study. As for the effect of age, the inclusion of age and age squared enables us to control for the conventional inverted U-shaped relation between entrepreneur’s age and economic performance. Education enters the analysis as years of schooling obtained in Germany and abroad. The number of family members employed in the company and, on the other hand, the presence of spouses indicates the social capital endowment of the immigrant entrepreneur. These are the only variables that can be considered in the further empirical analysis. Table 32.1

Potential determinants of immigrant entrepreneurial performance Human capital

General

Industry-specific

Age Age squared Education in years Experience in inductry, Vocational education

Social capital

Homophily

Presence of spouse Share of family members as employees Member of professional association, Chamber of Trade and Chamber of Commerce

Number of employees, customers and suppliers of same nationality

Control variables Gender, initial objectives and ambitions of the founder, Legal structure of the company, Industry

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Moreover, regarding homophily, we incorporate four different variables in the empirical model: the number of employees with the same nationality as the founder’s, genderbased homophily calculated accounting to male dominance in the working team, customer- and supplier-based homophily that comprised having mainly conational versus German customers and suppliers. The motive for considering only predominant customers of the same nationality in the study relies on the main assumption that ‘birds of a feather flock together’. Finally, control indicators such as legal form and initial objectives motivating the enterprise establishment and industrial dummies are included in the empirical analysis. Patterns of immigrant entrepreneurship in Hamburg This section analyses some of the basic features concerning the immigrant entrepreneurs, their work teams and companies derived from the sample. Firstly, we will present the propensity to incline towards entrepreneurial activities among the six different groups of immigrant entrepreneurs. Subsequently, we will address the company characteristics such as business volume in general, by industrial sectors and country of origin, and we will conclude with the team structure at the workplace and regarding the firm’s environment. Age of company and entrepreneur The surveyed companies included in the sample are of age not elder than eleven years. Table 32.2 depicts the distribution of year of establishment and age of immigrant entrepreneur by country of origin. The mean values of the year of establishment by country of origin are close to each other, and as a consequence, given the migration policy of the German governments, we can conclude that immigrant entrepreneurship in Hamburg is a phenomenon that has appeared since the 1990s. Those developments can be explained by political migration; in particular, this holds true for immigrant entrepreneurs from Afghanistan, FormerYugoslavia and Iran. Firm foundations built by Polish immigrants have been carried out earlier, which could have been motivated by the privatization of former state-owned enterprises. In contrast, the entrepreneurial activities of Turkish immigrants started recently in Hamburg. A significant cause of Turkish immigrant entrepreneurs being younger, in comparison to others in the present sample, is the change in the migration generation. This apparently concerns enterprises established by the second immigrant generation among the Turks residing in Hamburg. Table 32.2

Year of establishment and age of entrepreneur, by country of origin

Country Afghanistan China Former-Yugoslavia Iran Poland Turkey

Year of establishment (mean)

Age of entrepreneur (mean)

1992 1995 1992 1991 1990 1996

43 48 42 46 42 38

Source: Own calculations based on the sample characteristics.

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According to other immigrant entrepreneurship studies in Germany, the entrepreneur’s age is noticeably higher, but the empirical evidence is rather mixed. Based on the Global Entrepreneurship Monitor (Sternberg et al., 2003) the 18–34 age cohort is one and a half times more entrepreneurial comparing to immigrants older than 35 years. Moreover, Fertala (2003) found, using the German Socio-Economic Panel data set (waves 1984 and 2000) that the average age of the self-employed immigrants in Germany was 38.17 and 41.25 years, respectively. In this context, the results obtained for Hamburg city are not surprising at all. Business volume by industry and country of origin The sample contains data on the volume of sales realized. This information is pooled by nationality of the founder and the results (mean values) are presented in Figures 32.1 and 32.2. Figure 32.1 illustrates that entrepreneurs from the Former-Yugoslavia realize a sales volume of almost 500 000 euros, and receive the smallest revenues apart from those of Polish entrepreneurs. Despite the fact that Chinese ventures deal predominantly with retail, they have only comparatively narrow markets, as opposed to the Turkish enterprises (on average the youngest), which account for the highest volume of sales. However, it depicts one of the economic indicators for entrepreneurial dynamics. Multifarious motives and factors might account for these divergences among the groups of immigrant entrepreneurs. For instance, the volume of sales is strongly related to vocational education and, on the other hand, it is notably higher for technicians and university diploma holders than for skilled and semi-skilled labour. Another reason to be taken into consideration is the number of employees and their productivity. Finally, the

750000

685 000 635 000

610000 S a l e s

575 000

565000

600000

464000 450000

i n 300000 e u r o 150000 s

225 500

0 Afghanistan

China

FormerYugoslavia

Iran

Poland

Country of Origin

Source:

Own calculation based on the sample.

Figure 32.1

Business volume structure by country of origin

Turkey

Total

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1000000

930 000

S 800000 a l e s 600000

675 000

665 000 610 000

573 000

580 000

510 000

i n 347 000

e 400000 u r o s 200000

To ta l

O th er Se rv ic es

Ca te rin g

Tr an sp or ta tio n M an uf ac tu rin g

W ho le sa le

il ta Re

H an di cr af t

0

Industrial Sector Source: Own calculation based on the sample.

Figure 32.2

Volume of sales by industrial sectors

business revenues depend on the industrial sector in which the enterprise is operating (see Figure 32.2). Figure 32.2 shows that manufacturing (930 000 euros) accounts for the highest sales, followed by handicraft (675 000 euros) and wholesale (665 000 euros). The volume of sales with respect to handcraft seems to be overrated in the sample owing to the fact that entrepreneurs who hold a commercial degree as well as being members of the Chamber of Handicraft are classified as handicraft workers. Among the retail and wholesale, a few enterprises conduct vertical integration with correspondingly high business revenues. Moreover, the transportation sector, largely including taxicabs and couriers, reports the lowest turnover pertaining to the sample. Lastly, retail and other services each account for nearly one-fifth of sales in the sample. While retail, as a rather traditional activity, accounts for lower sales among the immigrant entrepreneurs in Hamburg, the situation regarding other services, starting with cleaning companies over Internet service and ending with finance service providers and freelances, seems significantly sustainable. Team structure of the workplace To what extent does a preference exist for co-national employees or, more precisely, for immigrants from the same country of origin? We investigated this matter further and

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100.0 100 95 S h 90 a 85 r 80 e 75 70 o 65 f 60 c 55 o 50 m 45 p 40 a 35 t 30 r 25 i 20 o t 15 s 10 5 0

83.7 75.6

72.4

72.3

68.1 66.1

31.0 21.0 16.0

17.0

15.8

7.0 3.0 Afghanistan

China

FormerYugoslavia

Iran

Poland

Turkey

Total

Country of Origin Employees

Customers

Suppliers

Source: Own calculation based on the sample.

Figure 32.3

Origin of employees, customers and suppliers

surveyed whether the employees, customers and suppliers are mostly compatriots. The results are depicted in Figure 32.3. Nearly two-thirds of the immigrant entrepreneurs engage entirely or primarily individuals of their own country of origin. This tendency varies significantly among the immigrant entrepreneurs interviewed. For instance, Chinese and Polish entrepreneurs are considerably above the average sample. Preferring predominantly compatriots as employees might relate especially to language ability, specific trust and to the small size of the enterprises established. The latter applies, in particular, to both the above-mentioned immigrant groups. In addition, Chinese handicraft companies are founded typically by married couples and are often administrated from the dwelling place, according to the survey. The same holds true for the smallest companies providing services in the case of Polish origin. Moreover, the language ability argument is of relevance only for the Chinese entrepreneurs in Hamburg city. In contrast, the Turkish entrepreneurs themselves disengaged from the solely compatriot employment the most compared to the other immigrant groups. In the overall picture, it appears that the origin link is of importance only as regards employment and the relations to customers and suppliers; it hardly plays an important role. Nevertheless, there exist differences at the country level that should be considered in greater depth. For instance, the high proportion of fellow citizen suppliers among the

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Chinese entrepreneurs is related to the commercial firms which either import various products such as parts for ships, textiles or comestible goods from China to Germany, or export producer goods. Afghan entrepreneurs deal more with retail and less with services, and vice versa in the case of Iranian entrepreneurs. The differences in localization of national customers correspond to this development. Model specification We first model the immigrant entrepreneurial performance in dependence of his human capital endowment and then we enrich the model to account for gender- and nationalitybased homophily with respect to employees, customers and suppliers. Let i be the volume of sales per employee for immigrant entrepreneur i in 2002, and xij entrepreneur i’s value of human capital determinant j for the same year. We specify the logarithm of sales per employee as the dependent variable rather than absolute or relative profit because of data constraints. The estimated initial model is given by equation 32.1: ln( i )  

J

jxij  i,
j 1 

where i N(0,2 ).

(32.1)

As the main focus of this study is to explore the influence of homogenous working teams among the immigrant entrepreneurs as regards nationality and gender, we expand the above-stated initial model. The model specification is the following: ln( i )  

J

jxij  1 yemployee  2 ycustomer  3 ysupplier  i, i i i
j 1

(32.2)



where i N(0,2 ) . Equation 32.2 presents a reduced-form empirical specification where sales per employee at firm i depend on human capital endowment with respect to the founder (xij), such as age, years of education, working experience accumulated in Germany and in the country of origin, and on the gender and nationality-based characteristics of employees, customers and suppliers (yemployee ycustomer ysupplier ) , respectively. i i i Estimation results The entrepreneurial performance of immigrants from Afghanistan, China, FormerYugoslavia, Iran, Poland and Turkey located in Hamburg will depend on several factors. As explained above, the process of fielding a work team within a venture is likely to follow the principle of homophily. On the other hand, this principle leads to a stable team structure over the course of time and consequently affects the venture’s economic performance. Two different econometric specifications have been estimated. First, we exclude the effect of homophily on the entrepreneurial outcome and concentrate on the main characteristics with respect to the immigrant entrepreneur. Second, we consider the impact of homophily on a venture’s performance measured by indicators such as gender, employee, customer and supplier homophily in different variations. The results for the business volume per employee as dependent variable are depicted in Tables 32A.1 to 32A.5. For

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each model, we present the coefficient estimates with the standard error; the asterisks denoting the significance level at 1, 5 or 10 per cent in a two-tail test. Capital endowment and economic performance Currently, human capital is a widely used concept with complex and varying definitions, when investigating the determinants of entrepreneurial performance. Its positive impact on employee performance is well accepted and explored in the social science research. Van Praag and Cramer (2001) made a first attempt to formalize its implications for the business founder’s case. Consequently, we concentrate in the first econometric specification on the capital endowment, predominantly human capital, regarding the immigrant entrepreneur, and examine its impact on the volume of sales per employee as performance measure (see Table 32A.1). Empirically, the educational attainment versus years of schooling as proxy of human capital stock is one of the most often used measures when investigating the value of human capital for the economic performance. By using variables that only reflect formal education we neglect the human capital accumulation that is obtained by vocational training. Age structure could be a proxy for this learning-by-doing process. For instance, taking the age of the founder, Fertala (2004) ascertained, for immigrant entrepreneurs operating in Upper Bavaria (Germany), a negative effect on the survival rate as an indicator for economic performance, while that of the age-squared was positive. Different human capital measures are incorporated in the empirical analysis such as age of the immigrant entrepreneur, years of schooling obtained either in Germany or in the country of origin, and finally occupational experience accumulated in Germany and in the country of origin. The result confirms the findings of the previous literature on entrepreneurship, that the level of human capital endowment influences positively the economic outcome in general. The main determinants of performance within this category are occupational experience and years of education. Having worked in Germany prior to establishing one’s own business increases significantly the volume of sales per employee (ceteris paribus by 53.39 per cent). This effect is negative for the occupational experience cumulated in the country of origin but, on the other hand, it is statistically insignificant. Regarding the years of education obtained either in Germany or abroad, the estimated coefficient shows that the sales per employee increase by 4.49 per cent, while the years of education increase by 10 per cent. Age of entrepreneurs appears to enhance the volume of sales positively, as assumed, but on the other hand the estimated coefficient is not statistically significant and, thus, should only be taken into consideration cautiously. Additionally, several empirical studies, for instance Bosma et al. (2004) and many other scholars, have found evidence for the conventional inverted U-shaped relation between economic performance and age of entrepreneur. We therefore tested that hypothesis by adding a squared term, but we did not find significant support for the assumption stated above. Moreover, we carried out Remsey’s regression specification error test including one versus two fitted terms in order to detect misspecification error. Both test specifications rejected the hypothesis that the coefficients on the powers of fitted values are zero. The firm size proxied by the number of employees plays a crucial role in entrepreneurial performance. The size effect is negative and, on the other hand, it indicates a decrease in sales by 5.21 per cent while the number of employees increases by 10 per cent. As a

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result, we can conclude that, given the small size of companies included in the sample, the highest output is realized by rather small firms. Interestingly, image and income improving account for the strongest positive versus negative impact on volume of sales among the objectives prior to firm establishment. The estimates obtained are 0.58 for image and
0.42 for income, respectively. Dissatisfaction with previous occupational status prior to enterprise establishment leads to a decrease in the volume of sales. Finally, the entrepreneurial performance varies significantly among the industrial sectors included in the sample. Apart from other industrial sectors, the order of magnitude is manufacturing (1.09), followed by handicraft (0.94) and wholesale (0.55) as those accounting for the strongest effects on sales per employee realized by the immigrant entrepreneurs. Homophily and entrepreneurial performance Conditional on the capital endowment of the immigrant entrepreneur, we explore the impact of the homophily on the firm’s performance. In this econometric specification we consider four types of homophily regarding both the working team structure within the company and the economic environment represented by customers and suppliers. With respect to the company’s team structure we account for gender and nationality of employees. The same holds true for customers and suppliers of the firm. The gender-based homophily included is a dummy variable, which gets a value one if the immigrant entrepreneur and the majority of the employees are male. As for the firm’s employees, we account in the model for those dominantly and predominantly from the same country of origin. Moreover, owing to the mixed empirical evidence regarding the effect of homogenous customers and suppliers, we incorporated two variables: the customer–employee versus supplier–employee relationship. The first deals with customers versus suppliers predominantly from the same country of origin, and the second one with predominantly German customers and suppliers, given that at least one firm’s employee is German. The empirical results are depicted in Tables 32A.2 to 32A.4. Given that homophily generally translates dissimilarity regarding the above-mentioned characteristics into network distance, but that on the other hand it leads to stable working teams, which communicate effectively, the impact on entrepreneurial performance should be positive. Surprisingly, not all variables measuring the homophily phenomenon have a positive influence on the volume of sale per employee; therefore, we refer to this phenomenon as homophily paradox. Hiring predominantly employees from the same country of origin as the founder accounts for a significant decrease of 5.14 per cent by increase of employee’s dominance by 10 per cent. Moreover, working teams dominated by males are the regular case in our study. In 84.31 per cent of the companies, the founder and the majority of employed are males. The effect of the calculated gender-based homophily on the sales is positive but rather stronger compared to that based on nationality (38.13 per cent). While incorporating the customer’s and supplier’s homophily base on predominantly co-nationals into the analysis, the effect of gender-specific homophily rises by 9.93 per cent and that of the nationality-specific similarity declines by 7.07 per cent in comparison to the first version. As a result, we can conclude that the gap between the gender and nationality homophily increases, and thus, the total impact on entrepreneurial performance

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diminishes. Acquiring customers as well as cooperating with suppliers predominantly from the same country of origin enhances the sales opportunities. The estimates obtained for customer and supplier-based homophily are 0.05 and 0.39, respectively. As the customer impact is not statistically significant, it should be taken into consideration more cautiously. Moreover, dealing mainly with German suppliers deteriorates the economic performance of immigrant entrepreneurs. In contrast, serving mostly German customers increases significantly the sales volume per employee, by 55.53 per cent. In total, the most relevant factors with respect to homophily based on our immigrant entrepreneurship sample are male dominance within the working team, predominantly co-nationals as employees and suppliers, and German customers in the main. The genderbased homophily accounts for the strongest positive influence and the nationality of the members of staff for the negative influence on business sales. Discussion Any study of the way homophily affects the economic performance of immigrant entrepreneurs in Germany faces a number of challenges. First, because of potential legal challenges, it is rare for similarity and performance data at the company level with respect to immigrants to see the light of the day. Additionally, to the best of our knowledge, this sample is the only one to be conducted within Germany. Second, homophily versus heterophily exists as a concept along infinite dimensions. We focus in the current research on the socially salient dimensions of gender and nationality, although many other dimensions are expected to matter. Third, in practice, similarity is often confused with the main effects of demographic differences. Finally, the impacts of homophily are often confounded with other differences across occupations, employers or economies. Because females and immigrants typically work in different places and jobs than do Germans, the challenge is to isolate the effects of similarity from the effects of both omitted location and occupation characteristics. Therefore we employ a study design that dramatically reduces this problem by using data from a single city in Germany with a higher fraction of immigrants. Homophily studies can mistake not just employer similarity but also special similarity for homogenous effects. In our model specification we could not control for special characteristics that might affect the sales per employee realized. Finally, a particular special unit can experience an employment shock that might influence both the demographic mix of employees and the demand for this company’s products and services. In our study we have not accounted for the effect of regional shocks to sales or workplace demographics because of the cross-sectional structure of the data set applied. Conclusion In many cities of advanced economies, such as Germany, we find a significant number of immigrants who have set up businesses themselves. Consequently, we can position these enterprises at the intersection of structural change in these urban economies. This specific means of economic insertion, therefore, clearly shows how immigrants, using their own resources, not only make use of existing economic opportunities but also are able to create new ones. In this context, we aim to answer the question whether ‘birds of a feather flock together’ and perform economically better in the current study. In other words, does

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effective communication due to the ‘similar-to-me’ hypothesis cause better economic performance among immigrant entrepreneurs in Germany? To answer this question, we conducted a unique data set consisting of 500 immigrant entrepreneurs from Afghanistan, China, Former-Yugoslavia, Iran, Poland and Turkey during the period September–October 2002 in Hamburg city by means of face-to-face interviews, using a detailed questionnaire to study various aspects of immigrant entrepreneurship in Germany. The main finding suggests that the process of fielding a work team within a venture is likely to follow the principle of homophily. Work teams with male dominance among the immigrant entrepreneurs in Hamburg city are more common than mixed gender teams. In 84.31 per cent of the companies included, the founder and most of the employees are male. Moreover, the gender-based honophily raises significantly the volume of sales by (8.31 per cent) while increasing the male dominance by 10 per cent, and thus, we confirm hypothesis 1. The nationally homogenous work teams are the regular case in our study. In 72.3 per cent of the companies, the work team is composed mainly of employees from the same country of origin as the entrepreneur. Surprisingly, the team structure thus formed causes a decline in the sales per employee by 5.14 per cent while raising the dominance of co-nationals by 10 per cent. As a result, we could not confirm hypothesis 4. One reason for these developments might be the fact that similarity did lead to effective communication and did reduce communication cost. But, on the other hand, it might stifle the innovativeness of the working team in the long run as we analysed companies beyond the start-up stage. It is highly possible that the effect of innovativeness dominates that of effective communication, and leads in this vein to a negative total impact on the economic performance. Finally, cooperating mostly with co-nationals as suppliers improves the economic performance of immigrant entrepreneurs in Hamburg city. In contrast, serving mostly German customers significantly increases the volume of sales per employee. In sum, the patterns of homophily among the immigrant entrepreneurs are remarkably robust over those varying types of relations investigated in the study. As a consequence, we can conclude that the principle of homophily does lead to stable work teams within a company with respect to gender and nationality, but does not always improve entrepreneurial performance. Notes 1. More precisely, identity and cognitive orientation tend to be linked in this explanation. The mechanism of homophily implies that these individuals who have a common identity also tend to share values, beliefs and norms. 2. Williams and O’Reilly (1998) and Reskin et al. (1999) provide excellent recent reviews of demographic research in organizations.

References Aldrich, H.E. (1989), ‘Networking among women entrepreneurs’, in O. Hagan, C. Rivchun and D. Sexton (eds), Women-Owned Business, New York: Praeger, pp. 103–32. Aldrich, H.E. and R. Waldinger (1990), ‘Ethnicity and entrepreneurship’, Annual Review of Sociology, 16, 111–35. Ancona, D. and D. Caldwell (1992), ‘Demography and design: predictors of new product team performance’, Organizational Science, 3, 321–41.

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Baker, M.Q. (1999), ‘Reaching new markets’, Association Management, 51(5), 43–5. Becker, G. St. (1957), The Economics of Discrimination, Chicago: University of Chicago Press. Bird, B. (1989), Entrepreneurial Behavior, Glenview, IL: Scott, Foresman. Bosma, N., C.M. van Praag, R. Thurik and G. de Wit (2004), ‘The value of human and social capital investments for the business performance of startups’, Small Business Economics, 23(3), 227–36. Byrne, D. (1971), The Attraction Paradigm, New York: Academic Press. Carley, K. (1991), ‘A theory of group stability’, American Sociological Review, 56(3), 331–54. Carter, Nancy (1994), ‘Reducing barriers between genders: differences in new firm startups’, presented at the annual meeting of the Academy of Management, August, Dallas, TX. Chyna, Julie T. (2001), ‘Mirroring your community: a good reflection on you’, Healthcare Executive, 16(2), 18–23. Cox, T. (1993), Cultural Diversity in Organizations: Theory, Research and Practice, San Francisco: BerrettKoehler Publishers. Eisenhardt, K. and C.B. Schoonhoven (1990), ‘Organizational growth: linking founding teams, strategy, environment, and growth among U.S. semiconductor ventures, 1978–1988’, Administrative Science Quarterly, 35, 504–29. Fertala, N. (2003), ‘Immigrants’ propensity to self-employment in Germany’, Journal of Transforming Societies and Economies, 4(38), 30–40. Fertala, N. (2004), ‘Do human and social capital investments influence survival? A study of immigrant entrepreneurship in Upper Bavaria’, presented at the 24th Babson Kauffman Entrepreneurship Research Conference, Glasgow, Scotland, June 3–5. Friedkin, N.E. and E.C. Johnsen (1990), ‘Social influence and opinions’, Journal of Mathematical Sociology, 15, 193–205. Friedkin, N.E. and E.C. Johnsen (1999), ‘Social influence networks and opinion change’, Advances in Group Processes, 16, 1–29. Friedman, N. and J. DiTomaso (1996), ‘Myths about diversity: what managers need to know about changes in the US labor force’, California Management Review, 38(4), 54–7. Greif, A. (1993), ‘Contract enforceability and economic institutions in early trade: the Maghribi traders’ coalition’, American Economic Review, 83(3), 525–48. Ibarra, H. (1992), ‘Homophily and differential returns: sex differences in network structure and access in an advertising firm’, Administrative Science Quarterly, 37, 422–47. Ibarra, H. (1995), ‘Race, opportunity, and diversity of social circles in managerial networks’, Academy of Management Journal, 38, 673–703. Ibarra, H. (1997), ‘Paving an alternative route: gender differences in managerial networks’, Social Psychology Quarterly, 60, 91–102. Jackson, S.E., J.F. Brett, V.I. Sessa, D.M. Cooper, J.A. Julin and K. Peyronnin (1991), ‘Some differences make a difference: individual dissimilarity and group heterogeneity as correlates of recruitment, promotions, and turnover’, Journal of Applied Psychology, 76, 675–89. Kalleberg, A.L., D. Knoke, P. Marsden and J. Spaeth (1996), Organizations in America: Analyzing Their Structures and Human Resource Practices, Thousand Oaks, CA: Sage. Kalmijn, M. (1998), ‘Intermarriage and homogamy: causes, patterns and trends’, Annual Review of Sociology, 24, 395–421. Lang, K. (1986), ‘A language theory of discrimination’, Quarterly Journal of Economics, 101(2), 363–82. Lazarsfeld, P.F. and R.K. Merton (1954), ‘Friendship as a social process: a substantive and methodological analysis’, in M. Berger (ed.), Freedom and Control in Modern Society, New York: Van Nostrand, pp. 18–66. Lazear, Edward P. (2000), ‘Performance pay and productivity’, American Economic Review, 90(5), 1346. Lee, J. (2001), ‘The racial and ethnic meaning behind Black: retailer’s hiring practices in inner-city neighborhoods’, in John David Skrentny (ed.), Color Lines: Affirmative Action, Immigration, and Civil Rights Options for America, Chicago: Chicago University Press, pp. 168–88. Lee, L. (2000), ‘Speaking the customer’s language – literally’, Business Week, 25 September, 178. Lieberman, S. (1998), ‘America’s changing face’, Restaurant Hospitality, LXXXII, 51–60. Liparulo, R. (1998), ‘Make diversity work: serving people’s differences can be a profitable pursuit’, Today’s Realtor, June, 46–9. Marsden, P. (1987), ‘Core discussion networks of Americans’, American Sociological Review, 52, 122–31. Marsden, P. (1988), ‘Homogeneity in confiding relations’, Social Networks, 10, 57–76. McPerson, M. and L. Smith-Lovin (1987), ‘Homophily in voluntary organizations: status distance and the composition of face to face groups’, American Sociological Review, 52, 370–79. McPerson, M., L. Smith-Lovin and J. Cook (2001), ‘Birds of a feather: homophily in social networks’, American Review of Sociology, 27, 415–44. Nemeth, C. (1985), ‘Dissent, group process and creativity’, in E. Lawler (ed.), Advances in Group Processes: Theory and Research, Greenwich: JAI Press, pp. 57–75.

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O’Reilly, C.A., D.F. Caldwell and W.P. Barnett (1989), ‘Work group demography, social integration, and turnover’, Administrative Science Quarterly, 34, 21–37. Pfeffer, J. (1983), ‘Organizational demography’, Research in Organizational Behavior, 5. Reskin, Barbara F., Debra B. McBrier and Julie A. Kmec (1999), ‘The determinants and consequences of workplace sex and race composition’, Annual Review of Sociology, 25, 335–61. Schofeld, J.W. (1995), ‘Review of research on school desegregation’s impact on elementary and secondary school students’, in J. Banks and C. McGee (eds), Handbook of Research on Multicultural Education, New York: Macmillan, pp. 597–616. Sternberg, R., H. Bergmann and I. Lückgen (2003), Global Entrepreneurship Monitor, Cologne: Universität zu Köln. Tajfel, H. and J. Turner (1985), ‘The social identity theory of intergroup behavior’, in S. Worchel and W.G. Austin (eds), Psychology of Intergroup Relations, Chicago: Nelson-Hall, pp. 7–24. Tajfel, H. and J.C. Turner (1986), ‘The social identity theory of intergroup behavior’, in S. Worchel and W.G. Austin (eds), Psychology of Intergroup Relations, 2nd edn, Chicago: Nelson-Hall, pp. 7–24. Thomas, D.A. and R.J. Ely (1996), ‘Making differences matter: a new paradigm for managing diversity’, Harvard Business Review, 79–90. Tsui, A.S., T.D. Egan and C.A. O’Reilly (1992), ‘Being different: relational demography and organizational attachment’, Administrative Science Quarterly, 37, 549–79. Praag, C.M. van and J.S. Cramer (2001), ‘The roots of entrepreneurship and labor demand, individual ability and low risk aversion’, Economica, 269, 45–62. Verbrugge, L.M. (1983), ‘A research note on adult friendship contact: a dyadic perspectives’, Social Forces, 62, 78–83. Vesper, K. (1990), New Venture Strategies, Englewood Cliffs, NJ: Prentice-Hall. Williams, K.Y. and C.A. O’Reilly (1998), ‘Forty years of diversity research: a review’, in M.A. Neale, E.A. Mannix and D.H. Gruenfeld (eds), Research on Managing Groups and Teams, Greenwich, CT: JAI Press. Zenger, Todd R. and Barbara S. Lawrence (1989), ‘Organizational demography: the differential effects of age and tenure distributions on technical communication’, Academy of Management Journal, 32(2), 353–76.

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Appendix: regression results Table 32A.1

Entrepreneurial performance, natural logarithm of sales per employee Model without homophily indicators

Independent variables Constant term

Coefficient

Std. error

9.624***

0.646

Entrepreneur’s characteristics Age of the entrepreneur Years of education1 Working experience in Germany2 Working experience in country of origin2 Number of family members as employees

0.006 0.449** 0.428***
0.085 0.349

0.009 0.201 0.154 0.171 0.244

Motives prior to enterprise establishment2 Image improvement Income improvement Dissatisfaction with previous occupation Unemployment

0.579***
0.419**
0.386**
0.074

0.179 0.170 0.172 0.204

Control variables Firm size1 Legal form, limited company2


0.513*** 0.390**

0.120 0.189

Industrial sectors2 Retail Wholesale Restaurants and catering Handcraft Manufacturing Other sectors

0.179 0.548* 0.483 0.942** 1.094** 0.671**

0.309 0.331 0.301 0.306 0.465 0.310

F-Statistic Probability (F-Stat) R-Squared

4.1209 0.0000 0.2304

Notes: *** Statistically significant at 1%; ** statistically significant at 5%; * statistically significant at 10%. 1 Natural logarithm. 2 Dummy variable; the reference group regarding sector dummies is transportation.

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Regression results Table 32A.2

Entrepreneurial performance, natural logarithm of sales per employee Model 1 with homophily indicators

Independent variables Constant term

Coefficient

Std. error

9.907***

0.664

Entrepreneur’s characteristics Age of the entrepreneur Years of education1 Working experience in Germany2 Working experience in country of origin2 Number of family members as employees1

0.005 0.385* 0.402***
0.120 0.359

0.009 0.200 0.153 0.170 0.247

Motives prior to enterprise establishment2 Image improvement Income improvement Dissatisfaction with previous occupation Unemployment

0.560***
0.436*
0.363**
0.069

0.177 0.169 0.172 0.202

Control variables Firm size1 Legal form, limited company2


0.549*** 0.401**

0.126 0.187

0.253 0.578* 0.577* 0.938*** 1.180*** 0.803**

0.308 0.328 0.300 0.303 0.462 0.312

Industrial sectors2 Retail Wholesale Restaurants and catering Handcraft Manufacturing Other Sectors Homophily indicators Employment, mainly co-nationals Gender, male F-Statistic Probability (F-stat) R-Squared


0.666** 0.605** 4.1193 0.0000 0.2523

Notes: *** Statistically significant at 1%; ** statistically significant at 5%; * statistically significant at 10%. 1 Natural logarithm. 2 Dummy variable.

0.278 0.247

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Regression results Table 32A.3

Entrepreneurial performance, natural logarithm of sales per employee Model 2 with homophily indicators

Independent variables Constant term

Coefficient

Std. error

9.887***

0.663

Entrepreneur’s characteristics Age of the entrepreneur Years of education1 Working experience in Germany2 Working experience in country of origin2 Number of family members as employees1

0.004 0.386** 0.364**
0.120 0.339

0.009 0.200 0.154 0.169 0.246

Motives prior to enterprise establishment2 Image improvement Income improvement Dissatisfaction with previous occupation Unemployment

0.559***
0.421***
0.321*
0.090

0.177 0.168 0.173 0.202

Control variables Firm size1 Legal form, limited company2


0.524*** 0.369**

0.126 0.188

0.259 0.532* 0.553* 0.968*** 1.236*** 0.785***

0.307 0.328 0.301 0.302 0.461 0.315


0.734*** 0.653*** 0.046 0.391*

0.280 0.248 0.218 0.213

Industrial sectors2 Retail Wholesale Restaurants and Catering Handcraft Manufacturing Other Sectors Homophily indicators Employees, mainly co-nationals Gender, male Customers, mainly co-nationals Suppliers, mainly co-nationals F-Statistic Probability (F-Stat) R-Squared

3.9301 0.0000 0.2641

Notes: *** Statistically significant at 1%; ** statistically significant at 5%; * statistically significant at 10%. 1 Natural logarithm. 2 Dummy variable; the reference group regarding sector dummies is transportation.

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Regression results Table 32A.4

Entrepreneurial performance, natural logarithm of sales per employee Model 3 with homophily indicators

Independent variables Constant term

Coefficient

Std. error

9.851***

0.674

Entrepreneur’s characteristics Age of the entrepreneur Years of education1 Working experience in Germany2 Working experience in country of origin2 Number of family members as employees1

0.004 0.391** 0.447***
0.096 0.320

0.008 0.120 0.153 0.170 0.246

Motives prior to enterprise establishment2 Image improvement Income improvement Dissatisfaction with previous occupation Unemployment

0.602***
0.384**
0.353**
0.039

0.178 0.170 0.171 0.201

Control variables Firm size1 Legal form, limited company2


0.536*** 0.326*

0.125 0.189

0.268 0.533* 0.482 0.906*** 1.228*** 0.891***

0.306 0.326 0.303 0.302 0.460 0.313


0.730*** 0.700*** 0.443**
0.185

0.277 0.249 0.199 0.167

Industrial sectors2 Retail Wholesale Restaurants and catering Handicraft Manufacturing Other sectors Homophily indicators Employees, mainly co-nationals Gender, male Customers, mainly Germans Suppliers, mainly Germans F-Statistic Probability (F-Stat) R-Squared

4.0231 0.0000 0.2686

Notes: *** Statistically significant at 1%; ** statistically significant at 5%; * statistically significant at 10%. 1 Natural logarithm. 2 Dummy variable; the reference group regarding sector dummies is transportation.

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Regression results Table 32A.5

Entrepreneurial performance, natural logarithm of sales per employee Model 4 with homophily indicators

Independent variables Constant term

Coefficient

Std. error

9.717***

0.662

Entrepreneur’s characteristics Age of the entrepreneur Years of education1 Working experience in Germany2 Working experience in country of origin2 Number of family members as employees1

0.004 0.406** 0.391***
0.084 0.306

0.008 0.198 0.153 0.169 0.244

Motives prior to enterprise establishment2 Image improvement Income improvement Dissatisfaction with previous occupation Unemployment

0.605***
0.361**
0.322*
0.055

0.177 0.169 0.171 0.200

Control variables Firm size1 Legal form, limited company2


0.504*** 0.301

0.125 0.189

0.276 0.510 0.508* 0.927*** 1.302** 0.853***

0.304 0.325 0.298 0.300 0.458 0.310


0.781*** 0.729*** 0.383** 0.405**

0.277 0.248 0.190 0.207

Industrial sectors2 Retail Wholesale Restaurants and catering Handicraft Manufacturing Other sectors Homophily indicators Employees, mainly co-nationals Gender, male3 Customers, mainly Germans Suppliers, mainly co-nationals F-Statistic Probability (F-Stat) R-Squared

4.1901 0.0000 0.277

Notes: *** Statistically significant at 1%; ** statistically significant at 5%; * statistically significant at 10%. 1 Natural logarithm. 2 Dummy variable; the reference group regarding sector dummies is transportation.

33 Chinese entrepreneurs in Hungary Pál Nyíri

The Chinese are one of the most important groups within Hungary’s migrant population. Most of the country’s 144 thousand foreign residents, or 1.5 per cent of the country’s total population (1997 figure, Organisation for Economic Cooperation and Development, 2001: 50), come from neighbouring countries. In terms of numbers, 10 to 15 thousand Chinese do not appear significant,1 yet, if we discount ethnic Hungarian migrants (who, though there are no official data on this, account for most of those coming from neighbouring countries), Chinese may advance to first place among migrant groups. In any case, they form the largest ‘visible minority’ for the Hungarian public. Along with, but even more exclusively than, less numerous groups of Arabs and Vietnamese, they represent an entrepreneurial migration with a strongly transnational character, which fits into the Hungarian economy in a way that is quite different from that of Romanian, former Yugoslav or Ukrainian labour or family reunification migrants or refugees. This chapter attempts to review and interpret the main points of contact between the ethnic and transnational economy of Chinese entrepreneurs in Hungary and the Hungarian economy, with particular attention to the development of migrants’ trade, employment and mobility strategies. It is based on participant observation from 1992 until 2001 and additional fieldwork and interviews in 2003, supplemented by an analysis of Chinese-language media reports on the Chinese economy in Hungary published in 2002–03. The history, social composition and demographics of Hungary’s Chinese population are only briefly reviewed here: these and methodological aspects of my research are described in detail in my previous publications (among others, Nyíri, 1999; Pieke et al., 2004). Part of the research presented here enjoyed the support of the Economic and Social Research Council (UK) in 1999–2001 (grant number L214252012). ‘An ideal goldmine for the Chinese’: the formation of the ethnic economy Chinese migration to Hungary is entrepreneurial migration. Taking advantage of a 1986 liberalization of passport regulations, an increasing number of residents in China’s northern provinces began to trade across the Soviet border (see, for example, Zhao, 1994). Informal ‘shuttle trade’, involving the sale of consumer goods brought with onself and the purchase of other goods in the destination country, to be sold upon return, had characterized Eastern Europe’s economies of scarcity since at least the 1960s, in some places providing the only access to imported consumer goods. Chinese traders, stepping into the trade at the critical moment when what later turned out to be the transition to market economy began, filled the niche left by non-existent or collapsing retail networks in the market of lowprice clothing and footwear. In terms of the movement it generated, the shuttle trade in the Russian Far East reached its peak in 1993, when, depending on the source, 2.5 million or 800 thousand Chinese citizens entered the border of the region, mostly as tourists, but, according to the unanimous opinion of researchers, overwhelmingly to trade (de Tinguy, 1998: 302; Bagrov, 1999). 534

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The traders ventured farther and farther along the Trans-Siberian Railway, reaching European Russia and then Hungary, the only European country that, as of 1 January 1989, did not require a visa from Chinese citizens. According to Hungary’s Ministry of the Interior, the number of Chinese citizens entering the country jumped from nearly zero in the mid-1980s to 11 621 in 1990 and 27 330 in 1991. By the early 1990s, Russia and Hungary had become hubs from which Chinese migrants moved on to other Eastern European countries. While opportunities offered by the transition from the economies of scarcity made migration economically attractive for Chinese entrepreneurs or would-be entrepreneurs, and a brief period of liberal immigration policies in Eastern Europe made it possible, two factors in China contributed to their willingness to migrate. The first was the bloody Tiananmen Square crackdown on the student democracy movement on 4 June 1989, which created serious anxiety in the fledgling private sector. Entrepreneurs tried to find escape routes for their capital and their families in case of a hardline turn in economic policy. The second – related – factor was the recession of the Chinese economy between 1989 and 1991, which affected private entrepreneurs, managers of state enterprises who were unable to sell their stocks, and their workers whose wages were held back, alike. Many of these – former officials, workers, intellectuals – became migrants at the same time as turning into entrepreneurs. By leaving the country, they wished to increase their upward mobility within Chinese society. This helps explain why Chinese migrants to Hungary are educated not only above the Chinese average but also above the average of earlier waves of Chinese migration. Roughly a quarter of Chinese citizens in a May 2000 database of the Ministry of the Interior, or 2650 persons, responded ‘businessperson’ or ‘sales agent’ to a question about ‘professional qualifications’; 342 responded ‘engineer’; 275 said ‘teacher’; 223 ‘clerk’; 183 ‘doctor’; 171 ‘economist’; 235 ‘intelligentsia’; and 125 ‘student’. Forty-six per cent of those in the database gave their occupation as ‘leader of private business’.2 Relatively high education levels are confirmed by the fact that, of a sample of 135 market traders in Budapest, 45 per cent said they had upper secondary, and 39 per cent higher, education (City of Budapest, 1997). Another distinctive demographic feature of Chinese entrepreneurs in Hungary is the high share of women compared to earlier migration waves from China. Thirty-five per cent of Chinese citizens in the Interior Ministry database, and nearly one-third of those who indicated their occupation as ‘leader of private business’ are women. Thirty-seven per cent of the women indicated their marital status as single or divorced, suggesting that many of them may be independent entrepreneurs (see Nyíri, 2002). The first Chinese shuttle traders to arrive in Hungary say that they had chosen the goods they took with them in their huge plastic duffel bags – known as ‘Manila Vuittons’ – on a more or less random basis, considering mostly what was easy to carry. The first euphoric reports from the Eastern European market assured, in a tone of incredulity mixed with condescension reminiscent of European conquistadors exchanging glass beads for gold nuggets, that these were places where it was possible to sell any old thing. The resourceful traveller who makes a killing thanks to accidentally discovering the demand for some cheap souvenir or personal item he has with him is a basic motif of later stories immortalizing the ‘pioneers’ in Chinese press and literature. In the first book on Chinese migration to Eastern Europe, Mao Chun writes:

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Although these accounts were not thorough reports . . . those with a brain could get market information from them: ‘A string of pearls that cost a couple of yuan3 in China can be sold for over ten dollars in Hungary’. (Mao, 1992: 38–9)

Mao himself offers the following story of a ‘pioneer’: Wang Jun took some of the remaining gifts – essential oil, silk blouses and bead necklaces – to sell at the open-air market. Smiling, Wang Jun reminisces about that year: ‘I had never done business before. I didn’t even know how much my relatives had paid when they bought these things for me. Okay, let’s just sell them! Each bottle of essential oil fetched a dollar; the beads, fifteen; the blouses, sixty dollars. I sold everything within a day and made 860 dollars on a small bag of goods.’ (Mao, 1992: 2–3)

From then on, Wang made the trip from Budapest to Peking each month, netting $20 thousand on each selection of goods: strings of beads, digital watches, lighters and shirts. ‘These things were light, and the profit was tenfold’ (Mao, 1992: 3). This mythical golden age, which sent tens of thousands of Chinese packing, did not last long. Markets matured, consumers grew more discriminating, regulations became stricter, and Chinese foreign trade officials started worrying about the reputation of Chinese goods. Nonetheless, enthusiastic reports from Hungary kept on coming until the mid1990s. The following passages are taken, respectively, from a book by a Chinese scholar, the Chinese Communist Party’s central newspaper, and a former president of the Chinese Chamber of Commerce in Hungary: Chinese in Hungary are . . . brilliantly successful businesspeople: altogether, they have over one thousand companies and forty-eight restaurants; more than eighty percent have become bosses; those who make between one and two hundred thousand dollars a year are countless, and more than a dozen make over two million; the volume of international trade that passes through their hands exceeds a hundred million dollars a year. (Liu Xianling, 1994, quoted in Li Minghuan, 1995: 356) Each member of the [Hungarian Chinese Federation of Trade and Industry] has more than one million dollars in invested capital, and most have more than ten million. (Renmin Ribao, 1996) From peddling to running their own shops; from hauling merchandise on their backs or pushing it on carts to driving their own vans; from using public phones to using their own cell phones; from working for others to hiring their own employees . . . No other country has made it possible for the Chinese to achieve such brilliant success within such a short time of starting so low. (Yu Jun, 1994)

Zhao’s case exemplifies the rapid economic mobility of early migrants. After hearing that Hungary had abolished the visa requirement, Zhao, an instructor at the party school of a large Southern Chinese city, boarded the train to Budapest in 1991, with two thousand peacock feathers and two hundred dollars. Just in case, before leaving, she attended a massage course to acquire a marketable skill. Yet she never had to use it: the peacock feathers, sold for a dollar apiece in a Budapest underpass, provided sufficient capital to start a business. A hundred feathers were enough for the first month’s rent; after a few days, Zhao rented a stall at a Budapest market; in three months, she opened a shop near the Opera House and hired a Hungarian saleswoman. In the best times, the shop brought in a monthly profit of seven thousand dollars. Today, Zhao owns a company that deals with imports and shipping.4

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Across Eastern Europe, shuttle trade quickly developed into more institutionalized and specialized forms of business. As Tchoudinovskikh and Zhulin write, ‘the gradual concentration of resources, the appearance of businesses specialising in the purchase, shipping, or distribution of large parties of goods squeezed most individual entrepreneurs out of foreign trade’ (Tchoudinovskikh and Zhulin, 2001: 36–7). After a few rounds, and in many cases immediately upon first arrival, migrants registered an enterprise or joined an existing Chinese business as a partner, manager or employee, which enabled them to apply for a residence permit. In parallel with formalizing their title to stay in the country, they looked for a permanent place to sell their merchandise, strove to develop a stable clientèle, and, now more knowledgeable about local demand, asked a relative or acquaintance to put together and bring to Hungary the next batch of goods. Rapidly rising demand for Chinese goods, however, made the use of people to transport goods increasingly impractical, if not impossible. After the collapse of the Soviet Union, travel became more expensive and more dangerous. More importantly, after a brief period of freedom, the borders of one Eastern European country after the other were becoming impenetrable. This prompted Chinese businesspeople to turn to international shipping companies and, for some of them, to become important clients. The Budapest office of Maersk, one of the world’s leading shipping companies, hired several Chinese employees. A 1996 Chinese-language directory of Budapest businesses lists 25 non-Chinese shipping companies (Bao and Ujlaky, 1996: 134–6). In early 1992, 1400 Chinese-owned businesses were registered in Hungary. A third of them were limited liability companies (kft); the rest, sole proprietorships (bt). Their total registered capital was $20 million, averaging $1400 per company, and only five businesses had capital in excess of $200 thousand. At that time, the minimum capital required to register a business was the equivalent of $8 thousand; circulating between bank accounts, this sum could in fact serve several registrations (Nyíri, 1999: 50). Those who were unable to come up with the funds even together with their friends would often borrow money in China or partner with investors there. Despite low capitalization, yearly sales of the largest Chinese businesses in Hungary reached sums of between five and 30 million dollars thanks to favourable credit arrangements with suppliers in China (Nyíri, 1996: 134). Ten years later, according to the Ministry of the Economy, the number of Chineseowned businesses (mostly kft) had risen to around ten thousand. This means that, at least on paper, the majority of Chinese in Hungary own a business. At the same time, the total capital of the businesses, according to the Ministry, is a mere $120 million (excluding the Budapest branch of the Bank of China and the partly Chinese-owned Asia Center). That is, average capitalization is, at $1200, even lower than before. This is partly explained by the fact that some of the businesses are inactive, either registered only in order to obtain a residence permit in the first place or abandoned by their owners in favour of a new business out of immigration or tax considerations. Still, this does not detract from the fact that the overwhelming majority of Chinese in Hungary effectively head enterprises, whether on their own or jointly with others, even if those enterprises consist of just a market stall. The ‘Chinese market’ In obtaining local knowledge and building up business structures, Chinese entrepreneurs at first relied on the existing infrastructure of open-air consumer goods markets, formerly

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used by Eastern European shuttle traders and hence known as ‘Polish markets’ or ‘COMECON markets’. Chinese newcomers heard about these markets, some of which were permanent, while others were set up weekly, and took buses or trams to get there. By the turn of the 1990s, ‘Polish markets’ had lost their original reason to exist: the inconvertibility of Eastern European currencies and the constraints on international trade. For Poles and other Central Eastern Europeans, shuttle trade was losing attractiveness. Besides, Eastern European mass consumer goods, especially low-price clothing, could not compete with those from China, whether in price, quantity or quality. Chinese traders therefore encountered little resistance as they familiarized themselves with the rules governing the functioning of the markets and the establishment of contacts between sellers and buyers, employers and employees. They occupied the spaces of the markets and soon were themselves able to shape the rules. For Chinese migrants, most of whom did not know Hungarian, were unfamiliar with official institutions and communicated with them via Hungarian middlemen, the markets meant a familiar space: a space exempt from the xenophobic logic of Hungary’s bureaucratic or rebureaucratizing regimes of immigration and trade (see Nyíri, 2003a), within which they exercised a degree of influence and into which even newcomers without local connections could fit after a few hours’ apprenticeship. The public of the markets – customers, traders, people in search of work, including migrants from Romania, Yugoslavia and elsewhere – quickly adjusted to the dominance of Chinese importers, forming new structures and relationships around it. Some Hungarian businessmen were quick to see profit in the appearance of Chinese traders. In 1994, an investor leased 3.5 hectares of land next to Budapest’s Józsefváros railway station to open a new market, christened ‘Four Tigers’ in Chinese, specifically for them. The operators of the existing Fáy Street market, too, began targeting Chinese and Vietnamese traders. The new migrant entrepreneurs gave the markets a new lease of life, and the Four Tigers Market, with over a thousand traders and tens of thousands of customers daily in its heyday, turned into a hub of Eastern Europe’s Chinese economy and an important element of Budapest’s cityscape. The number of smaller ‘Chinese markets’ in other cities reached 30 by 1995 (Nagy, 1995). The following descriptions of the Four Tigers Market date from the same year. The first is taken from a Chinese-language paper published in Hungary; the second, from an article about a raid in the periodical of the Hungarian Border Guard lapjából: Before six o’clock every morning, some stallkeepers have already arrived and opened their stalls. On a few square meters, the stallkeepers can display dozens of kinds of merchandise . . . a feast for the eyes, very attractive! At seven, the market comes alive with the noise of pots and bowls at the fast-food stalls, the calls of Arab dollar-changers, the bargaining and haggling of sellers and buyers, the cries of Romanian workers pushing carts, seething with life and thriving with activity. Shoppers come from all directions: buyers from Budapest supermarkets and owners of small neighbourhood shops along with traders visiting from Croatia, Yugoslavia, even Russia. In a broken Hungarian, they bargain and haggle with the Chinese, Vietnamese, Arabs and Hungarians at the market. If they cannot make themselves understood they swiftly pull out a calculator and show the numbers to their interlocutor. After the deal is done they joke with each other, leaving a feeling that the world is one big family. (Yang, 2001) As we check the industrious, diligent persons labouring in the containers, an odour akin to the stench of sewage hits our noses. The stench is emitted by the heat of the frying-stalls along the fast-food row nearby, and only its view is more dreadful than its smell. Rubbish; filth; ramshackle

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pavilions; inferior and disgusting dishes. As we enter the market, the rubbish is still there; my feet chomp wet pieces of cardboard. The crowd doesn’t let you move. Most of the wares are low quality, but because of the prices many still shop here. At one of the pavilions, border guards catch a trader. His papers are all right, but he is selling fake goods. He cannot prove their origin, so we have to cordon off the space around the pavilion. The many fakes are put in sacks, and while I wait I admire the largest underpants in the world. They are size XXXXL and need three people to stretch them. (Vezda, 2001)

Superimposing the pioneer romanticism and multicultural optimism of the Chinese description on the threatening Hungarian picture of a hotbed of infiltrating physical and cultural contamination yields a richly textured image of the Four Tigers Market. In addition to around a thousand Chinese-owned stalls at the market, there are hundreds owned by Vietnamese, Turkish, Ukrainian, Hungarian, Romanian, Afghan and other traders. In 1997, the company that operates the market declared an income of 1.5 billion forints ($7.5 million) and a profit of Ft280 million ($1.4 million) (Vitéz, 2002). In the mid-1990s, demand for stands at the Four Tigers Market was so great that (nonChinese) real estate developers leased former factory buildings across the road from the market and converted them into more market space with additional hundreds of stalls. The range of goods sold at the market, initially more or less random, soon converged to a selection that became institutionalized and associated with ‘the Chinese market’: lowprice casual clothing and footwear including T-shirts, track suits, men’s underwear, socks, cotton and mixed shirts, summer dresses, cotton and synthetic sports jackets and coats (including down coats), knitwear, ski suits, pyjamas, silk shirts, trainers, flip-flops and slippers. Later, these were supplemented by small hardware (such as locks), domestic appliances and fabrics (bed linen and towels). In 1994, one of the leading Chinese businesses at the time, according to its owner, sold three million pairs of men’s underwear on the Hungarian market (Nyíri, 1996: 130). According to a 2002 survey by the market research company GFK, open-air markets and street vendors account for 21 per cent of retail footwear sales and 22 per cent of clothing sales in Hungary; a year earlier, another poll had concluded that the share of open-air markets in clothing retail was as high as 39 per cent (Heti Világgazdaság, 31 March 2001, 65; Népszabadság 2002). The overwhelming majority of those goods come from Chinese importers, and many vendors are Chinese too: in 1997, they accounted for 47 per cent of all vendors at open-air consumer goods markets in towns and cities with a population of over 10 thousand (Sik, 1999). According to a Budapest homeless newspaper, the ‘Chinese market’ is ‘a place with a strange reputation . . . though most of us go there, as soon as we see someone we know we turn around like at the nudist beach, because – let’s admit it! – it would be embarrassing to reveal to them the provenance of our clothes and our shopping habits’ (Simon, 2002). Obviously, part of the popularity of Chinese goods is due to their low price, which in turn comes, in addition to low production costs, from the underreporting of customs value. Retail prices at markets are two or three times lower than prices for similar (or the same) items in the cheapest shops. In 2002, the retail price of a T-shirt at the Four Tigers Market was between Ft500 and 1000 (between $2 and $4); track suits started at Ft2000 ($8); trainers at Ft2500 ($10). Wholesale prices are much lower: the wholesale price of a T-shirt at the same time was under Ft250 ($1). But, along with low prices, the rapid reaction of the entire supply chain – from retailer to manufacturer – to consumer preferences

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has been decisive in making Chinese goods popular. At the consumer’s request, the Chinese market vendor or village shopkeeper will obtain a size or colour that is not currently in stock, while importers attentively follow changes in casual fashion and, if necessary, ask manufacturers to change models in mid-season. Traders at the market are primarily wholesale merchants. Their income depends mostly on long-term relationships with trade customers: distributors and shopkeepers. In the mid-1990s, the Four Tigers Market owed its prosperity to business customers coming from Yugoslavia, the Ukraine and Romania. As the then president of the Chinese Chamber of Commerce in Hungary wrote, ‘the markets of neighbouring countries rest on the axis of the Hungarian market’ (Yu, 1994). In the parking lot of the market, one could see 30 or 40 buses with foreign licence plates at a time, carrying two to five thousand shuttle traders. The market page of the local Chinese-language Ouzhou Daobao printed news like the following: ‘The Turkish suits sold by Vietnamese traders enjoy high demand among Armenian merchants who say they wish to sell them in Yugoslavia’ (Nyíri, 1999: 52). In addition to individual traders, the market is the base of importers and distributors. It is here that Chinese goods arrive from the Hamburg port, whether or not they are intended for the market’s stalls. According to customs officers, 60 to one hundred containers of up to two tonnes arrived at the market from China every day in 1994 (Nagy, 1995). The market functions as a commodity and information exchange. It is also the centre of Chinese social life, surrounded by eating shops, hairdressers’, casinos, karaoke parlours and travel agencies. Growth and consolidation of the ethnic economy Chinese exports to Hungary plummeted after the collapse of the planned economy, hitting bottom in 1992. Since then, they have consistently been on the rise. For years, Hungary has been China’s largest trade partner in the Central Eastern European region, receiving a third of Chinese exports to the region in 2002. Both the Chinese and the Hungarian governments attribute this position to the presence of Chinese entrepreneurs in Hungary (Lai, 2003: 1, www.huemb.org.cn/hungary/e1.htm, accessed 15 October 2003). It also reflects Hungary’s role as a regional re-export hub: in 1994, according to a former president of the Chinese Chamber of Commerce in Hungary, only 28 per cent of Chinese imports remained in the country (Li Qiang, 1996). Nonetheless, domestic sales of Chinese consumer goods reached, according to one estimate, $300 million in 1997 (Karacs, 1997), a year when customs statistics registered Chinese imports worth $288 million.5 The same statistics for 2003 yield a figure of $3.3 billion, an eightyfold rise over 1992.6 Yet, beginning in the mid1990s, the increase in imports has been driven primarily by electronics components imported by multinational companies with assembly plants in Hungary (such as Nokia, Philips, Siemens, IBM, Flextronics and Audi), rather than by the items traditionally imported by Chinese businesses. According to Chinese data, the share of electronics components in imports doubled between 1998 and 2002, rising to 46 per cent (or to 70 to 80 per cent according to Hungarian data)7 (Lai, 2003: 1). According to Hungarian customs figures, the share of clothing, fabrics, and footwear in 2002 was down to around one-third (42 per cent according to Chinese data), from around 80 per cent in 1994 (Lai, 2003: 1, www.huemb.org.cn/hungary/e1.htm, accessed 15 October 2003). Still, in absolute terms, the value of imports in this category characteristic of Chinese importers, $646

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million, was more than eight times higher than in 1994. According to the Leather, Footwear, and Leather Processing Industry Scientific Association – a Hungarian trade lobby group – imports of footwear from China directly and via Hong Kong in 2000 totalled almost 30 million pairs, accounting for almost three-quarters of all imported shoes (Demeter, 2002). Successful Chinese entrepreneurs in Hungary gradually changed from market vendors into distributors who buy large batches of imported goods and re-sell them (baohuoshang) or into importers (fahuoshang). Most importers source their merchandise from small manufacturers in Zhejiang, Fujian, and Guangdong Provinces. Shoes usually come from Fujian, while Guangdong goods are more expensive and considered higher-quality. A smaller number of migrants have been importers from the beginning. Most of these had been employed by state foreign trade, shipping or other enterprises in China and had come to Hungary with the approval of their employers in order to identify business opportunities and represent the company. For their employers, this meant both new markets and a reduction in personnel costs. Instead of a salary, such employees usually received a commission on sales. Although the businesses they registered in Hungary were not owned by their mother companies on paper, they usually travelled with service passports and were counted as employed by the mother company for two years. After that period, the relationship between the sending company and the migrant loosened. Many did not return to China, but have continued to enjoy the support of their former employers and some privileges of belonging to a state ‘work unit’ on visits home.8 Such migrants not only enjoyed preferential access to sources of merchandise but frequently received seed capital and favourable credit arrangements from the state enterprises they were affiliated with. Managers of the mother company also benefited from the arrangement, either in the form of direct cash transfers or in the form of joint ventures established in China by the mother company and the (nominally independent) Hungarianregistered business. As joint ventures enjoyed tax privileges and were allowed to export profits, they could be used as conduits to siphon off capital from the state enterprise (Nyíri, 1999: 52–4). As the owner of Hualu, one of the largest Chinese-owned businesses in Hungary in the early nineties, said, The main source of capital for Hungarian Chinese enterprises is the support of . . . various foreign trade companies in China: without it, Hungarian Chinese could not have achieved their current level (of economic success) even in ten years. . . . A Hungarian Chinese largely obtains merchandise on credit. (Li Qiang, 1996)

The Zhejiang Province Import–Export Corporation owned a 40 per cent stake in Hualu itself, which had a registered capital of $780 thousand and had 52 Hungarian and 26 Chinese employees in 1995 (Li Qiang, 1996). Design and quality of merchandise gradually improved. The first Chinese goods shipped to Eastern Europe were unsold stocks, but soon importers were ordering merchandise specifically for the Hungarian market, often using samples purchased in local shops. Owners of large importing companies visit international trade fairs and have their suppliers manufacture trainers and track suits according to the latest trends. Chinese companies keep their prices low by minimizing their overhead costs; thus most eschew advertising. Nonetheless, some of the largest businesses have achieved a degree of brand recognition

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on the Hungarian market. The two best-known apparel brands, Wink and Sandic, have placed advertising in the press and on billboards, sponsored sports events and, most recently, aired television spots. An important element of their marketing strategy is to contract Chinese- and Hungarian-owned shops as authorized brand dealers, ensuring that they display the brand logo in exchange for a commission on sales. According to Wink’s homepage (www.wink.hu, accessed 3 July 2003), the brand is sold by 250 shops across Hungary. The products are positioned as low price and fashionable look. For instance, Sandic’s campaign on Budapest buses used the slogan ‘Sandic: accessible fashion’. Several companies have opened subsidiaries or found Chinese distributors in other Eastern European companies. Wink, introduced in Hungary in 1993, is present in the Slovene, Serbian, Montenegrin and Polish markets, selling 2.5 to 3 million pairs of Wink and Groovy shoes a year. Through similar channels – using networks of relatives and acquaintances from home – some companies have reached South American and African markets. In these countries, similarly to Eastern Europe, the appearance of new Chinese migrants in the 1990s, and demand for low-price footwear and fashion, have created favourable conditions for Chinese imports, and Chinese entrepreneurs in Hungary have successfully applied there their business models designed for Hungarian conditions. An added advantage of doing business in those countries was that winter or summer stocks unsold in Eastern Europe could be shipped to the Southern hemisphere, where the season was just starting. As Hungarian customs duties rose and retail prices stagnated, more Hungarian importers became interested in the growing market for Chinese goods in Southern Europe (Italy, Spain and Greece). Guoshi Group, founded by Guo Jiadi, formerly a state enterprise employee in Fujian Province and now overseas delegate to the Fujian People’s Political Consultative Conference, has been one of the most successful companies in terms of international expansion. Guoshi exemplifies the transnational practices of the Hungarian Chinese entrepreneurial élite. Guo launched the Sandic brand in Hungary in the early 1990s. In 1995, he opened his own shoe factory in Putian Prefecture of Fujian Province, appointing his brother as director. The factory has around a thousand employees and has a production capacity of 8000 pairs per day, over 95 per cent for export. According to the company’s website (www.sandic.hu, accessed 24 September 2004), the factory’s fixed assets exceed $12 million. Later, Guo expanded the brand to several Eastern European and American markets. To date, Guoshi has subsidiaries dealing with the import and wholesale of footwear in the Czech Republic, Poland, Romania, the United States and Brazil. In 1999, it opened a subsidiary in Spain. New markets (Lebanon, Jordan and South Korea) compensated for a slump in Hungarian sales in the late 1990s.9 According to the general manager of the Guoshi plant, the company sold one million pairs of shoes in 1999 in Eastern Europe alone. In 2000, Guo introduced a new brand, Moonarch, to overcome the disadvantage of Sandic’s brand image being associated with the ‘Chinese market’. Moonarch is sold in shopping centres at prices between Ft3000 and 8000 ($15 to 40), somewhat higher than Sandic’s. In 2001, Guo estimated the total value of the company’s exports from China to be around $2 million. Their sales value is, of course, much higher: according to Guoshi’s Budapest accountant, sales of the Moonarch brand alone were around $1.2 million in the first year of its introduction to the Hungarian market. Guoshi’s Hungarian subsidiary has

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11 Hungarian and five Chinese employees. In addition to shoes and a sports apparel line, it imports angling gear. A Hong Kong subsidiary of the group is responsible for part of the financial and administrative services. It secures Hong Kong bank loans for the overseas enterprises and processes the export of merchandise from China as well as the import of raw materials for the plant in China from Taiwan and South Korea. According to the head of the Prefectural Foreign Trade Office in Putian, Guoshi was the prefecture’s largest European investor at the turn of the century and the only manufacturer to export to Europe directly rather than through foreign-trade companies.10 Saturation of the clothing market and changes in the ethnic economy Eastern European Chinese lore remembers the years before 1995 as a golden age when everything could be sold with a hundred-per cent profit.11 During that period, it was reportedly possible to accumulate fortunes of hundreds of thousands of dollars within a year. In the mid-1990s, profit fell, owing to several circumstances. The market became increasingly saturated; the flow of shuttle traders from neighbouring countries decreased as Chinese enterprises appeared there; customs duties were repeatedly raised (a fourfold rise in 1995 caused the flight of the two largest Chinese companies and the redirection of 4000 containers of Chinese imports to other countries; see Nagy, 1995); and the forint fell against the yuan. Suburban discounters entered the low-price clothing and footwear market, offering mostly Chinese imports in better shopping conditions. Finally, as part of its efforts to reform the loss-making and poorly managed state sector, the Peking government prohibited the granting of low-interest loans to Chinese entrepreneurs overseas and ordered state enterprises to require a surety for exports and to limit their investments abroad. During the 1998s ‘Asian currency crisis’, this was followed by a new decree requiring state enterprises to liquidate most of their overseas investments. Delegations began arriving in Hungary to retrieve importers’ debts, but most of their partners had disappeared.12 In the words of Hualu’s owner, ‘all suppliers . . . wanted to retrieve the goods they had shipped on credit, so we had a crisis’. (Soon after this interview was published, Hualu itself suddenly collapsed, and its owner moved to Sierra Leone.) Importers passed the pressure on to distributors, and they in turn to retailers, making their already troubled business even more difficult. At the turn of the century, the situation deteriorated further. Responding to pressure from the trade lobby represented by the Leather, Footwear, and Leather Processing Industry Scientific Association and other organizations, the value-based quota for shoe imports was replaced by a quantity-based one. Chinese importers circumvented this obstacle by shipping shoes via Hong Kong, but, in 2002, Hungarian customs authorities stopped accepting the value of goods imported from China as declared by importers, introducing instead an estimation procedure. According to Chinese importers, this measure raised the customs duty on an average container of goods, worth between $50 and 100 thousand, from Ft1 million ($3300) to between 4 and 6 million (Demeter, 2002). Thus traders’ costs increased even as they were forced to lower their prices. One of them recalls that the wholesale price of a T-shirt in 1994 was Ft300, or $2; in 2001, the same T-shirt sold for Ft200, now only worth $1. A trader at the Szeged market, in southern Hungary, remembers making the equivalent of $10 thousand in 1995, his first year in Hungary. In 2000, his profit was down to 10 per cent, but as his sales volume had increased

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thanks to expanding to two market stalls and developing a stable clientèle, he still made a profit of around $26 thousand, of which, after deducting his costs, a net amount of $12 thousand remained. But costs in Szeged were much lower than in Budapest. Two traders at the Four Tigers Market interviewed in 1999 complained that, even in the two best months of the year, when they sold merchandise worth almost $10 thousand, with a 30 per cent profit, they could only save a few hundred dollars a month after paying for rent, social security, food and petrol. Responding to the profitability of the business, prices of leasehold rights for stalls at the Four Tigers Market dropped from $40 thousand in 1995 to $20 thousand in 1998, then rose to $50 thousand in 2000, and finally plummeted to $4–5 thousand in 2002, when the profit on a container of merchandise had, according to importers, dropped to $3000. In addition to decreasing profits, this last drop in leasehold prices had to do with expectations of the market’s closure. (The operators of the market had themselves leased it until 2004, although the lease has subsequently been extended by another year.) Decreasing profits affected the entire business chain from importers to market vendors, but triggered differing reactions. Better capitalized businesses focused on forging contacts beyond the traditional circles of the ‘Chinese market’. Many importers shifted to betterquality merchandise. A number of entrepreneurs launched new brands, sold only through a network-contracted shops. Others became suppliers to multinational discount chains, dealing not only in low-price fashion but also in hardware, furniture and other durable consumer goods. The most successful of these clinched supply contracts for several European and even North American stores of the chains. Some tried exporting Hungarian products (mainly foodstuffs), while a few experimented with supplementing the import business with local manufacturing of fabrics and bolts of cloth. Those businessmen and women who had access to connections in China but had missed out on the ‘soft’ money of the early 1990s focused on matching large Chinese companies and local governments with investment opportunities or technologies for sale in Hungary, hoping to benefit as intermediaries. Representatives of the city of Kaposvár – twinned with Lanzhou thanks to the efforts of a Chinese businessman living in Budapest – were present at the opening of a large shopping centre built in Lanzhou, the capital of Gansu Province, as an investment of Chinese entrepreneurs in Hungary. (Some say, however, that the funds really came from state enterprises in Lanzhou itself, and the Hungarian partners were needed only to launder the money.) Another migrant opened a franchise of Chaoshifa, a Peking supermarket chain, in Budapest. By the mid-2000s, benefiting from a new government policy of actively courting Chinese investments, Hungary was clearly becoming their top destination in the region. As of 2007, one large Chinese maker of video equipment, Flextronics, has opened an assembly plant in Hungary, and two IT giants, Huawei and Zhongxin, were establishing subsidiaries. Although it is unclear what specific role Chinese in Hungary have played in these deals, it is likely that the country’s status as an established hub of the Chinese economy in the region has again been an important factor in the investors’ choice. The largest-scale investment linked directly to Chinese in Hungary has been the Asia Center, opened in Budapest in 2003 and featured on the website of the Hungarian embassy in Peking as a positive example. With an expected total investment of €200 million and an area of 205 thousand square metres, the Asia Center has been advertising itself in the press, on billboards and on the www.asiacenter.hu site as ‘Europe’s largest wholesale, trade and

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exhibition centre’. The Center’s agressive media campaign, until now unseen among Chinese businesses in Hungary, has been designed to convince both Chinese entrepreneurs and customers that, in the words of a press release on the Center’s website, it is ‘not a new Chinese market’ (www.asiacenter.hu/hun/press/releases.csn, accessed 10 February 2003). As part of the strategy developed by a Hungarian PR agency, the opening of the Asia Center’s office building in central Budapest in 2001 was celebrated with an extravaganza in Buda Castle, at which Michael Song, the investment’s mastermind and a former clothes and footwear importer, arrived in a Rolls Royce. In 2002, the Center held a ‘business forum’ in Le Méridien, just opened as one of Budapest’s plushest hotels. Yet, although Song is immortalized on a marble stele in front of the Asia Center, his actual role is unclear. According to a press release, it was Song who had convinced Strabag, a major Austrian construction company, of his plan, and Strabag had then secured an Austrian bank loan of $200 million (www.asiacenter.hu/hun/press/releases.csn, accessed 10 February 2003). Rumours circulating among Chinese in Budapest had it, however, that at least some of the money came from officials in China who urgently had to get rid of it because of an anticorruption campaign. The management itself has been secretive and inconsistent about ownership and sources of funding. At an early press conference, they described the latter as a combination of investment from China and the Austrian loan. Hungarian papers said that Song and his wife had a 49 per cent stake in Asia Center Kft, which organized the investment and had a starting capital of $8 million, while the remaining 51 per cent belonged to Strabag (T.S. Kiss, 2002). But in 2004, the Center’s website described it as solely owned by Strabag, with Song and his wife mentioned as ‘founders’. Although the Asia Center’s press releases have maintained that the project targets Asian manufacturers and exporters wishing to expand in European markets, the management has also actively tried to lure traders away from the Four Tigers Market, both enticing them with its conveniences – the airconditioning, escalators and cafés, styled after retail shopping centres, are a far cry from the crammed alleys of the market – and arguing that the days of the grey economy were numbered now that Hungary was entering the European Union. Yet, although introductory monthly rents were comparable to those at Four Tigers, half of the store space remained empty three months after the Center opened. Those who did rent stores were largely importers and wholesale merchants who, while maintaining a presence at Four Tigers, used the new spaces as brand showrooms. But occupants I interviewed complained that, despite all the advertising, business had failed to take off, while costs were much higher than at the market. When additional maintenance fees were introduced in 2004, many of them pulled out. Meanwhile, a group of Hungarian Chinese investors had opened another wholesale centre, called China Mart, across from the Asia Center. China Mart has four hundred shops on 25 thousand square metres and has also been targeting traders at Four Tigers, but is at least as far as Asia Center from becoming a serious alternative to the market as a wholesale hub. Shops and restaurants While better-capitalized entrepreneurs have targeted multinational discounters and aimed at becoming intermediaries in big business, smaller ones have opened wholesale-cumretail shops and fast-food restaurants as a way out of open-air markets. Compared to the latter, both forms of entrepreneurship, which spread rapidly around the turn of the

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century, were lower-risk and lower-profit, although the first, well-located fast-food restaurants had the reputation of being very lucrative. Prices in ‘Chinese shops’, often so signposted to signal a range of goods and prices that have by now become institutionalized, are twice as high as wholesale prices at the Four Tigers Market (though still significantly lower than at multinational discounters’ chain stores), but the sales volume of these shops is small. In 2001, the Chinese embassy in Budapest estimated that there were around two thousand Chinese shops around the country, including remote villages. Their profitability varies widely, as illustrated by the following two examples. Chen came to Hungary in 1998. After some time as an assistant at a Chinese clinic, she spent $1600 to rent two shops in Mezökövesd és Hatvan, towns of around 20 thousand less than 100 kilometres from Budapest’s northeast along a main road. As Chen had little capital and no warehouse, she went to Four Tigers every day before opening to stock up. She hired a Chinese man, who had no money of his own, to manage one of the shops against a commission but with no fixed wage. In early 2000, she estimated the total monthly sales of the two shops to be around the equivalent of $6000, about a quarter of which was profit. She attributed her success to good relations with traders at the market, who extended her one month’s credit. As Chen generally sold her stock within a week, she could invest the revenue in more merchandise, increasing sales. At the end of the year, for $2000 a month, she rented a third, larger shop in Tiszaújváros, a town of similar size farther along the same road. She invested $40 thousand in initial stock and hired ten Hungarian employees. After five months, she closed this shop after it had made a loss of $20 thousand and with debts of $16 thousand. But by this time, the two smaller shops combined were generating sales of $22 thousand a month, of which Chen kept a net profit of $4000. Instead of taking the bus to the market every day as she had in the beginning, she now drove a van to Budapest once a week to stock up. Yan, a trader at the market in Szeged, a city of 200 thousand near the Romanian and Serbian borders, had more ambitious plans than Chen, but he failed. In 2000, Yan had been trading at the market (formerly relying heavily on now-declining shuttle trade from the two neighbouring countries) for five years when he decided to open the city’s first Chinese wholesale outlet. In addition to fashion and footwear, he sold chinaware imported from China 40 per cent cheaper than similar products at Tesco, the city’s main discount superstore. Yan took out advertising on local television, newspapers in Szeged and the nearby Serbian city of Subotica, and printed leaflets targeting ‘trade customers from Hungary and the neighbouring countries’ and marketing his store as an approved Sandic distributor. He employed two Hungarian women as sales clerks and one as supervisor in charge of outside contacts. Like Chen, Yan drove his van once a week to Four Tigers, stocking up on Sandic and other brands. But the expected Yugoslav customers failed to come, while other Chinese traders at the Szeged market continued to purchase their merchandise in Budapest, bypassing Yan’s store. As the forint continued to drop, Yan was forced to compensate rising costs by raising prices. This caused sales to drop further. Yan saw no way out of the situation, which, in his opinion, was caused fundamentally by the oversupply of similar goods in the market. By the end of the year, Yan closed the store, with a loss of nearly $10 thousand. Four years later, leaving the market stalls for his wife to manage, he moved to Morocco. The first Chinese-owned restaurant in Budapest opened in 1990, but Chinese restaurants remained few and expensive for some years. In 1994, there were 48 Chinese restaurants in

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the city. Many of their owners had previously run restaurants in Western Europe and moved to Hungary because of the saturation of the business there. The situation changed with the appearance of fast-food restaurants. Their meals were priced similarly to McDonalds or upscale workplace cafeterias, but were seen by Hungarian consumers as more tasty, nutritious and varied, soon making them very popular at lunchtime. Chinese fast-food restaurants opened in all of the shopping centres that mushroomed in Budapest in the second half of the 1990s. Zeng, who had moved to Hungary from Australia in 1990, opened the first of these – and, in Zeng’s view, the largest in Europe – in 1996. In the beginning, the restaurant produced, according to Zeng, a monthly profit of $10–15 thousand. By 2001, Zeng owned seven restaurants: fast-food places in four shopping centres in Budapest and one in another city, two full-service restaurants in Budapest and one in a nearby town. During the best times, Zeng employed over a hundred Hungarians. Spurred on by the success of the first fast-food restaurants, many traders left Four Tigers between 1998 and 2000 to follow their example. They recall that, at the time, a Budapest fast-food restaurant netted a monthly profit between $2000 and 4000. Unlike full-service restaurants, which had to hire highly paid Chinese cooks in addition to Hungarian waiters, most fast-food restaurants are low-cost businesses with no more than three Hungarian employers, and often with no employees at all other than the couple who own it (the husband cooks, the wife serves). But the fast food boom resulted in overkill: by 2001, in some of Budapest’s inner districts there were blocks with three Chinese fastfood restaurants. Chinese fast-food stalls appeared even at swimming pools and festivals. As their number grew, so their profits declined. Zheng and Fu opened their full-service but low-price restaurant in 1998. In 1999, they worked with a net monthly profit of $3000; a year later, this decreased by half. While fast-food restaurants cater to what their owners consider Hungarian taste, many full-service restaurants target Chinese customers. Some entrepreneurs have ventured beyond Chinese food, taking over gyros (fast food shops), strudel shops and small-town Hungarian restaurants. There are three Chinese-owned three-star hotels in Budapest, catering chiefly to non-Chinese tourist groups. ‘Ethnic services’ is a smaller but rapidly growing sector of Chinese business, ranging from groceries to video shops, from telephone card vendors to travel agencies, from hairdressers to car repair shops, from computer and satellite dish specialists to newspapers. So-called ‘Chinese service agencies’ (huaren shiwusuo) constitute a special, small but lucrative market. Their services range from translations to help in immigration and other official matters. Other agencies specialize in shipping, customs clearance, warehousing and real estate. These businesses are usually run by experienced migrants who claim to master the Hungarian language and to have good local connections. Hungarian media and the manufacturing lobby, and until recently government officials, have regularly accused ‘the Chinese’ of customs and tax fraud, smuggling and counterfeiting (Tóth, 1997). The Leather, Footwear and Leather Processing Industry Scientific Association, for instance, claims that Chinese importers defraud the treasury of Ft40 billion ($200 million) in customs duties each year (Demeter, 2002). Although the hostility largely remains at the political and discursive levels, the first signs of grassroots mobilization by Hungarian merchants resenting Chinese competition have appeared. In 2004, 70 Hungarian shopkeepers in the town of Mohács petitioned the mayor to ‘expel’ the town’s 11 Chinese shops, arguing that, ‘often, the Chinese do not possess valid permits to

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remain in Hungary, work illegally, and obtain their merchandise in violation of rules’. The mayor refused to do so but claimed that ‘in the long term, the introduction of certain restrictions may foster healthier competition’ (Magyar Hírlap, 3 June 2004). Most of my Chinese informants acknowledge underreporting customs value, adding that this is the only way to stay competitive and, in some conversations, that it is in any case impossible to clear merchandise through customs without paying a bribe. Besides, they pointed out that they pay enough taxes and social security contributions as it is, otherwise their residence permit extension applications would be refused. Chinese entrepreneurs perceived these expenditures (which they call yang lanka, ‘to feed the blue card’, that is, the residence permit) not as their natural share in the public burden but as the price of being allowed to remain in Hungary. Exclusion, transnationalism and the obligation of success in a middleman minority Chinese migrants in Hungary, and their contemporaries in many other countries, appear to fit Edna Bonacich’s (1973) model of a ‘middleman minority’, modified to account for the particular features of twenty-first-century globalization and transnationalism. Bonacich’s description of a group that, relying on cross-border ethnic networks, builds up institutionalized positions in certain economic niches between superior and subordinate populations while remaining, because of its alienness, outside that hierarchy, can be more usefully applied to transnational conditions than the later ‘ethnic enclave’ (for example, Wilson and Portes, 1980) and ‘ethnic niche’ (Waldinger, 1996) models, which rely entirely on the nation/state/society framework (see Wimmer and Glick Schiller, 2002). The ethnic networks serve the flexible mobilization of labour, capital and business information in order to provide goods and services that are either inaccessible locally or only accessible at a higher price. Since locally accepted avenues of upward mobility are closed to the middleman minority, their livelihood depends on the ethnic economy. To remain competitive, they have to keep costs down. Therefore, and because of their vulnerability, they are inclined to take on economic roles or methods seen as deviant (‘sweatshops’, ‘flea markets’). This leads to an increased identification of the entire group with a particular business in the eyes of the local population, which sees it as an economic threat. Although locals and migrants meet daily, the typical contact situation is one in wich the migrant appears as seller and the local appears as buyer. This deepens hostility rather than helping to overcome it. Locals perceive the migrants not as members of society but as a familiar, useful, sometimes exotically interesting but potentially threatening alien element. Combined with legal vulnerability, this situation deters the migrants from making longterm financial or emotional investment. Middleman minorities are familiar from premodern Europe and colonial Africa and Southeast Asia. They have been absent from postwar Western Europe with its strong social mobility, its well-developed and regulated retail networks and its lack of discriminatory laws and practices. In Hungary, the memory of the Jewish village shopkeeper, the Bosniak peddler and the Gypsy tinker had faded into oblivion, to be reborn after 1989 in the bodies of the Chinese village shopkeeper and the Arab money changer. Chinese migrants to Eastern Europe found themselves in economic environments with poorly functioning retail networks (often in the gray economy), underdeveloped imports and strong social and psychological barriers in front of local entrepreneurship. Chinese migrants in the early 1990s exploited the fact that the economies they encountered were

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all, to different degrees, economies of scarcity. They found an important unoccupied market niche, which they filled with cheap but popular clothing already mass-produced in China for Western budget retail chains. Unlike earlier Chinese migrants to Western Europe, many of these newcomers possessed the cultural capital, mobility and channels of communication to develop close contacts with state enterprises that could supply them with merchandise at low state-subsidized prices and with favourable credit conditions. Their extensive transnational connections enabled them to supply capital, goods and labour rapidly and flexibly in order to satisfy the needs of the market. The same connections made it unnecessary for them to rely on cultural capital accumulated locally. They could afford to ignore their peripheral position in Hungarian society and follow instead the models of transnational entrepreneurship transmitted by global Chinese media. Though the niche they occupied was between those locally superior and those locally subordinate, they became, even more importantly, middlemen in another sense, mediating between the cultural and capitalist logics of Western and Chinese globalizations in places that were peripheral to both. For Chinese migrants, the motivation of entrepreneurship goes beyond mere economic rationality. The centrality of ‘success’ and its identification with individual enterprise – as opposed to salaried employment – in contemporary Chinese public discourse not only pressures businesspeople wishing to increase their profits to migrate, but also pressures migrants to become entrepreneurs. Chinese media and popular culture have turned the glossy image of ‘the new migrant’ into a symbol of business success (Nyíri, 2002). For migrants, therefore, leaving China offers a chance of ‘success’ that must not be wasted. On the other hand, Hungary’s institutional and discursive immigration regimes exclude Chinese from those tracks of the mainstream economy that make capital accumulation possible (Nyíri, 2003b). Transnational entrepreneurs like Guo Jiadi are often in perpetual motion between countries. A Chinese entrepreneur in Budapest and her Warsaw-based husband, both originally dispatched by state enterprises, visit each other every two weeks. Several times a year, they travel to China, where they own businesses dealing with purchasing and exporting merchandise in two provinces and a company providing financial services to the business in Hong Kong. The couple have acquired immigrant status in Canada, bought a house in Vancouver and started a business employing ten workers. This company does the same as the ones in Budapest and Warsaw: it supplies discount chains with low-price clothing, footwear, household fabrics, film and consumer goods from China. In the wife’s words, ‘It doesn’t matter where I do business: whether I do it in Budapest or Canada, I do the same thing. What matters isn’t so much where you live but what passport you have.’ Localization of the ethnic economy Of course, such careers are limited to the élite, but Chinese in Hungary are a homogeneous enough group for these models to appear within reach to less ‘successful’ migrants. On the other hand, despite its strongly transnational nature, the Chinese economy in Hungary is at the same time part of the Hungarian economy. Nearly every Chinese migrant has business contacts with Hungarians, and Chinese businesses employ not only thousands of permanent local staff such as sales clerks, drivers, waiters and managers, but also a large number of interpreters, solicitors and accountants.

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That the overwhelming majority of Chinese migrants are independent entrepreneurs – in 2004, only 848 held work permits13 – is related to the fact that Chinese businesses can hire Hungarians or, especially, Eastern European migrants at a lower cost than their compatriots. (By contrast, most Chinese migrants in Western and Southern Europe are wage labourers.) The cheapness of Hungarian labour further decreases the migrants’ need to learn a kind of Hungarian that is acceptable in formal situations, a need that their transnational economic and lifestyle practices put, in any case, relatively low. Instead, many Hungarian employees have learned the basics of the Chinese language, while a Hungarian-based pidgin functions as the usual medium of communication spoken by both sides. Employees of Chinese businesses tend to come from the lowest-paid population groups, notably, rural or migrant women. For example, most Chinese traders at the Szeged market in 2001 employed young, Hungarian-speaking Romanian women as salespersons. Their wages were somewhat below the official minimum wage, but they paid neither taxes nor social security contributions. It is common for rural Chinese shopkeepers to employ women obtaining unemployment benefits and to pay them substantially below the minimum wage. In addition to the low wage, however, many Chinese entrepreneurs offer their employees a sales commission. For more highly skilled work – for example, as sales or shipping managers at large imports companies – Chinese businesses usually require similar qualifications and offer similar remuneration to that of their Hungarian counterparts, but on-the-job requirements may differ. Some Chinese employers insist on determining when their employees may take a holiday, a practice common in China but illegal in Hungary. In the words of a Hungarian clerk at Guoshi, ‘You can wave the doctor’s note all you want, there’s no such thing as somebody being sick for two weeks. They expect us to make up for absence. There’s no overtime pay.’ Such expectations are typical, and owners of larger Chinese businesses often complain of their managers’ lack of flexibility and motivation. Recruitment of employees usually relies on personal recommendations, but often on job advertisements as well. Based on interviews with 24 Hungarian employees of Chinese restaurants, Annamária Kiss (2002) concludes that, for some Hungarian employees, including not only those with little education and low network capital but also some with well-defined entrepreneurial plans, the Chinese economy represents a chance of upward mobility. They have learned norms of behaviour and accummulated connections necessary to get ahead in the ethnic economy. For another group, employment in the Chinese economy is a result of downward mobility, while, for a third, it reflects a tendency towards entrepreneurship, spatial mobility and migration. Transnational economy and urban spaces So far, the Chinese economy remains centred on the Four Tigers Market. Its closure would likely impact both the spatial structure and the forms of business in the ethnic economy. The main function of the market is to provide a spatial frame for mechanisms of trade and employment that are accessible to migrant entrepreneurs and workers without a knowledge of Hungarian. Within an hour, any newcomer, whether a Romanian Gypsy, an Afghan refugee, an aspiring Chinese trader or a Hungarian country girl, can become familiar with the rules of business and behaviour. This is a space within whose closely guarded borders migrants and Hungarians have equal rights, even though its internal regime of

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power is continuously challenged, outside, by police, border guards and customs agents representing the dominant hierarchy of power and, inside, by security guards representing the market’s owner. This exceptionableness is reflected in the representation of the market in Hungarian media as an inscrutable, dangerous place that disobeys the rules of Hungarian society (Tóth, 1996) and in Chinese media as the locus of economic rationality and development (Nyíri, 2005). Compared to the market, the Asia Center is a more closed and formalized space, adjusted to the locally dominant imagery of modernity and regularity. The strategic visual elements of its design make it part of Chinese transnationalism: they are designed to lift the buildings out of the surrounding world, whose regime of power assigns Chinese an inferior place, while projecting a modernity that the Center’s marketing often emphasizes. (According to Michael Song, the Chinese trader must ask himself this question: ‘Should I go to the Asia Center, that computerised world of high-level commerce, or should I stay at my stall with my abacus?’14) Outside, the development recalls real estate projects typical of today’s China: it is showy and eclectic, imposing and abrupt, with no relationship to its environment; avant-garde architecture that grows out of the middle of nowhere. Having crossed a wide, unstructured field on a driveway (there are no footpaths) visitors are greeted by monumental statues, a triumphal arch, a raised, tribune-like platform, and a black marble ‘Asian Culture Wall’, all executed in a ‘traditional Chinese’ style in stark contrast to the buildings. A bilingual chronicle of the development (in Chinese and literal English translation) is carved in golden letters into the backside of the ‘Asian Culture Wall’, which depicts a line-up of monuments from Iraq to Cambodia: Great Asiacenter fuse fengshui theory from the East with material culture from the West, extending traditional Chinese culture, as well as enriching modern western material technology. The palatial Asiacenter is a rare creature in the world, its name will spread to each corner of the world.

The Asia Center’s space corresponds better than the Four Tigers Market to the selfrepresentation of Chinese merchants in Hungary as successful, modern businesspeople (Nyíri, 2005), but the alternative regime of power is less sustainable here. The space is more closed, less accessible to new migrants looking for work and business. In addition, shopkeepers say that customs and tax raids have been much more frequent than at Four Tigers. As a result, they only employ legal labour and are stricter about issuing invoices. (Asia Center Kft forecast a total of five thousand jobs for locals at the Center.15) Prospects The Hungarian government’s efforts to upgrade Hungarian–Chinese economic relations, marked by a visit to China by Prime Minister Péter Medgyessy in 2003, have not had much of an impact on the plans of Chinese businesses in Hungary. By contrast, Hungary’s accession to the European Union in 2004 has had a strong psychological effect, with more prosperous Chinese businesspeople focusing primarily on the potential of new market opportunities and smaller ones worrying about expected measures to tighten customs and trade regulations, some of them already introduced. So far, most migrants have kept a wait-and-see attitude, but accession has already contributed to what seems to be a restructuring process in the ethnic economy. If Hungarian Chinese entrepreneurs find their place in investments in the manufacturing sector fuelled by capital from China and in imports

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with higher added value, the position of their families is likely to become more stable, and their relationship with the Hungarian economy closer. After 15 years, the number of Chinese citizens who hold permanent residence permits is slowly increasing. More children are joining their parents and going to school in Hungary. Family reunification and cultural and economic rights will eventually become facilitated by European Union standards. But, counterintuitively, it is part of the élite with the most intense transnational connections – those who feel comfortable enough in Hungary but who can hedge their bets by spreading their business across countries, acquiring Canadian or Australian residence permits, and sending their children to British or American schools – that will be able to wait and benefit the most from these trends. Lower-income migrants have already started to leave, driven out by increasing costs of local labour and overheads, tightening trade regulations and a persistently hostile immigration system. Notes 1.

2.

3. 4. 5. 6. 7.

8. 9. 10. 11. 12. 13. 14. 15.

Considering information supplied by Chinese organization leaders and the number of functioning Chinese businesses, I estimate the actual number of Chinese currently residing in Hungary to be around 15 thousand. In May 2000, a database provided by the Ministry of the Interior (courtesy of György Váray) contained information on 11 541 Chinese citizens. This database is supposed to contain information on those foreign citizens who have in some way come into contact with the central aliens police (immigration) organs, for example by applying for a long-term or permanent residence permit. In fact, it also contains data on individuals who hold only temporary residence permits. Ministry officials responsible for data entry have been unable to provide information on the actual criteria of inclusion in the database. It can therefore serve as only a very rough indication of the number of Chinese migrants. On the other hand, because of its large size, it is suitable for analysing their demographics. The database contains two separate variables entitled ‘professional qualifications’ and ‘occupation’. Some respondents gave their original occupation (in China) as the answer to the former and their current occupation to the latter question; others gave their formal educational qualifications as the answer to the former and their occupation to the latter; still others their educational qualifications as the former and their job title as the latter, and so on. Thus analysing these data is difficult, and they can only be treated as rough indicators. $18.89 yuan. Interviews in Budapest, 1995–2000. www.huemb.org.cn/hungary/e1.htm, accessed 27 October 2003. www.huemb.org.cn/hungary/e1.htm, accessed 27 October 2003. The strong divergence between the two sources may be related to the fact that Hungarian data are based on customs value declared at entry, while Chinese figures reflect the value declared at exit. Thus the discrepancy may reflect underreporting of customs value by Chinese importers, so that the share of goods characteristic of their businesses appears smaller in Hungarian statistics. Interviews with migrants from Shandong and Gansu Provinces and from Peking, 2000–01. Interview with the general manager of the Guoshi factory in Putian, 22 August 1999. Ibid. Both Chinese entrepreneurs and others evaluate their business in Hungary (where they had few competitors) as unusually profitable. But Tchoudinovskikh and Zhulin (2001: 24) note that Russian shuttle traders also aimed at a hundred per cent profit in the early days of the trade. One such case is described in You Mingfa, ‘Xiongyali Budapeisi Maoyi Gongsi xianxing ji’ (A record on the current situation of Budapest Trade Company, Hungary), in a letter to the European Federation of Chinese Organisations, 30 December 1997. Data of the State Employment Service. Xin Daobao (Budapest), 20 December 2000–3 January 2001, p. 12. www.asiacenter.hu/hun/press/releases.csn.

References Bagrov, M.V. (1999), ‘Moskovskoe kitayskoe zemlyachestvo’, term paper, Institute for Asian and African Studies, Moscow State M.V. Lomonossov University. Bao, Luzi and Ujlaky György (1996), Hungary Budapest: Ni xuyao di dizhi he dianhua (Addresses and Phone Numbers You Need), Budapest: ZMZ Kft.

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Bonacich, Edna (1973), ‘Theory of middleman minorities’, American Sociological Review, 38, 583–94. City of Budapest, Government of (1997), Report on the Chinese in Budapest. Demeter, Kálmán (2002), ‘Elárasztja a hazai piacot a kínai lábbeli’ (‘Chinese footwear floods home market’), Világgazdaság, 10 October. Karacs, Imre (1997), ‘Hungary fears its Chinese “guests” ’, South China Morning Post (Hong Kong), 11 November, p. 19. Kiss, Annamária (2002), ‘Cultural interaction in Chinese restaurants: the Hungarian employee’s perspective’, MA thesis, Department of Nationalism Studies, Central European University, Budapest. Kiss, Tamás S. (2002), ‘Complex to bring Far East closer’, Budapest Sun, 20 December 2001–10 Januáry 2002. Lai, Chunsheng (2003), ‘Zhong-Xiong maoyi qian tan’ (‘Shallow chatter on Hungarian–Chinese trade’), Budapeisi Zhoubao, 1(4), (Budapest), 6–12 June. Li, Minghuan (1995), Dangdai haiwai huaren shetuan yanjiu (Overseas Chinese Organizations Today), Amoy: Xiamen Daxue chubanshe. Li, Qiang (1996), ‘ “Hualu” yijing zhuanyi la!’ (‘Hualu has moved!’), ZhongOu Shangbao 1(2), (Budapest), 19 February. Liu, Xianling (1994), ‘Zhongguoren lixiang di taojindi’ (‘An ideal goldmine for the Chinese’), Huashengbao (Peking), 29 March. Mao, Chun (1992), Zhongguoren zai Dongou (Chinese in Eastern Europe), No place: Zhongguo Lüyou Chubanshe. Nagy, Ildikó Emese (1995), ‘Kínaiak Magyarországon (2.)’ (‘Chinese in Hungary’), Magyar Hírlap, 19 September, 10. Népszabadság (2002), ‘Cipöt a cipöboltból’ (‘Shoes from the shoe shop’), 18 April, 32. Nyíri, Pál (1996), ‘Magyarország helye a kínai világkereskedelmi hálózatban’ (‘Hungary’s place in the global Chinese trade network’), in Endre Sik and Judit Tóth (eds), Táborlakók, diaszpórák, politikák (Camp Dwellers, Diasporas, Politics), Budapest: International Migration Research Group, Institute for Political Sciences, Hungarian Academy of Sciences, pp. 130–39. Nyíri, Pál (1999), New Chinese Migrants in Europe, Aldershot: Ashgate. Nyíri, Pál (2002), ‘Mobility, entrepreneurship, and sex: how narratives of modernity help Chinese women in Hungary evade gender constraints’, in Pál Nyíri and Igor R. Saveliev (eds), Globalising Chinese Migration, Aldershot: Ashgate, pp. 290–308. Nyíri, Pál (2003a), Xenophobia in Hungary: A Regional Comparison. Systemic Sources and Possible Solutions, Budapest: Center for Policy Studies, Central European University (www.ceu.hu/cps/pub/pub_reports.htm). Nyíri, Pál (2003b), ‘Chinese migration to Eastern Europe’, International Migration, 41(3), special issue, Frank, Laczko (ed.), Understanding Migration Between China and Europe, pp. 239–65. Nyíri, Pál (2005), ‘Global modernizers or local subalterns? Parallel perceptions of Chinese transnationals in Hungary’, Journal of Ethnic and Migration Studies, 31(4), July, 659–74. OECD (2001), Migration Policies and EU Enlargement: The Case of Central and Eastern Europe, Paris. Pieke, Frank N., Pál Nyíri, Mette Thuno and Antonella Ceccagno (2004), Transnational Chinese: Fujianese Migrants in Europe, Stanford: Stanford University Press. Renmin Ribao (1996), ‘Xiongyali Zhonghua Gongshanglian toushen Guangcai Shiye’ (‘Hungarian Chinese Federation of Trade and Industry devotes itself to Project Brilliant’), 26 March, 3. Sik, Endre (1999), ‘The spatial distribution of informal marketplaces and informal foreign traders in contemporary Hungary’, in Edgar F. Feige and Katarina Ott (eds), Underground Economies in Transition, Aldershot: Ashgate, pp. 275–306. Simon, János (2002), ‘Egy kínai piac képei, avagy a kultúrák olvasztótégelye’ (‘Pictures of a market, or the melting pot of cultures’), Fedél nélkül, IX(219) (2), 31 October. Tchoudinovskikh, O.S. and A.B. Zhulin (2001), Ekonomiko-demograficheskiie aspekty chelnochnogo biznesa v Rossii (Economic and Demographic Aspects of Shuttle Trade in Russia), Moscow: Teis. Tinguy, Anne de (1998), ‘Chinese immigration to Russia: a variation on an old theme’, in G. Benton and F.N. Pieke (1998), pp. 301–19. Tóth, Judit (1996), ‘Kína és a kínaiak a magyar sajtóban’ (‘China and the Chinese in the Hungarian press’), in Endre Sik and Judit Tóth (eds), Táborlakók, diaszpórák, politikák (Camp Dwellers, Diasporas, Politics), Budapest: International Migration Research Group, Institute for Political Sciences, Hungarian Academy of Sciences, pp. 139–60. Tóth, Judit (1997), ‘ “Ne arra gondolj, hogy Magyarország mit adhat neked, hanem arra: te mit adhatsz Magyarországnak” (Illúzió és valóság Kínával és a kínai migránsokkal való kapcsolatunkban)’ (‘ “Do not think about what Hungary can give you; think about what you can give Hungary” (Illusion and reality in our relationship with China and Chinese migrants)’), in Endre Sik and Judit Tóth (ed.), Migráció és politika, MTA Politikai Tudományok Intézete Nemzetközi Migráció Kutatócsoport évkönyve, Budapest, 219–43. Vezda, László (2001), ‘Hamis a baba (is)’ (‘The doll is fake (too)’), Határör, 1, 32. Vitéz, F. Ibolya (2002), ‘Piacfelügyelet’ (‘Market supervision’), Heti Világgazdaság, 16 February, 9.

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Waldinger, Roger (1996), Still the Promised City? African-Americans and New Immigrants in Post-Industrial New York, Cambridge, Mass.: Harvard University Press. Wilson, Kenneth and Alejandro Portes (1980), ‘Immigrant enclaves: an analysis of the labor market experience of Cubans in Miami’, American Journal of Sociology, 86, 296–319. Wimmer, Andreas and Nina Glick Schiller (2002), ‘Methodological nationalism and beyond: nation-state building, migration and the social sciences’, Global Networks, 2(4), 301–34. Yang, Ban (2001), ‘Yun meng zhi zhu’ (‘Candle in a cloudy dream’), Lianhe Shangbao (Budapest), 8–13 June, 9. Yu Jun (1994), ‘Bai nian da ji zaiyu tigao ren di suyang’ (‘The great task of the century is raising the people’s quality’), Huikan (newsletter of the Hungarian Chinese Association, Budapest), 25, 30 April, 6. Zhao, Xinluo (1994), ‘Barter tourism along the China–Russia border’, Annals of Tourism Research, 21(2), 401–3.

34 Roma entrepreneurs in Hungary Ferenc Babusik

The social-economic situation of entrepreneur and non-entrepreneur Roma One part of the entrepreneurial group studied comprises private entrepreneurs and onemember companies. Every smaller venture is obviously fundamentally determined by the person who owns it, and for this reason we shall first examine the social and economic situation of the owners of the ventures. We are not only interested in what the situation of the entrepreneurs is in itself, for another important issue is the question of the precise way in which the entrepreneurs differ from the circumstances of the Roma population as a whole. The basis for our comparisons is the data from our own nation-wide Roma research conducted previously. Educational background Compared to the Roma population as a whole, the educational level of entrepreneurs is higher: it is very rare to find one that has not finished all eight grades of primary and middle school, and there is a much higher ratio of those with skilled worker training or even a background of higher education. Nevertheless, two things should not be forgotten: both the age structure and the male–female proportion of entrepreneurs are markedly different from the figures describing the Roma population as a whole: 85 per cent of entrepreneurs are male. Their age follows a near-normal distribution, while the age distribution of the entire Roma population generally follows the demographic characteristics. Since gender and age-group differences fundamentally affect the educational indices for the Roma, we shall briefly discuss this issue. The data on gender difference demonstrate that the level of education among entrepreneurs as such is higher, but gender differences follow the national division. Meanwhile it is interesting that the proportion of female Roma entrepreneurs with higher degrees is relatively high, five times more than the average for Roma women in general. The majority of Roma entrepreneurs are middle-aged; the ratio of the 19–34 group among them is much lower than the national average, while there is nobody in the sample above 62 years of age. All this suggests that indices for educational levels according to age can significantly differ from the indices for the Roma population as a whole. The data illustrate that the level of education according to age bands among entrepreneurs differs markedly from the Roma average in general. Even among the oldest group, between 49 and 62, there are hardly any that had not accomplished eight grades in primary and middle school; and within this age band the proportion is higher than the national average in each category of education. The differences according to age bands among the entrepreneurs indicate that, among younger entrepreneurs, there are far more people with A-levels than among the older generations; the difference between the two lower age bands is three times higher than the difference among the Roma in general within the age bands. Nonetheless, it is noteworthy that, even in the youngest age group, the proportion of those with only eight grades 555

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Table 34.1 Educational background of entrepreneurs in the sample and the Roma population according to gender (%) National Roma population

Less than 8 grades Primary and middle (8 grades) Skilled worker training Total people with A-levels University, college

Sample

Male

Female

Male

Female

24.2 37.9 26.6 10.5 0.9

36.1 34.9 14.7 12.4 1.8

2.1 45.2 38.1 11.4 3.2

8.0 50.0 24.0 10.0 8.0

Table 34.2 Educational background of entrepreneurs in the sample and the Roma population according to the main age bands (%) National

Less than 8 grades Primary and middle (8 grades) Skilled worker training Total people with A-levels University, college

Sample

Between 19–34

Between 35–48

Between 49–62

Between 19–34

Between 35–48

Between 49–62

15.2 40.6

30.8 42.0

64.4 21.0

1.0 35.1

2.7 46.8

6.4 59.6

26.0

17.8

11.4

38.1

40.3

21.3

17.0

7.8

1.7

20.6

7.0

6.4

1.2

1.6

1.4

5.2

3.2

6.4

of primary and middle school is relatively high, while the ratio of those with a higher education degree among the entrepreneurial age bands does not increase to the advantage of the younger people. Our data allowed us to conclude that the difference in educational level between entrepreneur and non-entrepreneur Roma can fundamentally and in general be explained by the learning of a profession; the professional training of entrepreneurs is higher. Currently, a significantly greater level of higher educational degrees or vocational certificates with A-levels are not typical among Roma entrepreneurs, and nearly a third are successful in their chosen fields with primary and middle-level schooling. Although the nature of businesses will be the subject of later chapters, one index that is characteristic of ventures is worth comparison with the educational level of entrepreneurs. This index shows the age of ventures (how long a given Roma has been in business) and is one of the fundamental indices on the stability of any existence based on a commercial venture; comparing this with the educational level, therefore, is informative about the way the various educational levels can contribute to the stability of an entrepreneurial existence. The majority of those who have fewer than eight grades of schooling, and the ratio is actually quite small, have been in business for a longer period of time. On the other hand,

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Table 34.3 Distribution of domestic infrastructure among entrepreneurs and in the Roma population (%)

Bathroom Toilet within the home Electricity Mains water Sewage

Roma population

Sample

60.9 54.1 98.6 72.6 42.0

97.7 97.2 99.7 98.6 77.3

most of those with higher education degrees, again a small ratio, have had their venture for a maximum of two years and, as a tendency, the same is valid for those with A-levels. The enterprises belonging to Roma with a skill are distributed evenly among the age bands. All this leads to the conclusion, seemingly paradoxically, that the age of the enterprise (and indirectly, therefore, the stability of entrepreneurial existence) is less affected by the level of education of the Roma entrepreneur. The stability of a venture is influenced by other factors, too; among entrepreneur Roma the economic–sociological paradigm for entrepreneurs, according to which educational background clearly contributes to the success of a venture, is less strictly dominant. Standard of living connected with living environment Life in segregated versus assimilated environment situations is among the most distinct differences between entrepreneur and non-entrepreneur Roma. While nearly half of the total Roma population (44.7 per cent) lives in segregation, within that over a fifth live in ghetto-like circumstances, the figure for entrepreneur Roma in segregated environments is ‘only’ 16.5 per cent, of which 10 per cent are in ghetto-like environments. On the one hand, these proportions indicate that entrepreneur Roma live in much better circumstances, but our data also indicate that ventures can also function in segregated or even ghetto-like circumstances. It is also noteworthy that 15 per cent of entrepreneurs live in a completely assimilated context (that is, no other Roma live in their neighbourhood), while this ratio among the Roma in general is 4 per cent. While 17 per cent of the Roma population lives in emergency housing, this proportion among entrepreneurs is insignificant. Whether entrepreneurs live in a traditional village building, a family house or in an urban building, basically depends on the nature of the settlement, and the age of the ventures has no effect on this aspect (that is, a similar proportion of the owners of old businesses live in village or family houses as do the owners of younger ventures). The data show that the vast majority of entrepreneurs live in homes with all necessary infrastructure, unlike the Roma populace in general. The point could be raised here that perhaps the already stable ventures might ‘improve the statistics’, so we examined the effect of the age of a venture on the level of comfort in the homes. We found that there is no such effect: so the owners of the youngest enterprises also live in better conditions. These data, however, strengthen the (natural) presumption that those living in better conditions have a better chance of entering a business, even if the home representing the better condition happens to be in a ghetto.

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On average there are more members living in the families of entrepreneurs than is the case for the Roma population as a whole; independent of age bands, there are more married couples among them, more have children, more cohabit with their parents, siblings and others. As the earlier data indicated, the better circumstances of entrepreneurs in an absolute and a relative sense, and the number of cohabitors, allows us to conclude that the families of entrepreneurs have a significantly larger capacity to offer support than the Roma average. Meanwhile, the data also indicate, precisely because more people share a home, that entrepreneurs, in relation to their ability, have greater solidarity with their relatives than do their poorer compatriots; that means they are not only able to share their homes with more people, but also do so. Against this contemplation, an obvious counter-argument could be that they might be entrepreneurs because, among other factors, they have stronger family connections which then help them in their venture, represent a labour force, and so on. That would mean that the data are not about solidarity, but about the possibility of ‘capitalizing’ on family connections. We tested this contention. Social networks will be analysed later, but here we also mention it, for the sake of the test: a proportion of the entrepreneurs suffer from a ‘network vacuum’, we could say, while, at the other end of the scale, there are those with extra-strong connections who can rely on many people. Data demonstrate that the strength of the network is practically independent of whether the entrepreneur shares their household with some relative, or of how many relatives live in their household. In a characteristic way, there are also isolated entrepreneurs among those who live together with all their relatives, just as there are entrepreneurs with a strong network who live with only a few relatives. Moreover, the strength of the network intensely influences the scale of derivable income, meaning that it is not the quantity of family connections that is capitalized upon, but the connection-making abilities of individuals and the consequent network capital which then becomes financial capital. All this underpins the presumption that the Roma who live in better financial situations than others, thanks to their enterprise, in the meantime show more solidarity with their relatives. This leads us directly to the contemplation of the issues around financial strength. Financial strength We examined the financial strength of Roma entrepreneurs and their families with a method that has proved sound in our earlier Roma researches. In the various household panel surveys it is customary to measure the household’s financial level through the various consumer-durable goods present. In our case, experience has revealed that this method is less meaningful than the direct polling of the US dollar value of the income data. Previous research shows that these data are quite trustworthy and, in comparison with the other data, distributes the polled masses consistently. Financial strength will, therefore, be measured by two values: firstly, the scale of income achieved by the entrepreneur; secondly, the scale of per capita income in the family. The first indicator reveals what personal income a given entrepreneur is able to achieve through their activities, and the second index shows the standard of living in his family (as the per capita income includes the income of the married partner and so on, while the per capita scale of these incomes is decreased by the non-earning members such as children and elderly people). The scale of personal income is among the most tried and tested indices for the success of an enterprise (success which obviously depends on many aspects, such as sector, yield, personal skills, education, regionality and the rest).

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Table 34.4 The average US$ value of labour monthly incomes among Roma entrepreneurs and in the Roma population, indicating the multiplier between them, and according to settlement types

Budapest County seat Town Village

Roma population

Sample

Multiplier

298 135 124 109

560 785 625 638

1.9 5.8 5.0 5.9

Table 34.5 Serial differences of the average US$ value of labour monthly incomes among Roma entrepreneurs and the Roma population according to gender and educational background Entrepreneur/ Roma population multiplier

Less than 8 grades Primary, middle school (8 grades) Skilled worker training A-levels University, college

Male/female multiplier

Average multiplier

Male

Female

In Roma population

Among entrepreneurs

19.0 6.5

18.8 5.9

13.2 6.0

1.8 1.5

2.6 1.5

2.9 3.9 1.4

2.7 3.0 1.2

3.4 5.1 1.5

1.4 1.8 1.4

1.1 1.0 1.1

Entrepreneurs achieve a significantly better income compared to the average for the Roma population: the average achievable income in Budapest is, relatively, the smallest: on average they earn only twice the Roma average. On the other hand, the Roma entrepreneurs in villages earn six times the local average Roma income. Income differences depending on the degree of urbanization between entrepreneur and non-entrepreneur Roma are less dramatic than the differences dependent on the level of education. The income average of entrepreneurs with no full primary and middle schooling is nearly 20 times more than those non-entrepreneur Roma with the same educational background. This, at the same time, means in absolute values that an entrepreneur who has not completed their eight grades of schooling, on average, gains an income similar to the average income of a Roma entrepreneur in Budapest, and a somewhat higher average income than a Roma entrepreneur with a degree. The differentiating effects of education among incomes show up primarily among Roma entrepreneurs and non-entrepreneurs; within the group of entrepreneurs those with A-levels lead the income table. Gender differences also have a differentiating effect on incomes, just as they do in society as a whole. Among the Roma population in general, men earn 1.4 to 1.8 times the

560

Handbook of research on ethnic minority entrepreneurship 900

25.0

800 20.0

700 600

15.0

500 400

10.0

300 200

5.0

100 0

1

2

3

4

5

6

7

8

9

10

Roma population average

3

33

54

69

88

106

132

173

222

429

Entrepreneurs: average

72

119

146

172

209

260

309

376

463

780

21.7

3.6

2.7

2.5

2.4

2.5

2.3

2.2

2.1

1.8

Entrepreneurs: multiplier

Figure 34.1

0.0

Per capita monthly incomes (in US$)

value of their female compatriots, the result of a labour-market that is immensely depressed from the perspective of the Roma. Among entrepreneurs gender differences are less strong: female entrepreneurs with skilled worker training or with higher educational levels earn only a fraction less than their male counterparts. Only the income of female entrepreneurs who have not completed their primary and middle schooling is significantly lower than that of men in the same category, but that is primarily an issue of sector (women with no completed primary and middle education mostly work as agriculturists and salesperson, or as ‘market women’). Finally, let us look into per capita monthly income, which describes the families’ standard of living. Figure 34.1 presents the per capita income for the Roma population as a whole and in the families of the surveyed Roma entrepreneurial group according to income tenths. The multiplier is the number that shows how many times the per capita income in the entrepreneurial families in a given income tenth is bigger than the per capita average in the families of the Roma population in general in the same income tenth. The data in Figure 34.1 lend themselves to various conclusions. Firstly, it is known from previous studies that the Roma population as a whole is practically divided from the aspect of per capita income that describes the standard of living. In the lower two income tenths the per capita income of families does not reach US$50, and 70–90 per cent of the Roma population lives below the poverty line. Although our data reflect that Roma entrepreneurs have a relatively good income, the data describing the families’ standard of living demonstrate that 40–50 per cent of the entrepreneurial families also live below the poverty line (though at a much better level when compared to the Roma as a whole). On the other hand, 20–30 per cent of Roma entrepreneurs’ families (belonging to the upper two to three tenths) live in good financial situations compared to both the Roma and non-Roma population in Hungary.

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The value of the multiplier reveals that the difference in the circumstances between the families of entrepreneurs and non-entrepreneurs is dramatic in the lowest income tenth where we see a differential of twenty times. However, let us not forget that the per capita income in the families of the Roma population in the lowest income tenth is inhumanly low, while the per capita income in the entrepreneurial families in the lowest income tenth is also very low, and far below the poverty line. All this means that the difference between the entrepreneurial and non-entrepreneurial families in the lowest income tenth is manifested in the scale of their poverty; we may talk about the difference between deep poverty and poverty. At the same time, in the upper seven income tenths the per capita income difference between entrepreneur and non-entrepreneur Roma families fluctuates between 2.5 and 1.8; in these groups entrepreneur families live only two to two and a half times better than the Roma families of non-entrepreneurs. This two to two and a half times difference is already enough for a relative good level – in the upper two or three income tenths, that is. The main background factors that influence the income of entrepreneurs As pointed out above, the scale of personal income is among the most tried and trusted indices of the success of an enterprise and its quantification in the field. First let us begin with the factors that, contrary to all beliefs, hardly influence the scale of personal income achievable by Roma entrepreneurs. We saw that, although entrepreneurs with A-levels have the highest income, the income of those who have not finished eight grades of primary and middle school hardly lags behind this entrepreneurial average. Having examined the causal effect of educational level on income through analysis of variance, we have found that there is no causal relationship between them. Economic activity prior to the launch of the venture also has no noteworthy effect on achievable income. Except for the youngest, those who have just left school, income is around US$650 per month, independent of whether the entrepreneur was working previously or was unemployed or raised children or not. The analysis of variance underpins the same unrelatedness. Among the entrepreneurs the middle generation is able to achieve the best income from their venture, and the older generation the least. However, the differences are rather insignificant. The result of the analysis of the mathematical variance shows that the age of entrepreneurs on income is a total of 1.5 per cent (meaning that, from among the numerous possible reasons, age contributes to a degree to the diversion of incomes in this small amount). The degree of segregation in the environment also influences income and, interestingly enough, to the advantage of entrepreneurs living in segregated but not ghetto-like circumstances. Nevertheless, the analysis of variance reveals that the effect of environment is also low, only 1.4 per cent. A question is worth posing here: why do entrepreneurs who live in segregated but not ghetto-like circumstances earn the most? The answer is actually quite obvious: they can find the relatively cheapest labour in these places, compared to other entrepreneurs (that is, their profitability is the best). The average age of enterprises is a factor that seriously influences incomes: the difference between the incomes of owners of ventures in the youngest and oldest layers is US$300. Moreover, analysis of variance demonstrates that this factor has a strong causal

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Table 34.6 Monthly average income of entrepreneurs according to various levels of network capital intensity Network capital intensity layers Network vacuum Weak network Average network Strong network Extra-strong network

US$ average 531 526 559 794 1003

effect as well: it defines the income achieved by an entrepreneur as 9.7 per cent. The sector of a venture also intensely affects income, 8.1 per cent in total. The highest-earning entrepreneurs manage only a building industrial venture, followed by those in agriculture (these issues are again related to the employment of black labour). The least advantaged are the entrepreneurs who venture into several sectors simultaneously. Only those entrepreneurs who operate an agricultural and a trade venture (‘integrators’ of their own venture) earn much above average, while those busy in agriculture and processing have incomes far below average income. Finally, the last effect we shall summarize (1) has the strongest effect on incomes, (2) is very close to everyday informal experiences, and (3) has thus far had least attention in economic policy: that is, social network capital, or the effect of the intensity of connections on determining income. This is the only effect where the income difference between the two opposite extremes is double; within that, the average income of entrepreneurs with the strongest network capital is outstandingly high compared to the total average of entrepreneurs. The causal strength of the dominance of network capital on income is higher that the other effects, at 12 per cent. It is also worth calculating the mutual strength of a few effects on income. The results of analyses of variance are the following: 1. 2. 3.

4.

the mutual effect of the age of an enterprise and the degree of segregation of environment is 12 per cent, the mutual effect of the age of an enterprise and the network capital density of the entrepreneur is 19 per cent, the mutual effect of the age of an enterprise, the network capital density of the entrepreneur and the degree of segregation of environment comes to as much as 22.4 per cent, while the highest effect is practised by the mutual effect of the age of an enterprise, the network capital density of the entrepreneur and the sector of the venture: this determines income to a degree of 26.1 per cent.

In conclusion, in the summary of factors that influence the entrepreneur’s income it is noteworthy that, while the effects of, for example, the level of education or work experiences is insignificant, the strongest influence is affected by contacts alone. Nonetheless, this does not mean that anyone could run a business without any level of education. Yet,

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in the cases of entrepreneurs with a proven track record, the statement above fits neatly. All of which also means that one of the most influential factors in entrepreneurial success absolutely concerns human character, and as such can be developed. Moreover, appropriate networking, as a necessary means for entrepreneurial existence, or the incubation of contacts, can open vast perspectives in the further development of Roma enterprises. The characteristics of the enterprises The data compiled in the research clearly show that, while we can almost exclusively talk about Roma micro-enterprises, we found no small or middle-sized enterprises in the legal sense. The categorization of the size of enterprises is based on the number of permanent staff and the balance sheet total for the previous tax year. Some 89 per cent of the ventures operate with fewer than ten full-time employees (69 per cent are private entrepreneurs or agriculturists employing themselves, or a one-person limited ‘partnership’ or Ltd). Similarly, only a total of 2.6 per cent of ventures said that the last year’s (pre-tax) profit exceeded US$50 thousand. The proportion of businesses making up the combination of these two items of data (which employ at least above ten permanent staff members and have a profit over the minimum US$50 thousand) is below the statistical margin of error. All of which does not mean that there are no Roma-owned enterprises in Hungary larger than micro-sized. What became clear was that the larger Roma ventures do not lend themselves to examination through the method of sampling-based statistical data compilation. Our sample of 356 businesses is large enough to see that the ratio of larger ventures is so small that their noteworthy statistical study would necessitate a Roma enterprise sampling of many thousands. The vast majority of the entrepreneur group in the sample, 95.4 per cent, has one venture (that is, they are private entrepreneurs, agriculturists, or have an enterprise in some other legal form). Of the remaining insignificant proportion, 4.3 per cent operate two enterprises, while 0.3 per cent run three businesses. As the ratio of those with two or three ventures is near the margin of error we refer to ‘the enterprise’, meaning that the handful of entrepreneurs with more than one venture are handled along with the majority. The legal form of the enterprises and the sector of their activities Of the enterprises surveyed, 70.5 per cent are private entrepreneurs or agriculturists, 20.7 per cent are in limited partnership, 4.8 per cent are limited liability companies, while the remaining 4 per cent are in the other category (for example, co-operative, non-profit company and so on). Limited partnerships cannot be brought under the same umbrella as private ventures, neither can limited liability companies under the first two categories; thus, wherever it is necessary, they are discussed separately. Elsewhere we talk about enterprises as a whole. In the case of the sector in which a venture is active we accounted for business activities that belong to different sectors but are conducted by one venture, as well as activities that are carried out in more than one enterprise but by one entrepreneur. Some 80 per cent of the entrepreneurs are active in one sector only, 14 per cent in two sectors, while the rest are distributed between three to six sectors. In the end, 11 per cent of the ventures in the surveyed entrepreneurial group operate simultaneously in more than one typical sector, an accumulation that can be considered typical. Activities in sectors led by other enterprises divide in the following way:

564 1.

2. 3. 4.

Handbook of research on ethnic minority entrepreneurship Most enterprises carry out activities in the building and construction industry (meaning that over 90 per cent of these enterprises work in the building industry, the rest in the areas of the mining and processing industries). Mercantile trading ventures are the second largest group. Ventures are ordered into the third largest group that operate in rare sectors in 1–2 per cent proportions (transport, security services, education, other community services). Contrary to expectations, relatively few entrepreneurs work exclusively in the area of agriculture.

Private entrepreneurs are found in greatest numbers in agriculture and trade; the few that operate in more than one sector simultaneously and those doing other services were more likely to establish limited partnerships. Source and scale of primary capital While 67 per cent of the forced entrepreneurs invested their own money, an 86 per cent proportion launched their enterprise voluntarily. The majority of entrepreneurs thus invested their own or their relatives’ money, establishing their venture from family, not external resources. The ratio of bank loans is well below 10 per cent, while the scale of other resources is insignificant. A review according to the age of the enterprises can show whether in recent years the opportunities for accessing money for primary capital from outside the family have or have not changed. Data suggest that lately the possibility of an entrepreneur receiving a bank loan or some support from a foundation has risen slightly. The percentage ratios indicating the distribution of state supports in time are near the margin of error, so the change cannot be estimated. Although bank loans have grown more prominent over recent years among resources at the time of a company launch, looking at the issue by environment shows just how disadvantageous a factor segregation is in itself. Entrepreneurs living in segregated circumstances practically receive neither bank loans nor any state support to help them at the Table 34.7 Average distribution among the various investment resources according to the age of the enterprise (%)

Own money Parents’, relatives’, acquaintances’ money Bank loan Financial support from a foundation Financial state support Financial local governmental support Land support within the social land programme

Average distribution

2 years or less

2–4 years

4–6 years

Older than 6 years

73.7 13.2

66.4 13.7

72.4 13.4

78.8 11.8

78.6 11.7

7.6 3.3 1.8 0.1 0.2

10.0 8.6 0.7 0.1 0.0

10.1 1.3 2.8 0.0 0.2

6.6 0.5 2.7 0.1 0.0

5.6 2.6 0.2 0.0 0.4

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outset. The reasons for this lie, firstly, in prejudice and discrimination, and, secondly, in the data on education. Among the Roma entrepreneurs in segregation the proportion of those with only eight years of primary and middle schooling is 66 per cent, while for those in mixed or assimilated habitats the figure is between 39 and 44 per cent. Obtaining a bank loan, necessary in establishing a venture, is evidently related to the applicant’s ability to write a credible business plan. The third factor lies in the collateral coverage system set as a prerequisite for bank loans: while a housing property may serve as collateral among those who live in better circumstances, the properties of those living in segregation are more likely to be worth very little. The data in Table 34.8 basically demonstrate that the few entrepreneurs who are active in some service sector (social, educational and so on) or in trade can obtain a loan with considerably better conditions. They can also have a closer look through the support opportunities offered by foundations as well. State support to some noteworthy extent has been given to entrepreneurs in the service sector, too. These things indicate that people in these sectors are better educated, know their possibilities better and are in better positions to assert their interests. Consequently, the entrepreneurs who work in industrial or agricultural sectors receive a significantly smaller proportion of state support or bank loans in relation to their needs, even though the majority of entrepreneurs are in these sectors. The level of education and ‘creditworthiness’ in an economic sense (the necessary educational background required to receive support and/or a loan) are closely related. So it is precisely those who are deprived of the necessary resources outside family support who have the least education (they are the least creditworthy, have no collateral). The assets of the majority of entrepreneurs (77.2 per cent) on establishing their company was below US$5 thousand, and nearly 20 per cent had between US$5 and 50 thousand. The very few enterprises with assets of over US$50 thousand were mainly co-operatives or ventures of other legal form. If the type of the wealth upon which a company is founded is examined, cash, fixed asset, property and so on, then it becomes clear that enterprises with initial capital below US$5 thousand constitute the majority of the ventures, and these had almost exclusively cash and a few fixed assets in their possession. This also means that, at the time of the launch, these small entrepreneurs did not enter their property, for example, into the Table 34.8 Average distribution of the various investment resources according to the degree of segregation of the environment (%)

Own money Parents’, relatives’, acquaintances’ money Bank loan Financial support from a foundation Financial state support Financial local governmental support Land support within the social land programme

Segregated

Unsegregated

Assimilated

86.3 9.6 0.2 2.9 0.0 0.0 1.0

71.1 13.8 9.3 3.3 2.3 0.1 0.0

73.2 12.8 8.0 3.6 1.4 0.0 0.0

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company: all they risked was money and tools. In addition, fewer than three-quarters of the enterprises with below US$5 thousand primary capital are private entrepreneurs; the rest are limited partnerships or Ltd companies. The situation is different with ventures with more than US$5 thousand primary capital: most of them had fixed assets, and nearly a fifth possessed a property, while only a quarter put in cash. This indicates that the majority of Roma entrepreneurs, micro and small enterprises, private entrepreneurs, family limited partnerships and agriculturists, can basically only start their business using cash. Main types of Roma enterprises, factors in failure or success An important aspect of entrepreneurial existence and the personality of the entrepreneur is the issue of how they view the financial and human resources necessary for a successful enterprise, and what they consider to be a priority or otherwise. Another important aspect, also interrelated with the above issue, is how the enterprise itself is viewed: which resources are considered to be missing or to be strongly present. Responses to the first area primarily give an account of values held while the second forms a self-portrait of the enterprise itself. These two allow conclusions to be drawn about the ‘entrepreneurial personality’ of the businessperson (or the enterprise), as well as about the types of this ‘personality’. In the course of our research we tried to find answers to the questions of what Roma entrepreneurs/enterprises are like, and what their typical characteristics are. These point far beyond the purist descriptions drawn from the sector, the size or the profitability. An enterprise is evidently a broader, more multicoloured, reality than the picture painted by its micro-economic model: it is a closed unit of a way of thinking, of needs unveiled by experience and of an entrepreneurial economic reality. It should not be forgotten that the larger part of the entrepreneurial group examined are individuals, private entrepreneurs; moreover, smaller enterprises are also dominated by the personality, traditions and values of their owners. The methodology applied was the following: in the course of the work we asked the entrepreneurs to evaluate the importance of a total of 18 areas from the perspective of entrepreneurial success. These areas represent some sort of resource (material resources, information, certain preparatory intellectual activities, and networks). The entrepreneurs were then asked to evaluate, within the same 18 areas, the extent to which they are available, absent or sufficient. Responses, in both cases, were to be indicated on a scale. In the first step, we conducted a factor analysis of the data of scale given to each of the 18 areas in both questions. The factor analysis isolates three areas within the view on entrepreneurial success: (a) business information (knowledge about economic processes, banks, tenders, etc), (b) business potential (knowledge about money, market, customers, profession, etc) and (c) connections and backers. Four factors evolved from the perspective of needs as absences: (a) business information, (b) business potential, (c) support of non-Roma, (d) money and the support of the Roma community. The entrepreneurial profile was then analysed in the light of values believed to lead to success, and perceived needs. Accordingly, we continued the work with the factor score coefficients of the two factor systems. In the second step we conducted a cluster analysis with the coefficients of the two factor systems. Thus six stable clusters evolved.

Roma entrepreneurs in Hungary Table 34.9

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Distribution of entrepreneurial types (%)

Name of the type (cluster) Traditional, without hope Educated, well-positioned Uneducated, isolated Despite everything, losing Average Traditional, born entrepreneur

Distribution (%) 9.0 9.8 16.9 11.0 36.7 16.6

Below we describe the various groups in size order, while further patience is requested from the reader; the reasons for naming the groups will become clear in the course of the coming analyses. Average: this group constitutes 36.7 per cent of Roma entrepreneurs and experiences a real deficiency in all three areas; they feel the need for entrepreneurial information, potential and networks (and money) to the same extent as they perceive that their enterprise suffers an absence of these. Traditional, born entrepreneur: this group constitutes a significant ratio, a total of 16.6 per cent of the polled entrepreneurial group. They experience an abundance of entrepreneurial information and potential (as we shall see later, they rightly view themselves with pride). They are satisfied in terms of the support of the Roma community, while sensing a deficiency in support from non-Roma sections (local government, authorities and ministries). Uneducated, isolated: this group constitutes 16.9 per cent of the entrepreneurs studied. As we shall see, the title is justified by a lower than average educational background and the absence of networks. Paradoxically, these entrepreneurs feel that they possess an abundance of entrepreneurial information (this has been termed ‘false awareness’; today we would call it ‘self-delusion’), while they perceive a need for and a deficiency in entrepreneurial potential, money and networks. Despite everything, losing: this group, 11 per cent of the total, offer a fascinating picture. In terms of entrepreneurial information and potential they experience that these resources are both necessary and available (‘all is well’), while sensing a hiccup in the area of networks (superfluous and absent resources). The title was derived from the fact that the educational level of the group members is somewhat better than average, they are about the average in their networks, their income situation is slightly better than average, yet their business course in recent years has shown a downward tendency. Educated, well positioned: the members of this group, making up 9.8 per cent, are the only ones who take the ‘all is well’ position in the areas of entrepreneurial information and potential, as well as of networks (these areas are important and are sufficiently available). The title reflects that their members have the highest qualifications in general, the largest proportion acquired their entrepreneurial knowledge at school, and their development and income are well founded. Traditional, without hope: this is the smallest group, with 9 per cent of the total. They experience a hiccup in the area of entrepreneurial information (superfluous and deficient resources), perceive their entrepreneurial potential as excellent (necessary and available),

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Table 34.10 Distribution of entrepreneurial groups according to the source of entrepreneurial information (%)

Traditional, without hope Educated, well-positioned Uneducated, isolated Despite everything, losing Average Traditional, born entrepreneur

School, post-training

Family, environment

Practice

10.0 47.1 12.3 43.6 23.6 –

80.0 17.6 56.1 33.3 42.3 98.3

10.0 35.3 29.8 23.1 33.3 1.7

while suffering a real deficiency in terms of money and networks. This group is similar to the ‘traditional, born entrepreneur’ group in many ways, apart from the nature of their networks, but they are without hope, they produce a loss in their operation in losing sectors, and their income level is the lowest. Before going into a more detailed presentation of the groups, to summarize, over a quarter of the Roma entrepreneurial group examined, 26.4 per cent, heads a prospering business. Entrepreneurs, alongside them, have two layers of almost the same size: the 36.7 per cent that can be seen as average, struggling with average problems, and the 36.9 per cent that is in some way losing and/or uneducated. ‘Traditional, born entrepreneurs’ nearly always picked up their entrepreneurial information in the family and their environment, hence the ‘traditional’ attribute in their title, similar to the ‘without hope’ group that also mostly gains its entrepreneurial information from tradition handed down. The strong differentiating factor between these two groups is not, then, in the source of information, but to be sought elsewhere. The members of the ‘educated, well-positioned’ group acquired their knowledge in formal university education, an aspect which makes them very similar to the ‘loser despite all’ group. The members of the group termed ‘average’ represent the average of the complete entrepreneurial sample surveyed (also) from the perspective of the source for entrepreneurial information. Glancing though the data on the level of education, we see that the ‘traditional, born entrepreneurs’ qualified mostly from skilled worker training schools; among them some professional training appears next to family traditions, as a solid grounding (there are none among them without at least primary and middle schooling accomplished). The following is worth noting: studies analysing the relationships between educational background and the labour market usually agree that, in the current employment environment, skilled worker training without A-levels offers almost no opportunities on the labour market. Nevertheless, our data show that, for the Roma who have a strong background of professional/entrepreneurial family traditions alongside their skilled worker training, this level of education ensures them far better chances (and living) than others, even with a better education. The coupled effect of these two factors is demonstrated, for example, in that among the ‘loser despite all’ group members the proportion of those with skilled worker training is almost the same, but family traditions are weak: only 33 per cent ‘brought’ their entrepreneurial information from home, but a high proportion gained these during their studies. This leads us to conclude that the entrepreneurial expertise and

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Table 34.11 Distribution of entrepreneurial types according to educational background (%)

Traditional, without hope Educated, well-positioned Uneducated, isolated Despite everything, losing Average Traditional, born entrepreneur

Less than 8 grades

Primary, middle school (8 grades)

Skilled worker training

A-levels

University, college

3.1 2.9 3.4 2.6 4.6 –

43.8 20.0 63.8 41.0 51.1 42.4

40.6 40.0 27.6 46.2 27.5 49.2

9.4 20.0 5.2 7.7 12.2 8.5

3.1 17.1 – 2.6 4.6 –

potential that is the token of success will have a genuine effect when entrepreneurial tradition and education are present at the same time. A group of successful entrepreneurs, absolutely different from the previous one (‘educated, well-positioned’) is constituted by those whose level of education is the highest on average. This entrepreneurial layer works mainly in the areas of services and trade. That is the case despite one-fifth of them having only primary and middle education, but the majority of people with A-levels and higher degrees are in this group. People with only primary and middle schooling are over-represented in the ‘uneducated, isolated’ and the ‘average’ groups. However, the data for educational background again indicate that the level of education in itself is not decisive from the perspective of the success of Roma entrepreneurs (among the most successful stratum, the ratio of those with only primary and middle schooling is also high); the key to entrepreneurial successes is in the composition of background factors. The bleakest outlook for success is when an entrepreneur is busy in more than one sector; this misguided strategy, obviously thought up under pressure, also prevails among the ‘uneducated, isolated’ and the ‘traditional, without hope’ group of entrepreneurs. Concentration on a sector is a very important success factor: entrepreneurs in both the ‘educated, well-positioned’ and the ‘traditional, born entrepreneur’ groups are active in one sector only, without exception. The distribution of the network capital among the various entrepreneurial types indicates the strength of traditional community as well as the self-generating cycles of failures and isolation. Among the ‘traditional, born entrepreneurs’, the ratio of those with a strong social network and high network capital is astonishingly high. A deep integration in their families and local communities is revealed in their examples, just as the retrospective power of attraction is lent to them by success. In contrast, the ‘educated, wellpositioned’ Roma entrepreneurs have an average value network capital; the social networks of entrepreneurs with a higher educational background (in many cases living away from the land of their birth) are weaker; this shows up in the considerable value of their index for struggling in a network vacuum. The two least successful, failing entrepreneurial types, the ‘uneducated, isolated’ and the ‘traditional, without hope’, mostly live in isolation. In their case, presumably the weakness of potentials for personal networks, lack of entrepreneurial success and the absence of a

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community network operate simultaneously; moreover, these factors can keep reinforcing each other. This presumption is reinforced by the fact that the distribution of the various entrepreneurial types is independent of the degree of environmental segregation, the age of the entrepreneur or the enterprise. This means that Roma entrepreneurs with the appropriate conditions (educational background, entrepreneurial and work traditions, money necessary for the start) have the same chance of being successful whether young or old, and, contrary to our expectations, segregated circumstances are no hindrance to this group of entrepreneurs with better conditions. Similarly, entrepreneurs with more failures are not unsuccessful because of their age or their worse living circumstances, but rather because they are uneducated and/or have no appropriate work and entrepreneurial traditions; that is, entrepreneurial and work culture. We may rightly think that the financial conditions at the time of the launch of a venture strongly influence later successes or failures; in other words, businesses that start out in worse financial situations are less successful. However, our data do not support this possible presumption; moreover, the only entrepreneurial layer whose primary capital was in all cases below US$5 thousand is precisely the group of ‘traditional, born entrepreneurs’ (these data are noteworthy, even if it is possible that many from this group use the tools in their own ventures that were already present in the family and so had to invest less). This is also supported by the fact that the highest proportion of those who started with a capital investment of more than US$5 thousand (46.2 per cent) is in the group of ‘despite everything, losing’. Similarly, 32.8 per cent of the members of the ‘average’ group also launched their venture with a primary capital of more than US$5 thousand. The ‘uneducated, isolated’ group is the only one among the entrepreneurs whose members mostly began with little money: presumably, this is mainly due to their isolation, as the level of their education does not explain the scale of initial wealth. A few things, however, are worth highlighting: there is a very serious difference between the two most successful entrepreneurial groups. Although their income is above average, the income of those leading a traditional building industrial enterprise with deeper integration into the community is not only above the level of the Roma entrepreneurial average in general, but also above the average national income level: their income is outstanding. The index for development is positive in these two groups, so in the past three years their venture has progressed: for the moment their high income is not foreseeably endangered by anything. The groups termed ‘average’ and ‘despite everything, losing’ are indeed losers in relation to the more successful ones, earning at about the average level of Roma entrepreneurs. Their development index, however, is slightly negative or is around the average; their ventures prosper slightly less than average. The income and development data for the two least successful groups show struggle, deterioration and an uncertain entrepreneurial future overall. Conclusions Roma entrepreneurs and enterprises struggle with accumulated disadvantages in many cases: they gather the necessary primary capital with the help of their families (credit institutions leave them with a lack of confidence, and, in the majority of cases, lack of information prevents them from preparing their credit applications). A significant proportion of entrepreneurs do not have A-levels and gather information on entrepreneurship in

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practice; thus they lack modern, up-to-date business information that is often circulated. An absence of capital coupled with the lack of specific and modern entrepreneurial information means that a number of entrepreneurs operate in two or three sectors, while our research demonstrated that a key to success is concentration on one sector. The hopelessness of those suffering segregation winning bank loans calls attention to the need for a credit fund to be established, with the involvement of the appropriate governing bodies, that would serve specifically to fulfil the demands of Roma enterprises for primary and operational capital. All this has to be independent of the capital status of the family or the entrepreneur. Since the enlivening of Roma enterprises is aimed at offering jobs to destitute Roma or to those who have no capital wealth to offer, the current credit system is unrealistic in demanding collateral from them. Our data demonstrate that the Roma who couple skilled workmanship in a particular field with a strong tradition of family entrepreneurship secure far better opportunities and livelihoods even with this level of education, than others with a higher level of education. The entrepreneurial expertise and potential, which is one of the prerequisites of success, truly have an effect when entrepreneurial tradition and education are present concurrently. The key to more successful entrepreneurs is in the scale of entrepreneurial skills. The ratio in which the source of these skills is to be sought in family traditions or in more formal training is another issue. In essence a more successful entrepreneur is one with a background of entrepreneurial socialization. Among our main suggestions is the development of a mentoring system that is able to help entrepreneurs to put into practice what they have acquired through formal training. Since beginner entrepreneurs take on an unbelievably large risk, while most of them do not have the socialization background that is indispensable in a venture, then, next to the mentoring system a non-traditional incubator system also has to be developed. The ‘nontraditional’ attribute is stressed: the usual ‘incubator houses’ provide only tools, in particular office equipment, while one of the keys to successful entrepreneurial existence is how the entrepreneurial knowledge itself should be used (how to recognize market opportunities, how to exploit them, how to negotiate and so on). Incubator systems can only be effective, can only achieve their final target, that is, the development of enterprises, if they have a mentoring and a training function at the same time, if they teach (beginner or more advanced) entrepreneurs how to interpret market, business and professional phenomena, and how to react to these in practice. Making training and equipment available independently of training, in itself, cannot be effective. Successful entrepreneurs have strong connections, which is one of the keys to and the results of their success. The mentoring and incubator system, even if it works, is incapable of replacing real life connections. Entrepreneurs need a great deal of information, which they are fundamentally only able to obtain from other entrepreneurs (entrepreneurial tricks, market information, news and so on). A networking system needs to be developed, within which entrepreneurs are able to make contacts. Bibliography Babusik, Ferenc (2005), ‘The state of health of the Roma in Hungary, and their access to health care services’, in Ferenc Babusik, The Limitations of Equal Opportunities in Hungary, Budapest: L’Harmattan. Babusik, Ferenc and Judit Adler (2002), ‘Research on Roma enterprises’, in Ferenc Babusik (ed.), The Chances of Roma in Hungary, Budapest: Kávé Kiadó. Frey, Mária (1997), Creation of Workplaces outside the Mainstream Labour Market, Budapest: NVNSZA, OFA.

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Kertesi, Gábor (1994), ‘Roma on the labour market’, Review of Economics, Budapest, 11. Kertesi, Gábor and Kézdi Gábor (1998), ‘The Roma population in Hungary’, documentation and data archive, Socio-typo, Budapest. Hablicsek, László (1999), ‘Demographic characteristics of the Roma population: a tentative pre-calculation up to 2005’, based on KSH Népességtudományi Intézet. National Census (2001), series, 16, The Layers of Society, KSH.

PART IV ETHNIC MINORITY SELF-EMPLOYMENT IN ASIA

35 Ethnic entrepreneurship and the internationalization of Chinese capitalism in Asia Henry Wai-chung Yeung

Introduction Internationalization and its associated international business activities have become one of the most transformative dimensions of Chinese capitalism in today’s globalizing world economy. When leading actors in Chinese capitalism extend their economic operations across borders, they are often entering into host business environments that are fundamentally different from their ‘home’ economies in terms of institutional and market structures, industrial organization, social relations and cultural practices. To overcome these barriers to internationalization or what is commonly known in the management literature as ‘the liability of foreignness’ (Zaheer, 1995; Matsuo, 2000), leading Chinese business firms require actors who are creative, proactive, adaptive and resourceful in different countries and regions; these are all critical aspects of transnational entrepreneurship that refers to an ongoing process of calculated risk taking and foresight in foreign business venturing (see Yeung, 2002a, 2002b). Sometimes, these ethnic Chinese actors are the owners or founding entrepreneurs themselves. They often participate actively in the establishment and management of foreign operations. More commonly, these actors who spearhead the transnational operations of Chinese business firms are intrapreneurs or professional managers. They are neither founders nor owners; they may not even be ethnic Chinese who are hired on the basis of their personal relationships to the founders or owners. Instead, these new breeds of actors in Chinese capitalism are given much autonomy to manage transnational operations. They may be equally entrepreneurial in their approach to managing cross-border operations. Examining the nature, modus operandi and performance of these entrepreneurs and intrapreneurs is therefore vital both to understanding the successful internationalization of these Chinese business firms and to unpacking the changing dynamics of Chinese capitalism itself (Yeung, 2004a; see also Gomez and Hsiao, 2004). In this theoretically-grounded empirical chapter, I have two specific objectives. First, I want to take up the issue of unpacking transnational ethnic entrepreneurship that remains a key missing link in much of the existing research on Chinese capitalism. Previous studies of Chinese capitalism have almost exclusively emphasized the domestic entrepreneurial tendencies of ethnic Chinese in individual East and Southeast Asian economies and explained these tendencies in relation to cultural and/or institutional factors.1 Entrepreneurship in Chinese capitalism has been construed in these studies as strongly embedded in uniquely Chinese cultural practices that serve as the organizational foundations to overcome ethnic-biased discriminatory political agenda in some Asian economies or state-driven economic development processes in others. Couched in these narrow terms, both cultural focus and domestic orientation, it is not surprising that 575

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Chinese capitalism has been recognized in the literature as largely a passive and static form of economic organization reacting primarily to domestic pressures in East and Southeast Asia economies. In a globalizing era, however, I argue that transnational entrepreneurship – a phenomenon much less acknowledged in the literature – plays an increasingly important role in the internationalization of Chinese business firms from East and Southeast Asia and in opening up new horizons for cross-border learning and experiences. Many attributes of domestic entrepreneurship can be fruitfully exploited across borders to become transnational entrepreneurship. In Chinese capitalism, this interconnection between domestic and transnational entrepreneurship is even more pronounced and important because of the extensive interpenetration of Chinese business networks throughout the Asian region. Successful Chinese businesses at the regional scale can be attributed to the transformation of the entrepreneurial skills of Chinese entrepreneurs from predominantly domestic foundations to increasingly regional and global orientations. In that sense, transnational entrepreneurs in Chinese capitalism are capable of transferring their skills and goodwill from their ‘home’ economies to the host countries and, in the process, filling various gaps in economic spaces. Through this process of internationalization, these leading actors also encounter different operating contexts and modes of organizational practices that require them to ‘disembed’ from the coping strategies (such as patron–client relationships) and entrepreneurial practices (for example, family-oriented management) in their domestic contexts. This disembedding process is therefore likely to bring out significant transformations in the nature and organization of Chinese capitalism towards an increasingly hybridized mode of economic organization. My second objective in this chapter is to offer some important theoretical and empirical correctives to the so-called ‘three generation model’ of Chinese capitalism. Previous studies of domestic entrepreneurship in Chinese capitalism have assumed not only the foundational importance of the family, but also the failure of the family firm to extend beyond three generations (see Wong, 1985, 1988; cf. Yeung, 2000a, 2001). The universalization of this ‘three generation model’ might be appropriate to Chinese capitalism in its domestic settings primarily because of fairly enduring organizational and institutional contexts that in turn provide few incentives for different generations of family members to change and transform the family firm. Stagnation and decline might be the dominant features after the second generation of many Chinese family firms in East and Southeast Asia. When we take into account the dynamics of Chinese capitalism in a global era, however, it becomes clear that the new generation of ethnic Chinese taking charge of their family firms are often endowed with different sorts of entrepreneurial tendencies from those of their fathers or even grandfathers. This new generation of entrepreneurial actors has developed much better access to diversified globalizing actor networks in international business and finance (Yeung, 2000b). Their complex repertoires of knowledge and skills are also likely to be much wider in relation to their international education and management experiences. They are capable of bringing their traditional family firms across borders to tap into new economic opportunities. They can succeed their parents and grandparents in terms of not only family succession, but also business performance and management practices. Internationalization, an underdeveloped theme in the existing literature on Chinese capitalism, thus provides both an important mechanism for the further growth of traditional Chinese family firms and a critical medium through which the new

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generation of family members can practise and extend their entrepreneurial tendencies in a transnational context. In the next section, I briefly examine the nature of transnational entrepreneurship in Chinese capitalism as a precursor to the two subsequent empirical sections. In the third section, I provide an empirical analysis of the role of transnational entrepreneurship in the regionalization of Chinese family firms from Singapore. Here, I focus on the way entrepreneurs from these ethnic Chinese firms are able to capitalize on a diverse range of actor networks beyond simply their family networks as predicted in the culturalist analysis of Chinese capitalism. In the penultimate section, I develop a case study of Li Ka-shing and his son, Victor Li, from Hong Kong to showcase their succession through internationalization and the professionalization of management. This case study serves to challenge the predominant ‘three generational model’ of the Chinese family firm. By way of introducing a revised model of the Chinese family firm in a globalizing era, the concluding section offers some general lessons for understanding the changing dynamics of Chinese capitalism. Transnational entrepreneurship and Chinese capitalism There is no doubt that ethnic Chinese in East and Southeast Asia are well known to be exceptionally entrepreneurial in their domestic economies. Table 35.1 offers some glimpses into their high net worth as billionaires comparable to those entrepreneurs in OECD countries (see also Lever-Tracy, 2002). Many of these ethnic Chinese have formed formidable business networks embedded in particularized family and social ties as well as political–economic alliances. In such Asian economies, business networks are constituted not only by fellow Chinese entrepreneurs, but sometimes also by political figures (for example, in Taiwan and Thailand) and non-Chinese business people (for example, in Hong Kong and Singapore). Since the 1970s, it has become clear that ethnic Chinese entrepreneurs are increasingly spreading their business networks across countries and, sometimes, regions. This process of the internationalization of Chinese business firms represents a significant development in the business history of Chinese capitalism because transnational operations demand more than just traditional modes of social norms and economic practices to secure competitive advantages and to ensure the business success of these Chinese entrepreneurs in their ‘home’ economies. Kao (1993: 32) might be right in arguing that ‘cross-border investments alone are responsible for turning the de facto network of loose family relationships into today’s Chinese commonwealth’, but he offered little to explain why and how such a transformation in the spatial organization of Chinese business networks takes place. In this chapter, I argue that transnational entrepreneurship plays a critical role, not only in spreading these business networks abroad, but also in transforming them into significant business opportunities. What exactly then is the nature of transnational entrepreneurship? I have defined it elsewhere as a learning process because transnational entrepreneurship evolves from experience and learning gained through progressive involvement in foreign operations (Yeung, 2002a, 2002b). Through these cross-border operations, transnational entrepreneurs not only learn how to deal with unexpected contingencies in the host countries, but also develop deeper understanding of the realities of these host countries. Strong transnational entrepreneurship also requires the entrepreneur to take certain risks. Of course, not all risk taking is good, at least from a firm’s point of view. But transnational entrepreneurs must have certain

578

Note:

1

Ng Teng Fong Singapore Oei Widjaja Indonesia Liem Sioe Liong Indonesia Mochtar Riady Indonesia Bob Hasan Indonesia Robert Kuok Malaysia/HK Francis Yeoh Malaysia Dhanin Thailand Chearavanont Lucio Tan Philippines

Taiwan Taiwan Singapore Malaysia Singapore

Hong Kong Hong Kong Hong Kong Hong Kong Taiwan Taiwan

Source: http://www.forbes.com, accessed on 1 March 2003.

Goodwood Park Group Far East Organisation Sina Mas Group Salim Group Lippo Group Kalimanis Group Kerry Group YTL Group Charoen Pokphand Group Fortune Tobacco

12.3 14.7 x x 11.3 x

Kwok brothers Lee Shau-kee Patrick Wang Fung brothers Tsai Wan-lin Tsai Wan-tsai

Wang Yue-che Chang Yung-fa Kwek Leng Beng Quek Leng Chan Khoo Teck Puat

x

Richard Li (son)

Pacific Century CyberWorks (PCCW) Sun Hung Kai Group Henderson Land Group Johnson Electric Group Li & Fung Group Cathay Life Insurance Fubon Financial Holdings Formosa Plastics Evergreen Group Hong Leong Group

Hong Kong

Li Ka-shing

33 50 75 183 106 33 193 184 x

x

49 x 45 112 78

12 9 x x 16 x

x

19

7.0 5.4 4.0 1.8 3.0 7.0 1.6 1.7

5.5 x 5.8 2.9 3.9

11.0

2.1

3.4 3.2 1.0 x x 4.6 1.2 1.2

4.3 1.7 2.0 1.8 2.7

9.0 8.6 4.5 2.3 6.7 x

4.3

11.3

201

143 151 312 x x 84 281 281

100 229 207 224 171

26 28 88 184 44 x

97

20

1.9

1.7 x x x x 3.4 x 1.3

1.9 x 1.7 1.5 2.6

6.6 3.7 2.6 x 3.7 1.8

1.0

7.8

209

236 x x x x 97 x 329

209 x 236 278 137

42 88 137 x 88 222

427

28

1997 Rank 2000 Rank 2003 Rank

Cheung Kong Holding

Economy of origin

Company/group name

Estimated net worth (US$billion) and Forbes world’s richest billionaires ranking1

High net worth ethnic Chinese from East and Southeast Asia, 1997–2003

Major shareholder (ethnic Chinese)

Table 35.1

Sino Land (HK) Asia Pulp and Paper and Asia Food First Pacific Group (HK) Lippo Banks (worldwide) – Shangri-la Hotels and TVB (Asia) YTL Construction (Asia) CP Pokphand (Asia) Telecom Asia (Asia) Eton Properties (HK)

Formosa Plastics (worldwide) Evergreen Marine (worldwide) CDL Hotels Guoco (HK) Goodwood Park Hotel Group (Asia)

Husky Oil and Pacific Concord (Canada) Hutchison Whampoa (Asia) PCCW (worldwide) Sun Hung Kai Group (Asia) Henderson Land Asia Johnson Electric (worldwide) Li & Fung trading (worldwide) Cathay Life (China) Fubon group

Major worldwide operations

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inherent capabilities in absorbing calculated risks; that is, the ‘right’ kind of risks, which generate potential gain. This risk-taking behaviour is particularly critical because operations in a foreign land are often filled with uncertainties and potential business risks. In fact, the risk-taking capacity of an entrepreneur tends to increase with his/her experience with the host countries. A critical factor that enhances the risk-taking capacity of a transnational entrepreneur is the informal information and peer support he/she receives from the host country. The actor network factor becomes very important here because strong social and business networks, albeit no longer exclusively ‘family’ and ‘Chinese’, can serve as the institutional foundations for transnational entrepreneurship. Social and political institutions significantly shape the attitudes and behaviour of individual entrepreneurs and intrapreneurs. Transnational entrepreneurs are therefore conceived as creative individuals embedded in wider cross-border business networks and social/political institutions. These networks and institutions provide the necessary strategic infrastructure to enable the success of these transnational entrepreneurs. Intrapreneurs are professional managers who are empowered to manage transnational operations. This empowerment may come from the founding entrepreneurs themselves through a prolonged process of socialization. It may also be institutionalized within the organization itself when top management from headquarters delegates power and control to professional managers abroad. This is known as intra-firm networks that tend to facilitate headquarters’ control and coordination of overseas subsidiaries through a corporatized mechanism.2 Another important attribute defining transnational entrepreneurship is foresight in foreign ventures. This aspect is important at least from the perspective of strategic management. Foresight distinguishes domestic entrepreneurship from transnational entrepreneurship because an entrepreneur is often well entrenched in his/her domestic economy. There is a strong sense of inertia against venturing abroad, given his/her comfortable ‘home’ market share. A transnational entrepreneur therefore needs to possess strong visions and foresight in order to position the future of his/her (family) firm in an era of global competition (such as the case of Acer from Taiwan – Mathews, 2002 – and Li and Fung from Hong Kong – Fung, 1997; Magretta, 1998). Though often assisted by professional analysts and strategists, he/she must be able to identify market opportunities abroad and tap into them. This relentless search for direct investments in foreign markets is important in today’s global economy because market presence remains the fundamental drive for an entrepreneur to venture abroad, whether he/she runs a manufacturing or a service firm. If successful, this transnational entrepreneur will enjoy first-mover advantages unavailable to other firms and their actors. Every foreign venture, therefore, may appear as a new business start-up synonymous with the process of new firm formation so well documented in most entrepreneurship studies (McDougall et al., 1994; Brush, 1995; McDougall and Oviatt, 1996, 2000; Yeung, 2002b, 2004b; Dana, 2004). The difference here, though, is that, once a foreign venture is established, a transnational entrepreneur must continue to resolve operational and management problems in an operating context very different from his/her domestic economy. Taken together, transnational entrepreneurship is important in international business environments primarily for two reasons: foreign ventures are full of risks and uncertainties and strong visions and foresight can help diversify one’s business portfolios beyond the domestic economy. How, then, does this concept translate into business practices in the context of Chinese capitalism and how does it enhance the internationalization of Chinese business firms?

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Three attributes of Chinese transnational entrepreneurship are particularly important in facilitating the transnational operations of Chinese business firms: their greater possibility of internalizing overseas markets, their trust and goodwill in host countries, and their enrolment into transnational social and business networks. First, transnational Chinese entrepreneurs tend to exhibit a greater tendency towards internalizing foreign markets through direct investments and other forms of equity investments. In the context of crossborder operations, this drive towards ownership and control implies that transnational Chinese entrepreneurs are more willing to venture into rather opaque business environments (such as mainland China) because, once established, these foreign ventures tend to be less risky under the direct control and management of these entrepreneurs and their trusted managers. These transnational Chinese entrepreneurs are also more likely to take a personal approach to these foreign ventures through direct participation in negotiation and, subsequently, more frequent visits. These aspects of transnational entrepreneurship are particularly useful in host countries with opaque business environments and ineffective corporate governance systems (see case studies below). Direct ownership in highly competitive and open business environments (such as North America and Western Europe) require both transnational entrepreneurship and significant competitive advantages (brand names, proprietary technology, management expertise and so on). It also necessitates the strategic enrolment of Chinese transnational entrepreneurs into globalizing actor networks in these host regions (see the case of Victor Li in the next section). Second, while developing ethnic-centric trust and goodwill forms an integral part of traditional business practices in Chinese capitalism, the strategic deployment of this trust and goodwill during the internationalization of Chinese business firms must be acknowledged. For aspiring transnational Chinese entrepreneurs, having strong trust and goodwill in the host countries (which often means Asia) certainly helps to open doors and gain better acceptance by the host business and political communities. There is thus less necessity for complex and detailed contracts to be negotiated because verbal guarantees by a transnational Chinese entrepreneur, well known for his/her trustworthy behaviour, are better than many contracts that lay out all contingencies. This reliance on trust and goodwill rather than just formal contracts is much less common in Anglo-American capitalism. Trust and goodwill is important, nevertheless, for transnational Chinese entrepreneurs not only to penetrate difficult host countries in Asia, but also to establish themselves successfully in highly competitive business environments. On this latter point, some of today’s transnational Chinese entrepreneurs are increasingly globalizing into North America and Western Europe (see Yeung and Olds, 2000). Trust and goodwill, in their strategic and discursive modes, can be a significant source of competitive advantages that enable these key actors in Chinese capitalism to receive favourable support by powerful non-Chinese bankers and financial analysts and therefore to gain access to global capital markets. Strategically, trust and goodwill can be accumulated through improvement in corporate governance and incorporation of professional management. Discursively, trust and goodwill can be constructed through the enrolment of media reporters and financial analysts into ‘Chinese’ business networks. The access to global capital and finance thus enables a widening of traditionally ‘Chinese’ business networks to enrol strategically non-Chinese actors who function as bridges for transnational Chinese entrepreneurs to enter these globally competitive markets. While they may prefer to own and control foreign ventures, transnational Chinese entrepreneurs do not always

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take on an authoritarian approach to these ventures. They often delegate these responsibilities to trusted members of their inner circles who are often non-Chinese. Traditionally, these members may be kin and relatives from the families of these transnational Chinese entrepreneurs. In a globalizing era, however, they are more likely to be non-family members who have been socialized into the entrepreneur’s family through a process of ‘family-ization’ (Chan and Chiang, 1994: 297). Foreign ventures are established to provide opportunities both for developing family succession and for internalizing enterprising employees. Over time, more competent professional managers are socialized into Chinese capitalism, so that they become trusted insiders in this reshaped hybrid capitalism. Third, transnational Chinese entrepreneurs often rely on their social and business networks to facilitate foreign ventures, although these networks are no longer exclusively ‘Chinese’ in terms of their ethnic constituency. Studies of ethnic Chinese entrepreneurs from Hong Kong have revealed the importance of personal history and embedded interests in their transnational operations (for example, Siu and Martin, 1992; Yeung, 1998, 2002a). The contemporary Chinese people are experienced migrants and tend to form socially organized networks to provide emotional and personal support. Sometimes, these social networks are constituted almost exclusively by family and clan members. As Kao (1993: 24) argued, ‘for many generations, emigrant Chinese entrepreneurs have been operating comfortably in a network of family and clan, laying the foundations for stronger links among businesses across national borders’ (see case studies below). In other circumstances, transnational Chinese entrepreneurs may rely on their trusted friends and employees to develop business networks across borders. These strong personal relationships with key employees often result in the growth of transnational intrapreneurs who are empowered by their owners to develop foreign ventures. These ethnic Chinese entrepreneurs therefore need to take significant risks and possess foresight in the selection and delegation of these transnational intrapreneurs. Taken together, these three dimensions of transnational entrepreneurship offer a new horizon for us to examine the changing nature and organization of Chinese capitalism in a global era. While they do not necessarily imply the complete withering away of traditional cultural values and norms in Chinese capitalism, they certainly provide some useful analytical clues to understanding the emergence of a hybrid mixture of entrepreneurial tendencies that characterize Chinese capitalism today. Capitalizing on actor networks abroad: the regionalization of Chinese family firms from Singapore Table 35.2 shows the historical geography of 54 Chinese family-owned transnational corporations (TNCs) from Singapore. It is clear that the internationalization of these firms occurred well before the 1993 launch of Singapore’s regionalization programme. In fact, their subsidiaries in Hong Kong, Indonesia, Malaysia and Other Regions (such as South America and Africa) were mostly established prior to 1985. In terms of their geographical spread, these 54 Chinese family-owned TNCs from Singapore were operating mainly in Asia, in particular mainland China and Malaysia, which respectively attracted some 59 per cent and 74 per cent of them. Very few of them were indeed global in their geographical scope of operations. Of the four having operations in Europe, only two had operations in North America and Asia. In terms of number of subsidiaries, the same geographical pattern emerges where some 87.5 per cent of all 216 subsidiaries were located

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Table 35.2 The historical geography of Chinese family firms from Singapore (percentage in parentheses) Mean year of establishment

Number of operating TNCs

Number of subsidiaries

Southeast Asia Indonesia Malaysia Thailand Philippines Others East Asia China Hong Kong Others Europe North America Other Regions

NA 1982 1983 1988 1994 1994 NA 1991 1981 1993 1991 1989 1985

NA 15 (27.8) 32 (59.3) 7 (13.0) 6 (11.1) 7 (13.0) NA 40 (74.1) 14 (25.9) 4 (7.4) 4 (7.4) 6 (11.1) 6 (11.1)

91 (42.1) 16 (7.4) 55 (25.5) 7 (3.2) 6 (2.8) 7 (3.2) 98 (45.4) 77 (35.6) 17 (7.9) 4 (1.9) 4 (1.9) 6 (2.8) 17 (7.9)

Total

NA

54 (100)

216 (100)

Regions/countries

Source: Author’s survey (see Yeung, 2004a, pp. 256–7 for full details on methodology).

in Asia, in particular Malaysia (n
55) and mainland China (n
77). On average, each Chinese family-owned TNC from Singapore in my sample owned and controlled at least four subsidiaries abroad. Given the long historical roots of ethnic Chinese investments from Singapore in other Asian countries, I examine how transnational entrepreneurs in these Singaporean Chinese family firms managed to extend their business operations across borders. The main focus here is on their capabilities in exploiting diverse actor networks at regional and, sometimes, global scales. As shown in Table 35.3, among the 54 Chinese family firms from Singapore, some 37 transnational entrepreneurs had some forms of connections/network relationships with the host countries prior to the establishment of transnational operations. This empirical finding conforms to the incremental model of internationalization well developed in the international business literature (see Andersen, 1993; Buckley and Ghauri, 1993; Chryssochoidis et al., 1997; Eriksson et al., 1997; Blomstermo and Sharma, 2002). In this literature, a TNC tends to engage in international business activities incrementally through the accumulation of foreign learning and experience. This accumulation takes place via developing prior network relationships with foreign customers, suppliers, trading partners and so on (Lee and Chen, 2003; Chen and Ku, 2004). In Table 35.3, prior connections of Chinese family firms from Singapore were particularly focused on business connections (n
37) rather than family networks (n
15), implying a more diversified nature of business networks among Chinese family firms. These prior business activities could be conducted at arm’s-length level or through introduction by other friends and business contacts. Once these transnational entrepreneurs have gained more experience with the host country business environments, direct investments become much more attractive because of reduced risks and uncertainties. High trust and

583 73

Total sample size

Source:

79.5 20.5 30.1 2.7 23.3 5.5 4.1 1.4 — 30.1 5.5 8.2 — 4.1 2.7 —

58 15 22 2 17 4 3 1 — 22 4 6 — 3 2 —

1. Business connections 1. personal contacts 1. trading and business partners 1. industrial and commercial associations 1. customers, suppliers and subcontractors 2. Political connections 1. personal contacts with government officials 1. special access to government grants/concessions 1. contracts from host governments 3. Family connections 1. relatives 1. close friends 1. kinship and clan associations 4. Social connections 1. ethnic groups 1. religious groups

Author’s survey (see Yeung, 2004a, pp. 256–7 for full details on methodology).

100.0

Percentage

Frequency

Types of Connections

Hong Kong

—

— 1.8 1.8 5.0 2.3 — 1.3 2.0 — — 2.5 2.2 — — 2.0 —

Average Importance

54

37 37 17 12 21 15 23 11 8 15 9 9 5 10 9 3

Frequency

Table 35.3 A typology of prior connections of Chinese family firms from Hong Kong and Singapore

100.0

68.5 68.5 31.5 22.2 38.9 27.8 42.6 20.4 14.8 27.8 18.5 18.5 9.3 18.5 18.5 5.6

Percentage

Singapore

—

— 1.9 1.5 2.6 2.3 — 1.8 1.8 2.1 — 1.9 1.9 2.4 — 2.0 3.3

Average Importance

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goodwill relationships with host country trading and business partners (mean score
1.5) and personal contacts in host countries (mean score
1.9) were cited as most important in facilitating these transnational operations. My previous research on 73 Chinese business firms from Hong Kong also shows a similar pattern of much greater emphasis on business networks rather than family networks (see Yeung, 1998). As shown in Table 35.3, while almost 80 per cent of these Chinese business firms (n
58) from Hong Kong had prior business connections with the host economies, only 30 per cent of them (n
22) had family connections with them. Both sets of empirical findings point to the declining significance of family networks when Chinese business firms from Hong Kong and Singapore operate across borders. They also point to the broadening of the scope and diversity of actor networks among Chinese business firms that engage in international business activities. Transnational Chinese entrepreneurs from Singapore were clearly capable of capitalizing on prior actor–network relationships with host countries, particularly business connections, in order to venture into those countries. My respondents in Singapore voted for three most important network advantages: easier coordination with local headquarters (mean score
1.4), access to local information and knowledge (mean score
1.9) and access to new distribution channels and markets (mean score
2.0). Apparently, all these three advantages are related to better chances of penetrating the host markets. In that sense, successful foreign ventures by transnational Chinese entrepreneurs from Singapore depend on their ability to exploit actor–network advantages. It is important, however, to caution that these network advantages are neither static in their relevance nor culturally predetermined in all circumstances. Instead, transnational entrepreneurs are expected to develop these ongoing connections when venturing abroad, irrespective of their host economies (see the case of Victor Li in Vancouver, in the next section). My respondents identified five key ingredients in enhancing these ongoing network relationships: high trust (25.2 per cent), prior personal or family relationships (17.4 per cent), prior transactional relationships (14.8 per cent), involvement in established networks (12.2 per cent) and strong reputation and credit worthiness (10.4 per cent). Together, these five ingredients accounted for 80 per cent of all responses. This finding indicates that, while prior relationships are important in extending emerging actor-networks when venturing abroad, transnational entrepreneurs are expected to demonstrate their trust and credit worthiness through these cross-border operations. Trust relationships and cross-border operations are therefore mutually reinforcing. A Chinese entrepreneur with low trust relationships in the host countries tends to find it more difficult to venture abroad. The lack of success in foreign ventures by this entrepreneur also reduces further his/her trust and credit worthiness in the host countries. Some of these mutually reinforcing problems and their solutions are presented in Table 35.4. It is clear that these problems and the solutions adopted by transnational entrepreneurs are highly uneven across different regions. In terms of problems, the lack of home country government support is a major problem confronting all Chinese family firms in my Singapore sample, irrespective of their host regions of operations. For those operating in East and Southeast Asia, host government regulation represents one particularly chronic problem. This is not surprising since most host countries in Asia have relatively opaque rules and restrictive regulations on foreign investors. The implementation of these rules and regulations is also often unpredictable and subject to the preferences of host

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Table 35.4 Major problems faced and solutions by transnational entrepreneurs from Singapore, by host regions

Problems/solutions Problems (mean score1) 1. high costs of operations 2. lack of technological edge 3. problems with local partners 4. lack of market information 5. lack of special connections with host 1. countries 6. lack of personal experience 7. labour force problems 8. government regulations 9. lack of sufficient financial assets 10. lack of home government support Solutions (cases) 1. reliance on local partners/connections 2. sending trusted executives from 1. Singapore to manage 3. asking local government for help 4. closing down the operations/downsizing 5. personal involvement of top executives/ 1. entrepreneurs 6. established procedures 7. encourage higher worker productivity/ 1. training of local staff 8. adopt local practices/conform to local 1. culture 9. dismiss local staff/change local partners 10. compensate with better products and 1. customer servicing Total cases (multiple answers allowed) Note: Source:

1

North Other America Regions

SE Asia

East Asia

Europe

3.7 4.1 3.3 3.8 3.6

3.2 3.9 3.4 3.3 3.4

2.8 4.0 5.0 3.3 3.5

3.6 4.7 5.0 4.4 4.0

3.8 3.8 4.0 3.8 3.8

3.4 3.4 2.9 3.8 1.9

3.1 2.9 2.5 3.3 1.9

2.0 3.3 3.0 3.3 2.0

3.8 4.5 4.0 2.8 —

3.5 4.0 3.5 3.8 2.0

11 (18%) 2 (3%)

32 (44%) —

— —

— —

— —

— 8 (13%) 9 (15%)

9 (12%) 12 (16%) 6 (8%)

1 (20%) 1 (20%) —

— — 1 (33%)

— — 3 (50%)

12 (20%) 4 (7%)

2 (3%) 3 (4%)

— —

— —

2 (33%) —

11 (18%)

4 (5%)

1 (20%)

2 (67%)

—

3 (5%) —

5 (7%) —

1 (20%) 1 (20%)

— —

1 (17%) —

60 (100%) 73 (100%) 5 (100%) 3 (100%) 6 (100%)

The scale of importance ranges from Very Important [1] to Not Important At All [5]. Author’s survey (see Yeung, 2004a, pp. 256–7 for full details on methodology).

country governments (see also Backman, 1999). For host-developed countries in Europe and North America, the nature of problems is quite different from those in Asia. Here the main problems are the lack of personal experience (Europe) and the lack of sufficient financial assets (North America). The open competitive business environments in these regions indicate that, to penetrate a market successfully, transnational Chinese entrepreneurs need to build up substantially their experiential and financial capital bases – a strategic requirement that brings about significant pressures on Chinese capitalism to change and adapt. In order to resolve these problems in foreign ventures, transnational

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entrepreneurs in my sample seem to take different approaches in different host regions. For their Asian operations, these entrepreneurs are much more comfortable with reliance on local partners and connections and adopting local practices in resolving operational problems, in particular in mainland China. Their capabilities in exploiting network advantages tend to ensure the success of their foreign ventures in Asia. When asked for the key attributes of entrepreneurship in overcoming these problems of venturing abroad, most of my respondents chose one or more of the following inter-related attributes of transnational entrepreneurship: personal experience and expertise (25 per cent), strong vision and accomplishment (17 per cent), risk taking (15 per cent), highly motivated and independent (12 per cent) and well-connected and resourced (10 per cent). These five attributes of transnational entrepreneurship constituted an overwhelming 80 per cent of all responses. While transnational Chinese entrepreneurs have been spearheading the internationalization of Chinese business firms from Singapore, we also witness an increasing professionalization of Chinese family business and the emergence of transnational intrapreneurs in these formerly ethnocentric organizations. Very often, transnational Chinese entrepreneurs are unable to manage all their operations abroad. They have to co-opt more professional and trusted managers who are then socialized into the corporate ‘family’. Here, I consider the extent of transnational entrepreneurship among professional managers who are managing the foreign operations of Chinese family firms from Singapore. First, I examine the survey data to find out how many of the 54 respondents in my sample considered themselves as entrepreneurs. It turned out that 31 of them (57.4 per cent) agreed that they could be considered entrepreneurs, while 28 respondents were either chairmen or CEO/managing directors of Chinese family firms. Virtually all of them were the patriarchs or their family members. Whereas 17 of these 28 respondents (60.7 per cent) claimed to be entrepreneurs, among the other 26 respondents who were not family members, only 14 (53.8 per cent) considered themselves as entrepreneurs. When I asked them about the ingredients of entrepreneurship in their view, there seemed to be a divergence in the perceptions between family and non-family members. Those chairmen, CEOs and managing directors who considered themselves as entrepreneurs cited ‘abilities to capitalize on opportunities’ as the most important attribute of transnational entrepreneurship (18.4 per cent). Receiving equal percentage at 13.2 per cent, other important attributes included risk taking, strong vision and accomplishment, and being highly motivated and independent. Together, they constituted 57.9 per cent of all responses from these 28 family members. On the other hand, non-family members or intrapreneurs tended to cite ‘proactive adaptability to different environments’ as the most important attribute (18.4 per cent) of transnational entrepreneurship. Other important attributes were similar to those of family members. On the basis of these empirical observations, I argue that transnational intrapreneurs are much more concerned with adaptability issues than owner entrepreneurs who are more opportunity-driven in their entrepreneurial behaviour. This observation should not be surprising because most trusted professional managers may be sent abroad to manage foreign operations. They have often been chosen because of their high adaptability to different business environments. Their performance is assessed on the basis of their success in managing and developing these foreign operations (see case studies in Yeung, 2002a, 2004a). Owner entrepreneurs, however, are less concerned with management issues since they can entrust their transnational intrapreneurs with management responsibilities.

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Rather, owner entrepreneurs are keen to expand the overall business activities of the group through capitalizing on business opportunities that may arise in different countries and/or regions. During its internationalization processes, a typical transformation may occur in an entrepreneurial Chinese family firm when key family members are kept within the home country so that they can be groomed to take over from the founder and/or patriarch when the time is ripe. Though these family members may be involved directly in the establishment and management of overseas subsidiaries, they are often required to take over more important group strategic management functions (see also Yeung, 2002a). This observation thus brings us to the strategic issue of family succession and the professionalization of management in Chinese family firms, particularly those that engage in transnational operations. Beyond the ‘three generation model’: transnational entrepreneurship in a global era Despite my arguments in this chapter for the professionalization of management in Chinese family firms as a key dimension of hybridizing Chinese capitalism, I do not quite advocate the complete separation of ownership and management as in the case of AngloAmerican corporations and ‘managerial capitalism’ (Chandler, 1977, 1990; cf. Shleifer and Vishny, 1997; Hamilton, 2000; Redding, 2000).3 The reality of Chinese capitalism is a messy mixture of the continual domination of Chinese family firms and the rapid transformations and broadening of these family business networks to incorporate increasingly non-Chinese and non-family actors. The complex operating environments in many East and Southeast Asian economies and the historically specific emergence of Chinese capitalism imply that the family-oriented mode of economic organization may continue to enjoy the special advantages of enhancing entrepreneurship and reducing business uncertainty. To reap these competitive advantages embedded in family businesses, nevertheless, I believe that today’s Chinese family firms need an explicit strategy for succession. By succession, I mean a clear system of promotion to senior executive positions on the basis of some objective and performance-based criteria, even though kinship relations may be one key criterion (see also Lee et al., 2003). The options for Chinese family firms are thus two-fold, either grooming family members (typically sons and nephews) to become successful transnational entrepreneurs, or socializing capable professional intrapreneurs into the corporate ‘family’ and becoming the future heir to top management. For the first option, many Chinese patriarchs are sending their children to be educated in top universities and business schools. They also get their children involved as interns in many leading global corporations before returning to manage family businesses. These new generation successors of Chinese family business tend to gain better recognition among bankers, financiers and analysts based in major global financial centres, collectively known as globalizing actor networks. On the other hand, it is true that, as the family business empire expands across regions and countries, a Chinese family firm will eventually run out of family members to occupy top management positions within the group. There is thus a strong need to develop a professional management system in order to unravel significant entrepreneurial tendencies among managers who can be delegated important management functions (see Birkinshaw and Hood, 1998). An intrapreneur programme is required in these Chinese family firms so that they can survive beyond the classic dilemma encapsulated in the ‘three generation model’ – growth, stagnation and decline associated with each of the three generations of family ownership.

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In this section, I aim to show how Chinese family firms can grow beyond three generations of family ownership and management through transnational entrepreneurial activities of key family members and successors. The case study of Victor Li from Hong Kong demonstrates that internationalization and transnational entrepreneurship may transform the nature of Chinese capitalism beyond a particular culturalist reading of the Chinese family firm: inward-looking in business orientation, closely-knit around family members in management and morally hazardous in corporate governance. This transformation happens, not because of the demise of the family firm as a mode of economic organization in Chinese capitalism; rather, it occurs because of the continual vitality of the family firm in Chinese capitalism, albeit that the Chinese family firm is no longer exclusively ‘Chinese’ and ‘family’ this time. Chinese capitalism may remain familyoriented in form, but increasingly diverse and hybridized in substance. Globalization tendencies, expressed via the enrolment into globalizing actor networks, help to revitalize the family firm in Chinese capitalism and in the process transform its very nature and organization (see also Tsang, 2001, 2002). Before I analyse the case study, I want to recapitulate briefly the dominant discourse in the literature on Chinese capitalism in relation to the inherent limits to the growth of Chinese family firms. Growing beyond three generations? Limits to Chinese family firms Intra-firm organization of control and coordination is an important nexus for understanding the nature of the Chinese family firm and therefore Chinese capitalism itself. Redding and Wong (1986: 272) defined organization structure as ‘the relatively enduring pattern of relationships among units of individuals inside an organization’. Existing studies have identified several key features of intra-firm Chinese organizational structures (see Redding and Wong, 1986; Wong, 1988; Redding, 1990; Whitley, 1992): 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13.

centralization of power through the domination of family ownership and control; small size and relatively simple organizational structuring; normally focused on one product or market; lack of vertical integration and low level of specialization; less standardization of activities and fewer routine procedures – ‘management by persons’ rather than ‘management by rules’; a relative lack of ancillary departments, such as R&D and marketing; strong overlap between ownership and control; linked to the environment with personalized networks; normally very sensitive to matters of cost and financial efficiency; commonly linked, strongly but informally, with related and legally independent organizations handling key functions such as parts supply or marketing; relatively weak in terms of creating large-scale market recognition for own brands, especially international brand names; subject to limitations of growth and organizational complexities; and a high degree of strategic adaptability.

Given the above ‘universal’ characteristics of the structure and management of Chinese family firms, some researchers have argued that these culturally specific firms cannot grow beyond a certain size because of the inherent limits to their growth. These limits originate

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from their organizational structures and management processes (cf. Hamilton, 2000; Yeung, 2000a). To Redding (1990: 3–4, 2000), for example, the Chinese family firm is a special organizational entity because ‘it retains many of the characteristics of small scale, such as paternalism, personalism, opportunism, flexibility, even to very large scale. It does not follow the Western pattern of professionalization, bureaucratization, neutralization to anywhere near the same extent. Nor does it follow the Japanese pattern of the powerful but informal trans-organizational bonding found in the sogo-shosha or keiretsu. It is capable of extending its transactions and influence by complex external networking, but the basis and mechanisms of this process seem quite distinct. It is its own animal, and seemingly unique’. He further remarked: For the Overseas Chinese [sic], the personalized organization, run paternalistically and with ownership overlapping normally onto one or two families, is still perfectly normal, and it is the neutral bureaucracy under public ownership and professional management which is the deviant and almost nonexistent case . . . The first professionally managed and publicly owned Chinese multinational is still waiting somewhere in the shadows, and may, in any case, be a fantasy of minds which assume all enterprises contain the same essential dynamics, and are not really cultural artifacts. (Redding, 1990: 116, 176)

Some scholars (for example, Kao, 1993; Chen, 1995; Fukuyama, 1995; Carney, 1998) have argued that it is very difficult for Chinese family firms to be transformed from family businesses (based on traditional moral reciprocity) into the modern, impersonal and professionally managed corporation (based on contract and property rights). It is even more inconceivable to expect these family firms to become large transnational corporations with extensive networks of foreign subsidiaries and/or affiliates. Their pessimistic assessment is predicated on four alleged weaknesses in the management processes of Chinese family firms: paternalism, nepotism, personalism and fragmentation (see Redding, 1990; Chen, 1995; also Kets de Vries, 1996). First, paternalism tends to reinforce organizational rigidity in Chinese family firms when the patriarch of the family takes up full control of the firm. Consider a culturalist assessment by Silin (1976: 9–10) that ‘in Chinese society leaders have a marked preference for hearing only information that supports their point of view. Negative information or alternative methods are not valued. This preference, because it hinders a rapid flow of information, constitutes a cultural impediment’. The decision maker of the family firm is assumed to be unable or unwilling to delegate authority to professional managers outside the core family, deterring the expansionary path of the family firm. In reality, however, we often find a hybrid mixture of management styles with varying degrees of control among Chinese family firms. Second, nepotism is a well-known obstacle to the growth of Chinese family firms. The replacement of the retired or deceased founder by family members is arguably not the most optimal long-term solution to the crisis of succession because able and competent professional managers, who aspire to the top echelon of the family firm, will be discouraged. There is an upper limit to their promotion and upward mobility within the family firm. The consequence of both tendencies is that the family firm will be depleted of good quality managers. Instead, it will rely on incompetent personnel who are employed, not on the basis of their qualification and performance, but on the basis of their kin relationships to the family. Third, researchers consider personalism in the management and transactional processes of Chinese family firms as another critical limit to growth. The personalization of business

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is a defining characteristic of Chinese capitalism. It is also an anti-thesis to the Weberian style of rational bureaucracy that is based on formalized rules, contracts and professionalism. Accordingly, rules and regulations in Chinese management are often made to be implicit and subject to interpretation under different circumstances (see Tang and Ward, 2003). This dimension of personalism is particularly relevant in the formation and evolution of informal inter-firm relationships among Chinese business firms. Most of these firms tend to activate personal relationships, or guanxi, in their business transactions (Tong and Yong, 1998). This personalization of business transactions and management inhibits growth because ultimately the sheer complexity of running very large-scale businesses requires decentralization of decision making and formalization of contracts. Personalism and ad hoc decisions of family firms make it impossible to institutionalize formal organizational structures and clearly defined lines of authority (à la Redding, 1990, 2000; Whitley, 1992, 1999). Finally, the role of inheritance in Chinese family business proves to be prohibitive to growth beyond a certain size because it promotes fragmentation of the family business. It is true that many Chinese family firms do experience a ‘down-sizing effect’ when the family firm is broken down into separate business units, each headed by a son or a nephew. Moreover, even without this element of fragmentation, some family firms may face dilution of their family control during its growth that requires raising more capital than the family can afford. Corporate takeovers of Chinese family firms, as a consequence of internal struggles among family members or public listing, sometimes happen.4 Fragmentation of control and ownership represents therefore another important limit to the growth of Chinese family firms. To conceptualize the temporal dynamics of Chinese family firms, Wong (1985, 1988) proposed a developmental model of four phases in their evolution (see Table 35.5). He argued that ‘these phases tend to coincide with generational shifts inside the jia [family] so that the profit, management, and estate of the family enterprise are progressively fragmented’ (Wong, 1988: 152). During the emergent phase, the founder patriarch– entrepreneur is usually involved in a joint venture with several partners. Once a shareholder is successful in securing a majority shareholding of the partnership or in accumulating enough capital from that venture to set up on his own, the family firm is considered as entering the second phase of centralization. Leadership and decision making are didactic, that is, directive and authoritarian. Put in rather exaggerating terms, Silin (1976: 60; my emphasis) found that the ‘emphasis on the intention of actors and on the didactic role of leadership means that all authority holders are held personally responsible for initiating all Table 35.5

A three-generation model of the Chinese family firm

Phases III Emergence III Centralization III Segmentation IV Disintegration Notes:

Estate

Aspect of family firm management

Profit

   

   

   

 means unity,  means division.

Source: Wong (1985, Table 1; 1988, Table 6.5).

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actions for which they hold authority and for supervising subordinates once an action is taken. Holders of authority expect to be fully informed on all activities within the scope of their responsibilities. They alone make all decisions necessary to the unit’s functioning. This breadth of scope calls for a high frequency of decision-making’. According to this interpretation, decision making is highly centralized in the hands of the patriarch. This centralization of power is found in the centripetal authority around founders or core family members (Tong, 1991). It is a kind of entrepreneurial familism in which the family serves as the basic unit of economic competition and organization. Succession by second generation family members often takes place in the third phase when the family firm begins to be segmented through equal inheritance. Most Chinese family firms have an internal regulation that, if any family member wants to sell his/her shares of the company, he/she must first offer to existing shareholders who are usually family members. This measure has been established to secure the control of the firm in the hands of the family. Over time, tensions begin to build up around the competitive relations or incompatible expectations among siblings and family members. Centralized decision making becomes untenable and that in turn reduces the role of leadership in the growth of the family firm. Sometimes, one branch of the family may be able to build up a majority stake in the family firm that will then re-enter the second phase. If this process of rejuvenation does not take place, the family firm then enters the final phase of disintegration. This often happens in the third generation when rivalries among siblings become intensified and, eventually, detrimental to the very existence of the family firm. In the following case study, I show that the model has only limited applicability to Chinese family firms that participate in internationalization and globalizing actor networks. Succession through internationalization: the case of Victor Li from Hong Kong As argued above, an internationalization strategy can be a good testing ground for family members to gain experience in management and deal making. It helps to train quality future successors to the Chinese family firm and contributes to overcoming the limits to growth. In general, the patriarch will identify a good business opportunity and have his successor take charge. Overseas projects are sometimes preferred because any potential problems can be ‘hushed up’ before the reputation and trust of the successor in the ‘home’ economies are damaged badly. This method of grooming a future heir to the family business assumes that, if the successor can establish in a foreign land, he should be able to take over the family business in the ‘home’ economy where the patriarch is around to socialize the successor into the local business networks. Internationalization has become a strategy for investing in future successors rather than immediate growth per se. This distinguishes a Chinese family firm from a professionally managed firm when the latter cannot afford such ‘investments’ because of its public accountability. Pursuing such an internationalization strategy, Chinese family firms can achieve long-term growth through good quality successors (with solid business acumen and track records) and control of business within the family. The cross-border property investment of Li Ka-shing, a leading business patriarch in the Hong Kong business community, and his elder son, Victor Li, in Vancouver’s former Expo ’86 site in 1988 illustrates how the senior Li exposed Victor to different business environments and expanded his own property businesses beyond the limits of the Hong Kong market (see also Mitchell, 1995; Olds, 2001: ch.4). Victor Li was part of the

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‘transnational élite’ who work and live in several global sites and was involved in the control of capital and information between these sites (Mitchell, 1993; Sklair, 2000). He was thus well enroled into globalizing actor networks. As a Canadian citizen, Victor Li graduated from Stanford University in 1987 with a BA and an MA in civil engineering. He was well placed to participate in the family business of senior Li. In addition to his role in Concord Pacific, Victor was also a director of Husky Oil of Calgary, one of the first infrastructural development projects 95 per cent owned by his father (see Table 35.1). To Victor Li, the Canadian involvement represented a natural extension of the family business because ‘there is no difference between my father’s personal investments versus my personal investment. It’s one. It is called family investment and that’s it. The only separation is between family and public companies’ (quoted in Mitchell, 1995: 377). Victor Li also found more comfort and excitement in doing business and enroling in local actor-networks in Canada, particularly Vancouver. He recalled that ‘one of the best things about Canada is the way it treats new people. The cultural diversity makes the investor feel comfortable. There’s also political stability. Canada is one of the most comfortable places to do business compared to a lot of Western countries’ (quoted in Olds, 2001: 115). The main rationale for purchasing and developing the Expo site was to use this highprofile project as a vehicle for the extension of Victor Li’s social networks into Canada. Olds (1995: 14, 2001: 123–6) identified four such objectives of the Pacific Place project. First, it permitted Victor Li (at the age of 22 years in 1988) to gain some solid experience in international property development that had been the main source of business and profits for his father in Hong Kong. He could also gain potential accolades in a locale more distant from Hong Kong so that any problems or failures could be covered up. Second, the project enabled Victor Li to be parachuted into the top of Vancouver’s social network and hierarchy, a move virtually impossible in such established old boys’ network cities as New York and London. Third, Victor Li could build a strong base in Canada, both personally and financially, to prepare him for future business involvement back in Hong Kong. True enough, he returned to Hong Kong as deputy managing director of Cheung Kong Holdings, the flagship firm of the Li family, in 1993. Since 1994, he has been deputy chairman of the family firm. In 1999, he took over from his father as the managing director of Cheung Kong Holdings (http://www.ckh.com.hk/eng/index.htm; accessed on 21 September 2004). Finally, the project could be a pilot in developing large-scale property development in a non-Chinese setting. The senior Li could learn valuable lessons from intermingling different methods of property development in Hong Kong and in Canada. These lessons might be important to Li for making decisions about whether to venture further into the global property market. In short, the Pacific Place project was a beachhead strategy for Li Ka-shing and his son to prepare for future growth of the family business. During the course of developing the Pacific Place in Vancouver, the senior Li not only provided an opportunity for Victor Li to learn, but also participated actively in establishing business networks and informal ties, a process of developing and enroling in globalizing actor networks. William Shurniak, a senior executive responsible for setting up the Canadian Imperial Bank of Commerce’s (CIBC) merchant bank operation in Hong Kong in 1974, was an executive director and group finance director for Li Ka-shing’s Hutchison Whampoa when the Pacific Place project was launched (Olds, 2001: 65). Shurniak clearly

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served as the bridgehead between Canadian financial networks and Li Ka-shing’s vast and diversified actor networks in Asia and beyond. Indeed, Li Ka-shing held approximately 10 per cent of the CIBC, enabling him with both credibility and financial backing for the Pacific Place project. Li Ka-shing also brought into the Pacific Place project two other influential property magnates from Hong Kong: Cheng Yu-tung (New World Development) and Lee Shau-kee (Henderson Land Development). As indicated in Table 35.1, both tycoons are leading Chinese business families in Hong Kong. In fact, these two shareholders had co-operated with Li Ka-shing in many other property development projects (such as the Suntec City project in Singapore; see Yeung, 1998: 188–91). Victor Li once discussed the importance of informal relationships and trust among these Hong Kong property tycoons in the formation of the project: ‘When we drew up the original thing, after we got the site, there was no formal agreement more than two pages between all the shareholders. With all these shareholders, their word is their bond’ (quoted in Mitchell, 1995: 377). The diverse actor networks in which Victor Li was embedded in Vancouver enabled him to overcome grave difficulties in developing the prominent site. As Olds (2001: 90) noted, ‘the developers have managed to manoeuvre through Vancouver’s local system with sophistication and subtle power. While this development process certainly attests to the skills of Concord officials [developer of the Pacific Place] in working the system to achieve their goals, they were (and are) strongly supported by a labyrinthine “infrastructure” of institutions, individuals, state policies, and restructuring processes which are constructing Vancouver into the archetypal “Pacific Rim” metropolis’. In particular, Victor Li was able to tap into Stanley Kwok, a former emigrant from Hong Kong in 1968 and President of Pendero Development Co., who in 1981 was brought onto the ten-person board of directors of BC Place, the development company that preceded the Pacific Place in Vancouver. Kwok subsequently became the president and CEO of BC Place in 1984, following the death of its former chairman, Alvin Narod (Olds, 2001: box 4.2). He also served on the board of directors of Expo ’86 until 1986. After the provincial government of British Columbia abandoned plans to redevelop the Expo ’86 site into BC Place in April 1987, Kwok was hired by Li Ka-shing and Victor Li as director and senior vice-president of Concord Pacific Developments Ltd – the developer that eventually secured the former Expo ’86 site for C$320 million in May 1988. The actual cost, factoring in payment schedules and government’s absorption of clean-up costs, amounted closer to C$145 million (Olds, 2001: 108). Drawing upon Kwok’s ‘excellent connections with all of Vancouver’s key political and business elites, as well as with the provincial cabinet and the BCEC board [BC Enterprise Corporation – the contract awarding organization]’ (ibid.: 128), Victor Li was able to gain significant credits from his five years of work at Concord Pacific until his return to join the family’s flagship firm in Hong Kong in 1993. In short, internationalization serves the Li family well in grooming the next generation successor to the family business. While this phenomenon is much less appreciated in the literature on Chinese capitalism, it is not too different from the experience of some leading business families in advanced industrialized economies, such as the Murdoch family from Australia, the Wallenberg family from Sweden and the Ford family from the US. The most obvious commonality among these family businesses is their simultaneous family ownership and control that coexists with the selective incorporation of non-family members in professionalizing management.

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Conclusion: some lessons for Chinese capitalism In this concluding section, I want to propose a revised model to account for transnational entrepreneurship and dynamic transformations in Chinese capitalism in a global era. This model, in Figure 35.1 shows that, while Wong’s (1985) four developmental phases are generally valid in analysing the rise and fall of Chinese family firms in their domestic settings (typically over three generations), there are other possible developmental trajectories associated with internationalization that may account for both the diversity of organizational outcomes and the hybridized nature of Chinese capitalism. First, the segmentation

I. Emergence

Wong’s (1985) fourphase model

II. Centralization

III. Segmentation

IV. Disintegration

V. Corporatization

Professionalization and family ownership

Figure 35.1

A dynamic model of Chinese family firms

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of family ownership (phase III) does not necessarily lead to disintegration (phase IV). In some cases, one branch of the family may acquire a controlling stake in the family firm and re-centralize its ownership and management, although no significant transformations may occur in its management practices and business strategies. Second, if such a process of acquisition and re-centralization takes place together with significant transformations in strategic management and corporate governance, then a Chinese family firm is deemed to have entered a fifth phase of corporatization in which family ownership overlaps with a significant degree of professionalization in corporate management and organizational structures. This process of corporatization combines the strengths of both entrepreneurship through the direct involvement of family members in management and professionalism through organizational change to incorporate non-family managers in key corporate decision processes. Whereas the presence of family members ensures continuity and heritage, professionalization brings in new business ideas and corporate change that may result in a very different breed of Chinese family firms. A traditional Chinese family firm can not only operate across borders successfully, but also transcend the ‘three generation trap’ to become a professionalized modern business enterprise. Its success clearly contradicts the culturalist expectations that all Chinese family firms remain traditionally managed and conservative in their outlook, even if they are increasingly globalizing themselves (see Redding, 2000). What, then, are the implications of this revised model and the case study in this chapter for our understanding of hybrid transformations in Chinese capitalism? One implication is clearly concerned with the issue of succession that remains a thorny issue for many Chinese family firms today (Chau, 1991; Yeung, 1999, 2000b; Carney and Gedajlovic, 2003). The role of professional managers in sustaining the development of Chinese family firms is another critical implication. The future success of Chinese family firms rests with the capability and competencies of their successors rather than the fact that they are family members per se. A final and related point is that Chinese family firms are increasingly undergoing dynamic transformations to meet the challenges of globalization. Many Chinese family firms from East and Southeast Asia, for example, are internationalizing their operations across borders. This chapter has plainly shown that, to manage successfully across borders, a Chinese family firm needs both professional managers and corporatized organizational structures. As global competition becomes increasingly unavoidable in the Asia-Pacific region, Chinese family firms need to prepare themselves through the professionalization of management and governance, the consolidation of core competence and better access to global capital markets. Meeting these serious challenges of globalization requires both entrepreneurial capabilities of family owners and professional competence of managers in today’s Chinese family firms. In a global era, then, we are beginning to witness significant transformations in the social organization and corporate governance of Chinese business firms. These twin dimensions are highly important to our understanding of the changing nature of Chinese capitalism towards a form of hybrid capitalism. Acknowledgement I would like to thank Léo Dana for kindly inviting me to participate in this book project. The ideas in this chapter are developed and illustrated in much more detail in my recent book, Chinese Capitalism in a Global Era (London: Routledge, 2004). I am solely responsible for all errors and misinterpretations.

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Notes 1. See, for example, Wong (1988), Redding (1990), Whitley (1992, 1999), Brown (1994, 2000), Chan and Chiang (1994), Gambe (2000), Gomez and Hsiao (2001) and Menkhoff and Gerke (2002) for over a decade of such domestically-oriented studies of Chinese entrepreneurship. 2. There is a huge literature in management and organization studies on parent–subsidiary relationships. See, for example, Bartlett and Ghoshal (1989), Birkinshaw and Hood (1998), Harzing (1999) and Gupta and Govindarajan (2000). 3. See La Porta et al. (1999), Sykes (2000) and Franks et al. (2003) for very different interpretations of what Anglo-American capitalism should be in relation to corporate ownership and management control. While La Porta et al.’s (1999) study demonstrated clearly the incomplete separation between ownership and control in the largest public companies in the US and the UK, Franks et al.’s (2003) study showed that the evolution of corporate control among public companies in the UK remains in the hands of founding families through board membership and executive appointments. Of the three studies, Sykes (2000) made the most radical case by arguing for the reunification of corporate ownership and control among British companies to overcome their severe problems of absentee ownership, inadequate management accountability and short-termism. He identified ‘passive absentee ownership’ as the fundamental weakness in corporate governance in British capitalism because ‘shareholders, particularly the 80 per cent of beneficial shareholders, are not in a position to look after their shareholdings properly to reflect fully their own values and long-term interests’ (Sykes, 2000: xi). Together, these recent studies of corporate governance point to the hybridized form of ‘managerial capitalism’ even in the US and the UK. 4. The case of Singapore’s Yeo Hiap Seng, a well-known food and beverage business in East and Southeast Asia, is perhaps most instructive here. The intense rivalry between two factions of the second generation Yeo family during the early 1990s led to the eventual takeover of the family firm by another powerful family firm, Orchard Parade Holdings, controlled by Ng Teng Fong, in 1994 (Brown, 2000: 75–86).

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Dana, Léo-Paul (ed.) (2004), Handbook of Research on International Entrepreneurship, Cheltenham: Edward Elgar. Eriksson, Kent, Jan Johanson, Anders Majkgård and D. Deo Sharma (1997), ‘Experiential knowledge and cost in the internationalization process’, Journal of International Business Studies, 28(2), 337–60. Franks, Julian, Colin Mayer and Stefano Rossi (2003), ‘The Origination and Evolution of Ownership and Control’, ECGI Working Papers No. 09/203, Brussels: European Corporate Governance Institute. Fukuyama, Francis (1995), Trust: The Social Virtues and the Creation of Prosperity, London: Hamish Hamilton. Fung, Victor (1997), ‘Evolution in the management of family enterprises in Asia’, in Gungwu Wang and Siulun Wong (eds), Dynamic Hong Kong: Business and Culture, Hong Kong: Hong Kong University Press, pp. 216–29. Gambe, Annabelle R. (2000), Overseas Chinese Entrepreneurship and Capitalist Development in Southeast Asia, London: Macmillan. Gomez, Edmund Terence and Hsin-Huang Michael Hsiao (eds) (2001), Chinese Business in South-East Asia: Contesting Cultural Explanations, Researching Entrepreneurship, Richmond, Surrey: Curzon. Gomez, Edmund Terence and Hsin-Huang Michael Hsiao (eds) (2004), Chinese Enterprise, Transnationalism, and Identity, London: RoutledgeCurzon. Gupta, Anil K. and Vijay Govindarajan (2000), ‘Knowledge flows within multinational corporations’, Strategic Management Journal, 21, 473–96. Hamilton, Gary G. (2000), ‘Reciprocity and control: the organisation of Chinese family-owned conglomerates’, in Henry Wai-chung Yeung and Kris Olds (eds), Globalization of Chinese Business Firms, London: Macmillan, pp. 55–74. Harzing, Anne-Wil (1999), Managing the Multinationals: An International Study of Control Mechanisms, Cheltenham: Edward Elgar. Kao, John (1993), ‘The worldwide web of Chinese business’, Harvard Business Review, March–April, 24–36. Kets de Vries, Manfred F.R. (1996), Family Business: Human Dilemmas in the Family Firm, London: International Thomson Business Press. La Porta, Rafael, Florencio Lopez-de-Silanes and Andrei Shleifer (1999), ‘Corporate ownership around the world’, Journal of Finance, 54(2), 471–517. Lee, Ji-Ren and Jen-Shyang Chen (2003), ‘Internationalization, local adaptation, and subsidiary’s entrepreneurship’, Asia Pacific Journal of Management, 20(1), 51–72. Lee, Khai Sheang, Guan Hua Lim and Wei Shi Lim (2003), ‘Family business succession: appropriation risk and choice of successor’, Academy of Management Review, 28(4), 657–66. Lever-Tracy, Constance (2002), ‘The impact of the Asian crisis on diaspora Chinese tycoons’, Geoforum, 33(3), 509–23. Magretta, Joan (1998), ‘Fast, global, and entrepreneurial: supply chain management, Hong Kong style: an interview with Victor Fung’, Harvard Business Review, 76(5), 103–14. Mathews, John A. (2002), Dragon Multinational: A New Model for Global Growth, Oxford: Oxford University Press. Matsuo, H. (2000), ‘Liability of foreignness and the uses of expatriates in Japanese multinational corporations in the United States’, Sociological Inquiry, 70(1), 88–106. McDougall, Patricia P. and Benjamin M. Oviatt (1996), ‘New venture internationalization, strategic change, and performance: a follow-up study’, Journal of Business Venturing, 11(1), 23–40. McDougall, Patricia P. and Benjamin M. Oviatt (2000), ‘International entrepreneurship: the intersection of two research paths’, Academy of Management Journal, 43(5), 902–6, Special Research Forum. McDougall, Patricia P., Scott Shane and Benjamin M. Oviatt (1994), ‘Explaining the formation of international new ventures: the limits of theories from international business research’, Journal of Business Venturing, 9(6), 469–87. Menkhoff, Thomas and Solvay Gerke (eds) (2002), Chinese Entrepreneurship and Asian Business Networks, London: RoutledgeCurzon. Mitchell, Katharyne (1993), ‘Multi-culturalism, or the united colors of capitalism’, Antipode, 25(4), 263–94. Mitchell, Katharyne (1995), ‘Flexible circulation in the Pacific Rim: capitalism in cultural context’, Economic Geography, 71(4), 364–82. Olds, Kris (1995), ‘Globalization and the production of new urban spaces: Pacific Rim mega-projects in the late 20th century’, Environment and Planning A, 27, 1713–43. Olds, Kris (2001), Globalization and Urban Change: Capital, Culture and Pacific Rim Mega Projects, Oxford: Oxford University Press. Redding, S. Gordon (1990), The Spirit of Chinese Capitalism, Berlin: De Gruyter. Redding, S. Gordon (2000), ‘What is Chinese about Chinese family business? And how much is family and how much is business?’, in Henry Wai-chung Yeung and Kris Olds (eds), Globalization of Chinese Business Firms, London: Macmillan, pp. 31–54.

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Redding, S. Gordon and Gilbert Y.Y. Wong (1986), ‘The psychology of Chinese organisational behaviour’, in Michael Harris Bond (ed.), The Psychology of the Chinese People, Oxford: Oxford University Press, pp. 267–95. Shleifer, Andrei and Robert W. Vishny (1997), ‘A survey of corporate governance’, Journal of Finance, 52(2), 737–83. Silin, Robert H. (1976), Leadership and Values: The Organization of Large-Scale Taiwanese Enterprises, Cambridge, MA: Harvard University Press. Siu, Wai Sum and Robert G. Martin (1992), ‘Entrepreneurship of Hong Kong’, working paper no. MS90039, Business Research Centre, Hong Kong Baptist College. Sklair, Leslie (2000), The Transnational Capitalist Class, Oxford: Blackwell. Sykes, Allen (2000), Capitalism for Tomorrow: Reuniting Ownership and Control, Oxford: Capstone. Tang, Jie and Anthony Ward (2003), The Changing Face of Chinese Management, London: Routledge. Tong, Chee Kiong (1991), ‘Centripetal authority, differentiated networks: the social organization of Chinese firms in Singapore’, in Gary G. Hamilton (ed.), Business Networks and Economic Development in East and South East Asia, Hong Kong: Centre of Asian Studies, University of Hong Kong, pp. 176–200. Tong, Chee Kiong and Pit Kee Yong (1998), ‘Guanxi bases, xinyong and Chinese business networks’, British Journal of Sociology, 49(1), 75–96. Tsang, Eric W.K. (2001), ‘Internationalizing the family firm: a case study of a Chinese family business’, Journal of Small Business Management, 39(1), 88–94. Tsang, Eric W.K. (2002), ‘Learning from overseas venturing experience – the case of Chinese family businesses’, Journal of Business Venturing, 17(1), 21–40. Whitley, Richard (1992), Business Systems in East Asia: Firms, Markets and Societies, London: Sage. Whitley, Richard (1999), Divergent Capitalisms: The Social Structuring and Change of Business Systems, New York: Oxford University Press. Wong, Siu-lun (1985), ‘The Chinese family firm: a model’, British Journal of Sociology, 36, 58–72. Wong, Siu-lun (1988), Emigrant Entrepreneurs: Shanghai Industrialists in Hong Kong, Hong Kong: Oxford University Press. Yeung, Henry Wai-chung (1998), Transnational Corporations and Business Networks: Hong Kong Firms in the ASEAN Region, London: Routledge. Yeung, Henry Wai-chung (1999), ‘Under siege? Economic globalisation and Chinese business in Southeast Asia’, Economy and Society, 28(1), 1–29. Yeung, Henry Wai-chung (2000a), ‘Limits to the growth of family-owned business? The case of Chinese transnational corporations from Hong Kong’, Family Business Review, 13(1), 55–70. Yeung, Henry Wai-chung (2000b), ‘The dynamics of Asian business systems in a globalising era’, Review of International Political Economy, 7(3), 399–433. Yeung, Henry Wai-chung (2001), ‘Managing traditional Chinese family firms across borders: four generations of entrepreneurship in Eu Yan Sang’, in Leo Douw, Cen Huang and David Ip (eds), Rethinking Chinese Transnational Enterprises: Cultural Affinity and Business Strategies, Surrey, UK: Curzon, pp. 184–207. Yeung, Henry Wai-chung (2002a), Entrepreneurship and the Internationalisation of Asian Firms: An Institutional Perspective, Cheltenham: Edward Elgar. Yeung, Henry Wai-chung (2002b), ‘Entrepreneurship in international business: an institutional perspective’, Asia Pacific Journal of Management, 19(1), 29–61. Yeung, Henry Wai-chung (2004a), Chinese Capitalism in a Global Era: Towards Hybrid Capitalism, Routledge Advances in International Political Economy Series, London: Routledge. Yeung, Henry Wai-chung (2004b), ‘International entrepreneurship and Chinese business research’, in Léo-Paul Dana (ed.), The Handbook of Research on International Entrepreneurship, Cheltenham: Edward Elgar, pp. 73–93. Yeung, Henry Wai-chung and Kris Olds (eds) (2000), Globalization of Chinese Business Firms, New York: Macmillan. Zaheer, Srilata (1995), ‘Overcoming the liability of foreignness’, Academy of Management Journal, 38(2), 341–63.

36 Dalit entrepreneurs on the edges of caste and class: ethnic minority entrepreneurship in India David Blake Willis and J. Rajasekaran

Introduction The Dalits, formerly called Untouchables and then Harijans, seemingly forever condemned to the lower reaches of the caste/jati system in India, have in the past 20 years begun entrepreneurial activities that have generated success and self-employment in new ways. In spite of the enormous tensions generated throughout India by their moves into politics and their fight for social justice, the various communities which comprise Dalits, numbering over 200 million people, have strengthened their voices and actively campaigned for change at the local and national level in recent years, creating important waves in the caste system and local societies. These activities have meant an awakening and resistance to traditions. Part of the reason they have been able to do this is their success as economic, cultural and social entrepreneurs. The economic, political, and especially cultural empowerment of Dalit communities can be found in numerous entrepreneurial activities of this most marginalized of all Indian communities.1 This chapter will examine the context and activities of Dalit entrepreneurs in the South Indian state of Tamil Nadu, particularly in the traditional temple town of Madurai in the far south of India and in the Cauvery River Delta of Thanjavur. It is an ethnographic report of three cases of entrepreneurial success, stories that have touched on caste, class and society in South India today. Entrepreneurial successes in Dalit communities are more than we might initially expect, especially when we consider the range of their traditional jobs, often menial. Meat, for example, is a lucrative economic enterprise of Dalits, including, surprisingly for those who still believe the cow is sacred in India, beef. Meat, including beef, is valued not only by lower castes but by Anglo-Indians, foreigners living in India, and hotels/ restaurants catering to tourists. Such economic activities cross caste and ethnic lines, showing that opportunity is a beacon not only for the commercial entrepreneur for making a comfortable living, like our case study of the meat merchant Murugan here, but for community power and revival. Music is another success story for Dalits. The joyful, celebratory side of Dalit communities, as symbolized by the drum thappu, reveals to us another side of entrepreneurial success: the cultural entrepreneur. For people like Sangili, a thappu musician, the ‘returns’ or ‘profit’ of these activities can be seen cascading through the community, revitalizing its members psychologically, spiritually, emotionally and politically through their interactions with one another. Finally, a successful activist drive aimed at obtaining land for the landless in the Thanjavur District of coastal South India can be seen largely as the effective work of Krishnammal Jagannathan, a Dalit social activist and model of the social entrepreneur. Not only have over 12 000 families received housing and land through LAFTI, the 599

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Gandhian NGO which she has led with her husband S. Jagannathan, but the community has been given a fresh boost by the building of these homes which has been an inspiration to the people themselves. Their participation in this social movement has, in turn, empowered them to take action for themselves. In all of these cases such entrepreneurship should be viewed, as Dana (1995) notes, not as a function of opportunity but as a function of cultural perceptions of opportunity. These adventurous entrepreneurs, likewise, are characterized by innovative behaviour and the employment of strategic business management practices. Like Barth (1963, 1967), too, we see these Dalit individuals as having a special impact on their communities as essential brokers in their contacts with other cultures and castes, active in the transformation of society. As well as an introduction to the work of the great social activist Krishnammal Jagannathan, this chapter reports on two successful commercial and cultural entrepreneurs of the Madurai area, the musician Sangili and the meat seller Murugan. We have collected data from ongoing fieldwork conducted in the Madurai area of South India in the late 1970s, the late 1980s and the period 2002–04. Our ethnographic interviews and observations of these three individuals help us understand the context of violence and oppression which has been traditionally visited upon Dalit communities, and some of the ways in which this oppression has been resisted. All three of these entrepreneurs have aimed for a ‘return of profits’ to Dalit society and activities that will benefit both Dalits and the larger society. Ethnic and social entrepreneurs: self-employment and liberation There is considerable scholarship on both ethnic and social entrepreneurship concerning ethnic-owned and operated firms in developed countries, yet the activities of marginalized castes and communities in South Asia have only recently come to the attention of researchers. The small credit operations of the Grammeen banks or credit unions in Bangladesh and elsewhere have been of interest, but research has largely been on the operations of such institutions and their processes. There has been much less on entrepreneurship as an ethnic, community-based activity supporting an ethnic or community renaissance. Studies to date have been especially concerned with delineating the existence of ethnic entrepreneurship as either that of middlemen or comprador minorities, as taking place mainly in ethnic enclaves or ghettos, or as reactive/resistant cultural theory (Dana, 1997; Yoon, 1991, have excellent reviews of these theories). The theory surrounding middlemen minorities derives mainly from former and continuing colonial contexts, like India, of course. These comprador communities as entrepreneurs were seen as necessary and profitable buffers to a hostile native population, although the role of language intermediaries should also not be underestimated. Compradors are usually said to be imitative of their colonial overlords, culturally as well as economically, yet still able to move within the local native populations. Chinese comprador middlemen, for example, can be found not only throughout China, but all over Southeast Asia. These theories usually marginalize the nomadic character of the middlemen, preferring to site their ideas in national, ‘civilized’ (‘city’) contexts rather than recognizing the transnational character which they often have. As flexible diaspora (Ong, 1999) these communities have had their locus of power and identity tied as much to mobility and movement as to landed locations and specific places.

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There is a clear power dimension to this middlemen theory, too, inasmuch as such businesses have relied on colonial powers for credit and markets (European and North American Whites usually, though Japanese have been included here, too), and only secondarily on local native customers. The main resources (financial, emotional and labour) usually come from family and community members (Bonacich, 1973, 1987). The traders of Omi Hachiman in Japan are famous examples of such middlemen traders, as are the Minangkabau of Sumatra, whose signature Indonesian restaurants can be found throughout the world. In South India the Sindhis or Marwaris are reputed, as they are throughout South Asia, to be clever, efficient business/middlemen. Ethnic enclave theory is another approach to community recovery and empowerment (examples include Waldinger, 1989, and Wilson and Portes, 1980). Seen as a selfgenerating process, with the location of all activities within the community itself, including training, credit and finance, and production as well as consumption, the ethnic enclave supports new and upcoming entrepreneurs through informal communication networks which lead to market opportunities. Perhaps more important is the role modelling of successful entrepreneurs, which encourages young people to form their own enterprises. We can see this in Dalit communities, too, particularly when it comes to cultural activities and businesses concerned with the provision and sale of meat, a taboo food for many communities in India but relished by others. Finally, a third theory has it that these entrepreneurial activities are a result of culture reactive to historic and discriminatory treatment in society and the marketplace (Light, 1972, 1980; Nowikowski, 1984). These community members are thus seen as having been forced to adopt marginal niches in the economy, turning only to members of their own communities for help and upward social mobility. While this may be partly true, as a theory it misses the cultural and social richness of interaction between different caste and class groupings in the society, as will be seen in some of the examples which follow. We can observe and learn here from actual on-the-ground ethnographic interviewing. Dalits in South Indian history and society The ritual purity of Brahminical ideology, with its emphasis on purity and pollution, traditionally crushed the Dalits, of whom there are over 200 million in India today. They were expected to do all the menial jobs for other castes, with the only return being the building of good karma, which would lead to a better rebirth. The primeval man Manu was depicted as the model for the caste system, with his head (Brahmins), arms (Ksatriyas, warrior castes), loins (Vaisyas, merchants), and feet (Shudras, labourers). In some imaginings the Shudras included the Dalits, but in most they did not, relegating the Dalits to ‘below the below’. One of their traditional duties, doing laundry, even led to a subcaste of Dalit dhobi washermen called ‘Unseeables’, people who were not allowed to show themselves in the daytime for fear of polluting upper caste people. These ‘Unseeables’ did the laundry for the other dhobis, who were theoretically one rung above them on the caste ladder. While other so-called backward communities are able to find upward mobility within the caste system, such an opportunity has not been available to the Dalits. The scholar G.S. Ghurye notes, for example, ‘A well known Tamil proverb declares that Kallans, Maravans (“backward castes” who claim kshatriya status today) and others gradually turn into Vellalas (land-owning peasants).’ Shanars and Nadars, like the weavers who are prohibited

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from living in the main village (oor) have still been able to escape from the label of untouchability, perhaps because of their formerly nomadic status, whereas the ritual purity of the Brahminical ideology crushed the Dalits. They were expected to do all the menial jobs for other castes. While there have been mass conversions of Dalits to the egalitarian religions of Christianity or Islam in India, the reality of separation and discrimination continues, with, for example, separate communions and separate churches for Dalit converts. But the jobs almost always stay the same. Perhaps most importantly for the present study, the hierarchical caste society indirectly tells the Dalits they cannot have social equality if they want economic stability. Among the three Dalit subcastes in the Madurai area, the Chakkiliars, traditional sandal makers discussed in this chapter, are not represented politically, whereas the Pariyars and Pallars, agricultural workers, have turned their own caste associations into political parties. These political bases have given them the strength to negotiate with national and regional political parties for election alliances and seat sharing. They have elected representatives to the State Assembly, for example. The newfound courage which has come with these successes has allowed them to have their caste names as a suffix after their names. This has been practised by all ‘forward’ and ‘backward’ castes for some time, but not by oppressed communities. They have also removed the ‘n’ ending of their caste names, the names Pallan and Paraiyan being considered non-honorific in Tamil. Instead they now end their caste names with the honorific ‘r’ as with Pallar and Paraiyar. The recent actions of the Dalit Panthers of India (DPI) leader Thirumavalavan have resulted in the re-naming of thousands of Dalits, enabling them to give up their caste or Hindu names for pure Tamil names found in Sangam (Tamil Classical period) poetry. This is a counter to the anti-conversion bill brought by the Tamil Nadu State Government which was recently aimed at Christian and Muslim conversions. Dalits have been victims not only of poverty, but, as Racine and Racine (1998) and the International Movement Against All Forms of Discrimination and Racism (IMADR, 2003) remind us, of historical and continuing acts of extreme violence. The tragedy of Kilvenmani in Thanjavur District, Tamil Nadu, in 1969, drew national attention in India to the situation of the Dalits. In this atrocity, 42 Dalits, including children, were burned alive in their thatched huts, a caste Hindu answer to their strike for higher wages. The violence and abuse have continued throughout society, unfortunately, with separate drinking glasses in restaurants, public shunning and discrimination being commonplace. There were even segregated relief camps after the Great Tsunami of 2004. This terrible shame of India is, in many ways, an apartheid of the spirit as well as of daily social relations. What is changing in Indian society is the response and the impact of Dalit entrepreneurs on social, commercial and cultural activities in the larger society. Entrepreneurial success: meat and music in South India One of the most successful of all enterprises of Dalits is the sale of meat, especially beef. Not only is leather for drums obtained from these cows, indicating successful cultural enterprises, but the sale of fresh meat has great appeal for a range of communities. That the price is relatively low compared to other foods makes for exceptional economic opportunities. As one of the Dalits who was interviewed, the thappu band-leader Sangili, noted on one of our fieldwork visits,

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My father-in-law sells beef here. I buy the hides from him. There are three such shops here. The calf that is being skinned in front of you is 18 months old. Tender meat is in high demand. The beef is sold for 40 rupees, four times less than for goat and sheep. The cattle are bought from nearby weekly markets. The hide of the cow is suitable for making leather goods, so dealers from nearby towns come to buy the hides from my father-in-law.

During one of the fieldwork visits Sangili gave us a tour of his neighbourhood, showing the spot where he dries water buffalo hide and the whole process of making the drum on the roadside by an old irrigation canal. A visit to his father-in-law’s beef shop revealed a young man around 18 skinning a calf with a surgeon’s precision. They were not thrilled with an outsider’s presence, probably because a few weeks earlier in Haryana Province in North India, five Dalits who were skinning a dead cow by the roadside were lynched by a group of angry, frenzied caste Hindus. Sangili had to convince them of the outsider’s identity, and they later allowed pictures to be taken. They then warmed to the researcher, explaining the ups and downs of the trade. Kancha Ilaiah, the author of Why I Am Not a Hindu and a Dalit scholar, questions the lynching of these five Dalits (2002). For Dalits, skinning dead cows is a major occupation and has been a trade for thousands of years. Communities which should be appreciated for keeping the environment clean and reaping economic success for the nation through their hard work and knowledge are unfortunately labelled as untouchables. Nevertheless, there is another side to this trade, with large profits to be made in regular sales that sustain the community and its members in multiple ways. One example of this could be seen in late January 2005, when the 20th International Leather Fair was held in Madras (Chennai). The Hindu newspaper of 31 January 2005 gave extensive coverage to this fair, noting that Tamil Nadu had historically exported great quantities of leather from centuries ago, when the Nawab of Arcot sourced skins from all over the country and exported them through Madras. Now a $4 billion industry, according to the CLRI (Central Leather Research Institute, Chennai), the leather business in India takes advantage of what is the largest livestock population in the world. There is no doubt that this, as well as other forms of entrepreneurship in Dalit communities, stretches the boundaries of tradition as well as demonstrating a resistance to inequity, social hierarchy and poverty.2 Selling beef in India: Murugan, a Dalit entrepreneur ‘Who ever kills a cow or allows another to kill it, shall rot in hell as many years as there are hairs upon his body’ (Mahabharatha). Murugan, a beef merchant of Karumbalai, Madurai, was one of the subjects of our research. Ironically, one of the interviews took place with a breathtaking view of Yanamalai (elephant rock), a massive rock outcrop outside the temple city of Madurai where Jain monks preached non-violence and practised a strict form of vegetarianism in caves around the first century . Murugan’s residence, a substantial concrete house with two floors and named ‘Alagar Illam’, was constructed in 1991, one of the first concrete houses to come up around that time in what was then an area of mud huts. Adjoining the ground floor of the house is a neat little thatched shed which is the beef shop. Half a dozen calves were tied by the side of the main entrance to his house. On the left-hand side of the main door was a decorative iron grill in the shape of Lord Ganesh, the elder son of the Gods Shiva and Parvathi,

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whose younger son is known as Murugan in the south. Shiva and Murugan are both identified strongly with Dalits and Dravidians in general, whereas Ganesh and other Gods or Goddesses reveal the extent of Sanskritization. As I entered the room for my first interview, I was asked to sit on a plastic chair. Murugan’s wife was sitting on the floor having her dinner while he was watching TV. As I entered the TV was switched off. This gave me a sign that he was ready for our meeting. We were surrounded by his son, who is 19 years old, and his grandchildren from one of his married daughters. He looked very religious with his forehead smeared with sacred ash. I guessed he must have just finished his evening pooja (prayer). He looked very relaxed. After our initial greetings and talk about the sun and rain he warmed up to the interview. Murugan began by talking about his grandfather from his father’s side, how he came to Madurai from a village near Palani 75 miles northwest of Madurai. His grandfather was employed by the Madurai Municipality for laying tar (asphalt) roads. His grandfather was enterprising and had a small beef stall for additional income. His father later took over the business at the same time as he was working as a sanitary worker for the Madurai Municipality. Murugan began assisting his father in the beef shop when he was hardly eight. He had an elementary level of schooling, very proudly noting that ‘I belong to the third generation in this business and my son is the fourth’. He then began narrating an anecdote of how this family business had saved them from ruin. As generations of Telugu-speaking Chakkliars working as sanitary labourers for the Madurai Municipality, a caste whose origins is explained further below, the opportunities for economic advancement were bleak. Murugan joined the Municipality as a sweeper of roads in 1973 and was also looking after the family business of selling beef. In 1984, someone who was jealous reported them to the Health Department when they sold a dead cow. The Health Department took swift action and had all the meat tested. Murugan was fined and sacked from his job. Admitting that he had been wrong, he also notes that the family business then saved him, too, however. He got a licence to run three shops, one for himself and two for his younger brothers. There are now about 50 beef shops and a great demand for beef in this traditional Hindu temple town. According to Murugan, even people from vegetarian communities eat beef. He sells ten calves a day, veal being preferred for its tenderness. Goat and sheep merchants also buy from him, adulterating their own meat with the beef. They are able to do this as they can sell directly to local restaurants, which he cannot do because the location of his shop reveals his social status and the business he does. This stealthy trading will continue, both because of the taboo on eating beef for many caste Hindus and because of the cheap price of beef. There are clear risks in the business, too, though. One could make a lot of money in a short time but there might be times when one could trip up very badly. Murugan also sells directly to sidewalk soup and biryani stalls and push-carts. Beef is, in fact, good animal protein cheaply available to working-class people. Murugan also notes that the best beef stalls are run by Muslim businessmen, saying this with great appreciation because of the excellent symbiotic relationship between himself and these merchants. It is mandatory that a Muslim priest say prayers and then cut the animal’s head off, a practice called halal. For generations one Muslim family has been doing this service for the Madurai City

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administration, a practice which has existed since the tenth century, when Muslim businessmen settled on the east coast of Tamil Nadu. The priest is given 10 rupees per head. Murugan spends more than Rs 200 for this purpose per day (Rs 40
US$1 in 2007). He believes that the meat tastes good because of the prayer and that it brings in prosperity. To purchase cattle, Murugan travels in a 50 km radius around Madurai. Watching him, his wife, and his assistants in action over the course of some days was eye opening. He has to make the right decision about freshness and salability since he does not have a freezer to keep the meat. If there is any leftover meat he will keep it in a wooden box covered with sawdust and solid ice. He cannot sell this meat to the public because it is not fresh, yet pet owners will buy the meat for their dogs. On Sundays he sells 140 kg of beef from seven calves, with the business starting at three in the morning and ending sometime in the afternoon. Murugan came to the business by helping his father at a very young age, as we noted above. He dropped out of elementary school when he was 11 years old. Since there were three sons in the family there was a need for a woman to run the house. So he was married when he was 18. His wife was very young at the time and had not even attained puberty. He now has three daughters and one son, the youngest, who is taking care of the stall at home from time to time. When I observed him, I thought, ‘Ah, this is how generations of entrepreneurs are raised.’ Another stall, located in a village outside of the city, does a much better business, probably because people do not have to be seen walking through the recognizably Dalit neighbourhood of Karumbalai. Murugan has been in the business for 30 years, and he proudly declares that his family has been in the business for 90 years. When he was young they had to transport the meat on hand-pulled carts from town. Now they have cycle-rickshaws and Yamaha motorcycles to bring smaller quantities. He also takes pride in the way he slices the meat according to the needs of his customers. Some of the richest Muslim families, those who run textile businesses in town, are his customers. During the Ramzan and Bhagrith Muslim festivals the demand for beef goes up. He may have to travel to far-off places at that time to buy cattle. As I sat on a cot woven with rope I saw a man squatting on the ground checking a big sack, which happened to be one of the chambers of a cow’s stomach. A soothsayer, he was trying to figure out the rate at which he would buy the sack, which could be used to make a damaru, an hourglass-shaped drum held by Shiva and one of the tools of the trade for fortune-tellers. A little later a young man showed up, named Alagar. He comes every day to collect hides and proudly showed me a banker’s cheque for one lakh rupees (100 000) from a merchant from a far-off town. There it gets treated with chrome and sent to Chennai for export. Alagar pays 200 rupees for a big cowhide, 100 for a small one if they are of good quality. Every week Murugan borrows Rs 5000 from private moneylenders for his business, which he returns with an interest of Rs 50. He has also borrowed Rs 4000 from a Self Help Group of Dalit women who live in the neighbourhood. He makes Rs 100 profit per calf after all his expenditures and labours. Every Sunday he cuts up one big cow for around 80kg of meat and two calves weighing 30kg each. His tools cost Rs 80 for a cutting knife and Rs 35 for slicing knives, which he buys directly from the blacksmiths of a village famous for such tools. Once every two months he has to get them sharpened. All the knives that he uses are made from recycled truck parts.

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A significant picture: ‘The cow is born for the Muslims to eat’ Above the large cutting table in Murugan’s shop we can see a framed picture of a cow with the Gods of the Hindu pantheon present on different parts of its body (Figure 36.1). This is one of the most popular illustrations of Hindu Gods. Such pictures are very popular, and can be found in most people’s homes, and shops, even above the driver in buses and trucks (Vitsaxis, 1977). The cow is also considered to represent the dharma (divine order) by the Hindus, while the four legs of the cow represent the four Vedas. When I enquired about the picture, which clearly looked out of place, Murugan answered, ‘The cow is a God.’ According to Murugan, every day in Shiva temples the cows of the temple go to the sanctum and pour their milk onto the top of the phallic symbol Lingam. Probably Murugan believes this popular illustration to be true. Later, I rode

Figure 36.1

The sacred cow

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another three kilometres east and reached a Vishnu temple, looking for a further interpretation of the symbolic significance of the cow in Hindu culture. In the Brahmin’s agraharam (living quarters) for the temple there I found an elderly lady sitting on a porch and showed her the picture of the cow. She told me that the temple cow, Mahalakshmi, is made to stand by the main entrance of the temple showing its backside when the sanctum sanctorum is opened in the morning. She said that all five useful things to humans come from the back of the cow: milk, butter, ghee (clarified butter), urine and dung. This reverence for the cow, the traditional image of India, contrasts with the utilitarian, entrepreneurial spirit of Murugan as he does his work. Still, that his work presents dilemmas for someone working in a society where meat eating in seen as sinful, especially when it comes to beef, is unmistakable. As Murugan said at the end of one of our interviews, only killing is a sin, not selling the meat, absolving himself of the sin, as it is the Muslim priest who cuts the cow’s throat. As Murugan says, ‘The cow is born for the Muslims to eat.’ The world of Murugan is simple in other ways, too: ‘Once the kill is eaten the sin is gone.’ (Ironically, we might note, South Indian society has more non-vegetarians than vegetarians.) By 1.30 pm, Murugan manages to sell all 120 kg of beef. It has been another successful day. One man’s food may be another man’s poison, but a community which is not allowed to participate freely and gainfully in the society has made good use of an opportunity untouched by others because of their own beliefs, fears and taboos. The joyful side of Dalit communities: the thappu as cultural entrepreneurship and the drum of liberation The thappu is a one-sided circular drum with a rim made of wood that is found in the Dalit communities of South India. Played with two sticks, one made from a forest tree called purasu and the other from slender bamboo, this drum is considered the drum of destiny. Originally the job of the lowest castes in the villages, the beating of the thappu and broadcasting of the latest news, especially funerals or other key events, has been a familiar routine in South Indian villages. Even today this practice continues, but it has now taken on richer, more finely nuanced, and, yes, more highly politicized dimensions. An important part of daily popular culture as well as a contested site for imagined social and political constructions of ‘the Dalit people’ and their relation to the powersthat-be, the thappu has also become the vehicle for cultural entrepreneurs who have made success stories out of what was formerly taboo. It has thus been transformed from a symbol of oppression to a symbol of liberation. The thappu is the strength and the weakness, the joy and the sorrow, the promise and the fate, of the Dalits of Tamil Nadu. The drum always returns us to the story of community, symbolic of the heraldic duties of drummers in numerous societies around the world throughout history who have walked around their home villages and towns, announcing the news while beating their drums. Their announcements have often electrified their communities, bringing revitalization and empowerment. The word thappu, it should be noted at the outset, also means ‘a mistake’ in Tamil, much as the word for different in Japanese, chigau, also means ‘wrong’ in Japanese society. Both words reflect the marginalization and oppression of those who are not the same as the mainstream in these two respective societies. The thappu is also called a parai, from which the caste name Paraiyar/Paraiyan also originated. Moreover, with the British and French

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perception of the degraded caste status of these Dalits, and the subsequent spread of British and French imperialism, came the now universally established term pariah from this Dalit caste name. As communities, the Dalits over the years have found some mobility in different social spheres. Their drum thappu, too, has provided them with newfound mobility as the times have changed. The thappu has recently found a place in the mainstream culture of South India. It can be seen at the cinema, on TV shows, at the annual celebrations of matriculation (English Medium) schools, in political party processions, and as a part of the ethnic/folk shows presented as tourist entertainment at five-star hotels in Madurai, a major pilgrimage site and city of half a million people in Tamil Nadu state which is the focus of our research. Though there are several troupes which play the thappu in and around Madurai, a group located in the village of Karumbalai called Sangili Drum-Set was the focus of our research. Karumbalai is situated in the southwest corner of K.K. Nagar, a quiet, rich, and spacious suburb of Madurai. A housing colony carved out by the Madurai Municipality for city workers belonging to Dalit backgrounds in 1951, Karumbalai, with its dense crowding, noisy streets and riotous colours, presents a stark contrast with its neighbour. Power-lines, clothes hung out to dry, and thatched toilet enclosures over open drains compete, in what little open space there is, with stray dogs, buffaloes, cows, goats, and donkeys, not to mention bicycles, rickshaws, motorcycles and scooters, automobiles and carts. And people, people everywhere. The majority of the people in Karumbalai belong to the Chakkiliar community, one of many Dalit communities. And one of the most oppressed. The eminent ethnographers of South India, Edgar Thurston and K. Rangachari have described this community as follows: The Chakkiliars are the leather workers of the Tamil Districts corresponding to the Madigas of Telugu country. The Chakkiliars appear to be immigrants from Telugu or Canares dts; from North East and North West of Tamil Nadu. No mention is made of this caste either in the early Tamil inscriptions, or in early Tamil Literature. In social position they occupy the lowest rank. The Chakkiliars are in more contempt than Pariyas, because they use cow leather in making shoes. The aavaram plant (cassia auri culata) is held in much veneration by them (this plant was used for tanning before chromium became widely used). They worship Madurai Veeran, Mariamma, Muneswara, Draupathi and Ganga. (Thurston and Rangachari, 1909)

Karumbalai, their home community in Madurai, took its name from the cane sugar factory that flourished there once upon a time, so one can imagine how fertile this place must have once been. The surrounding area of the colony was later gradually taken over by squatters. The neighbourhood, which has the distinct markings of a city slum, has, over the years, seen some economic growth. The huts have been replaced by small, concrete houses, lower middle-class homes. Apart from TV as entertainment, many of these homes also now have cable television. Many of the women work as maidservants in K.K. Nagar homes. High school drop-out girls from the community work as salesgirls in the city shops. Men work as drivers, watchmen and at other odd jobs they can find. Basically they serve the rich and middle class of the suburbs. But some of them have become entrepreneurs. Sangili’s narration: a Dalit drummer’s story Sangili, the leader of the Dalit drumming group ‘Sangili drum-set’, is clearly a successful entrepreneur, socially and economically. His name itself means a chain, a rich symbol of

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the bonds of South Indian society. The sangili is a gold chain worn by brides that is used as a symbol of marriage and the family. Sangili’s own society, too, is under the shackles of convention, as members of an oppressed community. When asked why he uses English words for his group, he commented first that he did not realize those are English words. Then he replied, ‘People who are decent and educated call our group “drum-set”, but the actual name is Thappattai.’ Reaching beyond his own cultural sphere to the mainstream of society the name Sangili drum-set fits well for this cultural entrepreneur. Sangili describes his work as follows. During the seventies we were getting a lot of work. There was no competition. There were hardly four or five of us. We would have three thappus and one thammukku, an instrument made of a small brass vessel with a piece of hide tied to its mouth. The instrument is played by beating with two short, stiff leather straps. In the olden times three-fourths of our performances were for death rituals. The thappu was prominent. The thappu also accompanies political parties’ processions. We also do the Tiger Dance. When a girl comes of age the maternal uncle will bring gifts to her. We lead the procession. We also take part in the Mullaipari processions in Mariamman temples (young shoots of grains and legumes are grown in a decorated pot and carried by women on their heads in a symbolic fertility ceremony). We don’t play for weddings. (This is where a strong stigma is still strongly attached to Tamil sentiments concerning caste.) There are ten members in my group. Eight thappu drums, one big marching band drum, and one person who plays maraccas. We get an average of ten programmes a year from the Government. For a temple festival we are paid 4500 rupees, for a puberty ceremony 1500 rupees, for a death ceremony 3500 rupees from the Thevar community and 2500 rupees from the Naicker community (Telugu is the mother tongue of this community, which migrated from Andhra and Karnataka in 1529 during the Nayak’s rule in Madurai). For funeral drumming only seven players participate. I have registered my group with the State Government as Folk Artists. A number is given by the government. The state government runs a board to support folk arts. The state Governor is the president, the secretary of the state is the vice president, and it is called Tamil Nadu Iyal, Isai, Nataka Mandram. The Government is planning a pension scheme for aged folk artists. The thappu is very important for death rituals. People could understand from the sound of the thappu drums that someone has died in the neighbourhood. There is a particular rhythmic beat for announcing death. When the dead body enters the cremation ground the dancing will be stopped, thappu alone will continue. The dead shall hear the rhythm; this will enable the soul to reach sorgam (heaven). For a maternal uncle’s gift procession the cinema beats go well. In those days we were even invited for puberty cermonies. There was a unique beat played for this occasion. Nowadays the disco beat is played. People don’t appreciate the old (traditional) beats. There are more and more groups coming up. There is so much competition. In Karumbalai alone there are six groups. No songs for Thappu Attam – only (cinema) dance.

Sangili’s story appears to be a happy one on the whole, and the increased competition indicates entrepreurial success. He makes use of the cultural capital he possesses in the best way by negotiating directly with government officials and the managers of major hotels. His story, told in a matter-of-fact tone, is not the same for Chakkiliar drummers elsewhere. There are still areas awaiting recovery such as the arid lands of Messal Village in Ramnad District, another research site, where a deplorable situation for the Chakkiliars exists. Agricultural labourers there lament the lack of funds to even repair their drums, which would fetch them some earnings from their traditional funeral drumming and also playing for other important functions. No land, no job. They are left with nothing but heat and dust.

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The thappu as a drum of liberation, therefore, has multiple uses. Not only does the thappu reveal with a loud beat the kinds of oppression encountered by the likes of Viramma (Viramma and Racine, 2000) and Moon (2000), it also questions and challenges, with the beat of resistance, the historical hegemony of caste Hindus. The transformation of the thappu from a symbol of menial and impure work to one of liberation is an active and assertive demonstration of Dalit communities and Dalit entrepreneurs today. Another kind of entrepreneurship: Dalit social entrepreneurs The Thanjavur District of Tamil Nadu, at the mouth of the Cauvery River Delta, an area traditionally lush in paddy fields, has been the setting of untold oppression and serial atrocities. It is in this setting that the social activists S. Jagannathan and Krishnammal Jagannathan have devoted their lives to Gram Swaraj (village self-rule) and Gandhian social activism, a social entrepreneurialism that has uplifted over 12 000 poor, mostly Dalit, families, giving them land and work. Their work has been chronicled in The Color of Freedom, a biography by Laura Coppo and David Albert (2004). Two extraordinary people who have made a real commitment to peace and justice with a simple, powerful approach to social issues, Jagannathan and Krishnammal have taught us the true meaning of compassion and social action in our age of corruption and despair. And, through the power of their lives, these two direct disciples of Mahatma Gandhi teach us the virtues of humility, hard work, self-reliance and service to the poorest of the poor. Reminding us of Mother Theresa in their work, charisma and approach, Jagannathan and Krishnammal have been even more effective in their struggles for change because they have exposed and questioned the roots of poverty, the caste system, and globalization directly, followed quickly by a quest for the most wide-ranging solutions. Whether rich landlords, multinationals or the Indian Supreme Court, Jagannathan and Krishnammal have confronted them all. And they have won more than their share of battles. Encompassing the same devotion and love as Mother Theresa, they have helped to bring land and homes to tens of thousands, and kept the bright light of freedom burning for all to see. These two spiritual workers of light and power who have humbly shown the way to a new and more just society have woven the understandings of Gandhi into the fabric of today’s needs. In a powerful response to a society more insidious and destructive to the natural environment and to the human spirit than could even have been imagined in the heyday of colonialism, Krishnammal and Jagannathan are fighting an imperialism of the soul and of the belly, a frightening monster of greed and abuse that they know can (and will) be stopped with the gentle teachings of the Mahatma. Two saints indeed, Jagannathan and Krishnammal light the way for young revolutionaries of our age who are committed to the best of the human spirit and prospects for enduring change. Krishnammal and Jagannathan built on the land-grant bhoodan movement of Vinoba Bhave, Gandhi’s anointed main disciple, of the 1950s to 1970s. This movement appealed to the religious sensibilities of people who had traditionally given food to monks and the poor as a gift of good faith and the acquisition of karma (merit). Seeing the community itself as the locus of social and economic transformation was a key to the movement, but while it was able to mobilize landlords to give lands away, it was less successful at organizing the poor to make good use of these lands. Moreover, it invariably took place as a set scene, with upper-caste landlords giving to the upper-caste leaders of the bhoodan movement.

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This is where Krishnammal and Jagannathan entered the picture, providing transformative activities which empowered and organized the poor. Utilizing Gandhi’s satyagraha (truth-force) approach, they worked first to build self-confidence in the Dalit communities in which they were working. This movement took on a special force after 1968. Krishnammal recollects her own dark forebodings, even as the event was taking place: ‘On Christmas night in 1968, I was sitting by myself in Gandhigram. The moon was shining high in the sky. I could not sleep, and I kept on thinking about how humanity seems not to have understood the importance of Christ and his teachings’ (Coppo and Albert, 2004). That night, though as yet unknown to her, 44 women, children and infants were being murdered by landlords and their henchmen in the village of Kilvenmani, some 200 kilometres from where Krishnammal and Jaganathan lived. A place where they had never been and knew no one, ‘Venmani’ would transform what little remained of something bordering on a normal home life. Forty-three people were burned alive; the forty-fourth – a newborn – was stabbed through the heart and was found pinioned to a tree by the knifeblade. All of the victims were Dalits. Krishnammal, herself a Dalit, was thus led to a new and more radical approach to land reform, working not only for land-gifts, but purchasing land and building houses. Her first act was purchasing not only land, but also a house which had previously been completely off-limits to Dalits. This house became a community centre. The symbolic nature of such a change, in a community where Dalits were not even allowed to walk on the road in front of this very same house, who would even be killed if their shadow so much as touched the land or walls of this compound, cannot be overestimated. Through a combination of clever financing and active struggles, Krishnammal soon brought a successful movement for change for Dalits of the Cauvery Delta. The number of recruits to her cause is rising as these activities grow and spread to other parts of Tamil Nadu. These include the drive to end prawn farming (destructive of the natural environment and disruptive of traditional agricultural cycles), creation of schools and nurseries, house building projects, orphanages, children’s hostels, women’s self-help associations, farm implement cooperatives, agricultural experiments, small industrial workshops, new cultural flowerings, and campaigns against alcoholism and other social ills (Coppo and Albert, 2004). A challenge to globalization from the perspective of victims at the local level, the work of Jagannathan and Krishnammal presents an alternative to the greed and desolation of what some have called the new East India Company: neo-colonial multinational corporations whose grip is widening and deepening in South India (Rigby, 1997). Local indigenous enterprise: the beginnings of social change The commercial, cultural and social entrepreneurs discussed in this chapter give us pause, compelling us to consider new ways of seeing entrepreneurship. While the Dalit communities and the individuals discussed in this chapter reflect the various theories of entrepreneurship, they also move beyond each of these, spanning in complex ways not only their own communities but those of other castes with whom they are intimately linked. The ties of persons here, despite caste taboos and restrictions, are really imaginative venues for surprisingly creative new enterprises. All of these innovators can, in fact, be considered as social entrepreneurs, especially important because they cause positive social change through their organizing, skills, and determination to transform an idea into reality (Bornstein, 2004; Johnson, 2000) – and in

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the face of a powerful apartheid, one of the most serious of all the world’s great injustices. Possessing keen foresight, unflinching belief, and bold vision to build something new or to change institutions that have become outdated, they help us understand the new dimensions of entrepreneurship for the twenty-first century, where innovation and profits are not only economic and monetary, but social, civic and political. They are, in fact, laying the groundwork for a new conception of entrepreneurship in which the ties of oppression are replaced by a new citizenship beyond caste and class. The founder of Ashoka, Bill Drayton, has profiled these entrepreneurs and their social networks, creating a database of effective change makers which is invaluable if we are to understand the direction of ethnic minority entrepreneurs who would reach beyond their current status and society (www.ashoka.org/home/index.cfm). As Bornstein notes from his study of 100 of these social entrepreneurs, what is most important about them is that ‘one walks away after hearing their stories with the conviction that big problems can be solved. Their stories create a sense of possibility and hope and they encourage action because their ideas are practical and doable’ (www.csrwire.com/mediabuddies/article.cgi/2391.html). Our own examples here reveal Dalit entrepreneurs as visionaries of change, too, of seeing how something new can become practical and doable. That Murugan, Sangili and Krishnammal have been able to profit from their assigned roles, expanding and challenging them in new ways, even as they are strongly discriminated against as an ethnic or caste group, gives hope and meaning to other ethnic revival movements in India and in other societies where oppression and discrimination have traditionally held people down. Although marginalized, these Dalits reveal potentially new strategies for entrepreneurial activity as they obtain competitive advantage by seeking innovative trans-caste niches for their activities. Resources can be found from a number of different sources and more markets are then served by these strategies. Even as the effects of discrimination have an impact on decision making, we also see that creative planning in response to this discrimination encompasses larger and newer fields of opportunity and entrepreneurial success for these Dalit innovators and their communities. For Dalits in the South Indian state of Tamil Nadu, new roles for the thappu drum, the proudly open sale of meat, and successful triumphs of social activism against oppression are all powerful symbols of social transformation and cultural transmission. The awakening and resistance to traditions they represent are foreshadowed by the creative utilization of new economic, cultural and social opportunities available in Dalit communities, providing hope where hope did not exist. Providing hope, too, is an important role for successful entrepreneurs. Notes 1. Dalit identities and lives in South India are mirrored by the Burakumin, outcaste communities of Japan. There are more than three million Burakumin in Japan, comprising various occupations. Heavily discriminated against historically because of their ‘impure’ association with jobs such as leather tanning, one of the key jobs of Burakumin has also been drumming. The taiko and other drums can now be heard around the world with the success of wa-daiko troupes like Ondekoza who symbolize Japan for many people, ironically, given the suffering and oppression visited upon them at home. Throughout Japan, too, the sounds of the magical and colourful ching-dong-ya marching band troupes also resemble Nyandi Melam. Much has been written about these drumming activities in Japan as liberatory acts (see Caste Discrimination, http://www.hrw.org/reports/2001/globalcaste/caste0801-03.htm; Photo Gallery of my Buraku Study Tour in Osaka, http://www.geocities.com/gaijindo4dan/Photos 2.html and especially http://www.geocities.com/

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gaijindo4dan/Photos 6.html; Osaka – A People’s Town, http://www.city.yamagata.yamagata.jp/yidff/ catalog/en/97/jdoc100-3.html; Soul Flower Mononoke Summit (1995), http://www.breast.co.jp/soulflower/ sfms/sfms_profile_e.html; and Scott Schnell, The Rousing Drum: Ritual Practice in a Japanese Community (1999); see also this account of Dalit drumming at the World Congress Against Racism, 2002, WCAR List Archive Index by Author, http://www.hrea.org/lists/wcar/markup/author.php). 2. At the same time, however, we note the domination at the top of this industry by rich Muslims and non-Dalit high-caste Hindus, something we have also noted for entrepreneurs of waste management in India.

References Barth, Frederik (1963), The Role of the Entrepreneur and Social Change in Northern Norway, Bergen: Norwegian Universities Press. Barth, Frederik (1967), ‘On the study of social change’, American Anthropologist, 69(6), 661–9. Bonacich, E. (1973), ‘A theory of middleman minorities’, American Sociological Review, 38, 583–94. Bonacich, E. (1987), ‘ “Making it” in America: a social evolution of the ethics of immigrant entrepreneurship’, Sociological Perspectives, 30, 446–66. Bornstein, David (2004), How to Change the World: Social Entrepreneurs and the Power of New Ideas, Oxford: Oxford University Press. Caste Discrimination (2002), http://www.hrw.org/reports/2001/globalcaste/caste0801-03.htm, 19 December. Coppo, Laura with David Albert (2004), The Color of Freedom: Overcoming Colonialism and Multinationals in India, Monroe, ME: Common Courage Press. CSRwire, ‘A conversation with David Bornstein, author of ‘How to change the world: Social Entrepreneurs and the Power of New Ideas’ http://www.csrwire.com/mediabuddies/article.cgi/2391.html. Dana, Léo-Paul (1995), ‘Entrepreneurship in a remote sub-Arctic community: Nome, Alaska’, Entrepreneurship: Theory and Practice, 20(1), Fall, 55–72. Dana, Léo-Paul (1997), ‘The origins of self-employment in ethno-cultural communities: distinguishing between orthodox entrepreneurship and reactionary enterprise’, Revue Canadienne des Sciences de l’Administration (Canadian Journal of Administrative Sciences), March, 52–68. Ghurye, G.S. (1932), Caste and Race in India, Bombay: Popular Prakahan, reprinted 2000. Ilaiah, Kancha (2002), ‘Cow and culture’, The Hindu Newspaper, 25 October. International Movement Against All Forms of Discrimination and Racism (2003), ‘Summary of a survey on atrocities against Dalits’, http://www.imadr.org/project/dalit/atrocity.html, 26 January. Johnson, Sherrill (2000), ‘Literature review on social entrepreneurship’, http://www.bus.ualberta.ca/ccse/ Publications/, November. Light, I. (1972), Ethnic Enterprise in America: Business and Welfare Among Chinese, Japanese and Blacks, Berkeley, CA: University of California Press. Light, I. (1980), ‘Asian enterprise in America: Chinese, Japanese, and Koreans in Small Business’, in S. Cummings (ed.), Self-Help in Urban America, Port Washington, NY: Kennikat Press. Moon, Vasant (2000), Growing Up Untouchable: A Dalit Autobiography, trans. Gail Omvedt, Oxford: Rowman & Littlefield. Nowikowski, S.E. (1984), ‘Snakes and ladders: Asians in Britain’, in R. Ward and R. Jenkins (eds), Ethnic Communities in Britain, Cambridge: Cambridge University Press. Ong, Aihwa (1999), Flexible Citizenship: The Cultural Logics of Transnationality, Durham, NC, Duke University Press. Osaka – a people’s town (2002), http://www.city.yamagata.yamagata.jp/yidff/catalog/en/97/jdoc100-3.html, December 19. Photo Gallery of my Buraku Study Tour in Osaka (2002), http://www.geocities.com/gaijindo4dan/Photos 2.html and especially http://www.geocities.com/gaijindo4dan/Photos 6.html, 19 December. Racine, Jean-Luc and Josianne Racine (1998), ‘Dalit identities and the dialectic of oppression and emancipation in a changing India: the Tamil case and beyond’, originally published in Comparative Studies of South Asia, Africa, and the Middle East, Vol. XVIII, no. 1, and now available at the following website: http://www.history.ilstu.edu/mtavakol/cssaame/issues/V18-1/RACINES.pdf, 26 January 2003. Rigby, A. (1997), “Gram Sawaraj” versus “Globalization” ’, Peace and Change, October, 22(4), 381–413. Sainath, P. (1996), Everybody Loves A Good Drought, Delhi: Penguin Books. Schnell, Scott (1999), The Rousing Drum: Ritual Practice in a Japanese Community, Honolulu: University of Hawai’i Press. Soul Flower Mononoke Summit (1995), http://www.breast.co.jp/soulflower/sfms/sfms_profile_e.html; accessed 19 December 2002. Thurston, Edgar and K. Rangachari (1909), Castes and Tribes of South India, New Delhi: Indian Government Press.

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Viramma, Josianne Racine and Jean-Luc Racine (2000), Viramma: Life of a Dalit, trans. Will Hobson, New Delhi: Social Science Press. Vitsaxis, Vassilis G. (1977), Hindu Epics, Myths and Legends in Popular Illustrations, Delhi: Oxford University Press. Waldinger, R. (1989), ‘Structural opportunity or ethnic advantage? Immigrant business development in New York’, International Migration Review, 23, 48–72. Wilson, K. and A. Portes (1980), ‘Immigrant enclaves: an analysis of the labor market experiences of Cubans in Miami’, American Journal of Sociology, 86, 295–319. World Congress Against Racism (2002), WCAR List Archive Index by Author, http://www.hrea.org/lists/wcar/ markup/author.php; accessed 19 December. Yoon, I.J. (1991), ‘The changing significance of ethnic and class resources in immigrant businesses: the case of Korean immigrant businesses in Chicago’, International Migration Review, 25, 303–31.

37 Immigrant entrepreneurs and the Israeli welfare state: institutional support and institutional constraints Eran Razin

Introduction Prospects of individuals of particular immigrant or ethnic communities to become engaged in various types of entrepreneurial activity depend on class and ethnic resources of the community itself (Light and Gold, 2000) and on the external context, shaped by opportunities offered by the economic environment and by legal–institutional frameworks. These factors cannot be easily differentiated. For example, attributes of the ethnic community, such as human capital, financial resources and instrumental ethnic networks, influence the broader economy and can even affect the institutional environment, particularly with regard to formal and informal discriminatory measures or support mechanisms geared towards the specific community. Differentiating the roles of economic and institutional contexts is also difficult, because legal–institutional characteristics influence economic opportunity structures and economic circumstances lead to institutional change. Nevertheless, most previous research lacked a broad perspective on the institutional environment for immigrant enterprise. The roles of immigration policies, legal constraints and support mechanisms were frequently mentioned, but usually in studies that focused on ethnic resources and their interaction with economic opportunities (Boyd, 2003; Razin and Light, 1998). This chapter thus attempts to provide insights into the influence of the institutional context on immigrant enterprise. Based on the experience of the absorption of immigrants from the former USSR in Israel since 1990, it discusses the role of public policy and the legal–institutional framework of Israel’s welfare state on entrepreneurship among immigrants. The chapter does not provide a thorough examination of the Israeli case, but rather aims to demonstrate through this case some aspects of the institutional environment. These include a definition of Israel’s institutional context, the manifestation of this context in institutional support mechanisms and in institutional constraints on immigrant entrepreneurship, and the expected implications for immigrant entrepreneurs. I start by proposing a classification of institutional environments, based on three criteria: welfare state regime, level of enforcement of welfare state regulations, and immigration and absorption policies. I then provide a short background on immigrants from the former USSR in Israel, followed by a description of entrepreneurship-support mechanisms in Israel, mostly established with the impetus of the urgent need to absorb the unexpected wave of mass-immigration that commenced in autumn 1989. In the following section I describe constraints on small business development in Israel, distinguishing legal and bureaucratic constraints that affect all the population from those that have a specific impact on immigrants. No legal barriers are geared specifically at new Jewish immigrants in Israel (barriers do exist for non-Jewish guest workers and illegal immigrants). 615

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The discussion of the Israeli institutional environment is based on interviews with individuals engaged in entrepreneurship support in Small Business Development Centers, municipalities and relevant government ministries, and on an examination of laws, regulations and other documents that concern small-business formation. This examination is part of a broader study that examined self-employment among immigrants from the former USSR, a study that also referred to the influence of the national and local economies on immigrant entrepreneurs. My discussion mainly refers to the 1990s, the decade in which about one million immigrants arrived. I nevertheless comment on changes in the institutional environment following the political and economic crisis of 2001–03, and their possible implications for immigrant enterprise. The institutional environment of immigrant enterprise Opportunities and strategies of immigrant entrepreneurs are closely linked to their embeddedness in the economic and politico-institutional environments (Rath, 2000). The economic environment refers to economic fluctuations and trends, such as the emergence of the so-called post-Fordist era, in the 1970s and 1980s (Amin, 1994), that has created conditions for ethnic enterprise to flourish in specific sectors and locations. Local economic contexts refer also to the structure of the local economy, to the existence of agglomeration economies in specific economic activities, and to residential patterns that influence opportunities for small businesses, including geographical concentration of residences of co-ethnic immigrants or the clustering of their businesses (Kaplan, 1998). The economic milieu is clearly linked to the institutional one. Economic fluctuations provoke reforms in welfare state mechanisms and regulations. Such reforms, in turn, influence opportunities in the labor market and in various sectors of the economy. Public decisions that sway between laissez faire and interventionist economic policies are related to swings between different welfare state regimes, although economic policies do not fully explain institutional reforms. At the local scale, attributes of local governance, such as level of municipal fragmentation and policies of land use planning, affect levels of class/ethnic-based segregation and local economic development strategies, both potentially having a significant impact on immigrant enterprise. The institutional environment of immigrant enterprise in democratic countries depends on two major dimensions: welfare state regime and immigration policy. Of three elements of the institutional environment mentioned by Rath (2000), the extent of general laws and regulations on education, taxes, labor relations, safety, health and so on which influences prospects and amount of efforts required to establish a business, is determined by the welfare state regime. The extent to which foreign entrepreneurs are legally permitted to set up business is largely determined by immigration policy. The level of enforcement of the above laws and regulations also influences immigrant entrepreneurs and can be regarded as a facet of the welfare state regime. Welfare state regimes The welfare state regime refers to a broad spectrum of environments that are largely defined by the level of regulation of the economy in general and the labor market in particular. At one extreme is the less regulated American model, termed by Esping-Andersen (1990) the liberal welfare state. In this model, welfare state mechanisms are limited and mainly aimed at a clientèle of low income. At the other extreme are the more extensive

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central and northern European welfare states. Esping-Andersen distinguishes between the corporatist welfare state (for example, Germany), in which the state is ready to replace the market as a provider of welfare, and the social-democratic (Scandinavian) model that puts a greater emphasis on equality. However, the difference between the two systems may have diminished (Kloosterman, 2000). It is usually assumed that the less regulated American model is more receptive to entrepreneurship in general and to immigrant entrepreneurs in particular, because regulation implies higher barriers to the entry of entrepreneurs into the small-business economy. Such barriers are intended to protect the survival and welfare of existing businesses and their owners, and to assure professional standards of businesses in particular sectors, as well as to safeguard adherence of small businesses to laws and regulations that concern social benefits of employees, minimum wage (Ram et al., 2003) and tax payment. These barriers could be particularly high for immigrants, because they frequently either lack formal professional certificates, or possess certificates that are not acknowledged in their new country. The possible advantage of immigrants in utilizing ethnic networks to form a sort of ethnic entrepreneurial enclaves could also be realized to a lesser extent in a highly regulated environment. Kloosterman (2000) argues that, in the less regulated American model, unskilled immigrants have ample job opportunities as employees, thus the push towards self-employment is stronger among the more qualified persons who bump their heads on the employment glass ceiling. This model creates particularly ample opportunities for small-scale firms in personal and producer services, many of which offer favorable prospects for growth. The less regulated American model could also attract immigrants with greater entrepreneurial aspirations, whereas those who hope to rely on welfare state support would be attracted to more generous welfare states. In the more regulated European (Rhineland) model, it is largely unemployment and lack of alternative options for the less qualified immigrants that drive immigrants into self-employment. These self-employed immigrants frequently concentrate in ‘dead-end’ niches, characterized by poor prospects for growth and upward mobility. Nevertheless, many of the more regulated welfare states have relaxed regulations in the last two decades, reducing some barriers for immigrant enterprise. Moreover, welfare states have increasingly become receptive to the formation of entrepreneurship-support mechanisms. One could argue that the willingness to invest in public schemes that assist small businesses and entrepreneurs could be greater in more regulated welfare states, where such schemes are viewed as an integral part of welfare state institutions. Thus the more extensive welfare states could be characterized by both higher institutional constraints and greater institutional support to entrepreneurship than in less regulated environments. The balance depends on the particular magnitude of each of these factors, but it could be assumed that support mechanisms would usually not fully compensate for high institutional constraints. It should also be noted that relaxation of some regulations could actually favor largescale businesses over small ones in which immigrants are more likely to form an advantageous position. Deregulating opening hours, permitting Sunday shopping, as well as lifting planning restrictions on out-of-town large-scale retail, all favor large retail chains over independent stores, including those owned by immigrants. Another reservation to the above generalizations on welfare state regimes distinguishes between economic and welfare state policies. Whereas extensive welfare states can be

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expected to be more interventionist in the economy as well, exceptions do exist. For example, it can be argued that Canada has rather extensive welfare state mechanisms, but follows a more laissez faire approach than many European welfare states. Thus it offers a more favorable environment for immigrant enterprise than countries with similar levels of welfare state services and cushions. Enforcement of welfare state regulations The impact of the welfare state regime on entrepreneurship depends on the level of enforcement of welfare-state regulations (Freeman and Ogelman, 2000). Level of enforcement can be regarded as a sub-dimension of the welfare state regime. A high-regulation welfare state may not be so restrictive where the level of enforcement of welfare-state regulations is low. Minimum wage laws, for example, in a high-regulation state could even give immigrant-owned businesses a slight advantage, when lax enforcement enables them to engage in quasi-legal practices (Ram et al., 2003) more easily than mainstream businesses. Regulation of opening hours of retail businesses and bans on Sunday shopping in a low-regulation environment also provide an advantage to immigrant entrepreneurs, eliminated if restrictions on opening hours and Sunday shopping are lifted. The level of enforcement, however, could influence immigrant enterprise in opposing directions. On the one hand, a low level of enforcement practically reduces the substantial institutional barriers to entrepreneurship in high-regulation welfare states. On the other hand, low and inconsistent levels of enforcement could pose some difficulties for immigrant entrepreneurs, who lack the knowledge of unwritten norms and practices of small businesses. Thus, whereas a high-regulation high-enforcement welfare state (for example, Austria) could prove to be the most problematic institutional environment for immigrant entrepreneurs, low-regulation high-enforcement environments could prove more beneficial to immigrant entrepreneurs than a low-regulation low-enforcement environment. Immigration and absorption policies The second major dimension of the institutional environment is specific to immigrants and distinguishes immigration policies that actively support the absorption of immigrants from policies characterized by passive acceptance of immigrants or policies that are hostile and restrictive towards immigration and its undisturbed absorption into the labor market. The most supportive immigration and absorption policies could influence entrepreneurship among immigrants in opposing directions. On the one hand, such policies open the broadest array of opportunities for immigrants with very few restrictions on business formation among immigrants. These policies can be accompanied by substantial mechanisms that stimulate and assist immigrant entrepreneurs, although the impact of such mechanisms on ethnic enterprise is frequently argued to be rather small (Bates, 1997; van Delft et al., 1999), except for communities in which an entrepreneurial culture is already rooted (Mokrey, 1988). On the other hand, this supportive environment could reduce the motivation of immigrants to venture into small-business, since fairly attractive opportunities could be open to them as salaried employees in the primary labor market. Supportive immigration policies could also be generous in welfare and unemployment benefits, some of which are aimed particularly at immigrants. These benefits would also reduce the willingness of immigrants to assume the risks and hardships associated with self-employment.

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The most restrictive immigration policies clearly discourage immigrant enterprise, since immigrants that do not obtain citizenship could be altogether banned from owning businesses in most sectors. Immigrant enterprise in this environment could be limited to bottom-level informal or illegal activities. Thus the immigration policy that encourages most immigrant entrepreneurship is perhaps that of passive acceptance, in which immigrants do not face discriminating legal and institutional barriers to business formation, but also do not enjoy support and welfare benefits that reduce the attractiveness of selfemployment. It should be noted that immigration policy in a particular country could be groupspecific. Thus, in the same country, some groups could be actively encouraged to immigrate, frequently because of ethnicity or religion that conforms with the mainstream population, because of economic benefits associated with immigration of specific immigrants or because of humanitarian motives associated with acceptance of refugees and asylum seekers. Other groups could be only passively accepted, whereas immigration of other groups could even be actively discouraged. Portes and Rumbaut (1990), for example, distinguish between groups that are actively supported and groups that are passively accepted in the United States immigration policy. These inter-group variations could create different institutional environments for different immigrant groups in the same country. Indeed, Light and Rosenstein (1995) argue that mild discrimination forms a more conducive environment for entrepreneurship among immigrants than either harsh discrimination or lack of any discrimination at all, as long as the mildly discriminated groups possess class and ethnic resources to utilize the entrepreneurial path. Evaluation of institutional environments: summary In light of the above, Table 37.1 defines 12 institutional environments for immigrant entrepreneurs. The table also suggests the range of possible influences of each environment on immigrant enterprise. The range could be very broad in some categories. This reflects both the speculative nature of the table, which is not based on a thorough empirical research, and the fact that the influence of institutional environments of the same category on immigrant enterprise can vary from place to place and from group to group. These variations partly stem from fine differences between institutional environments that can be classified in the same category, and from complex interactions between institutional environments, economic environments and class and ethnic resources of particular ethnic groups, which make it difficult to isolate the impact of the institutional environment. Table 37.1 suggests that the most conducive institutional environment for immigrant entrepreneurs is characterized by a low regulation, but probably high enforcement, welfare state regime, with immigration and absorption policies of passive acceptance. Low regulation assures low barriers for starting a business. High enforcement reduces the barriers posed for ‘outsiders’ by unwritten norms and practices in the small business economy. Passive acceptance assures that no barriers for business ownership would be aimed specifically at immigrants, while less risky alternatives of secure salaried jobs or reliance on generous welfare support are also not readily available. The worst institutional environment for immigrant enterprise is that of a high regulation, high enforcement welfare state with restrictive immigration and absorption policies. In-between are other options whose impact on immigrant enterprise is schematically summarized in Table 37.1.

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Table 37.1

Institutional environments of immigrant enterprise Welfare state regime and enforcement level High regulation

Immigration and absorption policy1

Restrictive Passive acceptance Active support

Low regulation

High enforcement

Low enforcement

High enforcement

Low enforcement

--- -

- 

 -   

 -   

Notes: 1 The policy could vary for different immigrant groups in the same country of destination. 
most conducive institutional environment for immigrant entrepreneurs. --
least conducive institutional environment for immigrant entrepreneurs.

The context for immigrant entrepreneurs in Israel in the 1990s The wave of mass-immigration that commenced in autumn 1989, following the demise of communism in the USSR, surpassed in size any previous immigration wave to Israel since the early 1950s. The number of new immigrants reached about 400 000 by the end of 1991. The pace of immigration slowed down somewhat afterwards, but remained exceptionally high throughout the 1990s, and the number of new immigrants passed the one million mark in the year 2000. Even when accounting for limited flows of back and onward migration, these new immigrants formed about 15 per cent of Israel’s population at the end of 2000. Of these immigrants, 84 per cent came from the former USSR. The flow of new immigrants gradually dwindled in the early 2000s, with the economic crisis that accompanied the eruption of violance between Israel and the Palestinians, although immigration flows remained higher than in the 1980s. The new immigrants from the former USSR were characterized by an occupational mismatch, relative to the structure of the Israeli labor market (Flug and Kasir, 1996). They were extremely over-represented in white-collar occupations, such as doctors, engineers and artists, although not always holding qualifications up to Western standards. They were also over-represented in occupations associated with manufacturing, in a period when traditional manufacturing was contracting. This mismatch could have driven some of them to seek the entrepreneurial path. However, these immigrants have displayed a rather low propensity to become self-employed, particularly a low propensity to form traditional ethnic entrepreneurial enclaves, such as in small-scale retail, restaurants, construction and car repair shops. Among those who did become self-employed, many entered niches at two extremes of the occupational ladder: those based on high levels of education at the top and those non-skilled ones at the bottom (Razin and Scheinberg, 2001). As to the economic context for entrepreneurship, prolonged recession in the Israeli economy, during the 1970s and 1980s, made self-employment more attractive in relative

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terms. However, the economic expansion of the 1990s, triggered by mass-immigration that gave the economy a Keynesian expansionary shock (Lavi and Strawczynski, 2002), could have influenced immigrant enterprise in contradicting ways. Economic growth provided a more favorable environment than ever in Israel for business formation, but probably reduced the drive to self-employment because of the lack of attractive salaried jobs available for immigrants. The economic boom of the 1990s was associated with an unprecedented flow of guest workers and illegal migrants (Rosenhek, 2000). The former largely arrived as a replacement for Palestinian labor in construction and agriculture, whose access to these jobs has become increasingly difficult since the commencement of the uprising in the occupied territories in 1987 and the terrorist actions that accompanied the peace process in the 1990s. Illegal immigrants have been either illegal entrants or guest workers who left their legal employees. These immigrants obviously had extremely limited opportunities in selfemployment, except for marginal activities as domestic helpers, cleaners and the like. The Israeli welfare state and the institutional environment for immigrant entrepreneurs The Israeli welfare state regime has been in-between the high regulation central and northern European welfare state model and the low regulation American model. Between the 1950s and 1970s the prevailing trend was towards the construction of a European-type social-democratic welfare state. During the 1980s and 1990s, some retreat took place, but the system still resembled the European welfare state model more than the American liberal one, at least until the early 2000s. The level of enforcement of regulations in Israel has probably been lower than in either the United States or northern and central European countries, resembling perhaps more low regulation welfare states in southern Europe. It could be argued that informal practices that flourish in an environment of weak enforcement of regulations could make it harder for immigrants to venture into business, since they lack knowledge of unwritten norms and practices in Israel’s small business economy (Razin and Scheinberg, 2001). Hence, in terms of the welfare state regime, Israel presents a medium-level environment for immigrant entrepreneurs, inferior to that of the low regulation–high enforcement American model, but probably superior to that of some European welfare states, particularly those characterized by high enforcement. In terms of immigration policy, Israel again presents a medium-level environment for Jewish immigrants. Public policy actively supports Jewish immigration and views as legitimate, aiming public assistance in housing provision and labor market absorption specifically at immigrants, or offering immigrants preferred terms compared to those offered to the rest of the population. Jewish immigrants can obtain citizenship immediately upon arrival. There is no discrimination against immigrant entrepreneurs and the state even provides support to schemes that encourage them. However, immigrants could have been less motivated to engage in small business in Israel than non-mainstream immigrant groups in countries that follow a more passive acceptance approach to immigration. Moreover, the policy that accepts any Jewish person as an immigrant, even when the person does not have family ties in Israel and is unlikely to support him/herself economically, could attract a relatively large number of less economically motivated and less entrepreneurial immigrants than those who arrive in countries with less open immigration policies.

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The situation is different for non-Jewish guest workers or illegal immigrants. The policy towards these is restrictive, and self-employment options are not viable except for bottom level informal activities. Thus the Israeli environment is characterized by both institutional support and institutional constraints on immigrant entrepreneurs. In the following sections I seek to provide a preliminary assessment of both support mechanisms and constraints. A more thorough understanding of these two facets of the institutional environment, however, requires a cross-national perspective that compares attributes of support mechanisms and institutional constraints in Israel with those in other countries. Public support to immigrant entrepreneurs in Israel A loan fund for self-employed immigrants, operated by the Ministry of Absorption for many years, was perhaps the only scheme of public assistance for entrepreneurs in Israel prior to the late 1980s. It is interesting to note that, although modest in scale, this early attempt to support entrepreneurship was exclusively for immigrants. Only during the 1980s was it increasingly acknowledged that the encouragement of small business formation and self-employment is a high priority objective of economic development and regional economic development policies (Avraham, 1985). Even then, little was done throughout the 1980s. Only the mass-immigration wave from the former USSR gave the impetus to construct extensive public initiatives to support entrepreneurship that have become embedded in Israel’s welfare state system. Thus immigrant entrepreneurs in Israel do not only have access to entrepreneurship assistance mechanisms geared towards the general population. In fact, many of these mechanisms were established primarily to assist immigrant absorption and immigrants have received preferred treatment by these public support mechanisms. The loan fund for self-employed immigrants provided small loans (up to $8000) in most favorable terms, including an option for a small grant. In three years (1997–2000) this fund gave 1400 loans for the establishment of a new business and 1100 loans for the expansion of an existing business. Another fund for the support of small business was not exclusively for immigrants but provided larger loans of up to 500 000 Shekels (around $120 000) with government guarantees. The Jewish Agency operated an additional loan fund for the support of small businesses in peripheral regions (Felsenstein and Fleischer, 2002) and other funds were established by commercial banks. These funds usually began operating only during the 1990s. Technological incubators were established throughout Israel in the 1990s with the support of the Ministry of Industry and Trade. Their number reached 26 in early 2000. While not exclusively for immigrants, the encouragement of immigrant scientists and inventors was a prime objective for most. About 50 per cent of the entrepreneurs in the incubators and 70 per cent of the employees in the projects that received support during the 1990s were immigrants. An extensive network of small business development centers (SBDCs) was established in the first half of the 1990s (Razin, 1998). Composed of dozens of non-profit organizations that were established with the support of various NGOs, the Authority of Small and Medium Sized Businesses in Israel, established in 1994 by the Ministry of Industry and Trade, took over coordination of this effort. The SBDCs provided assistance in connecting entrepreneurs with relevant loan funds, assistance in the preparation of business

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plans, training and mentoring (in which experienced businessmen or former businessmen gave continuous guidance to new entrepreneurs on issues such as manpower and financial management). Whereas the government has covered 87.5 per cent of the mentoring costs, in the case of new immigrants, the immigrants have been reluctant to use the mentoring option, viewing it as interference of the government in their business. Immigrants utilized the SBDCs mainly to gain access to loans on good terms and also to get assistance with financial planning of their proposed business (Michlol, 2000). The extensive network of SBDCs has been geared towards the general population, but aimed at new immigrants in particular, both by marketing their services in Russian and by offering specific courses to immigrants, usually in Russian. Immigrants also enjoyed preference in payment for the SBDC services, their fees usually subsidized by the Ministry of Absorption. Institutional constraints on immigrant entrepreneurs in Israel Formal constraints on entrepreneurial activity of immigrants stem from laws and bureaucratic rules and practices that regulate the establishment of new businesses and their functioning. These constraints can be divided into three major types: (a) general constraints on entrepreneurship, (b) general constraints on entrepreneurship that have a specific impact on immigrants, (c) constraints that are specific to immigrants. Jewish immigrants in Israel should not in principle suffer from any constraints of the third type, but could be subject to constraints of the first two types. Informal constraints on immigrant entrepreneurship are not directly linked to laws and regulations, but can result from language barriers, lack of instrumental networks, informal forms of discrimination and unfamiliarity with the local business culture. Insufficient proficiency in Hebrew and in English (in the case of technological entrepreneurship) was indeed cited as a major obstacle in the way of new immigrants aspiring to venture into business. Starting in niches that largely cater to co-ethnic markets has been a strategy to reduce the language barrier. Procedures of Israeli banks that are unfamiliar to immigrants and difficulties in recruiting the three guarantors usually required in Israel to cosign loans is another obstacle that influences immigrant entrepreneurs in particular. Other constraints cited in our survey of directors of SBDCs include unfamiliarity with bureaucratic procedures: business licensing, registration in the value-added tax department, handling matters with social security, income tax, labor legislation and learning to utilize the rights and benefits awarded to selfemployed workers. All of these constraints refer to the immigrants’ unfamiliarity with Israel’s institutional environment. The services of the SBDCs should help immigrants to overcome these barriers. Moreover, in some institutions, for example municipal licensing departments and banks, Russian-speaking people were employed to serve immigrant clientèle. General institutional constraints on entrepreneurship that could have a specific influence on immigrants are of three major types: (a) business licensing, (b) professional/vocational licensing, based on certificates and experience required of those who aspire to practice in their profession or to operate businesses in particular professions, (c) standards of operation of particular businesses, such as hours of operation and so on. Except for conformity of the proposed use with the statutory zoning plan, most retail and office activities do not require licensing in Israel. A license of the municipal licensing

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authority is required for opening large retail establishments, stores in a few sectors, various laboratories, some automotive services (electrical, tires, glass), metal workshops and several manufacturing activities. A broad array of businesses require additional permits from various governmental agencies, such as the Ministry of Environment, the police, the Ministry of Labor and Welfare, the Ministry of Agriculture and the Ministry of Health. These include pharmacies and other businesses in the health and cosmetics sectors; agriculture and animals; food-related businesses: restaurants, grocery stores and supermarkets, and food processing plants; specific retail activities: laundry and dry cleaning, gems and diamonds, food transport; hotels, swimming pools and discothèques; most automotive services; security services; and several manufacturing activities. Most respondents have argued that business licensing is not a major constraint for immigrant entrepreneurs in Israel. In some agencies, Russian-speaking employees can assist immigrants and, in any case, the SBDCs can instruct immigrant entrepreneurs on how to proceed with the necessary licenses and permits. In some cases, an accountant hired by the entrepreneur can handle these formalities. If there are constraints such as demands for considerable experience in the profession (particularly experience obtained within Israel), in addition to certificates, from those who would like to operate businesses such as car repair shops or kindergartens, information on these constraints is not easy to obtain. Those in the ‘business’ of small business assistance have not been particularly familiar with this type of problems. The second institutional barrier – the requirement of professional certificates and experience – could be the most substantial for immigrants. This barrier refers to qualifications required by law from those aspiring to work in occupations such as travel agents, optometrists, car mechanics, pharmacists, kindergarten teachers, dentists, physicians and real estate agents. Three major types of such requirements were identified in our survey: (1) professional licensing, usually issued by a government ministry and required in order to practice in particular professions; (2) professional certification (recognition of certificates), usually involved with milder requirements in terms of courses and exams; (3) registration. Licensing and registration refer to professions and usually do not distinguish between self-employed workers and employees. However, the additional business licenses/permits mentioned above could include in some cases professional requirements from the business owner. Professional licensing is required in most health-related professions: physicians, dentists, veterinarians, various paramedical occupations, nurses and psychologists. In the case of immigrant physicians, those who completed their studies up to three or four years before immigrating and those who did not complete their training period were required to pass an exam. The Ministry of Absorption financed a preparation course. The ‘record’ of physicians with over 14 years of experience was assessed without an exam. A one-year temporary license is granted upon completion of the training period/passage of the exam. Afterwards, based on the work experience during that year, a permanent license is issued. Dentists are required to pass a license exam. Professional licensing is also required from lawyers, accountants, schoolteachers and kindergarten teachers. Except for schoolteachers, these are professions in which selfemployment is common. Immigrants have to pass various exams (nine exams in the case of lawyers: two in Russian and five in Hebrew), all of which require preparation courses.

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Certification is required in a broad array of professions. Some are white-collar professions (some of which also require a professional license, such as accountants). Others are ‘second-tier’ professions: technicians of various types, real estate agents, locksmiths, plumbers, electricians, pilots, commercial drivers, travel agents and tour guides, assessors, social workers and so on. These have to provide their educational or professional certificates and in some cases are required to take a course or to pass an exam. However, requirements are far milder than those called for in order to obtain a license. Several professions require registration: engineers and architects, electrical engineers, surveyors and electrical technicians. The attitude towards immigrants has tended to be flexible. Requests to exempt immigrants from exams are usually considered with good will, and exemptions are granted where possible, depending upon prior experience and related professional documents. Looking in more detail at the example of engineers and architects, to qualify for registration, immigrants must hold a degree in engineering or architecture granted by an accredited institution of higher education. Those who would like to practise their profession must be listed in the Registry of Engineers and Architects, maintained by the Ministry of Labor and Social Affairs. In addition to registration, architects, chemical engineers and civil engineers must obtain a license. To qualify for a license, one must have at least three years of work experience in the field. Employment outside of Israel is recognized, but it is necessary to have at least one year of work experience in the field in Israel. It should be noted that approximately 15 per cent of all registered engineers and architects in Israel are self-employed. The third institutional barrier – required standards of operation – could eliminate potential advantages of immigrants, who might be willing, for example, to open their business for longer hours than usual in the particular sector. This type of constraints does not seem to be high on the agenda in Israel. Regulations concerning hours of operation of businesses were relaxed before the commencement of the latest immigration wave in 1989 in most locations and for most types of businesses. Whereas such regulations do not hamper business initiatives of immigrants, in retail this could pose a problem for small independent businesses that have to compete with the large chain-stores. A major distinction at present in Israel is between retail establishments that operate within shopping malls or power centers and those that operate out of shopping malls. Within shopping malls, opening hours are regulated by the mall management, and are usually long, in line with the mall management policy. Out of the planned shopping centers, hours of opening are more flexible and usually shorter, and it is in these locations that immigrants could employ their unique strategies. Another issue that concerns hours of operation is the ability to open the business on Saturdays (the Jewish Shabath). It is forbidden to open most types of businesses, including retail establishments, on Saturdays. However, enforcement of this rule has been relaxed for some business types in particular locations, particularly for retail establishments located in rural regional councils. This situation is a source of considerable public debate, not only on ideological–religious grounds but also owing to complaints of store owners in urban business districts and shopping malls on unfair competition of retail establishments located within the jurisdictional areas of rural local authorities. Regulations that concern opening hours and standards of operation have not usually emerged as major issues that either discriminate against or offer unique opportunities for

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immigrant entrepreneurs. As most immigrants from the former USSR are secular Jews and some are actually Christians, immigrant entrepreneurs of this particular origin are rather flexible, with opening businesses on Saturdays where possible. A restaurant owner may seek to open his business for long hours on a weekend in order to exploit the potential market, while operating only for pre-reserved special orders on weekdays (particularly Mondays through Wednesdays) when revenues might not cover the costs of opening regularly. Stores that specialize in non-kosher meat are another niche in which immigrant entrepreneurs have found a substantial potential, particularly in serving their own community. This niche could cause conflicts between these immigrant store owners and the religious establishment, who could press to close down these stores or to move them to remote industrial zones, through municipal bylaws. However, the substantial representation of immigrants in the councils of municipalities in which they reside in large numbers has protected to some extent these store owners from being closed down or harassed by municipal wardens. Economic crisis and the erosion of the welfare state Israel plunged into unprecedented deep recession in 2001–03, associated with renewed Israeli–Palestinian violence, and exacerbated by the global downturn, particularly in high-technology industries. The severe economic recession has created an unfavorable economic environment for small businesses and business formation. However, it had a perhaps more far-reaching impact on the institutional context. The severe crisis and emergency atmosphere has served the Ministry of Finance as a window of opportunity to pursue far-reaching reforms promoted unsuccessfully for years. These aim to transform the welfare state regime, practically to erode welfare state mechanisms, to cut public spending and promote competitiveness. The main steps have been associated with reducing the ‘bloated and inefficient’ public sector, reducing welfare payments and other government transfers, pursuing pension reform to eliminate deficits, eroding the power of already weakened labor unions and breaking large monopolies. Directly related to immigration policy, the government pursued a rather effective policy of compelling illegal immigrants to leave, including use of arrests and deportations, reducing the ability of such immigrants to be self-employed even in domestic help. Whereas reform was inspired by American neo-conservative ideologies, implementation has seemed to follow much more British Thatcherian practices. This has probably been due to Israel’s centralized political culture and ideological foundations, so different than those that characterize the United States. For example, steps did not aim to decentralize functions from central government agencies to local governments, or to put privatized functions under the supervision of local authorities. Rather, grants to local authorities suffered drastic cuts, and reform has tended to be in the direction of privatization that bypasses local government. In such a reform the powers of supervising and monitoring privatized local services are frequently awarded to central government agencies rather than to the failed local government. It is too early to conclude on the impact of this marked shift in welfare state regime on entrepreneurship in general and on immigrant enterprise in particular. The economic context has certainly worsened, at least in the short term. Pursuing a neo-conservative response to recession, rather than expansionary Keynesian monetary and fiscal steps, meant that markets remained rather soft, and it seems that the self-employed suffered

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no less, probably more, than employees from the recession conditions. Widening economic gaps among individuals and among local authorities, associated with the erosion of the welfare state, also seem to limit the expansion of the small-business economy, particularly narrowing opportunities in peripheral regions that suffer most from these circumstances. One should not ignore the potentially positive effects of the new institutional environment on entrepreneurship. Breaking monopolies, encouraging outsourcing and reducing the appeal of salaried employment could create opportunities for small businesses and increase the attractiveness of self-employment. However, the decline in unionized labor, the proliferation of part-time jobs and the tendency of large corporations and organizations to employ workers through manpower corporations and sub-contractors, erode a potential labor cost advantage of immigrant entrepreneurs – an advantage based on exploiting inexpensive co-ethnic labor or operating in the ‘gray’ economy. It can be speculated that, whereas Israel has moved substantially from high to low regulation in terms of welfare state cushions, economic policies have not shifted that much towards laissez faire. Thus Israel increasingly displays a gap in levels of public intervention between welfare state and economic domains. Whereas in Canada, a rather extensive welfare state coexists with a rather laissez-faire regulatory environment, in Israel the opposite can be more true. Thus, eroding the welfare state does not necessarily have a considerable influence on the regulatory environment for immigrant enterprise. Obstacles for professional licensing and certification of immigrants have become higher in some cases, and special assistance for prospective immigrant entrepreneurs has gradually diminished. Taking into account the less favorable economic context, the overall impact of the recession of the early 2000s on immigrant enterprise has apparently been negative. Concluding remarks The discussion in the first part of the chapter indicates that Israel offers a mid-level institutional environment for immigrant entrepreneurs. Immigrants hardly suffer from discrimination and could benefit from preferred treatment by various welfare state mechanisms. However, these welfare state mechanisms and the active public support of immigrant absorption could actually reduce the motivation of immigrants to venture into business. Low levels of enforcement, and regulations that are not clearly spelled out, could also pose some difficulties for immigrant entrepreneurs. The specific examination of institutional support mechanisms indicates that these mechanisms favored immigrants. Their action could be expected to be effective at the micro scale, but apparently they have not been successful in increasing the propensity of immigrants to become self-employed, a propensity that remained rather low (Razin and Scheinberg, 2001). A reliable assessment of the classification of institutional environments and their anticipated outcomes must include a detailed comparison of institutional constraints and support mechanisms in Israel, European and North American countries. It can be assumed that constraints are lower in North America but higher in many European countries. Our survey has indicated that, in general, immigrants were not discriminated in institutional constraints on entrepreneurship, when compared to the rest of the population. There was probably a more positive attitude than in most other countries to acknowledge

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professional qualifications from abroad with minimal hassle, and to assist immigrants with the bureaucracy involved with licenses and certification. An assessment of the rather low rate of self-employment among immigrants from the former USSR can not therefore focus only on institutional constraints. It could well have been that the extensive support given to immigrants is an important institutional factor that reduces their inclination to entrepreneurship. Other constraints that refer to the economic environment and to competition of other population groups over niches that could have been occupied by new immigrants may be no less important than institutional constraints. Acknowledgements An early draft was prepared for the thematic network: ‘Working on the Fringes: Immigrant Businesses, Economic Integration and Informal Practices’, sponsored by the European Commission under the TSER Programme (4th Framework). The author thanks Nitzanit Nimni and Ziv Goldfisher for research assistance. References Amin, A. (ed.) (1994), Post-Fordism, Oxford: Blackwell. Avraham, M. (1985), With Their Own Resources: a New Look at Investment Required for Economic Development in Israel’s Development Towns, Jerusalem: Jewish Agency, Project Renewal. Bates, T. (1997), ‘Financing small business creation: the case of Chinese and Korean immigrant entrepreneurs’, Journal of Business Venturing, 12, 109–24. Boyd, R.L. (2003), ‘Ethnic competition in the retail trade in northern U.S. cities in 1900: a test of the saturation theory of entrepreneurship’, Urban Geography, 24, 45–60. van Delft, H., C. Garter and P. Nijkamp (1999), ‘In Search of Ethnic Entrepreneurship Opportunities in the City, a Comparative Policy Study’, Tinbergen Institute Discussion Papers, www.tinbergen.nl/discussionpapers/ 99059.pdf, Amsterdam. Esping-Andersen, G. (1990), The Three Worlds of Welfare Capitalism, Princeton, NJ: Princeton University Press. Felsenstein, D. and A. Fleischer (2002), ‘Small-scale entrepreneurship and access to capital in peripheral locations: an empirical analysis’, Growth and Change, 32, 196–215. Flug, K. and N. Kasir (1996), ‘Short-run absorption of the ex-USSR immigrants in Israel’s labor market’, in N. Carmon (ed.), Immigration and Integration in Post-Industrial Societies, Houndmills: Macmillan, pp. 107–26. Freeman, G.P. and N. Ogelman (2000), ‘State regulatory regimes and immigrants’ informal economic activity’, in J. Rath (ed.), Immigrant Businesses, the Economic, Political and Social Environment, Houndmills: Macmillan, pp. 107–23. Kaplan, D.H. (1998), ‘The spatial structure of urban ethnic economies’, Urban Geography, 19, 489–501. Kloosterman, R. (2000), ‘Immigrant entrepreneurship and the institutional context: a theoretical exploration’, in J. Rath (ed.), Immigrant Businesses, the Economic, Political and Social Environment, Houndmills: Macmillan, pp. 90–106. Lavi, Y. and M. Strawczynski (2002), ‘Policy variables and growth: evidence from Israel’, Applied Economics Letters, 9, 81–6. Light, I. and S.J. Gold (2000), Ethnic Economies, Orlando, FL: Academic Press. Light, I. and C. Rosenstein (1995), Race, Ethnicity, and Entrepreneurship in Urban America, New York: Aldine de Gruyter. Michlol Financial Consulting and Services (1987) Ltd. (2000), A Survey of Immigrants From the CIS Who Borrowed From the Loan Fund for Self-Employed Immigrants in the Years 1995–1996, Research Report. Mokrey, B.W. (1988), Entrepreneurship and Public Policy, Can Government Stimulate Business Startups?, New York: Quorum Books. Portes, A. and R.G. Rumbaut (1990), Immigrant America, A Portrait, Berkeley: University of California Press. Ram, M., M. Gilman, J. Arrowsmith and P. Edwards (2003), ‘Once more into the sunset? Asian clothing firms after the national minimum wage’, Environment and Planning C: Government and Policy, 21, 71–88. Rath, J. (2000), ‘Introduction: immigrant business and their economic, politico-institutional and social environment’, in J. Rath (ed.), Immigrant Businesses, the Economic, Political and Social Environment, Houndmills: Macmillan, pp. 1–19.

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Razin, E. (1998), ‘Location of entrepreneurship assistance centers in Israel’, Tijdschrift voor Economische en Sociale Geografie, 89, 431–45. Razin, E. and I. Light (1998), ‘Ethnic entrepreneurs in America’s largest metropolitan areas’, Urban Affairs Review, 33, 332–60. Razin, E. and D. Scheinberg (2001), ‘Immigrant entrepreneurs from the former USSR in Israel: not the traditional enclave economy’, Journal of Ethnic and Migration Studies, 27, 259–76. Rosenhek, Z. (2000), ‘Migration regimes, intra-state conflicts and the politics of exclusion and inclusion: migrant workers in the Israeli welfare state’, Social Problems, 47, 49–67.

38 Immigrants from the former Soviet Union as ethnic entrepreneurs in Israel Miri Lerner, Susanna Khavul and Robert D. Hisrich

Introduction Immigration flows are thought to be one of the major sources for the development of ethnicity and of ethnic entrepreneurship. This is especially true when immigrants bring their group boundaries into play as instruments for social and political mobilization or as means for collective action (Al Haj, 2002: 239). Ethnicity and ethnic boundaries can be used as an instrument for mobilization with the aim of increasing a group’s access to economic, social and political resources (Goldenberg, 1989). The ethnic solidarity and mobilization may actually improve socio-economic standing of the ethnic group. Drawing upon ethnic ties for resource mobilization is one of the channels influencing ethnic entrepreneurship. Ethnic small business has been viewed as an alternative and more viable route to upward economic mobility for immigrant groups. Ethnic entrepreneurship is important because it is one way immigrants and ethnic minorities can respond to the current restructuring of Western industrial economies, claim Waldinger, Aldrich and Ward (1990: 15), who emphasize that the groups that they consider all share a migrant experience. The literature on immigrant and ethnic entrepreneurship has had similar results when researching ethnic entrepreneurs in Western countries who are, first, second or third generation immigrants. Many of the features of ethnic and immigrant entrepreneurs are similar. Ethnics and immigrants often face political and economic obstacles that nativeborn or majority entrepreneurs escape, such as difficulties in obtaining loans from commercial banks. These obstacles lead to establishing and nurturing kinship and friendship networks that provide alternative access to the savings of co-ethnics (Waldinger, Aldrich and Ward, 1990: 156). Raijman and Tienda (2003) suggest that the ability of certain ethnic groups to create a self-sustaining entrepreneurial class lies in the development and vitality of two key mechanisms: ethnic vertical integration and resource mobilization through ethnic ties. Both act through a self-reinforcing and cumulative process and produce multiplier effects on business creation. The vulnerability of immigrant-owned businesses, especially during their early years, has attracted some empirical and theoretical attention. Failure rates have been ascribed to limited tangible and intangible resources of the owners, including their human and social capital in their new cultural and economic environment. It is believed that immigrant entrepreneurs start their businesses out of necessity for employment rather than from a recognition of an opportunity. Many institutions, including those affiliated with the government of the country involved, have tried to fill the void by providing a myriad of financial, advisory and networking support before and after immigrant businesses are established. While previous studies have looked at the efficiency and effectiveness of government institutional programs, relatively few studies have compared the relative importance of the entrepreneur’s 630

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original and acquired human capital with the institutional capital available. Owing in part to the lack of data, previous research has not compared immigrant businesses that have survived with those that have failed. The experience of immigrant entrepreneurs in Israel during the 1990s presents an interesting opportunity to compare the relative importance of founder human capital and institutional capital in terms of their impact on firm survival. In the 1990s, Israel’s population grew by 20 per cent as a result of large-scale immigration, primarily from the former Soviet Union. The influx of immigrants created a need for effective absorption policies and prompted the Israel government to make available a variety of institutional support mechanisms for immigrants desiring to start their own businesses. In this chapter, a model of immigrant business survival is proposed and tested using a unique data set made available to the authors by Israel’s Ministry of Absorption. The research is based on a survey of firms that received small business assistance loans from an Israeli government fund designed to support immigrants in their efforts to establish or grow their own new business. The survey occurred approximately five years after the loans were received. While all the firms in the sample had received loans, the firms varied in their use as well as their access to a diverse set of other institutional support networks. Background and hypotheses This study is based on the typology of resources that an entrepreneurial start-up firm needs in order to survive the liabilities of newness. The dominant aspect of this resourcebased view distinguishes between physical, human, social, organizational and financial resource bundles. This typology of resources allows for the analysis of differences in resource-related behaviors by characteristics of business founder/owners, as well as the characteristics of the business (Green, Brush and Hart, 1999: 110). For example, in their study of Cuban immigrant entrepreneurs in Miami, Light and Gold (2000: 97) emphasized the critical role of human and social resources that contributed to entrepreneurship of the refugees, even those without financial capital. The specific focus of the present study is to compare the importance of human and social capital to that of governmental institutional capital in improving the survival of immigrant businesses. Founder human capital Human capital theorists hypothesize that education is an investment that yields higher wage compensation in return for individual variations of skills, training and experience (Mincer, 1974; Honig, 1997). Robinson and Sexton (1994), for example, found in their study that higher levels of education increase the probability of success, in terms of earnings, of individuals who become self-employed. Experience was similar to education in its relationship to self-employment, the difference being in the intensity of the effect (Robinson and Sexton, 1994). The majority of empirical studies attempting to test the human capital model are based on examining data on wage rates in the labor force, controlling for intervening variables such as race, gender and socioeconomic background (Honig, 1997). Cooper, Gimeno-Gascon and Woo (1994) developed a predictive model of new venture performance based on measures of human and financial capital, discernible at the time of start-up. The authors hypothesized that firms with stronger resource positions are in a better position to survive environmental shocks and poor management decisions. Their model included four categories of human and financial capital: general

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human capital (represented by the entrepreneur’s education, gender and race), management know-how, industry-specific know-how and financial capital. Their findings showed that the resource condition at the start-up stage affected the firm’s performance and outcome. Human capital assets have been incorporated in many studies examining immigrant businesses. The results indicate that, among all ethnoracial groups, higher levels of human capital increase the rate of entrepreneurship (Light and Rosenstein, 1995). The results indicate that higher educational attainment increases the individual’s likelihood of business ownership (Light and Gold, 2000). For example, Light and Gold found that the low educational level of Hispanics in the US helps to explain why Hispanic self-employment rates were low as well as why Hispanic had fewer employer firms. They argue that, when combined with the effects of unequal financial capital, the effect of unequal human capital accentuates differences in entrepreneurship between ethnic groups (ibid.: 89). Studying Korean-owned businesses in Chicago, Yoon (1995) found that, while the use of ethnic resources facilitated business start-ups, success in business was hindered by continued reliance on these ethnic resources. In contrast, the use of family labor and human capital resources like education contributed to operating a successful business. Similarly, Bates’s (1994) study of several Asian immigrant groups indicated that human capital resources are positively related to business longevity and profits. The occupational integration of the immigrants in the large wave of immigration of the 1990s from the former Soviet Union to Israel has been examined in several studies, some of which focused on those immigrants who chose to launch their own businesses (Lerner and Hendeles, 1996; Menahem and Lerner, 2001). Mesch and Czymansky (1997) found that those immigrants with secondary and college education were more likely to start a business than those with lesser education. Until now, owing in part to scant data, no study has focused on comparing the human capital of immigrants whose businesses have survived to those whose businesses have failed. Hypothesis 1 Businesses owned by immigrants with higher human capital will be more likely to survive than similar firms whose owners have lower human capital. This hypothesis looks at initial human capital as well as acquired human capital. The probability of survival should be higher for businesses started by immigrants with higher human capital, particularly when it is acquired. Motivation for business ownership Even though opportunity recognition has been identified as a fundamental task of the entrepreneur (Shane and Venkataraman, 2002), many businesses are started as a response to necessity in terms of employment and income needs of the entrepreneur. Analysis of the Global Entrepreneurship Monitor, a large cross-national study, has shown that two out of five entrepreneurs start their ventures out of necessity (Reynolds et al., 2002). While the balance of opportunity and necessity entrepreneurship varies from country to country, Israeli data show that there are approximately four times more opportunity entrepreneurs in Israel than there are necessity entrepreneurs. Opportunity entrepreneurs have higher expectations of growth in terms of rates of employment and foreign exports and are generally viewed as adding higher value to the economy. Just as

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entrepreneurs in the general population, immigrants often enter business ownership because other sources of employment are not available. Immigrants may actually be in a better position to identify opportunities that the general population does not recognize or perceives as incompatible with their social standing. This research is the basis for hypothesis 2. Hypothesis 2 Immigrants who start businesses as a response to a market opportunity will be more likely to have their businesses (a) survive and (b) grow than immigrants who start their businesses out of necessity. Acquired social capital One distinctive feature of social capital is that it is embodied in social relationships, specifically in relationships that enable individuals to cooperate with one another to realize goals (Coleman, 1988; Rosenfeld et al., 2001; Burt, 1992). These relationships are likely to differ in the value they provide to the organization (Friedberg, 2000; Walker et al., 1997). The more tightly linked the individual is to communities, the stronger will be the effect of social capital (Honig, 1997). Raijman and Tienda (2003) compare the experiences of Mexicans and Koreans in Chicago, two groups with very different levels of business ownership. Both Mexicans’ and Koreans’ small businesses are vertically integrated along ethnic lines, but differ in ways that reflect disparities in ethnic solidarity and command over business resources. Sanders and Nee (1996) examine how self-employment among Asian and Hispanic immigrants is affected by human capital/class resources and by family composition, which they regard as social capital. Looking at family composition, being married and living with the spouse increases the odds of self-employment. The authors found that the family facilitates the pooling of labor and financial resources. For immigrant entrepreneurs suffering from a shortage of relationships to mainstream entrepreneurs and clients, the importance of social relationships within the immigrant community increases in importance. On the other hand, reliance on social support networks in the ethnic community is associated with lower profits and higher failure rates, as shown in Bates’s (1994) study of several Asian immigrant groups. This leads to the following hypothesis. Hypothesis 3 The social capital acquired through business ownership will improve the chances of firm survival. Institutional capital Public policy and initiatives is another major topic that relates to both immigrant and ethnic entrepreneurs, particularly in terms of which policies have had an impact on immigrant entrepreneurs directly and indirectly. Governments have a major impact on the structure of opportunities of immigrants in many areas of their lives: residence, occupation and economic well-being. Access to ownership is also affected by governmental policies on the terms of country entrance as well as the policies affecting the ease with which businesses can be started. Thus several researchers have taken into account the role of the institutional framework on immigrant entrepreneurs. In a study of immigrants from the former Soviet Union in Israel, Menahem and Lerner (2001) revealed the importance of governmental support for immigrants’ incorporation.

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Their findings indicate that, when dealing with large waves of immigrants with relatively high human capital in the original society, the difference between the more and less successful immigrants is the adaptability of human capital to the host society. Retraining programs may contribute to such adaptability and thus enhance human capital transferability. With regard to the impact of the government intervention on these immigrants in Israel, though overall migrants earn less than veterans in similar jobs in Israel and almost all suffer an appreciable loss of occupational status and a downgrading of their human capital (Haberfeld et al., 2000), the losses were diminished for those who participated in government-sponsored programs (Lerner, Menahem and Hisrich, 2005). Thus getting institutional guidance and know-how made a difference among the more and less successful (ibid.: 206). In addition, Ram and Jones (1998) explored four layers of enterprise support for ethnic minority firms in UK. Their findings showed that many obstacles to the effective utilization of the support remain and that this stems mostly from the support organization. This forms the basis for hypothesis 4. Hypothesis 4 Immigrant businesses whose owners received a diversity of institutional support will be more likely to survive than businesses whose owners received less support. Networks and ethnic enclaves and absorption A tradition of research in the US and Europe has focused on immigrant enclaves where businesses are owned by immigrants from the same ethnic or country origin as their employees, customers and suppliers (Waldinger et al., 1990; Edin, Fredriksson and Aslund, 2003; see, for a review, Light and Gold, 2000). A large body of research has been devoted to understanding the creation of minority enclave economies, their common characteristics, structure and mechanisms of operation. The results of this research suggest that the operation of minority entrepreneurs within an ethnic enclave is contingent upon the structure of opportunity and resources available (Waldinger et al., 1990; Light and Gold, 2000; Wilson and Portes, 1980; Yoon, 1995; Zhou, 1992; Butler and Greene, 1997; Light and Rosenstein, 1995). The enclave serves as a shelter for the entrepreneurial activities of its ethnic group members. It enables immigrant entrepreneurs to cope with economic discrimination and competition by providing various secure community resources, labor and markets (Wilson and Portes, 1980; Waldinger et al., 1990; Yoon, 1995). Evidence from the US, U.K., and East Asia illustrate that immigrant businesses sometimes grow, change strategies and break out of enclaved immigrant areas (Bager and Razaei, 2000). Immigrant business owners with (1) close contacts to other ethnic groups (including the majority population), (2) an advanced and broad competence profile, with financial resources (often derived from family sources), and (3) cross-border business relations, are the ones most likely to develop firms that grow, restructure and relocate; that is, breaking-out firms. Finally, business ownership also contributes to immigrant absorption by integrating the immigrant owners into the local community. However, referring to the Chinese ethnic economy in Toronto, Fong and Ooka (2002) claim that the social costs of employment in ethnic economy is substantial, as it hampers participation in the social activities in the wider society. Immigrants who work in the ethnic economy are less likely to integrate socially, and they are less able to experience fully the assimilation process.

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Methodology This research methodology will be discussed in terms of data collection, measuring instruments and data analysis. Data collection The research population consists of a cohort of immigrants from the former Soviet Union to Israel who received business assistance loans from a government fund designed to support immigrants in their efforts to establish or grow new businesses. The immigrant business owners were tracked and interviewed in 2000, five years after receiving the loan. Tracking a cohort of immigrant business entrepreneurs over a five-year period enables the long-term impact of institutional capital on the performance of immigrant businesses to be assessed. It also allows the immigrant businesses that have survived to be compared to those that have failed. From the total population of 892 immigrants who received loans, 200 were randomly selected for participation in the study. Of these, 170 agreed to be interviewed. The firms under study represent 19 per cent of the population and have cooperated at the rate of 85 per cent. Of the respondents, 123 had operating businesses and 47 had closed or sold their businesses; that is, 72 per cent of the businesses were still in operation five years after receiving the loan. The data were collected by means of face-to face, in-depth interviews using a comprehensive structured questionnaire. Measurements Dependent variables Business survival and business growth are the dependent variables in this study. In the first part of the analysis, firms that are operating are compared with those that have closed. Firm survival was used as the outcome variable to estimate a logistic regression model. In the second part of the analysis, operating firms are compared, based on their rate of growth. To compare the growth rates of operating firms, a growth index was constructed that incorporates the firm’s profitability, revenues and number of customers. The growth index exhibited a high reliability (
0.96). Independent variables Human capital included traditional variables such as business founder’s age and experience, as well as variables specific to immigrants such as length of residence in Israel and length of experience as a salaried employee in Israel. The Tyree (1981) scale of occupational status was used to measure and compare the professional and occupational status of the business owners and spouses before and after their immigration. The number of financial and advisory support services the business owners received before the loan was approved measured the diversity of institutional capital. Institutional capital was operationalized in terms of the number of financial and advisory support services immigrants received. The acquired social capital variable in the logistic regressions measured the contribution of business ownership to absorption in Israel. Motivation was examined according to the main motive for establishing the business – economic necessity or opportunity identification. Starting businesses out of necessity reflected a lack of employment alternatives or a dissatisfaction with salaried employment. Those who started businesses as a response to opportunity indicated that they had identified a business opportunity to improve their standard of living. The effect of ethnic networks and

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enclaves on the growth of immigrant businesses was examined by asking business owners to indicate whether their main clients or main suppliers are (1) mostly immigrants, (2) partly immigrants and partly locals, (3) mostly locals, (4) corporations, or (5) other communities. Finally a number of traditional demographic variables to control for the gender of the business owner, legal organizational form of the business, industry and geographic location were obtained. Data analysis Two forms of data analysis were used: univariate tests and a logistic regression model. Univariate tests of significance between two groups of firms (those still operating and those which have closed) were done. In addition, for a subset of the data, operating firms, on the basis of their performance profile, are compared in terms of those surviving and those growing. Findings Businesses in this sample were founded largely by men (71.3 per cent) in their middle age (43.1 years old) who were married (83.5 per cent) and had at least one child (1.81 per cent). Firm characteristics are also revealing. In more than half of the cases, immigrants founded service businesses (54 per cent), slightly more than a quarter entered trade (26.4 per cent) and the remainder were engaged in light manufacturing (19.5 per cent). Fiftysix per cent of the businesses were located in Israel’s metropolitan or central region, and the remainder in the outlying regions in the North and South of the country. The univariate results are indicated in Tables 38.1 to 38.5, according to the hypotheses. The main findings of the chapter are indicated in two logistic regression models that predict the odds of survival for immigrant founded and owned businesses (Table 38.6). Human capital In hypothesis 1, human capital is suggested to be important to immigrant-owned businesses and the level of this will affect the survival of the firm. This hypothesis is supported. Results of the logistic regression suggest that human capital variables do play an important role in predicting the odds of survival for immigrant businesses. Table 38.1 shows univariate analysis where a larger set of human capital variables were examined for both operating and closed businesses. The owners of operating businesses had been in Israel significantly longer than the owners of closed businesses (t
2.85; p0.01). Owners of operating businesses had on average one year of experience as salaried employees in Israel, whereas the owners of closed businesses had only half a year. While in absolute terms the difference of half a year does not appear to be material, the difference is a statistically significant differentiator between the two groups of firms (t
2.31; p0.001). Occupational status of the founders after immigration was significantly higher for owners of operating businesses than for owners of closed businesses (t
5.06; p0.001). Owners of operating businesses are also significantly less likely to report a lack of experience in the industry of the business they have founded (2
3.49; p0.05). There are significant differences between owners of operating and closed businesses with respect to their experience in their occupation both prior to and since arriving in Israel. Similarly, the spouses of founders whose businesses are still operating have a significantly higher occupational status after immigration than founders’ spouses whose businesses are closed. No

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Table 38.1 Comparison of human capital variables for founders of operating and closed businesses Variables

Operating

Closed

Total

Mean (SD) N

8.6 (1.5) 123

7.9 (1.8) 47

8.4 (1.6) 170

t
2.85**

Language proficiency (Hebrew)

Low Medium High

8.9 (9) 56.4 (57) 34.7 (35)

13.3 (6) 53.3 (24) 33.3 (15)

10.3 (15) 55.5 (81) 34.2 (50)

2
0.66

Professional status

Mean (SD) N

67.8 (20.5) 117

65.1 (19.6) 43

67.1 (20.2) 160

t
0.71

Professional status before immigration

Mean (SD) N

69.4 (20.8) 104

65.3 (19.6) 42

68.2 (20.4) 146

t
0.97

Professional status after immigration

Mean (SD) N

62.5 (20.7) 97

42.5 (15.2) 32

57.6 (21.3) 129

t
5.06***

Work experience in profession

Mean (SD) N

11.5 (17.0) 118

6.5 (12.8) 45

10.1 (16.8) 163

t
1.78~

Work experience not in profession after immigration

Mean (SD) N

14.7 (16.7) 118

17.2 (18.4) 45

15.3 (17.3) 163

t
0.83

Work experience as an employee in profession after immigration

Mean (SD) N

12.8 (17.4) 123

6.4 (13.1) 47

11.0 (16.6) 170

t
2.31***

Lack of experience in industry

Yes %(N) No

27.6 (34) 72.4 (89)

42.6 (20) 57.4 (27)

31.8 (54) 68.2 (116)

2
3.49*

Human capital of the founder’s spouse Professional status Mean (SD) N

53.1 (22.1) 83

49.4 (25.6) 34

52.0 (23.3) 117

t
0.77

Professional status before immigration

Mean (SD) N

72.2 (18.5) 76

69.3 (22.3) 32

71.3 (19.7) 108

t
0.70

Professional status after immigration

Mean (SD) N

57.7 (22.8) 86

41.8 (24.3) 30

53.6 (24.1) 116

t
3.24**

Spousal employment status

No Yes

20.7 (19) 79.3 (73)

13.5 (5) 86.5 (32)

18.6 (24) 81.4 (105)

2
0.89

Human capital of founders Length of residence in Israel (years)

Test

Notes: Occupational status range 1–100; work experience variables measured in months.
p0.1 * p0.05 ** p0.01 *** p0.001.

statistically significant differences in the occupational status from before immigrating is apparent. Finally, there is no significant difference between the proportion of spouses working between the two groups of firms. A subset of the variables analyzed in Table 38.1 were included in the logistic regression. In our model, the results suggest that length of residence in Israel and length of experience as a salaried employee in Israel both positively and significantly affect the odds of

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business survival. For every additional year that the founders live and work in Israel before starting a business, the likelihood that their businesses will survive increases by 1.77 times. Similarly, in our model, the effect of spouses’ employment status on the survival of the business were analyzed. The results suggest that a working spouse is associated negatively with the likelihood of the business surviving. The businesses of owners whose spouses work are 6.5 times more likely to fail. Motivation for business ownership Hypothesis 2 postulates that immigrants who start their businesses as a response to a market opportunity will be more likely to have their businesses survive than immigrants who start their businesses out of necessity. This hypothesis is not supported; no statistically significant difference in business survival was found as a result of the business being started in response to an opportunity or as a result of necessity. While no statistically significant results emerged, the direction of the coefficient is positive in the predicted direction. The positive coefficient suggests that businesses started as a response to opportunity may be in a better position to survive. It is also worth pointing out that 68 per cent of immigrant business owners indicated that they started their businesses as a response to an opportunity in the market which they had identified (see Table 38.2). In hypothesis 2, motivational effects for business ownership were further examined. Using an index of performance, operating businesses were classified into two groups: those surviving and those growing. Marginal support for this hypothesis (2
2.77, p
0.07) was found. More than 76 per cent of the businesses that are growing were started as a response to opportunity; also 62.5 per cent of the businesses surviving were started as a result of opportunity. Acquired social capital Hypothesis 3 tested whether the social capital the immigrant acquires through the business ownership will improve the odds of the business surviving. Acquired social capital in the logistic regression significantly improved the odds of immigrant business survival at the p0.001 level, supporting this hypothesis. For each unit change on the social capital variable, the likelihood of business survival increases by 5.97 times. Related univariate analysis reveals that owners of operating businesses were significantly more satisfied in Table 38.2

Motivation for business ownership

Necessity versus opportunity N
170

Operating (n
123)

Closed (n
47)

Total (n
170)

Started out of necessity Started as response to opportunity

30.1 (37) 69.9 (86)

37.5 (18) 61.7 (29)

32.4 (55)0 67.6 (115)

Started out of necessity Started as response to opportunity Notes:

Surviving (n
58)

Growing (n
59)

37.9 (22) 62.1 (36)

23.7 (14) 76.3 (45)


p0.1 * p0.05 ** p0.01*** p0.001.

Tests 2
1.05

2
2.77 ~

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639

their economic or general standard of living. However, they are as likely as the owners of failed businesses to remain in Israel. Institutional capital In this study, there were two types of institutional support that immigrant firms received. The first is the pre-loan financial and advisory support services. The second is the loan itself. Hypothesis 4 tests whether the diversity of institutional capital affects survival. Table 38.3 shows that there was no significant difference between operating and closed businesses in the number of different financial or advisory support services received prior to the loan. On average, immigrants received between one and two types of advisory support and one type of financial support. The data collected on the post-loan financial and advisory support revealed that 95 per cent of immigrant businesses did not receive support after they received the loan. The results of the logistic regression (Table 38.4) similarly suggests that there is no statistically significant effect of either financial or advisory support on the likelihood of firm survival. However, it is important to note that the sign on both coefficients is negative and the effect of the number of advisory services is marginally significant (p
0.075). Networks and ethnic enclaves Table 38.5 presents the distribution of the main customers and suppliers for immigrantowned businesses. Forty percent have some immigrants and locals as their customers. Approximately twice as many businesses owners report that most of their customers are immigrants (18.2 per cent) than local Israelis (9.9 per cent). However, as many businesses have mostly corporations as their main customers (18.2 per cent). Two-thirds (66.1 per cent) rely on a mix of immigrant and local providers, whereas only a handful rely solely on immigrant suppliers (4.2 per cent) or local suppliers (2.5 per cent). In terms of employment, 82 per cent of the employees in operating businesses are immigrants. Most immigrant businesses cross the borders of the enclave serving both immigrants and local Israelis. In addition, they appear to have an ethnically diversified supplier base. However, they do rely heavily on co-ethnics for operating the business. Table 38.6 compares the contribution that business ownership makes on absorption and satisfaction. Owners of operating businesses are not more likely to report that business ownership helped them learn the language or make friends. However, compared to Table 38.3

Diversity of institutional capital Operating (n
123) M (SD)

Closed (n
47) M (SD)

Total (n
170) M (SD)

Tests

Number of different types of advisory support received

1.48 (0.62)

1.68 (1.02)

1.54 (0.67)

t
1.75


Number of different types of financial support received

1.10 (0.32)

1.09 (0.64)

1.02 (0.36)

t
1.38

Notes:


p0.1 * p0.05 ** p0.01*** p0.001.

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Table 38.4 Logistic regression analysis: distinguishing between operating and closed immigrant businesses Survival of immigrant businesses (n
142) B (S.E.) Demographic variables Legal organizational form 0.99 (0.57)
(proprietorship
1/partner-corp
0) Industry (manufacturing
1; trade/services
0) 1.85 (0.75)** Geographic location (1
center; 0
periphery) Human capital Gender of business owner (male
1; female
2) 1.29 (0.62)* Age of business owner 0.02 (0.03) Length of residence in Israel 0.57 (0.19)** Length of experience as salaried employee 0.57 (0.27)* in Israel Spousal employment status (yes
1)

Survival of immigrant businesses (n
110) with spousal employment

Exp(B)

B (S.E.)

Exp(B)

2.69

1.31 (0.75)

3.72

0.16

2.12 (0.80)** 0.06 (0.76)

0.12 0.95

0.28 1.02 1.77 1.77

0.88 (0.82) 0.03 (0.04) 0.60 (0.24)** 0.51 (0.31)

0.42 1.03 1.82 1.66

1.89 (0.94)*

0.15

0.83 (0.70)

2.28

Motivation for business ownership Necessity v. opportunity (necessity
1)

0.63 (0.59)

Acquired social capital Contribution of business to social absorption

1.79 (0.40)*** 5.97

Organizational capital Lack of experience and poor decisions Difficulty in sales and marketing

1.87

1.66 (0.47)*** 5.24

0.43 (0.31) 0.50 (0.27)


1.54 0.60

0.70 (0.39)
0.56 (0.33)

2.02 0.57

Institutional capital Number of financial support types before loan 1.12 (0.79) Number of advisory support types before loan 0.73 (0.41)


0.33 0.48

1.09 (0.89) 0.91 (0.49)


0.33 0.40

Model 2 Notes:

69.20***

df
12

58.54***

df
14


p0.1 * p0.05 ** p0.01*** p0.001.

owners of businesses that have closed, they are significantly more likely to report (p0.001) that business ownership has made a significant contribution to their absorption in Israel as well as to their general satisfaction. Owners of operating businesses are not more likely to have a significantly higher satisfaction from their economic standard of living. However, they are significantly more likely (p0.001) to plan a future in Israel. The results of the logistic regression (Table 38.4) suggest that the nature of the business, the gender of the founder, the length of residence, founder’s salaried employment in Israel, and the social capital the founder acquired through business ownership improve the odds of surviving. However, the diversity of either financial or advisory institutional support before the business is founded does not have a significant effect on survival. Finally, the results of this study also suggest that businesses in this study cross the borders of the traditional immigrant enclave.

Immigrants from the former Soviet Union as entrepreneurs in Israel Table 38.5

641

Networks and ethnic enclaves*

Mostly immigrants Partly immigrants and locals Mostly locals Corporations Others Total

Main customers (n
121)

Main suppliers (n
118)

18.2% 40.5% 9.9% 18.2% 13.2%

4.2% 2.5% 66.1% 2.5% 24.6%

100%

Main employees (n
121) All immigrants Mostly immigrants Mostly locals No immigrants

100%

59.2% 31.4% 7.8% 1.3% 100%

Note: * Data available only for open businesses.

Table 38.6

Contribution of immigrant business ownership to absorption and satisfaction Operating M(SD)

Absorption variables Range (1–3) Learned the language Acquired new friends Establishing the business helped the family to absorb socially Establishing the business helped the family to absorb economically Planning a future in Israel thanks to the business Satisfaction from the situation Range (1–4) Satisfaction from the economic standard of living Satisfaction from the general standard of living Notes:

Closed M(SD)

Tests

(n
122)

(n
46)

2.39 (0.86) 2.42 (0.82) 2.67 (0.61)

2.20 (0.83) 2.15 (0.92) 1.91 (0.84)

t
1.34 t
1.81
t
6.46***

2.56 (0.69)

1.40 (0.53)

t
10.61***

2.54 (0.69)

1.27 (0.59)

t
11.12***

(n
122)

(n
47)

2.48 (0.71)

2.30 (0.93)

t
1.39

2.65 (0.69)

2.17 (0.79)

t
3.96**


p0.1 * p0.05 ** p0.01*** p0.001.

Of the four demographic variables in the logistic regression models, two significantly predict whether immigrant businesses will survive or fail. The gender of the founder is a significant predictor of firm survival. Businesses founded by immigrant women are 3.5 times more likely to fail than businesses founded by immigrant men. Immigrant businesses in manufacturing are 6.25 times more likely to fail than those in trade and services. Legal organizational form is only marginally significant as a predictor of survival (p0.08); however, proprietorships are 2.69 times more likely to survive than partnerships

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or corporations. Finally, whether immigrant business are located in the central business districts of Israel or in the periphery does not appear to matter for their survival. Conclusions In this chapter the relative importance of founder human capital compared to the diversity of institutional capital in improving the odds of survival for immigrant-owned businesses in Israel was examined. A model that predicts the survival of immigrant-owned businesses was proposed and tested on a longitudinal sample of immigrant business owners who received loans from a small business assistance program administered by the government of Israel. The results show that founder human capital and acquired social capital significantly improve the odds of survival for immigrant-owned business. As already stated, businesses started by immigrant women are 3.5 times more likely to fail than those founded by immigrant men, while immigrant businesses in manufacturing are 6.25 times more likely to fail than those in trade and services. The length of residence in Israel and length of experience as a salaried employee in Israel both positively and significantly affect the odds of business survival. Every additional year that a founder lives and works in Israel before starting the business increases the likelihood of business survival by 1.8 times. In addition, the social capital immigrants acquire through business ownership significantly improves the odds that their businesses will survive. Contrary to expectation, no statistically significant effect was found for either financial or advisory support prior to business founding on the likelihood of firm survival; in fact, the direction is negative. Human capital of the founders significantly predicts the survival of immigrant-owned businesses. Immigrants accumulated this human capital through the length of their residence in Israel. In the sample, an additional half a year of living in Israel significantly differentiated those who survived in business from those who failed. However, it is not just the length of residence in Israel that is important. Immigrants with higher occupational status in Israel, with a longer history of salaried employment in Israel, and prior experience in the same industry as the businesses they start, are more likely to survive. In contrast, the occupational status of the immigrant prior to immigrating to Israel does not lessen the odds of survival. In short, acquired rather than foreign human capital is critical to the survival of immigrant businesses. The human capital of the immigrant’s spouse is also important as immigrant business owners whose spouses worked were 6.5 times more likely to have closed their businesses. The causality of this finding is difficult to establish because the data reflect spousal employment at the time of the interview. This result can be interpreted in two ways. First, the difference in spousal employment can reflect the fact that, once the business has closed, the spouse of the business owner now has to find employment. They are not able to continue working in the business, nor are they able to stay out of the labor force. Second, immigrant business owners whose spouses are employed may be in a better position to close their marginal or failing businesses since they have an alternative source of income. Further research is needed to clarify this issue. The motivation of the immigrants in starting their business did not have an effect on survival. Immigrant businesses started as a consequence of opportunity in the market are not significantly more likely to survive than immigrant businesses started out of necessity. While the findings were not significant, the direction of the effect is as predicted. Whereas the level and composition of founder human capital is clearly an important determinant of business survival, the diversity of institutional capital appears not to be.

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The government institutional programs which support immigrant business owners did not create a type of social capital that is embedded in networks and resources that immigrants can draw upon as the diversity of institutional capital did not seem to make a difference to business survival. In fact, there is weak statistical evidence to suggest that the odds of survival of those who got more advisory types were lower than of those who did not receive any advisory support. The evidence suggests that, the more assistance the firm received prior to the loan, the less likely it was to survive. One possible explanation for this finding is adverse selection; that is, those immigrants who were not as experienced sought help from a greater diversity of sources than those who were more experienced. However, it is also worth noting that, in the analysis, a number of variables were controlled for, including founder human capital. No evidence was found that immigrant businesses were operating in an ethnic enclave. A strong relationship was found between firm survival and social capital that immigrants acquire as a result of business ownership. The evidence suggests that, not only are immigrants more successful as a result of the acquired social capital, but their absorption into Israeli society was also facilitated. In addition to comparing operating and closed businesses, operating business that were merely surviving were distinguished from those that were growing. Recognizing that the firms in the sample were heterogeneous with respect to business type and size, these effects were controlled for. A logistic regression, not reported here, showed that none of the variables that were found to distinguish between closed and operating businesses distinguished between growing and surviving businesses. This means that no significant differences were found between the features of the surviving and growing immigrant businesses. This finding contradicts all the previous literature and requires further research. The inability to distinguish between surviving and growing businesses may also reflect measurement limitations, in particular the measurements of growth used, as no data on revenues or the level of profitability were obtained. There were only data on whether the businesses experienced an increase or decrease in revenues, profits and numbers of customers. Knowing the magnitude of the growth would provide a more discriminating tool which may lead to more robust findings. Acknowledgement A former version of this chapter was presented at the BKERC 2003 and was published in the Frontiers of Entrepreneurship Research (2003). These authors wish to thank Michlol and Shmuel Adler of the Ministry of Absorption for making the data available, as well as Amram Turgeman (MSc) for his statistical assistance. They also thank the Walker Research Fund for support of this research. References Al Haj, M. (2002), ‘Ethnic mobilization in an ethno-national state: the case of immigrants from the former Soviet Union in Israel’, Ethnic and Racial Studies, 25(2), 238–57. Bager, T. and S. Rezaei (2000), ‘Immigrant businesses in Denmark: captured in marginal business fields?’, paper presented in the Nordic Conference on Small Business Research, Aarhus, Denmark, June, 18–20. Bates, T. (1994), ‘Social resources generated by group support networks may not be beneficial to Asian immigrant-owned small businesses’, Social Forces, 72, 671–89. Burt, R.S. (1992), Structural Holes, Cambridge: MA: Harvard University Press. Butler, J.S. and P.G. Greene (1997), ‘Ethnic entrepreneurship: the continuous rebirth of American enterprise’, in D.L. Sexton and R.W. Smilor (eds), Entrepreneurship 2000, Chicago: Upstart.

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Coleman, J. (1988), ‘Social capital in the creation of human capital’, American Journal of Sociology, 94, 95–120. Cooper, A.C., J.F. Gimeno-Gascon and C.Y. Woo (1994), ‘Initial human and financial capital as predictors of new venture performance’, Journal of Business Venturing, 9, 371–95. Edin, P.A., P. Fredriksson and O. Aslund (2003), ‘Ethnic enclaves and the economic success of immigrants – evidence from a natural experiment’, The Quarterly Journal of Economics, 329. Fong, E. and E. Ooka (2002), ‘The social consequences of participating in the ethnic economy’, International Migration Review, 36(1), 125–46. Friedberg, R.M. (2000), ‘You can’t take it with you? Immigrant assimilation and the portability of human capital’, Journal of Labor Economics, 18(2), 221–51. Goldenberg, S. (1989), ‘The acquisition and transformation of identities’, in J. Friederes (ed.), Multiculturalism and Intergroup Relations, NY: Greenwood Press, pp. 131–9. Green, P.G., C.G. Brush and M.M. Hart (1999), ‘The corporate venture champion: a resource-based approach to role and process’, Entrepreneurship Theory & Practice, 103–22. Haberfeld, Y., M. Semyonov and Y. Cohen (2000), ‘Ethnicity and labour market performance among recent immigrants from the former Soviet Union to Israel’, European Sociological Review, 16, 287–99. Honig, B. (1997), ‘What determines success? Examining the human, financial and social capital of Jamaican microentrepreneurs’, Journal of Business Venturing, 8. Lerner, M. and Y. Hendeles (1996), ‘New entrepreneurs and entrepreneurial aspirations among immigrants from the former USSR to Israel’, Journal of Business Research, 36, 59–65. Lerner, M., G. Menahem and R.D. Hisrich (2005), ‘Does government matter? The impact of occupational retraining, gender and ethnicity on immigrants’ incorporation’, Journal of Small Business and Enterprise Development, 12(2), 192–210. Light, I. and S.J. Gold (2000), Ethnic Economies, San Diego: Academic Press. Light, I. and C. Rosenstein (1995), Race, Ethnicity and Entrepreneurship in Urban America, New York: Aldine de Gruyter. Menahem, G. and M. Lerner, (2001), ‘An evaluation of the effect of public support in enhancing occupational incorporation of former Soviet Union immigrants to Israel: a longitudinal study’, Journal of Social Policy, 2, 307–31. Mesch, G.S. and D. Czymansky (1997), ‘Occupational closure and immigrant entrepreneurship: Russian Jews in Israel’, The Journal of Socio-Economics, 26(6), 597–609. Mincer, J. (1974), Schooling, Experience and Earnings, New York: Columbia University Press. Raijman, R. and M. Tienda (2003), ‘Ethnic foundations of economic transactions: Mexican and Korean immigrant entrepreneurs in Chicago’, Ethnic and Racial Studies, 26(5), 783–801. Ram, M. and T. Jones (1998), ‘Ethnic minorities in business’, Small Business Research Trust Report, London. Reynolds, P.D., W.D. Bygrave, E. Autio, L.W. Cox and M. Hay (2002), ‘Global entrepreneurship monitor: 2002 executive report’, Babson College and London Business School. Robinson, P.B. and E.A. Sexton (1994), ‘The effect of education and experience on self-employment success’, Journal of Business Venturing, 9, 141–56. Rosenfeld, R., S.F. Messner and E.P. Baumer (2001), ‘Social capital and homicide’, Social Forces, 80(1), 283–309. Sanders, J. and M.V. Nee (1996), ‘Immigrant self-employment: the family as social capital and the value of human capital’, American Sociological Review, 61(2), 231–51. Shane, S. and S. Venkataraman (2000), ‘The promise of entrepreneurship as a field of research’, Academy of Management Review, 25(1), 217–66. Tyree, A. (1981), ‘Occupational socioeconomic status, ethnicity and sex in Israel: considerations in scale construction’, Megamot: Behavioral Sciences Quarterly, 27, 7–21 (Hebrew). Waldinger, R., H. Aldrich and R. Ward (1990), Ethnic Entrepreneurs: Immigrant Business in Industrial Societies, Newbury Park, CA: Sage. Walker, G., B. Kogut and W. Shan (1997), ‘Social capital, structural holes, and the formation of industry network’, Organization Science, 8(2), 109–25. Wilson, K.L. and A. Portes (1980), ‘Immigrant enclaves: an analysis of the labor market experiences of Cubans in Miami’, American Journal of Sociology, 86, 295–319. Yoon, I.J. (1995), ‘The growth of Korean immigrant entrepreneurship in Chicago’, Ethnic and Racial Studies, 18(2), 315–35. Zhou, M. (1992), Chinatown: The Socioeconomic Potential of an Urban Enclave, Philadelphia: Temple University Press.

39 Small business among Japan’s Buraku people1 Mitsuru Tanaka

What is Buraku?2 ‘Buraku’ is a Japanese word referring to a village or hamlet. However, this word is usually used to refer to communities where discriminated-against Buraku people reside. Buraku people or Burakumin (min refers to people) are the largest discriminated-against population in Japan. They are not a racial or a national minority, but a caste-like minority among the ethnic Japanese. They are generally recognized as descendants of outcaste populations from the feudal days. Outcastes were assigned such social functions as slaughtering animals and executing criminals, and the general public perceived these functions as ‘polluting acts’ under Buddhists and Shintoist beliefs. Industrial economy and corporate activities in ‘Buraku min’ (discriminated community people): ‘Dowa’ (social integration), Dowa measures (social integration measures to eliminate discrimination), dual structure in the Japan’s industrial economy, internationalization and liberalization of trade, Buraku liberation and human rights, socially reasonable division of labour. Fundamental understanding of problems of Buraku The genuine purposes of discrimination against Buraku (Dowa districts) and Buraku people in Japan are to ‘divide and rule’ for political reasons on the one hand, and to ‘exploit’ for economic reasons on the other. The latter are demonstrated in industrial, labour and employment practices. ‘Recommendations of the Cabinet Dowa Policy Council’ of August 1965 recognized economic problems of Buraku in the context of Japan’s unique industrial structure (the modernized and developed sectors at the top, and the least modernized and underdeveloped sectors at the bottom). They stated, ‘Industries in Dowa districts constitute the very bottom of such a structure. They are found in old sectors which are left far behind the economic development of our country.’3) The recommendations defined ‘weak operation in agriculture, trade and manufacturing’, ‘unstable employment’ and ‘unsecured traditional industries in the urban area’ as industrial and occupational problems of Buraku, while listing butchery, leather processing, shoe-making, sundries, peddling and brokerage as lines of businesses.4 These problems may be attributable to discrimination and prejudice against Buraku.5 Buraku industries should consider themselves as well-established small and medium industries in production areas (SMIs). Despite the fact that they have played an important role by engaging in production of necessities for consumers inside and/or outside the country and supporting their modern life, they have been looked down upon and placed at the very bottom of the industrial structure of the country. Actual economic and industrial conditions of Dowa districts A number of surveys have been conducted by a number of different organizations into the actual conditions of Dowa industries. These have included the aforementioned 645

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‘Recommendations of the Cabinet Dowa Policy Council’; the ‘Current Status of Dowa Measures’ of the Office of the Prime Minister; the ‘Basic Investigation into Employment Structure’, which was prepared by the Management and Coordination Agency for the purpose of reviewing Dowa measures programmes every five years after the enforcement of ‘the Law on Special Measures for Dowa Projects’ and for promoting wider public recognition and understanding of the Dowa issue: those conducted by local governments, those conducted by Buraku-related organizations and institutions, especially industrial associations, and those conducted by researchers and research institutions. It is clear that these surveys have had a common ultimate goal: to advocate policies and programmes for the development and maintenance of Buraku industries and enterprises by conducting surveys and analysis of the associated findings. There is a common problem with the findings, however, in that the analysis used is very limited and there has been overdependence on the statistics collected by these surveys. Tachibanaki questions whether or not we can actually understand the actual conditions of Dowa areas through these data. He states that the data are ‘usually collected by government agencies or independent researchers [so the question must be asked:] do collected samples appropriately represent the entire community?’6 It is also true that there have been fundamental problems with the basic methodology used in conducting these kinds of surveys. Tachibanaki says, ‘To solve this, the samples must be collected in such a way that the whole can be evenly and precisely represented without any partiality.’7 I would now like to examine some of the challenges that Buraku industries and enterprises face with respect to their survival and development by referring to a number of significant surveys. Large cities: Osaka There are a number of different indications that suggest that conditions of Dowa districts are getting worse. The following is an outline of some of the major difficulties.8 Dowa district’s large-scale industrial structure mainly comprises wholesale/retail and restaurant businesses. This is a similar kind of structure to the overall large-scale industrial structure of Osaka prefecture. Under other industrial classifications, however, Dowa districts display their own unique characteristics with a higher proportion of real estate and construction industries on the one hand, and a lower proportion of service industries on the other. In comparison with the previous survey of fiscal year 1997, while the percentage of total industry that the real estate industry accounts for has increased, that of the manufacturing industry has decreased. This suggests that Dowa industries are undergoing a significant change. Dowa districts account for a large proportion of the following medium-sized industries: real-estate agents and care-takers (real estate industry); job classification, facility installation work (construction industry); tanning, tanned-leather goods and leather production (manufacturing); wholesale of food and beverage, construction material and mineral/metal materials (wholesaling, retailing and food catering); disposal of industrial waste (service industry); and truck transportation (transportation and communication industry). The proportion that the above industries account for is greater in Dowa districts than it is for Osaka overall. Examination of small-sized industries reveals that many people in Dowa districts are engaged in renting houses or rooms and running meat retail businesses. In comparison with the entire prefecture of Osaka in terms of percentage, Dowa districts have more than ten times more people engaged in the following

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businesses: production of leather shoes and related accessories, truck transportation businesses, wholesale of agricultural products, wholesale of meat, fish and recycled materials, meat retail, household waste disposal, and tanned leather good production.9 Most business operators in Dowa districts (47.5 per cent) indicate that business conditions are ‘getting worse’ according to the Diffusion Index (DI: showing the judgement of business conditions by business operators). They feel that they are in an unfavourable business environment. Those engaged in manufacturing, wholesale/retail, restaurants, finance and insurance face especially difficult conditions. In response to the question about the future of their business operations, nearly 75 per cent of respondents answered that they would continue working in the same business. There were only a small number of business operators who planned to review their current business and consider restructuring or participating in new businesses. There appears to be a problem of overall lack of innovation. Fewer than 10 per cent of Dowa businesses have introduced computers into their operations. This shows no improvement on past conditions, according to the 1995 survey. Dowa businesses lag far behind the general trend towards the introduction of information technology. These results indicate that business owners in Dowa districts face many problems in their business operations.10 The survey reinforces the fact that eradication of the continuing social discrimination against Buraku is an important prerequisite for the promotion and development of industries in Dowa districts.11 Rural area: Sakurai-city, Nara prefecture The conditions in Sakurai-city, Nara prefecture, will now be briefly examined.12 Nara prefecture is the oldest metropolis in Japan. It is the hometown of many traditional localized industries, some of which can be identified as the origin of many modern Buraku industries. Dowa districts in Nara prefecture have a long history. Even prior to the modern age, Nara had more than 80 Buraku communities. Today, Nara leads the country in terms of the proportion of Buraku households and population to the total number of households and population per prefecture. According to the survey to examine the actual conditions of Dowa areas, conducted by the Office of the Prime Minister in 1975, there were then 82 Dowa districts, 18 353 households and 62 175 Buraku people in Nara prefecture. The Buraku population accounted for 5.7 per cent of the total population of the prefecture, which made Nara pre-eminent in terms of the Buraku population percentage. About 60 per cent of the prefecture’s Dowa districts had more than 100 households each, which indicated a different kind of pattern of Buraku distribution than in other prefectures, including the Kinki area, as well as for the whole country. The progress of Buraku industries in Nara prefecture can be explained as one of factors that have contributed to the uniqueness of the prefecture. Having developed over time, Buraku industries in the prefecture currently engage in the manufacture of ski-shoes, sport-shoes, men’s shoes, baseball gloves and mitts, sandals, fur and leather goods and leather buttons. Except for a few companies, they are all small enterprises. They used to have a large portion of the market share in their respective domestic markets in terms of production output, but, as seen in the decline of the American baseball glove and mitt market, they have been driven close to collapse by increased competition from developing countries, backed by leading Japanese trading companies.13 The issue of the elimination of employment discrimination does not only mean promoting employment of Buraku people in companies, but also encouraging the invitation

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of specialists and general workers with special skills into Buraku communities in order to modernize, streamline and develop Buraku industries. While the exchange of technology, knowledge and experience among different lines of businesses has been called for, it is strongly urged that efforts should also be concentrated on the elimination of ‘bias and prejudice’ and discrimination against Buraku (which is the national objective) in order to encourage the invitation of human resources into Buraku areas and simultaneously to take the necessary steps for building infrastructure within Buraku industries (which is the obligation of the state). In summary, it can be concluded that the general nature of Buraku businesses as small or family businesses has made it difficult for them to manage employment from a perspective of maintaining good employment relations. They have had no other way to procure workers but to rely on such traditional and customary ways as asking family members, relatives, friends in the same district, or friends outside their districts, to find prospective employees for them. Traditional and representative Buraku industries In Osaka, many surveys have been conducted to find the actual conditions of the leather industry. The Osaka Prefectural Corporation for Promotion of Dowa Integration Projects Meeting Group on the Leather Industry also meets on a regular basis to facilitate fact-finding research. The Osaka Prefectural Corporation for Promotion of Dowa Integration Projects produced a report in 1991 as a result of this research. The report focused on the ‘tariff quota system’ or ‘liberalization of the leather industry’, this being an urgent issue for the local leather industry, which is in the midst of increasingly difficult environmental conditions. Pressure from other countries means that the leather industry of Japan needs to change from being a traditional household industry to what is known as a ‘total fashion industry’. Discussion I have referred to recent research and discussed the actual conditions of the industrial economy of Buraku, especially from the viewpoint of small and medium-sized enterprises (hereinafter SMEs). I have done so because I understand that making people aware of the real conditions of Buraku and promoting genuine understanding of the Buraku issue is the first step towards achieving a complete solution to the Buraku problem and the liberation of Buraku, for which the Japanese Government and people are responsible. Past measures taken for Buraku industries The nature of Buraku industry is such that ‘it exists in Buraku, and is determined by the relationship between capitalists and labourers within a Buraku context’.14 Thus any measures to improve Buraku industries should not be considered simply as part of the conventional measures for SMEs in general. In other words, measures for protection and development of Buraku industries should be designed within a comprehensive programme for Buraku liberation. These measures should facilitate the realization of economic aspects of the fundamental rights of Buraku people of which they have long been deprived. The Japanese economic environment is currently undergoing drastic change. This is causing anxiety among Buraku people about industries and jobs being taken away from them. In other words, the economic and social instability is substantially reinforcing

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existing discrimination as well as encouraging conceptual discrimination. This is causing the emergence of a reproductive structure in discrimination. These are serious phenomena that relate to the structural contradiction of contemporary capitalism and state policies that intensify such contradictions. In addition, under current circumstances, where the idea that economic efficiency comes first is prevalent and all-permeating, the basic attitude that places Buraku industries within the perspective of ‘the dual structural problem’ is no longer valid. In reality, however, the dual and differential structure has undoubtedly grown in industrial society. This is also true for ‘Dowa’ measures and policies for Buraku industries, as they have been changing their nature from ‘special industries’ to ‘regional industries’, finally being incorporated into general policies. Today, the world has already entered into the law of the jungle under the name of ‘mega competition’. The weak are being victimized and weeded out, naturally or even intentionally. Problems in the new ‘small and medium sized enterprise basic law’ The 21st century is said to be the century of ‘harmony’15 and ‘co-existence’ or ‘symbiosis’ in which people respect human rights of others. Nevertheless, industrial economic society is categorizing people into ‘the strong’ or ‘winners’ and the ‘weak’ or ‘losers’, encouraging them to be the former in order to win the game. The new ‘Small and Medium Sized Enterprise Basic Law (SME Basic Law)’, was introduced in order to put this theory into practice. Although the government states that the law has just been ‘amended’, the new law is actually worse as it promotes ‘the law of the jungle’. It works especially adversely with regard to the Buraku industrial economy and Buraku enterprises. As was pointed out earlier, solutions to the problems of ‘dual structure’ and ‘differentials’ laid in the Japanese economy have been an essential and noble proposition as well as an ultimate goal for the ‘former law’, or ‘Proposals for the Dowa Measures’. Has the problem of dual structure been resolved? Did the introduction of the ‘new law’ mean that the ‘former law’ had done its job in correcting the differentials? The answer is ‘no’. The dual structure and differentials have not been corrected. As discussed above, polarization has been advancing in the structure of industrial economic society, dividing it into the ‘bright side’ and the ‘dark side’, while expanding the differentials. Facing such a tendency, the Diet session had a heated discussion on the enactment of the ‘new law’. After all, the new ‘SME Basic Law’ passed by the Diet is based on the principles that encourage and nurture only stronger SMEs. I have repeatedly pointed out that the ‘reproductive structure of discrimination’ has been constructed in the course of the development of the Japanese capitalistic economy since the Meiji era. That structure is now being reinforced. In the current circumstances, where the dark side of the law that neglects fundamental rights is becoming apparent, it will be a challenge for the Buraku industrial economy and Buraku enterprises to take advantage of the new ‘SME Basic Law’ and to modify difficult aspects within it. SMEs and the future The international economic environment is undergoing increasingly dramatic changes. The globalization and simultaneous localization of economy have promoted shifts in and diversification of values themselves, while shifts in and diversification of values have caused changes in the world economic environment. For entrepreneurs and companies, particularly small enterprises, their basic problem is how to cope with changes in and

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diversification of, society, ethics and physics; sociology and political science; the legal system, ecology, polities and economy; and changes in natural and cultural values. This was a main topic at the ‘Rencontres de St. Gall 1996’ (Swiss International Small Business Society).16 As stressed at this meeting by Alfred Gutersohn, founder of the Society, what is called for to solve the basic problem is ‘entrepreneurship and managing ability of small businesses which are confronted with drastically changing environment and changes in and diversification of values; and reeducation and training which have an accurate grasp of such motivation, concept and factors as enable them to maintain and develop their operations’. With regard to changes in and diversification of values, economics in the US shows a quick response. For instance, the ‘Chicago School’ (which attributes importance to economies of scale) and ‘Reaganomics’ (which can be said to be influenced by the school) have now replaced the ‘Harvard School’ (which can be said to have supported the antitrust approach). A specific example is found in the Japan–US structural friction. As described earlier, it resulted in Japan being hit by the surging waves of full liberalization and deregulation, and small businesses having to bear the full brunt of the attack. Such are the trials and tribulations of being small business. In the circumstances, there should be shifts in points of view on justification for the existence of small enterprises, such as their standing and role in the national economy. In order to locate small businesses as the vital majority in a true sense, it is necessary to reform the old order in which they are strategically placed at the bottom of the industrial hierarchy, to install them at the centre of the industrial circle for social and reasonable purposes, and to cause a centripetal, centrifugal or circular ripple effect on other segments of the industry. What is more important, as another basic factor, is not only the corporate efforts of a small business itself, but also government policy to encourage small businesses and the role of a leader or catalyst who makes a proposal to both of them from the international point of view. I dare to repeat the importance. In discussing Buraku industries in relation to the problems of SMEs, it should be reiterated that the survival and prosperity of SMEs truly depends on their own untiring efforts in harmony with drastic policies implemented by the state and local governments.17 Problems that Buraku industries face should be viewed in the context of the industrial and economic structure of Japan, especially in the modern capitalistic structure, and from that viewpoint they should be solved by correct decisions. The problems cannot simply be solved by financial assistance. The solution requires, amongst other things, education and training in the fields of business management and skill development, since human resources hold the key to successful business operation. Needless to say, Japan’s economic society is a competitive economic society that rests on capitalism. Dowa measures, which had been carried out for 33 years, were terminated on 31 March 2002. This should be a moment for a new step forward rather than a termination of Dowa measures.18 It must be underlined that Buraku industries have been excluded from competition and have been driven into a very disadvantageous position by the ‘reproductive structure of discrimination’ that was shaped during the progress of capitalism in Japan, but that they are now very important for new business development, such as in the fields of total fashion and biotechnology, in the 21st century. This is well explained by the fact that more companies from both inside and outside the country and Buraku are participating in these business fields. Therefore, regardless of the kinds of measures that are to be taken for these industries, they

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should not be simply protective. In the first place, SMEs in general are placed in an unequal and disadvantageous position in comparison with monopolies and large enterprises. It is therefore necessary for the government to create measures to provide SMEs with education and strength so that effective and reasonable competition will be realized in an economic society. Aggressive and comprehensive measures will naturally be more important for Buraku industries in the move towards the ‘elimination of discrimination’ and complete liberation of Buraku. To reach the ultimate goal of ‘total liberation of Buraku’, it is essential to have a government that will govern the country under a genuine democracy on the basis of full national consensus and that will fulfil state responsibilities. For the people who constitute such a basis, it is also essential to understand Buraku liberation as a national challenge as well as a challenge for every person. In short, by improving and reinforcing the past Dowa projects, such as those carried out under the ‘Law on Special Measures for Dowa Projects’, substantial and universal foundations should be constructed as soon as possible, and more practical measures should be developed, using them as a base. The problem cannot be solved with just a fiveyear-extension of the law, ‘regional improvement’ measures, or general measures. It should be reinforced bit-by-bit while seeking feedback from the measures already implemented. Only in this way can state responsibilities be fulfilled and the national challenge tackled. Indeed, this is the reason why an immediate enactment of the ‘Fundamental Law for Buraku Liberation’ has long been awaited. As the problem ultimately constitutes a problem of human rights, we should understand that it does not simply remain as a socioeconomic problem of Japan, but that it needs to be seen in a global perspective. In other words, for the genuine internationalization of the Japanese economic society, Japan should actively commit itself to human rights issues both inside and outside the country, such as the problem of migrant workers’ rights, to fulfil its obligations as an industrialized country. For this, the state as well as people in Japan should begin with the tasks of the elimination of Buraku discrimination and the restoration of humanity. In other words, if we are ultimately to aim at establishing a socially reasonable division of labour between SMEs and Large Enterprises (LEs) then we need to overcome the legitimized and unreasonable exploitation of Buraku industries and their work force that have placed them at the bottom of the industrial structure. In order for SMEs to become a ‘vital majority’ in a real sense, the old system that places SMEs at the bottom of the hierarchy should be changed, and a new system that will generate centripetal and cyclic effects and relationships should be constructed by placing SMEs at the centre. The time for this has now come. To this end, it will be important for SMEs to focus more of their efforts on business management and for the administration to implement measures to support them while creating a new role for them as a catalyst to give both sides constructive advice from an international viewpoint.19 Notes 1. 2. 3. 4. 5. 6.

I dedicate this article to the memory of a great teacher, Alfred Gutersohn. Source: Buraku Liberation and Human Rights Research Institute, Buraku Liberation News, no. 123, May and July 2002, p. 4. Cabinet Dowa Policy Council, 1974, p. 32. Ibid., p. 52. Ibid., p. 32. Tachibanaki Toshiaki (1998), Nihon no Keizaikakusa – Shotoku to Shisan kara Kangaeru (Looking at Economic Disparities in Japan from the Perspective of Income and Property), Iwanami Shoten, p. 82.

652 7. 8.

9. 10. 11. 12. 13. 14. 15. 16.

17. 18. 19.

Handbook of research on ethnic minority entrepreneurship Ibid., p. 83. Mitsuru Tanaka, ‘Industrial economy and human rights problems – present conditions of small and medium sized enterprises of Buraku and tasks through investigations into actual conditions’, in Fueglistaller, Pleitner, Volery, and Weber (eds), Umbruch der Welt – KMU vor Höhenflug oder Absturz? (Radical Change in the World – Will SMEs Soar or Crash?), Rencontres de St-Gall 2002, IGWHSG, Schweizerisches Institut für gewerbliche Wirtschaft an der Universität St. Gallen (Swiss Research Institute of Small Business and Entrepreneurship at the University of St. Gallen, 2002), September, pp. 535–40. The Osaka Prefectural Corporation for the Promotion of Dowa Integration Projects (1998), ‘Dowachiku Kigyo Jittaichosa Houkokusho’ (‘Survey Report of Fiscal Year 1997 on the Actual State of Enterprises in Dowa Districts’) p. 3. Ibid., p. 45. Ibid., p. 55. Sakurai-city (1991), ‘Dowa-chiku Sangyo Jjttai Houkokusho’ (‘Report on the Actual Industrial State of Dowa Districts’). Tsujimoto Masanori (1986), ‘Nara Prefecture’, in Buraku Liberation Research Institute (ed.), Buraku Mondai Jiten (Encyclopaedia of Buraku Issues), Buraku Liberation Press (in Japanese), pp. 645–6. Ueda Kazuo (1972), ‘Buraku Sangyo no Mondaiten to Kadai’ (‘Problems and Challenges of Buraku Industries’), in the Buraku Liberation League Headquarters (eds), Kaiho Ririn no Sozo (Creation of the Theory for Liberation), Vol. 6, p. 399. For a discussion of harmony in Japan (wa in Japanese), see Léo-Paul Dana (2007), Asian Models of Entrepreneurship – From the Indian Union and the Kingdom of Nepal to the Japanese Archipelago: Context, Policy and Practice, Singapore and London: World Scientific. ‘Topic 5 – entrepreneur and enterprise in the face of changing values’, in Hans Jobst Pleitner (ed.) (1996), Significance and Survival of SMEs in a Different Business Environment, Swiss Research Institute of Small Business and Entrepreneurship, University of St. Gallen (HSG), September; extract from Mitsuru Tanaka, ‘Industrial Economy and Human Rights Problems – Present Conditions of Small and Medium-sized Enterprises of Buraku and tasks through Investigations into the Actual Conditions’, Buraku Liberation and Human Rights Research Institute, Buraku Liberation News, no. 120, May and July 2001; no. 121, September and November 2001; no. 122, January and March 2002; and no. 123, May and July 2002; and Mitsuru Tanaka (2004), ‘Small business of Buraku in Japan’s economy’ – Industrial Economic Society and Human Rights, Kansai University Press. Mitsuru Tanaka (1983), ‘Sabisukeizaika to Chushokigyo Seisaku’ (‘Service economy and small business policy’), in Tatsumi Nobuharu and Yamamoto Junichi (eds), Chushohgyo Seisaku o Minaosu. Editorial, in Japanese language, of Asahi Shimbun (newspaper), 1 April 2002. Mitsuru Tanaka (1999), Small Business in the Japanese Economy – The Position, the Role, the Present Conditions of Small Business and Future Directions – Notes and Materials, Kansai University Press, pp. 34–7.

40 Korean minority entrepreneurs in Japan David Blake Willis and Soo im Lee

Ethnic entrepreneurs as pioneers The activities of marginalized minority communities in Japan have only recently come to the attention of researchers, despite the considerable scholarship on entrepreneurship on ethnic-owned and ethnic-operated firms in Western countries. How might we understand the macro-societal forces at work encouraging ethnic enterprise and a high rate of selfemployment in a minority community in Japan? Ethnic, community-based entrepreneurs in Japan range from Chinese traders in the port areas of Osaka-Kobe and Tokyo-Yokohama to Indian real estate firms, Russian used automobile dealers, and many more. By far the largest number of ethnic entrepreneurs, however, are found among the Zainichi (‘staying in Japan’) Korean minority. Their pioneering activities in restaurants (yakiniku, BBQ), entertainment (pachinko, a kind of pinball), finance (sala kin, loan companies) and other industries have been visible and successful in a society which has traditionally subjected minorities to severe discrimination (Willis and Murphy-Shigematsu, 2007; Lee et al., 2006). Despite a chilly social reception, these entrepreneurs have established themselves, affected the communities in which they work, and been active in the transformation of Japanese society. We are particularly interested here in understanding the Korean ethnic minority community in Japan because their successful example, despite great odds, can help inform policy debates in other countries with immigrant populations, particularly those which also have colonial roots. Moreover, there are positive consequences for Japan itself of studying Korean ethnic entrepreneurs. As is well known, Japanese society is risk-averse and with a very low rate of entrepreneurial behavior (Yasuda, 2002). In Japan it is companies, not individuals, who have been entrepreneurs. Thus, there is a special need in Japan for understanding and emulating the lessons of successful individual Korean entrepreneurs in order for Japan to remain competitive on the global stage. This chapter provides an ethnographic inquiry into Korean entrepreneurs in Japan, specifically the Osaka-Kobe urban area, focusing on issues of struggle, oppression, resistance, and success in trying to understand how these entrepreneurs see themselves and their lives. In defining entrepreneurs we are particularly concerned with the extent and effectiveness of ethnic networks, markets, the sources of human and financial resources, and the effects of discrimination on business decisions (see Crick and Dana, Chapter 49 in this volume). Our definition of entrepreneurs emphasizes innovation and strategic management practices in the establishment and success of a business for one’s own (and one’s family’s) profits and growth. The study concludes with three case studies of successful entrepreneurs, followed by a discussion of the lessons which can be drawn for policy makers from these ethnic minority-based innovators, the historical pathways of their success as Koreans in a dominant Japanese society, and how their examples may indicate avenues for future research. 653

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Figure 40.1 Ethnic Koreans in Japan have accepted Japanese culture openly to pass or survive in mainstream society, as this photo taken on Japan’s most important holiday (New Year’s Day) demonstrates, but they have also strongly persisted in maintaining their Korean cultural identity, notably in their ethnic enterprises; photograph by Soo im Lee Ethnic entrepreneurship has traditionally been conceived as either middlemen or comprador minorities, ethnic enclaves or ghettos, or reaction/resistance to dominant oppressive cultures (Dana, 1997; Yoon, 1991). What do these theories mean for an oppressed minority population in Japan, a non-Western, Asian country? First, although some dimensions of the middleman role are present, it is really more as pioneers that Koreans have come to Japan, seeking financial and social opportunity unavailable back home. The customers of these entrepreneurs have mainly been Japanese, rather than members of their own community, as in China and other settings where there have been comprador middlemen. Although the main resources (financial, emotional, and labor) may come from family and community members (Bonacich, 1973, 1987), the target client communities have largely been from outside their own culture, in this case the Japanese. Two other theoretical approaches to entrepreneurs and entrepreneurship appear to follow more closely the Korean example in Japan. Ethnic enclave theory (Waldinger, 1989; Portes, 1981; Wilson and Portes, 1980) and reactive culture theory (Light, 1972, 1980; Nowikowski, 1984) both see entrepreneurial activities as a result of a culture reactive to historic and discriminatory treatment in the society and the marketplace, which echoes the situation for Koreans in Japan. The location of most activities in enclave theory is

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the community itself, including training, credit/finance, and production (though less so consumption in our case). The ethnic enclave supports new and upcoming entrepreneurs, especially through informal communication networks which lead to market opportunities and role modeling of successful entrepreneurs. Reactive culture theory, furthermore, sees community members as having been forced to adopt marginal niches in the economy, turning only to members of their own communities for help and upward social mobility. Elements of both these approaches can be seen among Korean entrepreneurs in Japan. Mabe (1988), for example, has suggested that Japan’s severe exclusionary policy was a driving and reactionary factor to lead many Koreans to start up their own businesses. At the same time, cultural characteristics such as frugality, a strong work ethic, and ethnic pride also led many Koreans to become successful entrepreneurs. Following Barth (1963, 1967), we see these Korean individuals as having an important impact on their communities, too, as essential brokers in their contacts with Japan and as active in the transformation of both their own society and the larger Japanese society. In contrast to Toulouse (1990), Koreans in Japan have in fact become entrepreneurs both because of cultural values and as a means to reach social acceptance (though not necessarily integration). Antonio Gramsci’s understanding of culture may help us to further understand the activities of Korean entrepreneurs in the context of Japan’s society today as an extension of this reactive cultural theory. In Gramsci’s conception, it is important to seriously question hegemony in any social or cultural context. Hegemony, in Gramsci’s perspective, means dominant groups in a society providing leadership, sometimes intellectual, sometimes moral, and always based on power. This leadership requires as its object the consent and participation of subordinate groups in the society. Gramsci sees struggle as occurring between the forces of resistance of these groups to the leadership of small power cliques which aim to incorporate them into a larger body politic. By employing the powerful explanatory tools of Gramsci for Zainichi Koreans through the media of oral history and archival research we can have a better understanding of possible future directions for research into ethnic entrepreneurs in Japan. These thoughts parallel those of Hagen (1962), who was concerned with the emergence of entrepreneurial change due to the perception by a group that they are not respected by the larger society and that entrepreneurship in the economic realm is one way of overcoming social grievance. For Hagen, and for Dana (1997) as well, social marginality triggers entrepreneurial energy, an adaptive response behavior to that marginality, especially when there has been a withdrawal of status respect, as happened in the colonial era to Koreans subjugated by the Japanese. With economic prowess comes social recognition, at least to some extent, which Hagen and others see as a driving force for entrepreneurial activity. For the Koreans in Japan, there are strong elements of Japanese popular culture in these activities, too, notably in the three traditional activities of these entrepreneurs in Japan (pachinko, yakiniku, and sala kin). It is important to note here that Gramsci does not see popular culture as imposed from above or generated from below so much as he sees it as a terrain of exchange between the two. This terrain is especially marked by resistance/incorporation. Historical processes play a key role: the struggle between dominant and subordinate cultures/classes is (or at least should be) the key focus of social activity and transformation, what Gramsci calls ‘articulation’. The symbols of this incorporation as well as the symbols of resistance to this hegemony can be found in the cases of Korean economic, social, and cultural entrepreneurs.

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Responses to marginality in Japan: the entrepreneurship alternative Koreans live invisibly in Japan. Using Japanese pass-names to avoid severe discrimination, the Korean presence in Japanese society, unspoken and taboo, is an uncomfortable reminder for the Japanese that their colonial past is not so far away (Lee, 2002). Few avenues for economic or social mobility have been available for Koreans, who comprise Japan’s largest ethnic minority. Tough, resilient, energetic, and innovative, Korean minority entrepreneurs in Japan have succeeded against great odds and in the face of an extremely challenging social milieu. The characteristics of minority Korean entrepreneurship in Japan contain important lessons for entrepreneurs in other settings where resident ethnic minorities face the brunt of racism, ignorance, and poverty. Although a minority within a minority, the majority of Koreans in Japan being working class and poor, successful Korean entrepreneurs demonstrate a phenomenal grasp of the requirements of entrepreneurship: flexibility, pride, courage, confidence, energy, and vision. As researchers of entrepreneurial success in other contexts have discovered (Enz, Dollinger and Daily, 1990; Shapero, 1984), much of this comes from a cultural values orientation that places high esteem on hard work, business acumen, and successful results. Min and Jaret (1985), Min (1984, 1986–87, 1987) and, especially, Yoo (1998) particularly noted the values of frugality, hard work, and other cultural characteristics of the Korean immigrant community in the United States, which explain their success (interestingly, this is not in the context of ethnic enclave theory in the United States, in contrast with Japan). Koreans in Japan have responded to their own marginality in Japan in ways similar to the Dalits, the ‘untouchable’ castes of India (see Chapter 36 on Dalits in this volume by Willis and Rajasekaran). For them, ‘the entrepreneurship alternative’ is a way of raising one’s family’s economic and social status. Oral interviews with a range of Korean entrepreneurs provided us with a clear picture of the motives, ambitions, and successes, and sometimes failures, of these remarkable individuals, while ethnographic observation in the Korean communities of Osaka and Kobe, Japan, along with archival research, has given further depth to our understanding of the historical and social dimensions of Korean minority entrepreneurship. The roots of Korean entrepreneurship in Japan Korean migration to Japan during colonization The sea route between Shimonoseki, on the southwestern tip of Yamaguchi Prefecture, and Busan, at the southern edge of South Korea, first opened in September 1905. The purpose of linking the two ports was to support Japan’s advance into China (SCOPE, 2004). During the colonization of the Korean peninsula by the Japanese imperial government many Koreans who could not make a living in Korea any longer came to Japan, mostly poor peasants who had lost their farmland to confiscation by the Japanese imperial government (So, 1987). Gradually spreading throughout Japan, a large proportion of these immigrants settled in Kansai and Kyushu. The economic stagnation in these regions then caused the Kanto area to become popular for economic initiatives until the horrific massacre of 6000 Koreans in the midst of the chaos following the Great Kanto Earthquake of 1923 (Lee and DeVos, 1981). This terrible tragedy created an exceedingly fearful and insecure socio-

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economic environment among Korean immigrants. The ‘pull’ phenomenon for these immigrants then shifted to Osaka, and, consequently, the largest Korean community developed there (Kashani, 2006). Moreover, Tokyo’s industry consisted of medium to large-scale manufacturing industries that required skilled labor and showed significantly lower turnover rates in terms of possible employment. In contrast, Osaka’s small-scale industries, which experienced extreme difficulty in recruiting unskilled labor, lured many unskilled Korean immigrants (Kashani, 2006). At the outbreak of the Pacific War, many young Korean men were also brought to Japan as forced labor (So, 1987). Even though Koreans were Japanese nationals during this period of Japan’s colonization of Korea from 1910 to 1945, they were treated as subjugated citizens and suffered from severe structural and social discrimination (Lee, 2001). Few job categories were available for them other than unskilled labor. As Hagen (1962: 241) has noted, this goes far in explaining the job categories an immigrant community chooses: ‘The channel in which creative energies will flow depends in part on the degree to which other possible channels are blocked.’ The will to succeed was reinforced by exclusion from other possible job categories (Aldrich, Jones and McEvoy, 1984), the access to power and status thus being narrowed to the business sphere, especially as professional and political opportunities were denied Koreans. By the end of the Pacific War, approximately two million Koreans were living in Japan, half of whom returned to their home country after Korea was liberated (Tanaka, 1995). Those who ‘returned’ went to North Korea, even though most of these ‘returnees’ had actually been from the South, in what has recently emerged as a project of the Japanese government to repatriate large numbers of Koreans for political, economic, and social reasons (Morris-Suzuki, 2005). The Japanese citizenship of the remaining Koreans was revoked in 1952 without prior notification. Since then, Koreans in Japan have been living as foreign residents. Even after many generations, their status continues to be severely marginalized. This power relationship between Koreans and Japanese has changed little over the years, even after Korea’s liberation in 1945, formal apologies, the establishment of official relations with South Korea, and the emergence of South Korea as a global economic powerhouse. Zainichi: the ethnic Korean minority society in Japan today We cannot really be sure how many residents of Japan today are Korean culturally, wholly or in part. Until recently, naturalization meant giving up Korean names, which makes a total count virtually impossible. There are, moreover, many mixed Korean-Japanese families who have kept at least some Japanese culture. Those Koreans who have either chosen to retain a South Korean passport, a North Korean passport or travel documents, or who are stateless, now number somewhere over 600 000 people. It is not unreasonable to see the total population of those affiliated with Korean culture as numbering over two million residents, or close to 2 per cent of the Japanese population. Often referred to as Zainichi Kankokujin or Zainichi Chosenjin, to distinguish these residents from more recent immigrants, these Japanese terms for the Korean minority in Japan carry suggestive nuances which reveal the depths of discrimination against Koreans. Zainichi means ‘staying in Japan’, the unspoken expectation being that these Koreans, some in Japan for four or five generations, will eventually ‘go home’. This, of course, misses the point that, for many Korean–Japanese, Japan is home.

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Many Zainichi have now appropriated and are using this term for themselves, in much the same way other oppressed peoples have taken terms originally meant to disparage them and given these terms new power (‘Yankee’ or ‘Black’, for example). Kankokujin is a person of South Korea, while Chosenjin refers to both North Korea (Kita Chosen) and the former name for Japan’s entire Korean colony of Chosen. The multiple layers of meaning associated with these terms suggest not only conflicts within the Korean community in Japan and abroad (North/South), and between Japan and North Korea (and to a lesser extent, South Korea), but a lingering colonial consciousness which Japanese have when dealing with Zainichi. Other subjugated minority groups such as Burakumin and Okinawans have been assured of civic rights along with their Japanese nationality, but Korean participation in society has been blocked because of their foreign status (Lee, 2005). This exclusionary policy has strengthened their ethnic solidarity, and the Korean community has gradually developed as a result of this isolation from mainstream society (Ko¯, 2002). After their own home country was ideologically divided into North and South Korea in 1953, they also had to face political divisions among themselves (Lee and DeVos, 1981). Diversity in Korean business in Japan: prospering in peripheral market niches Since Koreans have to face numerous difficulties in Japanese society, they have learned how to survive by searching for sukima sangyo¯, peripheral market niches, in which the Japanese would not be interested (Lee, 2005). These are not limited to one narrowly defined business sector alone, however, and we note the flexibility of Korean entrepreneurs to change the type of business in which they are engaging. The Osaka Korean (Ethnic) Business Association in Osaka (originally the Zainichi Kankoku Shokokai, they changed their name in 1961 to the Osaka Kankokujin Shokokai) lists their membership, for example, under the following categories: processing of plastic, vinyl, and rubber (173 companies), steel (185), cotton spinning (164), trading (17), real estate (200), entertainment corporations (such as pachinko, golf courses, movie theaters and so on) (103), leather, mainly shoes (28) and restaurants (142). With the 1980s civil rights movement for Koreans, a path to becoming lawyers and CPAs (Certified Public Accountants) was opened to Koreans. Now there are 169 companies related to law and accounting. However, these companies have mostly been engaged by the new generation of Koreans, whose fathers were affluent enough to accommodate their children with educational opportunities. Innovation and the creation of new market niches are legendary in the Korean ethnic minority community in Japan. For example, both ‘love hotels’ and ‘capsule hotels’ were introduced by Korean entrepreneurs (Mabe, 1988). Love hotels (also known as boutique or fashion hotels) provide couples with a room to spend some undisturbed time together at any time of the day, thus fulfilling the needs not only of customers but of hotel operators with empty rooms during the day time. The rooms of capsule hotels are about one meter wide, one meter high and two meters long, include essential items such as a bed, a room light, and a radio with an alarm clock for those who missed the last train and cannot afford to stay in a regular hotel. Capsule hotels offer a cozy space for drunken Japanese businessmen for about half the price of a regular hotel room. These are examples of creative new approaches to business opportunity, but by far the largest number of ethnic businesses in Japan traditionally conducted by Koreans are, as mentioned earlier, pachinko parlors (pinball gambling), yakiniku (Korean barbeque)

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restaurants, and sala kin (loan shark companies providing kin, money, for salaried men). Let us look into the inner workings of one of these industries. Entrepreneurship on the edge: the pachinko business Pachinko is one of the most popular entertainments for Japanese. Smoky and loud pachinko parlors can be found throughout Japan. It is an industry generally considered to be run by Koreans. The total sales of pachinko are unknown, but some estimates say they are more than 30 trillion yen, or about $26.4 billion (Murobushi, 1997). One of the largest of so-called third sector industries, pachinko (literally sling-shot) is a cross between a slot machine and pinball. The player wins if he or she drops the pachinko ball into the holes of the machine. This simple and passive play allows people to sit entranced, engrossed, and sometimes even making money, for long hours at a time. There are even pachi-pro (pachinko professionals) who make a living from playing pachinko for eight hours every day. Japan prohibits gambling, but pachinko is gambling that bypasses the law by allowing the player to exchange the balls for some special goods, such as cigarettes and sweets, and then exchanging these same goods for cash at a small window just outside the parlors. As one might imagine, the same goods circulate, and the real object is cold, hard cash. Some winners can earn as much as Yen 100 000 ($1,000) a day, but most customers lose three or four thousand yen instantly or even more in a longer sitting. The pachinko industry is closely related to high technology. In 1949, Nakajima Kenkichi, a first generation Korean, founded Heiwa Inc. A half-century later, Nakajima has expanded into a corporate group that not only manufactures pachinko machines, but also makes pachinko slot machines (pachislo) and related equipments that uses high technology. Heiwa developed the first pachinko company in the industry to be listed on the stock exchange (currently on the First Section of the Tokyo Stock Exchange). Heiwa’s consolidated sales for FY 2002 reached 9838.4 billion yen (US$89.4 billion), and Heiwa Sangyo¯ owns more than 50 per cent of the shares of the pachinko machine manufacturing sector (Heiwa Sangyo¯, 2005, ‘Message from president’). According to the latest statistics revealed by Zennichi Ru¯ren in 2003, the total number of pachinko parlors in Japan is 16 076 and the number of pachinko machines is 4 891 944. Sophisticated computers are built into these machines, and the pachinko industry is one of the major clients for computers. The statistics by region are 1430 in Tokyo, 1192 in Osaka, 4749 in Kanto¯, and 2595 in the Kinki areas. There is a dark side to fu¯zoku sangyo¯ (‘third industry’), too, a growing industrial sector which the Japanese government does not want to admit exists. As one interviewee noted, underground money called angura represents the share of ‘leisure’ businesses that figure largely in Japanese economics. The telekura (prostitution business via telephone) industry is a growing part of this third industry, too, and, unfortunately, some Koreans are closely working with yakuza (organized crime) groups in this area. Since many of the Korean entrepreneurs use Japanese names and do not disclose their ethnic roots to the other competitors, the only way to assess the number of Korean pachinko parlor owners is from the actual pachinko parlor owner’s testimony. Many Koreans use Japanese pass-names, but they often select names similar to their original Korean names. For example, those whose surname is Kim (the Chinese character meaning gold) might choose Kaneyama (gold mountain) for their Japanese name.

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Another interviewee disclosed that, in his opinion, 80 per cent–90 per cent of the pachinko parlor owners are of Korean descent, including Koreans who are naturalized Japanese. Korean pachinko owners who were interviewed demonstrated the applicability of both the ethnic enclave and reactive/resistant theories regarding entrepreneurship. One interviewee stated, ‘Financial aid, such as loans from Japanese banks, was almost impossible for us to get. So we had to develop our own community formed along mainly occupational lines. Korean pachinko parlor owners established a network and relied on financial support provided by the mutual and credit cooperatives, called tanomoshi-ko in Japanese and kye in Korean.’ Shokokaigisho (the Korean version of commerce and industry associations) were founded during the twentieth century throughout Japan and Korea. Ethnic schools were also built in order to reinforce the cultural ethnicity of the children. Another interviewee noted that: Discrimination by the majority culture restricts minority access to political power and social participation. So we concentrated on economic success to fulfill personal ambitions. Our solidarity created a supportive business community. We didn’t rely on any Japanese financial resources. During the peak time of our business, I remember we had kept most of our earnings in our closets with each bundle of bills at 5 million yen ($50,000). We threw the bundles into the closets without a care. We were making tremendous amounts of money, and we felt that we had overcome Japanese prejudice.

At the same time, there is an inherent instability in these jobs which forces these entrepreneurs to be ever-vigilant for both problems and opportunities. As another pachinko parlor owner stated, ‘We cannot afford to stay at a fixed business sector like the Japanese majority. The word “security” does not exist in our business practice, and we are fully aware of the vulnerability of our business. That’s why we have to be flexible in our business minds and feel no rigidity for not sticking to one kind of business sector.’ These words of one powerful entrepreneur are echoed again and again by other Korean success stories in Japan. We will now examine three of these stories for lessons with policy implications for minorities in other societies. Successful Korean entrepreneurs in Japan Shin Kyuk-ho: the empire of ‘sweethearts for your mouth’ In 1941, when war broke out between Japan and the US and its allies, Shin Kyuk-ho, a young and poor Korean immigrant, arrived in the port of Shimonoseki carrying a bundle of old rags (Mabe, 1988). Shin literally possessed no financial support in Japan, but he managed to graduate from Waseda Technical High School (the present Waseda University, Department of Science and Engineering). He struggled to earn money to pay for his tuition and living expenses. His hardship drove him to entrepreneurship. He started a small factory selling soap and men’s hair oil, and his creative business mind made it possible to bring in capital to enlarge his factory. Shin’s entrepreneurial aspirations appeared even in the naming of his factory. The other small and medium range factories were often called kojo¯ (factory), but he named his first factory kenkyusho (research laboratory). The company name came from his favorite literature, The Sorrows of Young Werther by Johann Wolfgang von Goethe, which had inspired young Shin when he was in his late

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twenties. He named his company after ‘Charlotte’, the heroine of Goethe’s book, later shortened to Lotte. Following Japan’s defeat and its occupation by the US and its allies, chewing gum became a symbol of modernization and democracy for the Japanese (Dower, 1999). Shigemitsu Takeo (Shin’s Japanese pass-name) sharply sensed the social climate of the devastated country and employed chemists who could help him manufacture better tasting chewing gums. These became a big hit among the Japanese, who were starving for sweet tastes after the long war. The Lotte Confectionary Company continued to introduce a series of hit products. The company’s catchy commercial slogan okuchi no koibito (‘sweethearts for your mouth’) was ranked number one among commercial advertising slogans that reminded consumers of a company’s name in a corporate message research survey conducted in 2004 (Nikkei BP Consulting Research, 2005). Shin invested much of his capital in Korea and developed one of the largest conglomerates in the country. By the 1980s, the Lotte group was ranked as one of the top ten Korean conglomerates. Opened in 12 July 1989, Lotte World began the theme park era in Korea and is regarded as a world-class theme park similar to Disneyland. About eight million visitors come to Lotte World each year. Shin Dong-bin, the vice chairman of Lotte Group and second son of the founder, was named Korea’s second-wealthiest person in August 2003 by Media Equitable (‘Lotte to make heavy chemicals a core field’, Korea Now, 2004). Shin hid his ethnic background by using his Japanese name, Shigemoto Takeo, in the early stages of his business. There is no record of his Korean ethnic background in the company’s history book, Lotte no ayumi 30 nen (Thirty Year History of Lotte) published in 1978. Obviously, he saw his Korean background as a negative factor for his company. However, he uses his Korean ethnic name in Korea, and his Korean name, Shin Kyuk-ho, is well known as an extraordinarily successful kyopo (Korean living overseas). His success story is a dream story for many Koreans, and his contribution of returning profits to his home country from Japan is highly regarded in Korean society. Masayoshi Son: the giant of Japanese IT Masayoshi Son, a Zainichi who leapt into sudden prominence in the late 1990s, opened the door to the internet and the information revolution in Japan. The most successful entrepreneur in the information and Internet age in Japan, his aggressive spirit, acquisitive energy, and bold vision have led to an empire which he calls an ‘internet zaibatsu’. Son has said, ‘I want us to be No. 1 in every area’ (Gibney, 1999). His company, Softbank Corporation, owns large shares of web sites such as Yahoo, GeoCities, E*Trade (EGRP), and E-Loan (EELN). His startup investment was nearly $2 billion and now the profits have surged to a value of $15 billion dollars. He is one of the richest entrepreneurs in the emerging internet economy in Japan and his e-samurai spirit (‘Profile: Masayoshi Son of Softbank’, 2004) and entrepreneurship have encouraged many young Japanese. In the mid-1990s, it was often said that Japan was one decade behind the US in the telecommunications and software industries (Ellington, 1995). Son drastically changed this view of Japan’s lack of ability in the software industry. By February 2000, Softbank was the world’s biggest internet company. It owned half of the software distribution market in Japan and was worth one-twelfth of Japan’s gross domestic product.

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Soon after this, Softbank purchased the Daiei Hawks, a professional baseball team (‘Softbank plans to buy the Daiei Hawks team’, 2004). Since Lotte has owned a baseball team since 1968, the Lotte Dragons, this purchase by Softbank meant that two of the twelve professional teams in Japan are owned by Zainichi Korean entrepreneurs. Born in Kyushu of Zainichi parents, ‘in a place with little tolerance of foreigners (particularly Koreans)’ (Gibney, 1999), Son has fought battles all his life. His father, a pachinko parlor owner, was wealthy enough to provide his children with the best education. Son went to one of the most prestigious high schools in Japan, but then left his school to travel to the US, where he finished high school. After graduating from the University of California at Berkeley with a degree in economics, he returned to Japan. From that time on he began using his Korean family name instead of the Japanese passname ‘Yasumoto’ his parents had taken. By 1980, he had already made a small fortune selling Sharp a design for an electronic translator. The next year, 1981, he founded Softbank. After signing a deal to represent Cisco Systems in Japan in 1993 his company took off. As he said, ‘I had a feeling this was going to be big.’ Japanese investors were eager to hand him money for development, and he very quickly purchased the computer industry’s largest trade show (Comdex) and the magazine PC Week. He has had some spectacular failures as well as successes, but his philosophy, clearly one of a star entrepreneur, is that, if you don’t play you can’t win. This fierce competitive drive has led him to the position where he is now, the giant of Japan’s information technology industry. Lee Chon Soon: the mountain of gold in scrap metals Seemingly an ordinary businessman, Lee Chon Soon is an extraordinary individual who reveals the trials and tribulations, the zeniths and nadirs, and above all the zest for life that mark the Zainichi Korean community in Japan and Zainichi Korean entrepreneurs. In 1929, Lee Chon Soon migrated to Japan from Taegu with his 20-year-old mother. He was four years old. Lee’s father had immigrated to Japan in 1925 when Chon Soon was born. Lee’s mother had lost contact with her husband. She had two options, divorce her husband and marry another man or migrate to Japan with her son to search for her husband. She took the second choice. Lee’s father was one of many peasants who had lost their farmland through land confiscation by the Japanese imperial government. As a result, many Korean farmers from the southern agricultural regions migrated to Japan in search of jobs. By 1931, two decades after Korea was colonized by Japan, the number of Koreans in Japan had reached 3 000 000. Most of the first Koreans in Japan were voluntary migrants and their perceptions toward the host country were different from those who were forcibly brought to Japan as contract laborers after 1937 under the War Mobilization Plan. By the end of World War II, the population of Koreans in Japan exceeded two million and they represented the largest ethnic community in Japan. The first response of those who were involuntarily brought to Japan was to repatriate to their homeland. However, most historians agree that the Koreans who remained in Japan after the war were people who largely had come to Japan of their own free will, before the start of the forced migrant labor policy in 1937. The decision to repatriate to Korea or not caused tremendous difficulties for the earlier, longer-established migrants who lived in Japan with their immediate families.

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First-generation Korean immigrants were highly motivated to work as low-wage laborers under harsh conditions (Kashani, 2006). Because of discrimination, the language barrier, and a lack of education, the only available jobs for many Koreans were ‘3 D’ (dangerous, demanding, and dirty) jobs. Koreans in Osaka often found employment in glass, fabric spinning, and rubber factories. They also toiled in coal mines and on canal construction projects. While many Koreans were migrating to Osaka to seek work in these industries, another wave of migration co-existed, as migrants from within Japan also arrived in Osaka from rural regions. Internal migration to Osaka consisted primarily of young Japanese males from nearby agricultural regions who sought employment. Despite the large numbers of domestic Japanese migrant laborers, the advantage of hiring Korean immigrants as a stable and cheap labor source was recognized by Japanese industrialists. In fact, Korean immigrants were more willing to accept lower wages and harder working conditions than Japanese workers. This systematic wage difference between Korean and Japanese laborers caused a keen competition for work that was available. As a result, Japanese workers exhibited discriminatory behavior toward Korean immigrants, causing further deterioration in relationships between these two groups of workers. Even though the Korean community in Japan in the early 1920s lacked an efficient social network, the Lee family was united and settled in Wakayama Prefecture. Lee remembers that during his childhood days in Wakayama the family had a difficult time searching for a place to live because many Japanese landowners were discriminatory against Koreans. However, they eventually found housing and Lee’s parents had six more sons and a daughter. For Lee’s parents, who were illiterate, education for their children was not the first priority. Therefore, it was not until Lee was ten years old that he started to attend a Japanese elementary school. He was already three years older than most of his classmates. Despite being Korean, Lee’s Japanese classmates did not bully him. Not only was he older and physically larger, but he also achieved the highest grades in his class. The principal at Lee’s elementary school recognized his academic potential and urged Lee’s parents to send him to a junior high school. However, Lee’s parents refused to take this advice. Lee, as the oldest son of the family, was obliged to support the family financially. It was common for Korean children who came from poor families to start working at an early age. At the age of 17, Lee was hired by the Osaka Gas Company. His ability was soon recognized by his boss, and he was given supervision of 50 Japanese manual workers. When Korea was liberated in 1945, Lee’s family ordered him to go back to Korea alone to find out what the situation was in their homeland. Lee returned to Korea in December 1945 and stayed there until August 1946. His Japanized behavior and accent when he spoke Korean made the local Koreans believe that Lee was Japanese and they physically attacked him. He was also shocked to see his homeland, which had been economically devastated; conditions were much worse than those in the Kansai area in Japan. Lee decided to return to Japan to inform his family that it was not the right time for the family to repatriate. However, by the time Lee came home to Wakayama, his family members had already left for Korea to follow their oldest son. Lee was then separated from his family in Korea until the 1965 Normalization Treaty between Korea and Japan. During those years, he lived as an orphan without a family in

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Japan. Meanwhile, Korean immigrant Kim Young Shik, a successful factory owner in Osaka City, was looking for a potential son-in-law who would eventually take over his business. Kim’s venture was to collect and recycle steel scraps from various factory dumps. In order to found his business, he called together four other Korean investors who pooled their savings through the use of kye (rotating credit associations). With those funds, used machinery was bought to open the business. Eventually, Kim’s business expanded, enabling him to purchase a small plot of land. On this new property, he built a factory in 1950, naming it Kaneyama Kinzoku Kabushiki Gaisha (Kaneyama Metals Company, Incorporated). Kim had no sons of his own, but he did have six daughters. Through the social network among the Korean community, Kim heard about Lee, a capable single Korean man who had no family. Kim arranged a marriage between Lee and his second-oldest daughter. Kim and his new sonin-law began to work together to enlarge the business. Lee passed a number of qualification tests for maneuvering heavy machinery that many illiterate Koreans at that time were unable to pass. Such certificates were essential to developing the small venture into a medium-sized company. Lee’s qualifications significantly helped Kim’s factory to become one of the largest scrap metal companies in Osaka. When business reached its peak, the company’s annual income was over 1.5 billion yen and Kim had over thirty employees, both Japanese and Korean workers. After Kim became a successful entrepreneur, he donated a large sum of money to his home village in Korea. With that donation, the village was equipped with electricity and an efficient water irrigation system. Because of his great financial contributions, Kim received a gold medal from Korean President Park Chung Hee. Like Kim, most successful Korean entrepreneurs in Japan were highly motivated to contribute to their country as they deeply believed in Kinikankyo¯, donating to the Motherland (Kawa, 1996). Their donations became one of the initial sources of financial support to modernize Korea and help the Korean economy recover after the Korean War. Lee joined the welfare pension and unemployment pension for his workers. Although Lee’s native language was Korean, his Japanese language skills were far better. By the time he was in his late twenties, Lee had forgotten most of his Korean. He re-studied the Korean language in order to communicate with Kim, his father-in-law. Although Kim became economically successful, he was not satisfied because he had no son, the patriarchal culture rooted in the Korean Confucian tradition weighing heavily on him with its value placed on sons. Kim strongly desired a son of his own, one who would eventually take over the family business. Kim’s strong wish of many years then came true when, after six daughters, his wife bore a son when Kim was 52 years old. Kim began to feel uncomfortable seeing his son-in-law managing the company while his own son, the heir of the company, was still a young child. When Kim died, he left most of his company property to his own son. Despite the fact that it was Lee who brought large contributions to the company’s success, Kim left him nothing. Kim’s son, a second generation Korean who had never experienced poverty, did not wish to remain in the scrap metal industry. He used the company as a mortgage and expanded his business by investing in hotels and restaurants. Japan was in the middle of its bubble economy and Kim’s son’s debt was accumulating. When the bubble finally burst in the 1990s, Kim’s son had debts of 5 billion yen. At the age of 42 he died from a stroke due to psychological stress, and the factory was closed down.

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In the meantime, Lee, who had lost much, had to take responsibility for bankruptcy procedures after Kim’s son’s death. His business associates, who knew Lee’s accomplishments, encouraged him to continue his work, though on a much smaller scale. Lee opened a new factory of his own and hired five of his previous workers. Today he barely manages to earn a living and pay the salary of his five workers. At the age of 80, Lee is running a small scrap metal factory, working among five Korean workers whose average age is over 65. Lessons of Korean ethnic entrepreneurs in Japan One thing we notice about Korean entrepreneurs is that they seriously question Japanese hegemony in the social and cultural contexts in which they find themselves. The dominant groups in Japanese society, ostensibly providing leadership, are doubted, circumvented, and trumped by Korean entrepreneurs, at least from the perspective of many of these innovators. Their hegemony is not to be taken lightly, nor is it necessarily always to be opposed. In order to live in the society certain adaptive arrangements need to be made by Korean entrepreneurs which give their consent and participation as ethnic minorities in a dominant society. Struggle occurs in unseen places as Korean entrepreneurs resist in ways they know how, by exploring and utilizing market niches left empty by the Japanese, for whatever reason. Some of these businesses are creations by Zainichi Korean entrepreneurs utilizing popular culture, one of the secrets of their success. While there have been certain socio-economic disadvantages for Korean entrepreneurs which have often functioned as motivating factors for their entrepreneurship, they have also been severely discriminated against in Japanese society, their ethnic background almost always hidden behind their Japanese names. Subsequently, Japanese believe they are Japanese. ‘Venture businesses’ have been immensely popular as a topic for future business strategies in Japanese society during the past five or ten years, these enterprises having especially become an inspirational dream among Japanese workers in their twenties and thirties. The existing corporate value system with its seniority-based wage system and lifetime employment has been breaking down. Since young workers feel that they have nothing to rely on but their own ability to survive in the 21st century, to do a ‘venture business’ means self-employment, pride, and, hopefully, success. Above all, it is entrepreneurship. But it also means a new life style with non-Japanese corporate values for young Japanese workers. It is here where the examples of Korean entrepreneurs come to the fore, always battling with the dark forces of discrimination and shunning. Studying the characteristics of Zainichi Korean entrepreneurs can provide strategic examples that could be useful for the Japanese in the pursuit of these ‘venture businesses’ as well, one of the quintessentially entrepreneurial of all economic activities. One pachinko owner noted in this context, however, that, ‘I would like my children to have more secure jobs. We, first generation Koreans, have lived in the midst of plight and had to survive economically while being confronted with cutthroat competition. I used my wealth to provide the best quality education for my children, and I am confident that I did much better than most Japanese parents. That’s one thing I am very proud of myself. My oldest son is a dentist, and my second son is a doctor. I think I will have to find someone else who can take over my pachinko business.’ The difficult sides of the entrepreneurial saga should be made clear, as well.

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‘Venture businesses’ have often been equated with internet-based business driven by three conditions: innovative ideas, progressive technology, and a command of a large amount of capital to start up a business. Japan, surprisingly, demonstrates the lowest rate of entrepreneurship among the industrial countries, at 4 per cent (Yasuda, 2002), and the tendency is often attributed to cultural characteristics that are oriented toward group business practices rather than the entrepreneurial mind. The flexible ideas associated with the entrepreneurial practices of Koreans in Japan have, on the other hand, led to businesspeople who are flexible, transnational citizens (Ong, 1999), ever ready to seize new opportunities. And not only for the economic benefits provided. Entrepreneurship provides social recognition, which is favorable to economic progress. There is always a strong degree of pride in the self-reporting of Korean entrepreneurs in Japan, even as they see Japanese emulation of their practices crowding them in their own markets: My father spent his life expanding the pachinko business, but he taught me not to have fixed ideas in business and always to try to find market niches meeting the needs of the time. I see for the next generation that the pachinko business is being intruded upon by Japanese companies with large capital. In that sense, they are following us. Now I am running a couple of manga kissa (coffee shops providing Japanese cartoons as one part of service) and an internet café. I bet that within the next decade, large Japanese companies will be following us into this market, too.

The terrain in which Zainichi Korean entrepreneurs have enacted and continue to enact these dramas of the survival of daily life are often chosen by them. Places of exchange such as the Ikaino and Nishinari sections of Osaka, for example, contain the artifacts and daily processes of incorporation or assimilation as well as of resistance. The usage or nonusage of certain names, for example, Japanese pass-names, Korean family names, and so on, signals degrees of incorporation or resistance. The territories where these transactions take place are not imposed from above either, by Japanese authorities or Japanese society. Nor are they created full-blown from Korean society, a society which many Zainichi no longer know anyway, except in fragmentary ways. What we really observe here, then, is the play of history, the flow of change and transformation, processes which articulate the power and the struggles of an energetic, committed entrepreneurial community. There are many lessons here which can be learned for the future of similar societies which have seen colonial legacies determining in at least some ways the economic outputs or lack of them in today’s societies. The successes, and the failures, of this powerful community are alive yet invisible, robust yet hidden. Policy makers would do well to study the community of Korean entrepreneurs in the ethnic minority society of Japan more deeply, innovators who have contributed greatly to the economic output and employment of Japan, but who have retained and proudly defined their own cultural identities. References Aldrich, H., T.P. Jones and D. McEvoy (1984), ‘Ethnic advantage and minority business development’, in R. Ward and R. Jenkins (eds), Ethnic Communities in Business: Strategies for Economic Survival, Cambridge: Cambridge University Press, pp. 189–210. Barth, Frederik (1963), The Role of the Entrepreneur and Social Change in Northern Norway, Bergen: Norwegian Universities Press. Barth, Frederik (1967), ‘On the study of social change’, American Anthropologist, 69(6), 661–9. Bonacich, E. (1973), ‘A theory of middleman minorities’, American Sociological Review, 38, 583–94.

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Bonacich, E. (1987), ‘ “Making it” in America: a social evolution of the ethics of immigrant entrepreneurship’, Sociological Perspectives, 30, 446–66. Dana, Léo-Paul (1997), ‘The origins of self-employment in ethno-cultural communities: distinguishing between orthodox entrepreneurship and reactionary enterprise’, Revue Canadienne des Sciences de l’Administration (Canadian Journal of Administrative Sciences), March, 52–68. Dower, J.W. (1999), Embracing Defeat: Japan in the Wake of World War II, New York: W.W. Norton & Company. Ellington, Lucien (1995), ‘Japan’s economy: 21st century challenges’, Japan Digest, National Clearinghouse for US–Japan studies, http://www.indiana.edu/
japan/digest8.html. Enz, C., M. Dollinger and C. Daily (1990), ‘The value orientation of minority and non-minority small business owners’, Entrepreneurship, Theory and Practice, 15(1), 23–35. Gibney, Frank, Jr (1999), ‘Asian newsmaker of the year – Masayoshi Son’, Time, 154(25), 27 December. Hagen, E.E. (1962), On the Theory of Social Change: How Economic Growth Begins, Homewoood, IL: Dorsey. Heiwa Sangyo¯, Homepage, ‘Message from president’, http://www.heiwanet.co.jp/english/index.html, 2005. Kawa, Meisei (1996), ‘Nihonni okeru minority no kigyo¯sha katsudo¯-zainichi issei cho¯senjinno jireibunseki’ (Ethnic minority entrepreneurs in Japan: a case study of the business activities of the first generation Koreans in Japan), Business History Society of Japan, University of Tokyo Press, 30(4), 59–78. Kashani, S. (2006), ‘Colonial migration to the “Manchester of the Orient”: the origin of the Korean community in Osaka, Japan, 1910–1952’, in S. Lee, S. Murphy-Shigematsu and H. Befu (eds), Japan’s Diversity Dilemmas: Ethnicity, Citizenship, and Education, Lincoln, NE: iUniverse. Ko, Eizou (2002), ‘Kankoku-kei Nihon-jintoshiteno aidentiti’ (‘Identity as a Korean Japanese’), Do¯wamondai kenkyu shiryo¯, takasegawa wo aruku, II- higashikujyo to zainichi korea jin, Ryukoku University Do¯wa Mondai Kenkyusho Iinkai, 34–42. Lee, C. and G. De Vos (1981), Koreans in Japan: Ethnic Conflict and Accommodation, Berkeley: University of California Press. Lee, S. (2001), ‘Kikagyosei ni mirareru nihonseifu no kankoku, cho¯senjin taisaku’ (‘Political measures and naturalization policy toward Koreans in Japan’), in S. Togami (ed.), Kousaku suru kokka, minzoku, shukyo (Issues across Nation, Ethnicity and Religion), Tokyo: Fuji Publications. Lee, S. (2002), ‘Koreans: a mistreated minority in Japan: hopes and challenges for the country’s true internationalization’, in R. Donahue (ed.), Exploring Japaneseness: On Japanese Enactments of Culture and Consciousness, New York: Ablex. Lee, S. (2005), ‘Kansho business ni mirareru kigyo¯ka seishin’ (‘The spirits of Korean entrepreneurs in Japan’), Ryukoku University Kyoto Sangyo¯gaku Kenkyu (Ryukoku University Research in Kyoto Business Studies), 3, March. Lee, S., S. Murphy-Shigematsu and H. Befu (eds) (2006), Japan’s Diversity Dilemmas: Ethnicity, Citizenship, and Education, Lincoln, NE: iUniverse. Light, I. (1972), Ethnic Enterprise in America: Business and Welfare Among Chinese, Japanese and Blacks, Berkeley, CA: University of California Press. Light, I. (1980), ‘Asian enterprise in America: Chinese, Japanese, and Koreans in small business’, in S. Cummings (ed.), Self-Help in Urban America, Port Washington, NY: Kennikat Press. Lotte no aryumi (Lotte’s Dream), Tokyo: Lotte Inc., 1978. ‘Lotte to make heavy chemicals a core field’, Korea Now, 2004. Mabe, Yoichi (1988), Nihon keizai wo yusaburu zainichi kansho power (The Power of Korean Entrepreneurs), Tokyo: Tokuma Shoten. Min, P.G. (1984), ‘From white-collar occupation to small business: Korean immigrants’ occupational adjustment’, Sociological Quarterly, 25, 333–52. Min, P.G. (1986–87), ‘Filipino and Korean immigrants in small business: a comparative analysis’, Amerasia, 13, 53–71. Min, P.G. (1987), ‘Factors contributing to ethnic business: a comprehensive synthesis’, International Journal of Comparative Sociology, 28, 173–93. Min P.G. and C. Jaret (1985), ‘Ethnic business success: the case of Korean small business in Atlanta’, Sociology and Social Research, 69, 412–35. Morris-Suzuki, Tessa (2005), ‘Japan’s hidden role in the “return” of Zainichi Koreans to North Korea’, Japan Focus, 11 February, http://japanfocus.org/208.html. Murobushi, T. (1997), Pachinko 30 Cho¯en Sangyo¯ Hakusho (Pachinko’s 3 Trillion Yen Business in Japan), Tokyo: Ariadone Kikaku. Nikkei BP Consulting Research, http://branding.nikkeibp.co.jp/br/cm2004/index.html, 2005. Nowikowski, S.E. (1984), ‘Snakes and ladders: Asians in Britain’, in R. Ward and R. Jenkins (eds), Ethnic Communities in Britain, Cambridge: Cambridge University Press. Ong, Aihwa (1999), Flexible Citizenship: The Cultural Logics of Transnationality, Durham, NC: Duke University Press.

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Portes, A. (1981), ‘Modes of structural incorporation and present theories of immigration’, in M. Kritz, C. Keely and S. Tomasi (eds), Global Trends in Migration: Theory and Research on International Population Movements, Staten Island, NY: Center for Migration Studies Press, pp. 279–97. ‘Profile: Masayoshi Son of Softbank’, http://www.ftmastering.com/mmo/mmo01_6.htm, 2004. SCOPE (2004), ‘Shimonoseki-Busan sea route marks centenary of ferry service’, Kyodo News on the web, 1 November. Shapero, A. (1984), ‘The entrepreneurial event’, in C. Kent (ed.), The Environment for Entrepreneurship, Lexington, Massachusetts: D.C. Heath, pp. 21–40. So, Y. (1987), Kankoku Chosenjin no genjyo to shorai (The Presence and Future of Koreans in Japan), Tokyo: Shakai Horon-sha. ‘Softbank plans to buy Daiei Hawks team’, http://www.pittsburghlive.com/x/tribune-review/sports/s_263029. html, 2004. Tanaka, H. (1995), Zainichi gaikokujin: hono kabe kokoro no kabe (Foreign Residents in Japan: The Wall of Law, the Wall of the Heart), Tokyo: Iwanami Shoten. Toulouse, J.-M. (1990), ‘Immigrants as entrepreneurs: developing a research model’, working paper, Ecole des Hautes Etudes Commerciales, Montreal. Waldinger, R. (1989), ‘Structural opportunity or ethnic advantage? Immigrant business development in New York’, International Migration Review, 23, 48–72. Willis, D.B. and S. Murphy-Shigematsu (eds) (2007), Transcultural Japan: At the Borderlands of Race, Gender and Identity, London: Routledge. Wilson, K. and A. Portes (1980), ‘Immigrant enclaves: an analysis of the labor market experiences of Cubans in Miami’, American Journal of Sociology, 86, 295–319. Yasuda, Takehito (2002), ‘Japan’s entrepreneurs face rough road’, Asia Times Online, 21 June. Yoo, Jin-Kyung (1998), Korean Immigrant Entrepreneurs: Network and Ethnic Resources, New York: Garland. Yoon, I.J. (1991), ‘The changing significance of ethnic and class resources in immigrant businesses: the case of Korean immigrant businesses in Chicago’, International Migration Review, 25, 303–31.

41 Clan associations of Singapore and their roles in the small business sector David Leong

When early immigrants arrived from China to Singapore, clan associations provided them with social contacts, training, business ideas, market information, business concepts, start-up capital and technical assistance. This web of ethnic networks played an important role in facilitating the development of entrepreneurship in Singapore. Since different dialect groups had their own associations, this resulted in industry clustering. The Hakka entrepreneurs, for instance, dominated the city’s medical halls. More recently, clan associations in Singapore have been linking up with similar associations overseas, resulting in impressive networks of international entrepreneurs. This chapter presents an account of the evolution of Chinese clan associations into vehicles for international entrepreneurship. Introduction Dollinger (1985) explains that entrepreneurs are hardly isolated in their decisions. They are influenced by networks of significant others. Networking involves calling upon a web of contacts for information, support and assistance. The literature on networks is rich. Aldrich and Whetton (1981), Baker (1990), Donckels and Lambrecht (1997), Holt (1987), Johannisson (1986), Mitchell (1973) and others, discuss social ties, which are all explanatory variables for network structures. Aldrich and Zimmer (1986) integrated network theory into the study of entrepreneurship. Carsrud, Gaglio and Olm (1986) found networks to be important in understanding new venture development. Aldrich, Rosen and Woodward (1987) found network accessibility to be significant in predicting new venture creation. Dubini and Aldrich (1991) found networks central to entrepreneurship. Birley, Cromie and Myers (1991) looked at networks in different geographic contexts. In a study of Korean entrepreneurs in Atlanta, Min and Jaret (1985) found family networks to be a source of manpower. In their investigation of Surinamese entrepreneurs in Amsterdam, Boissevain and Grotenbreg (1987), found that ethnic networks can provide introductions to wholesalers, and warnings of government inspections. Dana (1993) found a similar network among Italians in Canada. As well, Dunung (1995) noted that an ethnic network contributed to the success of Chinese entrepreneurs in Thailand. However, ethnic networks are not exclusive to minority groups. This chapter is about ethnic Chinese networks in Singapore, where the ethnic Chinese comprise three-quarters of the population. Here, the ethnic networks were institutionalized as clan associations. Each dialect group established its own clan network, and these were instrumental in the development of entrepreneurship in Singapore. Each association became a networking resource and a marketing research organization. In addition to providing potential and existing entrepreneurs with opportunities for networking and 669

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gathering market information, clan associations supported schools to propagate entrepreneurial spirit. Methodology for this study relied extensively on archival research. In addition to clan documents, interviews with entrepreneurs and retired entrepreneurs were very useful. Historical background In 1819, Sir Thomas Stamford Raffles, Lieutenant-Governor of Bencoolen, landed in Singapore with the intention of establishing a trading post for the East India Company. The indigenous people, at the time, were Malay fishermen. Raffles bought the rights to establish a trading post and, with the objective of attracting entrepreneurs from abroad, he made Singapore a free port. Within a few months, thousands of Chinese immigrants settled in Singapore. By 1824, there were 10 683 people in Singapore, of whom 31 per cent were Chinese (Saw, 1970). Yen (1986) documented that a famine in 1826 prompted 4000 men to leave China and seek opportunities in Singapore. During the following decades, thousands more came from Fujian province and from Guangdong. By 1840, half of Singapore’s population was Chinese (Saw, 1970). At the time, most worked on plantations. Then, the decline of agriculture in Singapore prompted urbanization. Telok Ayer Street became the economic heart of the Chinese community, and the home of several clan associations. The inauguration of the Suez Canal, in 1869, made Singapore a major node along the England-to-Australia route. This created countless opportunities for Singapore. Immigrants from China left their rural homes in Singapore and moved to the city. There, they became cargo-carriers, cart-pullers, dock laborers, and traders. Many worked with the dream of becoming entrepreneurs, and they did. They built and operated go-downs, and developed the support industries of the port. By 1901, there were 164 041 Chinese persons in Singapore (Leung, 1988). This was almost three-quarters of the population. For linguistic reasons, the Chinese in Singapore tended to live among and work with others who spoke the same dialect. The dominant dialect groups in Singapore are listed in Table 41.1. When new immigrants arrived, they joined established people who spoke the same dialect. (The segregation of dialect groups was a policy set by Raffles.) Newcomers worked for entrepreneurs, and learned specific trades. It was a tradition that an employee learned from an employer how to become an entrepreneur. This led to considerable occupational clustering. Many Hokkiens lived Table 41.1

Chinese dialect groups in Singapore

Dialect group

Dialect spoken

Origin in China

Cantonese/Guangzhouren Foochow/Fuzhouren Hainanese/Hainanren Hakka/Kejiaren Henghua/Xinghuahren Hokchia/Fuqinren Hokkien/Minnanren Teochew/Chaozhouren

Guangzhouhua Fuzhouhua Hainanhua Kehua Xinghuahua Fuqinhua Minnanhua Chaozhouhua

Guangdong Province Fujian Province Hainan Island Guangdong Province (mainly) Fujian Province Fujian Province Fujian Province Guangdong Province

Clan associations of Singapore and their roles in the small business sector 671 on China Street, where they sold sundry items along with fresh greens. Telok Ayer Street was home to larger-scale Hokkien entrepreneurs, importing rice and other goods from neighboring countries. On Chin Chew Street, Teochew entrepreneurs traded spices. On Chulia Street, Teochew merchants sold bird’s nest and shark’s fin. Regarded as a lower class on the social echelon, the Cantonese were clustered in the district around Kreta Ayer. Many of them sold cloth. Some sold furniture, musical instruments, tobacco and silk, which they imported from China. By 1947, there were 939 144 Chinese in Singapore (Saw, 1970). Chiang and Chan (1994) found that three socio-cultural features explained the success of Chinese entrepreneurs in Singapore: 1. 2. 3.

personal qualities including hard work ethic, commitments, perseverance, determination and realism; family and central values associated with it, including loyalty, commitment, protection, welfare, paternalism and mutual obligations; and the ability of Chinese entrepreneurs to organize themselves by creating relations embedded in the structure of trade and clan associations.

Clan associations Clan associations (hui kuan in Mandarin, wui kun in Cantonese, and huay kwan in Fujian) were established for the purpose of fostering friendship among immigrants sharing the same dialect, and to promote commercial and industrial development, while upholding cultural traditions. From conversations with members, one could understand the latest trends in product development and price fluctuations. As well, the clan provided (and still provides) a center where entrepreneurs could discuss partnerships, or obtain financing. A clan usually established several associations. Unpublished records indicate that the Hakkas formed at least 29 clan associations in Singapore. Of these, 11 were organized to bring together individuals from specific counties in China. In seven other cases, membership was based on family names. Four were cooperative societies. Seven others were professional, social and recreational associations. As a whole, they were crucial to the development of entrepreneurs among new immigrants from various villages in China. The first Hakka clan associations in Singapore were the Wui Chiu Hui Kuan (established in 1822), and the Ying Foh Fui Kuan (founded in 1823). The Char Yong Association was formed in 1857, followed by the Singapore Char Yong Association, in 1858. The Fui Chew Association was set up in 1870. Situated on Beach Road, the Foong Shoon Fui Kuan was established in 1873. In 1929, eight existing Hakka associations pooled their resources to create the Nanyang Khek Community Guild, an umbrella organization.1 Its founding president was Aw Boon Haw, the well-known philanthropist made famous by his tiger balm enterprise. The early stages of his business had depended on the participation and assistance of established Hakka entrepreneurs in Singapore. Collective planning and efforts helped his firm develop and, through association networking, it was possible for Aw to invite clansmen to share his vision and work as a team at his Wing On Tong Pharmaceutical Factory. As well, tiger balm needed distribution channels, and this prompted Hakka clansmen to start medicine halls, a sector in which they became dominant thanks to Aw. Over time, his success served

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as a motivating factor for Hakka people who adopted him as a role model. Finally, the time had come for him to lead the Nanyang Khek Community Guild. The purpose of creating such a network was to improve relationships among members of different Hakka associations. The long-term goal was to promote commercial and industrial development, and to organize charity events, educational institutions and welfare projects – all for the benefit of Hakka people. Committee members included representatives from Indonesia, Malaya, North Borneo, Sarawak and Thailand, as well as Singapore. Eventually, Hakka entrepreneurs became dominant in certain small business sectors. Hakka entrepreneurs owned two major newspapers, dozens of pawnshops, 56 import shops, 70 grocery stores and 167 medical halls. Although some business entities were partnerships, most were sole proprietorships, as indicated in Table 41.2. The specific objectives of the Nanyang Khek Community Guild are ‘to foster better relationships among members of the Khek community to promote industrial and commercial development, and to organize charitable, educational welfare projects’.2 The guild has four categories of members: (i) the fundamental members, who are the eight founding clan associations; (ii) the ordinary association members, who are other associations belonging to the Khek community, in Singapore or abroad; (iii) corporate members, who are commercial or industrial establishments that are owned by a member of the Khek community; and (iv) individual members, who belong to the Khek community or family members thereof. Membership in the guild involves obligations and privileges. There are prohibitions on gambling, lotteries, and interference with prices or trade. An internal policing system allows the Management Committee to investigate allegations of wrong-doing. Members found guilty are thenceforth deprived of guild privileges. Table 41.2 Small and medium enterprises operated by Hakka people in British Singapore Sectors Chinese medical halls Imported goods/ clothing materials Importers & exporters/ grocery shops Tailors Metal goods/Ironmongery Leather goods/shoes Watches/opticals/goldsmith Apparel Pawnshops Furniture Hotels Others (cinemas, Newspapers, etc.)

Sole proprietorships

Partnerships

Limited companies

Total

142 70

23 27

2 1

167 98

47

23

70

60 50 44 40 29 10 15 8 43

3 7 7 9 11 14

63 57 51 49 40 24 15 8 46

3

Source: Hakka Association Annual Report, Jubilee Celebration Edition, Singapore: Nanyang Khek Community Guild, October, 1965.

Clan associations of Singapore and their roles in the small business sector 673 The structure of the guild is such that different sections have assigned responsibilities. The Organisation Section initiates research about the economic standing of community members, and deals with commercial and industrial matters of members. The Culture and Education Section is responsible for educational matters such as publications. The Welfare Section attends to financial matters. The Social Section is responsible for networking activities. Like the Hakkas, other dialect groups also created clan associations. During the nineteenth century, the Hokkiens (from Fujian) established the Hokkien Huay Kuan. The Teochews (from Guangdong) set up the Ngee Ann Kongsi. The Hainanese formed the Singapore Kiung Chou Hwee Kuan in 1857. Henghua immigrants from Kang Tau (in the Fuquing district of Fujian’s old Fuzhou prefecture) and who shared the surname ‘Ong’ created the Singapore Kang-Tau Ong Clansmen Association; amongst themselves they spoke Xinghuahua dialect. People from the south of Fujian province and who shared the name ‘Ong’ joined the Singapore Hokkien Ong Clansmen General Association; there, Minnanhua was the dialect spoken. Of 298 surnames which are common in Singapore, Chen is among the most popular, with over a dozen clan associations (Cheng, 1990). The Gan Clan Association was established on Bukit Pasoh Road. The Wong Clan of Toishan established itself on Jink Chuan Road. Although each clan used a different dialect and represented different geographic origins, clan associations all had something in common. They all encouraged networking. Clan associations could provide market knowledge, technical training, entrepreneurship education, a workforce, market contacts, suppliers, credit, consumers, and successful role models. This facilitated their task of propagating Confucian values, which reinforced a propensity for entrepreneurship. Figure 41.1 illustrates the interaction of forces. Entrepreneurs in Chinese tradition According to Confucianism, ignorance is an obstacle and education is valued. The traditional cultural beliefs of the Hakka people emphasize several related values. Among these are persistence and perseverance, qualities that may improve an individual’s chances as an entrepreneur. Also crucial are notions such as respect for order, status and authority. Again, this may help in management of a business. The Hakka people also believe in the virtue of thrift. Weber (1904–05) argued that thrift was a cultural value linked to entrepreneurship. Finally, the Hakka people place emphasis on having a sense of shame. It was argued that a sense of shame would help individuals maintain honesty and long-term interpersonal relationships. To propagate these values, the Hakka associations built several private schools. While other schools emphasized learning to read and write, the schools of the Hakka associations had ulterior motives. Their objective was not limited to teaching reading and writing. As well, Hakka children were taught social etiquette and Hakka cultural values. The youth were encouraged to lead their lives such as to make future contributions to their people. These schools were to create entrepreneurs. The first of these Hakka schools was the Yin Sin School, consisting of six classrooms. Located on Telok Ayer Street, it opened in 1905. A year later, the 20-classroom Kee Fatt School was established at 30 Cainhill Road. Several other schools were built and supported by Hakka associations. These are shown in Table 41.3. For the past 50 years, however, the Hakka people have opened no new schools.

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CULTURAL TRADITIONS OF CONFUCIAN DYNAMISM

Access to networks Market knowledge Technical training Entrepreneurship education Market contacts Manpower Suppliers Credit Consumers Successful role models Propagation of confucian values

• Frugality • Thrift • Orderly relationship by status • Persistence • Perseverance • Having a sense of shame

CHINESE ENTREPRENEUR

Sociological factors Figure 41.1 Table 41.3

Psychological characteristics

Forces contributing to entrepreneurship among Singaporean Chinese Schools producing Hakka entrepreneurs

Institution Yin Sin School Kee Fatt School Nam Thung Public School Tong Fah School Tai Keow Public School Lee Chee Public School Sam Foh School Wen Shien Public School

Year opened

Number of classrooms

1905 1906 1927 1933 1936 1938 1946 1949

6 20 3 6 8 8 3 7

Source: Nanyang Khek Community Guild.

Address Telok Ayer Street 30 Cainhill Street 71⁄2 mi. Holland Road 53 Craig Road 288 Q Lorong Tai Seng 3 Mataban Street 467 Beach Road 160 Neil Road

Clan associations of Singapore and their roles in the small business sector 675 A clan association of the Teochews, the Singapore Teo Chew Poit Ip Huay Kuan, established the Ngee Ann College, in 1959. This was a Chinese-medium college, which provided tertiary education to students who graduated from Chinese high schools. It eventually evolved into Ngee Ann Polytechnic. The Hokkien Huay Kuan (Hokkien Clan Association) donated land to build Nanyang University, which opened in 1958. This was the first Chinese-language university outside China. Eventually, Nanyang University became home to the Nanyang Technological Institute, and in 1991 to Nanyang Technological University. The changing role of clan associations Independence changed demographics and this had a great impact on clan associations. Under British colonial rule, the associations were central to the success of entrepreneurship in Singapore. Members of the Chinese community tended to interact mostly with others from the same dialect group. These were people who shared a strong identity with their geographic roots, and with whom there were no communication barriers. As well, this arrangement allowed them to rely on guanxi relationships. The Singapore Chinese Chamber of Commerce & Industry (established in 1906) was the supreme economic institution of the Chinese community. The creation of the Republic of Singapore gave rise to a new nationalism that transcended dialect groups. The redistribution of population to new housing estates resulted in heterogeneous neighborhoods; clan associations were not allowed to follow. During the 1960s, only 39 new clan associations were established (Cheng, 1985). In the new housing estates, the Singapore Government set up a variety of new institutions, including Citizen Consultative Committees, Community ‘Centres’ and Residents’ Committees. In 1978, the state launched an annual campaign aimed at encouraging Singaporeans to speak Mandarin in lieu of dialects. Social interaction across clan lines resulted in inter-marriage, and the decline in the use of dialects in homes. Clan associations – in the traditional sense – were losing their economic importance. Although they still offered opportunities for business networking, it was possible to succeed without joining them. The year 1981 witnessed a new type of clan association, when the Hakkas, originating from Jiexi, established the Hepo Corporation. This was not a hui kuan; rather, the term ‘corporation’ was used to emphasize its commercial purpose as an instrument for investment. Thus the role of clan associations evolved. During the 1980s, the Singapore Government took initiatives to stimulate entrepreneurship in the republic. The traditional role of clan associations waned. Whereas the associations were formally the principal vehicles fostering local entrepreneurship in Singapore, governmental bodies took over this role. These are the Economic Development Board, the National Productivity Board, and the Trade Development Board. However, this did not make the clan associations obsolete. Instead, they embarked on a plan of far greater proportions. As discussed by Cheng (1990), in 1984, Chua Gim Siong sought government endorsement and support for clan associations. His success led to a national seminar on clan associations in December 1984. Nine associations, representing seven dialect groups, organized this event, the purpose of which was to examine how clan associations could contribute to the future. The event was attended by several hundred delegates, representing 185 clan associations, and led to the creation of an umbrella

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Table 41.4

Founding members of the Singapore federation of Chinese clan associations

Clan association

Dialect group

Sam Kiang Huay Kuan Singapore Foochew Association Singapore Hokkien Huay Kuan Singapore Kiung Chow Hwee Kuan Singapore Kwangtung Hui Kuan Singapore Nanyang Khek Community Guild Singapore Teo Chew Poit Ip Huay Kuan

Sanjiangren Fuzhouren Minnanren Hainanren Guangzhouren Kejiaren Chaozhouren

organization. Thus, in 1986, the Singapore Federation of Chinese Clan Associations was established, to promote a Singapore-wide network of clan associations. The founding members are listed in Table 41.4. Together with the Singapore Chinese Chamber of Commerce, the Federation contributes to the success of ethnic Chinese entrepreneurship in Singapore. While the Singapore Chamber of Commerce concentrates on economic and business matters at large, the Federation focuses on promoting, fostering and encouraging relationships and co-operation. It co-ordinates activities among different clan associations, and contributes to the propagation of cultural traditions which are relevant to Confucian dynamism and entrepreneurship, factors illustrated in Figure 41.1. Most recently, clans in Singapore have been networking not only amongst themselves, but also with their counterparts overseas. Eight clan groups have linked up with international associations of like clans. This has resulted in several worldwide networks of Chinese entrepreneurs, who are forging global economic links. Some clan associations have formed holding companies to invest overseas. Foong Shoon Holdings Limited, for example, was established by members of the Foong Shoon Fui Kuan. Already, some international networks of clans are operating in China. Their activities include manufacturing, trading, property development, infrastructure development, hotel management and medical care. Conclusion The role of clan associations, and the nature of their importance, has changed over time. During colonial rule, they enhanced networking relationships of local entrepreneurs who spoke the same dialect. During the early years of independence, the Singapore Government provided services similar to those that the clan associations had pioneered. Simultaneously, the spread of English, as Singapore’s language of business, facilitated interaction among persons of dialect groups. For a period, clan associations were actually discouraged, because they were deemed contradictory to efforts that focused on creating a feeling of Singaporean identity across clan lines. More recently, the Singapore Government has been encouraging the establishment of international networks among fellow clan associations. These institutions, which pioneered local entrepreneurship in colonial Singapore, have become instruments of international entrepreneurship.

Clan associations of Singapore and their roles in the small business sector 677 Notes 1. These were the Char Yong Association, the Fong Yun Thai Association, Foong Shoon Fui Kuan, Sam Foh Whai Kuan, the Singapore Eng Teng Association, the Singapore Nanyang Shang Hang Thung Hsiang Hui, Wui Chiu Fui Kung and Ying Foh Fui Kun. 2. Source: Rules and Regulations of Nanyang Khek Community Guild, The Nanyang Khek Community Guild, Singapore, p. 13.

References Aldrich, Howard E. and David A. Whetten (1981), ‘Organizational sets, action sets and networks’, in Paul C. Nystrom and William H. Starbuk (eds), Handbook of Organisational Design, Oxford: Oxford University Press. Aldrich, Howard E. and Catherine Zimmer (1986), ‘Entrepreneurship through social networks’, in Donald L. Sexton and Raymond W. Smilor (eds), The Art and Science of Entrepreneurship, Cambridge, MA: Ballinger, pp. 3–24. Aldrich, Howard E., Ben Rosen and William Woodward (1987), ‘The impact of social networks on business foundings and profit in a longitudinal study’, Frontiers of Entrepreneurship Research, Wellesley, MA: Babson College, pp. 154–68. Baker, W.E. (1990), ‘Market networks and corporate behavior’, American Journal of Sociology, 3, 589–625. Birley, Sue, Stan Cromie and Andrew Myers (1991), ‘Entrepreneurial networks: their emergence in Ireland and overseas’, International Small Business Journal, 4, July–September, 56–74. Boissevain, Jeremy and Hanneke Grotenbreg (1987), ‘Ethnic enterprise in the Netherlands: the Surinamese of Amsterdam’, in Robert Goffee and Robert Scase (eds), Entrepreneurship in Europe: The Social Process, London: Croom Helm, pp. 105–30. Carsrud, Alan L., Connie Marie Gaglio and Kenneth W. Olm (1986), ‘Entrepreneurs – mentors, networks and successful new venture development: an exploratory study’, Frontiers of Entrepreneurship Research, Wellesley, MA: Babson College, pp. 229–43. Cheng, Lim Keak (1985), Social Change and the Chinese in Singapore, Singapore: Singapore University Press. Cheng, Lim Keak (1990), ‘Reflections on the changing roles of Chinese clan associations in Singapore’, Asian Culture, 14, April, 57–71. Chiang, Claire and Chan Kwok Bun (1994), Stepping Out: The Making of Chinese Entrepreneurs, Singapore: Prentice-Hall. Dana, Léo Paul (1993), ‘An inquiry into culture and entrepreneurship’, Journal of Small Business and Entrepreneurship, 10(4), July–September, 16–31. Dollinger, Marc J. (1985), ‘Environmental contact and financial performance of the small firm’, Journal of Small Business Management, 23(1), January, 24–30. Donckels, Rik and Johan Lambrecht (1997), ‘The network position of small business: an explanatory model’, Journal of Small Business Management, 35(2), April, 13–25. Dubini, Paola and Howard E. Aldrich (1991), ‘Personal and extended networks are central to the entrepreneurship process’, Journal of Business Venturing, 6(5), September, 305–13. Dunung, Sanjyot P. (1995), Doing Business in Asia, New York: Lexington Books. Holt, David H. (1987), ‘Network support systems’, in Neil C. Churchill, John A. Hornaday, Bruce A. Kirchoft, O.J. Krasner and Karl H. Vesper (eds), Frontiers of Entrepreneurship Research, Wellesley, MA: Babson College, pp. 45–56. Johannisson, Bengt (1986), ‘The network strategies: management technology for entrepreneurship and change’, International Small Business Journal, 1, Autumn, 19–30. Leung, Yuen Sang (1988), ‘The economic life of the Chinese in the late nineteenth century Singapore’, in Lee Lai To (ed.), Early Chinese Immigrant Societies, Singapore: Heinemann Asia. Min, Pyong Gap and Charles Jaret (1985), ‘Ethnic business success: the case of Korean small business in Atlanta’, Sociology and Social Research, 69(3), April, 412–35. Mitchell, J. Clyde (1973), ‘Networks, norms and institutions’, in Jeremy Boissevan and J. Clyde Mitchell (eds), Network Analysis: Studies in Human Interaction, The Hague: Mouton, pp. 2–35. Saw Swee Hock (1970), Singapore Population in Transition, Philadelphia: University of Pennsylvania Press. Weber, Max (1904–05), ‘Die protestantische Ethik und der Geist des Kapitalismus’, Archiv für Sozialwissenschaft und Sozialpolitik (20–21); trans. (1930), Talcott Parsons, The Protestant Ethic and the Spirit of Capitalism, New York: George Allen & Unwin. Yen, Ching-Hwang (1986), A Social History of the Chinese in Singapore and Malaya 1800–1911, Singapore: Oxford University Press.

PART V ETHNIC MINORITY SELF-EMPLOYMENT IN THE SOUTHERN HEMISPHERE

42 Ethnic entrepreneurship in South Africa: an embedded approach to the study among various ethnic groups Bruce Mitchell and Mary Jesselyn Co

Introduction The critical importance of small and medium enterprises (SMEs) to the economic development of South Africa has been supported (Lekota, 1995: 11) and, in searching for possible strategies to develop SMEs, special focus needs to be given to ethnic groups that have been marginalized from active and meaningful participation in the South African economy. There has been a shortage of studies done on entrepreneurship in South Africa, and those that have been done have focused primarily on the psychological traits of entrepreneurs (Van Vuuren and Boshoff, 1994; De Klerk, 1998) and demographic differences (Boshoff, Scholtz and Roodt, 1995). Although many ethnic entrepreneur groups have been studied in the United States, such as Koreans, Chinese, Indians, Cubans, and Blacks in the United States (Light, 1972; Light and Bonacich, 1988; Portes and Rumbaut, 1990; Waldinger and Bozorgmehr, 1996; Yoo, 1998, 2000; Light and Gold, 2000), and in the United Kingdom, with studies of Asians, Black-Caribbeans and whites (Ram, 1991, 1994; Phizacklea and Ram, 1995; Fadahunsi, Smallbone and Supri, 2000; Ram, Abbas, Sanghera and Hillin, 2000), there is a paucity of studies of ethnic entrepreneur groups in South Africa. There has only been one study looking at the relationship between ethnicity and entrepreneurship (Godsell, 1991), but the study only focused on the characteristics of each group, and failed to take into account the institutional factors and the ‘embeddedness’ of entrepreneurship in South Africa. Therefore this study is critical in the context of South Africa in focusing on ethnic entrepreneurship in its entirety, and taking into account the wider institutional context. The official dismantling of apartheid and the establishment of an African-led government have resulted in unprecedented changes in the political, economic and social arenas in South Africa. Furthermore, under apartheid rule, there evolved a strong antientrepreneurial culture specifically in Black communities, as a result of the political policy of the time (Allie and Human, 1998: 27). Therefore, in discussing entrepreneurship in this context, one has to take into account the complexities and dynamism of the cultural, political and sociological forces at work, which have changed dramatically since the advent of democracy (Iheduru, 1998: 69). The main argument put forward is that different ethnic groups in South Africa have historically had different levels of opportunities. These opportunities include market forces favouring certain businesses, access to ownership, lack of mobility, personal aspirations, education and the ability to mobilize resources from family and government sources (Godsell, 1991; Allie and Human, 1998). The challenge for future research, therefore, is to determine the relative impact that this lack of opportunities has had on the different ethnic groups in South Africa. 681

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There is undue emphasis on co-ethnic social and cultural networks in research on immigrant entrepreneurship (Kloosterman, Van Der Leun and Rath, 1999: 257). Kloosterman et al. regard this as a one-sided perception of embeddedness and advocate a broader framework. This concept recognizes the crucial significance of community networks in immigrant businesses, but also requires that the wider economic and institutional context be included in any explanation. To fully understand the socio-economic position of ethnic entrepreneurs, one needs to take into account not only their embeddedness in social networks, but also their embeddedness in the socio-economic and politico-institutional environment of the country. Kloosterman and Rath (2001: 2) refer to this approach as ‘mixed embeddedness’. They maintain that opportunity structures are not the same in different contexts. Markets, and therefore opportunity structures, are absolutely social phenomena and thus are embedded in wider social contexts that may differ. Studying the three ethnic groups within the South African national context will be significant and will add to the knowledge and understanding of entrepreneurship in a developing and changing environment. Nevertheless, one needs to take cognisance of the fact that ethnic entrepreneurs create new and enduring economic networks that allow them to raise their economic standards (Galbraith, Stiles and Rodriguez, 2003). Often, individuals settle in areas occupied by their own ethnic group. Where there is a dense concentration, an ethnic economy develops, and these groups can become embedded in ethnic enclaves. It is these ties with their co-ethnics that open up various opportunities for ethnic entrepreneurs to start businesses. In addition, as the ties within the ethnic group get stronger, the cost of doing business decreases. With the increase in trust arising from the creation of social capital, entrepreneurs are exposed to information that is not readily available in the market (Galbraith et al., 2003). Researching entrepreneurship using the social networks perspective is imperative, as studying entrepreneurs’ participation in networks highlights the importance of the social structure. The establishment of a firm means that entrepreneurs have to mobilize a set of resources to be able to cope with the establishment process and manage the firm. Social networks are crucial assets for business owners struggling to survive in competitive markets (Aldrich and Zimmer, 1986; Aldrich, Elam and Reese, 1997). That entrepreneurship is largely a social activity and that entrepreneurs are largely social creatures suggests not only that academics need to continue research on the social networks of new ventures, but that aspiring entrepreneurs would benefit from learning the rudimentary tools of social network analysis (Burt, 1992). These tools can be used to identify which key people and firms are connected to one another, and which central players are crucial to a start-up’s success. The concept of social capital has been recognized by sociologists and economists as an alternative to traditional forms of capital, such as financial, physical and human capital (Marger, 2001). Social capital may be defined as those resources inherent in social relations that facilitate collective action. The critical issue is that norms of trust, obligation and reciprocity are established through membership in these social networks (Coleman, 1988; Portes and Sensenbrenner, 1993; Putnam, 1993; Fukuyama, 1995; Light and Gold, 2000; Onyx and Bullen, 2000). In addition, social capital is an entity, consisting of all expected future benefits derived, not from one’s own labour, but from linking with other persons. It is from this membership of a network that individuals are able to obtain scarce resources. Social capital does not constitute the resources themselves, but rather the individuals’ ability to mobilize these resources on demand (Portes, 1995).

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Furthermore, social capital is being recognized as contributing significantly to economic development. Studies of rural development have shown that a vigorous network of indigenous grassroots associations can be as essential to growth as physical investment or appropriate technology. Furthermore, studies of the rapidly growing economies of East Asia often emphasize the importance of dense social networks, so that these economies are sometimes said to represent a new brand of ‘network capitalism’ (Putnam, 1993). Key literature Ethnic entrepreneurship In trying to explain why some ethnic groups are more entrepreneurial than others, Waldinger et al. (1986, 1996) cite four main arguments: culture, structure, the ethnic enclave and the situation. The cultural approach focuses on the cultural resources or predispositions that may lead to business success. It is maintained that ethnic networks supply capital or labour to ethnic businesses through the ties or relations based on trust and obligation (Light, 1972; Light and Gold, 2000). The ‘reactive version of cultural theory’ argues that the alien status of immigrant groups and social discrimination against them enhance social solidarity and mutual co-operation (Light, 1980). The structural approach, also known as the ‘middleman minority theory’, sees ethnic businesses as a response by minorities to hostcountry cultural alienation and exclusion (Bonacich, 1973; Bonacich and Modell, 1980). The ‘ethnic enclave theory’ argues that the initial economic niche occupied by early immigrants heavily determines the economic opportunities and position of succeeding waves of immigrants in the host society (Wilson and Portes, 1980). The situational approach, also referred to as the interactive theory, emphasizes the relationship between the structure of economic opportunity and economic and cultural resources of the group (Aldrich and Waldinger, 1990; Waldinger et al., 1990). Importance of networks Entrepreneurial activity does not occur in isolation. Instead, it is embedded in cultural and social contexts, and within webs of human networks that are both social and economic (Johannisson, 1990). The entrepreneur’s personal networks are the ‘most significant resource of the firm’ (Johannisson, 1990; Singh, 2000). Empirical studies have illustrated that entrepreneurs use informal network contacts (family, friends and business people) more than formal network contacts (bankers, accountants and lawyers) as information sources (Aldrich, Rosen and Woodward, 1987; Light and Gold, 2000). Weak ties act as ‘bridges’ to information sources not necessarily contained within an entrepreneur’s immediate (strong-tie) network (Granovetter, 1973: 1367). Rather, it is embedded in the political–economic context of the country. Empirical research illustrates that the context has a major impact on entrepreneurial activity. However, even within the same context, studies show that there are differences in rates of entrepreneurship between ethnic groups. Researchers deem that the reason for this lies in the entrepreneur’s access to various forms of capital, and the ethnic groups with high rates of entrepreneurship utilize networking extensively in order to access resources. The contribution of social networks to entrepreneurship is arguably one of the most important research discoveries in the last generation (Light and Gold, 2000: 94). Aldrich

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and Zimmer (1986) propose that entrepreneurship is embedded in a social context, channelled and facilitated (or inhibited) by a person’s position in a social network. Networking allows them to enlarge their span of action, save time and gain access to resources and opportunities otherwise unavailable, as well as provide needed resources for a new venture. This view also suggests that success does not depend just on the initial structural position of the entrepreneur, but also on the personal contacts he or she establishes and maintains throughout the process. This view that entrepreneurship is a social process, and that entrepreneurs act largely as social rather than solo players, should not lead researchers and educators to conclude that entrepreneurs’ individual knowledge and skill is irrelevant to the success of a new venture (Byers, Kist and Sutton, 1997). Rather, the essentially social nature of establishing connections and fruitful relationships with both insiders and outsiders means that the study of entrepreneurship should focus on social behaviour. This includes investigations about the way people identify which relationships will be crucial to the success of their venture, and how they develop and maintain the relationships that enable their firm to obtain the resources needed for their firm to survive and grow. There are a number of dimensions of social networks that may be conducive to entrepreneurship. The first is the importance of being within a group which, through increasing group identity and group boundary, increases network density. Dense networks may produce a collective capacity necessary for an entrepreneur to draw upon. Secondly, the accessibility of persons who can match actors with similar interests is important for increasing the reachability within a network. Thirdly, the diversity of ties is important, and the balance between weak and strong ties is imperative. Fourthly, the access to those people with the most social resources through weak ties is important. Therefore, a high degree of density, reachability, diversity and access to social resources through weak ties are conducive to entrepreneurship (Aldrich and Zimmer, 1986). Differences between ethnic entrepreneurs Often groups subjected to equal discrimination are unequally successful in entrepreneurship. Irrespective of economic conditions and income levels, some groups save more and lend more than others. The causes of inter-group disparity in savings rate include values and attitudes that influence saving and lending, the size and integrity of the group’s kinship system, and the availability of rotating credit associations (Light and Gold, 2000: 85–6). Comparing the entrepreneurship of blacks and whites, Light and Gold (2000) found that, in addition to their advantage in financial capital, the whites had more human capital than the blacks. That is, the average years of education of whites were greater than the average among blacks. Like the financial capital advantage of the whites, the human capital advantage of the whites is a class resource that translates into higher rates of entrepreneurship. Dana (1993: 30), in a study of three different immigrant groups, illustrated that entrepreneurship rates were substantially lower in the black/Caribbean group. He explains that one possible reason is that, for some ethnic groups, entrepreneurship is culturally desirable and, for others, it is a means of coping with marginalization. However, Ram (1997: 149) argues that ethnic minority businesses often arise out of a context of disadvantage, and that the adverse ‘opportunity structure’ carries greater explanatory power than speculations on ‘culture’ and so-called ‘ethnic’ resources. Basu and Goswami (1999)

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studied the factors influencing South-Asian entrepreneurship in Britain and the validity of conventional wisdom that attributes its success to cultural factors. They claim that entrepreneurial growth depends positively on educational attainment, personal savings invested at start-up, hard work in the initial stages, and the delegation of responsibilities to non-family members. Furthermore, Bates’s (1994) comparative studies of Korean immigrant-owned businesses with African Americans and non-minority-owned businesses suggest that human and financial capital, and not social capital, are the key determinants of business activity. Korean entrepreneurs are more likely to have college degrees and more likely to have invested substantial personal assets in their businesses. However, Sanders and Nee (1996) accept the importance of social capital in explaining inter-ethnic variations in self-employment, but locate the relevant social unit as the immediate family rather than the immigrant community. Social capital, argues Portes (1998), refers to dense interlocking networks of relationships between individuals and groups. People engage with others through a variety of lateral associations, which must be both voluntary and equal (Onyx and Bullen, 2000). Social capital cannot be generated by individuals acting on their own in isolation; it depends on a proclivity for sociability, but a spontaneous sociability, a capacity to form new associations and to co-operate within the terms of reference they establish (Fukuyama, 1995). Putnam (1993) and Coleman (1988) refer explicitly to social norms as providing a form of informal social control that obviates the necessity for more formal, institutionalized legal sanctions. Social norms are generally unwritten but commonly understood formulas both for determining what patterns of behaviour are expected in a given social context and for defining what forms of behaviour are valued or socially approved. Both Coleman (1988) and Putnam (1995) argue that, in communities where social capital is high, there is little crime and little need for formal policy. On the other hand, where there is low level of trust, and few social norms, people will co-operate in joint action only under a system of formal rules and regulations, which have to be negotiated, agreed to, litigated and enforced, sometimes by coercive means, leading to expensive legal costs (Fukuyama, 1995). The crucial issue of social capital theory is that networks of relationships constitute a valuable resource for the conduct of social affairs, providing their members with ‘the collectivity-owned capital, a “credential” which entitles them to credit, in the various senses of the word’ (Bourdieu, 1986: 249; Nahapiet and Ghoshal, 1998). Much of this capital is embedded within networks of mutual acquaintance and recognition. Bourdieu (1986), for example, identifies the durable obligations arising from feelings of gratitude, respect and friendship or from the institutionally guaranteed rights derived from membership in a family, a class or a school. Other resources are available through the contacts or connections networks bring. For example, through ‘weak ties’ (Granovetter, 1973) and ‘friends of friends’ (Boissevain, 1974), network members can gain privileged access to information and to opportunities. Finally, significant social capital in the form of social status or reputation can be derived from membership in specific networks, particularly those in which such membership is relatively restricted (Bourdieu, 1986; Burt, 1992; Nahapiet and Ghoshal, 1998). They go on to state that these different attributes can be grouped into three clusters: the structural, relational and cognitive dimensions of social capital. The structural dimension of social capital refers to the pattern of connections between actors and includes network ties, network configuration describing the pattern of

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linkages in terms of such measures as density, connectivity and hierarchy, and appropriate organization. The relational dimension of social capital refers to those assets which are created and leveraged through the relationships and include attributes like trust, norms and sanctions, obligations and expectations, and identification. The cognitive dimension of social capital refers to those resources which represent shared understanding, interpretations and systems of meanings between parties achieved through shared language, code and narratives (Nahapiet and Ghoshal, 1997). Ethnicity and social capital Light and Gold (2000) distinguish class-derived social capital from ethnic-derived social capital. Class-derived social capital is ownership of class-derived social relationships that facilitate entrepreneurship. Being related to an entrepreneur by blood or marriage most facilitates one’s own entrepreneurship when one can take over a parent’s business relationships and reputation (Light and Gold, 2000: 95). Acquired social capital represents a class resource when it reflects the owner’s class status rather than the owner’s ethnocultural identity. Even those most endowed with inherited social capital acquire their own class-defined social capital as their work career proceeds. However, even entrepreneurs who inherit class resources have to perform work in order to renew social capital resources for their own lifetime use. Ethnic groups are capable of providing members with social capital. Denoting the web of connections, loyalties and mutual obligations (shared fate, solidarity and communal membership) that develop among people as part of their regular interaction, social capital refers to the sense of commitment that induces people to extend favours, expect preferential treatment, and look out for each other’s interests (Light and Gold, 2000). The ethnic base of social capital becomes apparent when co-operation and mutual aid develop among group members of disparate class origins, who would often provide co-ethnics with higher wages and better benefits than out-group consideration and respect. Ethnic resources may yield benefits to an entire group. However, financial, human, cultural and social capital is often more extensively amassed and shared among subcollectivities wherein control is greater and malfeasance less likely. Granovetter (1985) demonstrates that the value of social capital is often enhanced when it is confined within specific boundaries or, in other words, constrained by both ‘coupling and decoupling’. In order to optimize their economic position, group members benefit not only by co-operating among themselves, but also by minimizing obligations to others, so that gainful action will be unfettered (Light and Gold, 2000: 112). However, it is important to remember that ethnic resources do not exist in a vacuum. Their potential benefits and liabilities are to a large extent determined by the social, legal and economic context in which groups exist (Light and Gold, 2000). Flap, Kumcu and Bulder (2000: 142) deliberate over reasons why members of some ethnic groups enter business ownership in numbers disproportionate to the size of the group, whereas other ethnic groups shun entrepreneurship almost altogether. Existing explanations for differences in the success of ethnic entrepreneurs look to very diverse causes, such as prior experience in the business as an employer or employee, the characteristics of the settlement, or servicing a particular, often co-ethnic, clientèle. Light and Karageorgis (1994) make a useful distinction between market conditions on the demand side and supply side. On the demand side of the market they identify five conditions that are favourable to success: the special consumer demands of co-ethnics, the local industrial

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mix, the resurgence of small and medium-sized business, vacancy chains emerging from the retirement or exit of existing business owners, and political encouragement. Government measures also affect ethnic minorities in such a way that – as they are not fluent in the official language, have little or no formal education or are illegal immigrants – they are forced to work in informal or illegal circumstances (Portes, 1995). Another well-known explanation for the relative success of ethnic entrepreneurs is that they operate in product markets where entry barriers are low, for example in markets where one can start production without much technology, where little capital is needed to finance this and other necessities and where competition is minimal (Flap, Kumcu and Bulder, 2000). Portes and Sensenbrenner (1993: 1323) redefine social capital as ‘those expectations for action within a collectivity that affect the economic goals and goal–seeking behaviour of its members, even if these expectations are not oriented towards the economic sphere’. Relating to immigrants and their adaptation to the host society, social capital essentially refers to participation within social networks of kin and especially co-ethnics. Such networks may influence immigration decisions, settlement pattern, and social incorporation (Massey et al., 1993; Marger, 2001). In brief, ethnic networks provide immigrants with a support system that assists in the securing of housing and other initial settlement issues, yields crucial information regarding job opportunities and boosts psychological security in a shortage in a strange environment. These networks can take the form of ethnic voluntary associations, community ties to the origin society and local ethnic communities and neighbourhoods that emerge in the host society (Marger, 2001). Portes and Sensenbrenner (1993) give examples in which social capital has detrimental effects. Firstly, people become trapped in their network by their investments in their local community, and if they attempt to escape their fate they are ridiculed as ‘wannabes’. Secondly, those who are successful are approached by job and loan-seeking kinsmen who lay claim to their profits. Tight ethnic communities produce a great deal of social capital in the sense of enforceable trust, as Portes (1995) calls it. People fear getting a bad reputation or even being ostracized. Not living up to the implicit repayment agreement certainly means losing face. Thus business owners may lie about their financial situation, and in some cases they may in desperation even sell family properties in the home country (Flap, Kumcu and Bulder, 2000: 155). Not only is the successful use of social capital by a particular ethnic entrepreneur or group of entrepreneurs or groups detrimental to the business chances of other ethnic entrepreneurs or groups of entrepreneurs with less or less effective social capital, there is another consideration. One can also have social capital of a kind that does not work. Finally, one can have too much social capital, leading to adverse effects (Flap, Kumcu and Bulder, 2000). However, social capital is seen as a ‘double-edged sword’: on the one hand, it can provide community members with a familiar variety of benefits, ranging from job referrals to cash. But there is also a downside, in that the ties can place enormous non-economic claims on members’ obligations and commitments, cutting them off from information about employment opportunities (Woolcock, 2001). The African context Entrepreneurial activities vary from one socio-economic context to another (KinundaRutashobya, 1999: 24). These are due to differences in economic, political, historical and social circumstances, laws and the regulatory framework, policies and levels of state

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involvement, formal and informal socio-economic institutions, type and distribution of resources and socio-cultural sectors. Furthermore, formal institutional factors exert a powerful negative influence on entrepreneurship in South Africa, and the historical and political system has served to promote an anti-entrepreneurial culture due to the dependency on, or control of, the population by the state which decreased the propensity for entrepreneurship (Allie and Human, 1998; Ahwireng-Obeng and Piaray, 1999; Olomi, 1999). In addition, the South African government failed to maintain an enabling environment for the development of indigenous entrepreneurship and the participation of Africans in national development (Iheduru, 1998; Mbaku, 2000). With its many cultures as well as its dynamic and transforming socio-political environment, South Africa represents a particularly problematic case study as regards its levels of entrepreneurship. The official dismantling of apartheid and the establishment of a blackled government have resulted in unprecedented changes in the political, economic and social arenas in South Africa. One aspect of this change is the growing number of black entrepreneurs in various sectors of the economy from which they were previously excluded by law and social conventions (Iheduru, 1998: 69). The uniqueness of the South African political system needs to be addressed if one is comparing ethnic groups’ levels of entrepreneurship. Therefore, in discussing entrepreneurship in this context, one has to take into account the complexities and dynamism of the cultural, political and sociological forces at work, which have changed dramatically since the first democratic elections in 1994. Kinunda-Rutashobya (1999: 24) calls for more empirical work, especially in the African context, and contends that reasons for success of one ethnic group over another can be further understood by using network theory. This perspective is supported by the research of Godsell (1991), in her study of four ethnic groups in South Africa. She found that, although both Indian and African entrepreneurs were victims of discriminatory legislation, the Indian entrepreneurs were able to use resources provided by family and the local, national and international community. Among the African entrepreneurs, very few networks were found, which was attributed to the low status of owning a small business in the African community. A further explanation for this lack of networks was that, traditionally, African entrepreneurs have had very few entrepreneurial role models. In trying to explain the lack of entrepreneurship among African entrepreneurs in the UK (Ram, 1994, 1997; Basu and Goswami, 1999) and in the US (Light and Gold, 2000; Yoo, 2000), it is argued that one feasible explanation was that there was a shortage of entrepreneurial role models in their community. Ethnic minority businesses often arise out of a context of disadvantage, and the fact that the adverse ‘opportunity structure’ carries greater explanatory power than speculations on ‘culture’ and so-called ‘ethnic’ resources (Ram, 1997: 149; Basu and Goswami, 1999: 251). As a social organization of production, the family’s chief advantages are not simply tangible products, such as unpaid labour, but also involve the mutual obligation and trust characteristic of solidaristic small groups (Sanders and Nee, 1996: 233). The intensity of a community’s networks is a major factor that enables a particular region to develop competitiveness on wider national and international markets (Johannisson, 2000). One of the secrets of the success of the silk industry in Surat, India, is a system of ‘ethnic entrepreneurship’ in which entrepreneurs rely on informal networks based on ties of kinship, caste, sect and place of origin (Menning, 1997). These flexible networks provide merchants and manufacturers with access to community resources, and allow them to

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minimize costs, adapt to market fluctuations and avoid government restrictions. However, Brown and Butler (1993) claimed that these strong ethnic and cultural ties act as barriers to those entrepreneurs who are not members of the ethnic group. For example, in Zambia, a large proportion of the business sector is run by Asian immigrants, who are not bound by the cultural factors in the country, where the production and trade of indigenous goods, as well as trade in imported goods, were discouraged among ‘natives’ by colonial economic policies (Kobonyo, 1999: 131). According to research in Kenya, Africans found it very difficult to penetrate business sectors dominated by Asians. This is largely due to social networks among the Asian business operations, which excludes non-Asians. Research objectives Based on a theoretical and empirical review of the literature, the chapter attempts to compare the three ethnic entrepreneurial groups on the following: ● ● ● ● ●

their motivation for going into business; their source of start-up capital; obstacles in doing business; their utilization of networks; and their use of social capital.

Research methodology Data for the analysis were collected from 325 entrepreneurs in Durban, the largest city in the province of KwaZulu-Natal, South Africa. Entrepreneurs were requested to fill in a structured survey instrument to ensure reliability and validity in responses obtained. The sample was selected from the three dominant ethnic groups in the region: African, Indian and European. The African entrepreneur group is an example of a marginalized group, but in South Africa they are a majority, and an indigenous group, and it is important when comparing ethnic groups to have a ‘native’ group. The Indian ethnic group is an example of a group filling the ‘middleman minority’ group. However, in South Africa, they were also marginalized by institutional factors, and will therefore make for a fascinating study. The European ethnic group also have a long history in South Africa, but their position there has always been one of privilege, and was originally one of being the colonial power. However, with change, firstly with the Afrikaner-led government and then the black-led government in 1994, their position has altered dramatically. The sample was selected largely by personal contacts and referrals and introductions by those interviewed. Given that a large number of ethnic businesses are still operated in areas dominated by specific ethnic groups, research assistants from the same ethnic group as the respondents’ were used. This methodology was utilized by Ram (1991, 1994) and Basu and Goswami (1999) in studies conducted in England, and Light and Bonacich (1988) and Yoo (2000) in studies in America, whereby having interviewers of the same ethnic background led to more access and acceptance by the entrepreneurs. Frequency analyses and chi-square (2) tests were performed on the demographic data and motivation factors to measure if there were any significant differences between the African, Indian and European entrepreneurs. With regard to the sources of start-up capital, obstacles in doing business, network activity, network density, network diversity and social capital, an analysis of variance (ANOVA) was conducted to determine whether

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there were any significant differences between the mean scores of the three ethnic entrepreneur groups. A stepwise multiple regression was conducted to determine whether the demographic data can predict the respondent’s score on the network variables. Furthermore, a factor analysis was performed to determine the underlying social capital factors. In addition, the scale was subjected to discriminant analysis to ascertain whether the scale could significantly distinguish between the three ethnic groups. Results and discussion This section presents a profile of some of the characteristics of the entrepreneur in addition to the results of the analysis of variance, multiple regression, factor analysis and discriminant analysis on the social capital variables. Of the 325 respondents, 34.2 per cent (n
111) were African entrepreneurs, 37.2 per cent (n
121) were Indian entrepreneurs, and 27.7 per cent were European (n
90), while 1 per cent (n
3) was classified as ‘other’. Several demographic characteristics are presented in Table 42.1. The majority of the entrepreneurs in the ethnic groups were male, except for the European group. Chi-square test results indicate that at the 
0.001 level, Table 42.1

Frequency distribution of characteristics of the entrepreneur (per cent)

Characteristic

African

Indian

European

Gender Male Female

58.6 41.4

78.3 21.7

48.9 51.1

Age 21–30 31–40 41–50 51–60 61–73

24.1 38.9 22.2 11.1 3.7

8.7 19.6 32.6 26.1 13.0

11.6 4.7 53.5 23.3 7.0

Marital status Never married Married Divorced Widowed

36.8 55.7 4.7 2.8

8.3 80.8 10.0 0.8

8.9 66.7 15.6 8.9

Education Primary school or less High school or less Matric/12th grade Degree/diploma Postgraduate degree

2.8 10.1 36.7 45.9 4.6

2.5 16.7 53.3 23.3 4.2

0 8.9 42.2 42.2 6.7

Entrepreneurs in family Father Mother Close relatives

14.8 4.8 24.3

12.4 2.5 68.6

9.5 2.6 66.7

Note: * 0.001; **   0.05.

2 20.910*

60.179*

55.241*

21.644**

1.501 1.169 53.892*

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there were significant differences between the three groups on gender: fewer than 22 per cent of the Indian, 41.4 per cent of the African, and 51.1 per cent of the European respondents were female. Looking at the age distribution, it is evident that the African ethnic entrepreneurs were younger, with the majority (63 per cent) below the age of 40. In contrast, more than 70 per cent (71.7%) of the Indian and 85.8 per cent of the European ethnic group were over the age of 40. The 2 results show that, at 
0.001, there are significant differences in the ages between the entrepreneurs from the three ethnic groups. When one looks at the marital status of the entrepreneurs, the 2 results also show significant differences between the three ethnic groups. The majority of entrepreneurs in all three ethnic groups are married (55.7 per cent of the Africans, 80.8 per cent of the Indians, and 66.7 per cent of the Europeans). In terms of education, the results indicate that, at the 
0.05 level, there were significant differences between the three ethnic groups on education, with the majority having completed 12 years of schooling (African, 87.2 per cent; Indian, 80.8 per cent; European, 91.1 per cent). Interestingly, in the African group, 45.9 per cent had either a degree or a diploma. Looking at whether the entrepreneurs had immediate family members who were entrepreneurs, all groups showed that very few of them had parents who were entrepreneurs. However, looking at whether they had close relatives who were entrepreneurs, only 24.3 per cent of African respondents, as against 68.6 per cent of the Indian group, and 66.7 per cent of the Europeans, had said that they had a close relative who was an entrepreneur. Motivation to start a new business Table 42.2 presents the comparative results between the three groups on motivation for starting their own business. For the African respondents, more than half were motivated by the need to be able to implement their own ideas (55.9 per cent) and the desire to earn Table 42.2

Motivation to start your own business

Statement Personal independence Economic independence Earn more money Difficulty in finding a job Dissatisfaction with previous job To be compensated fairly Able to implement my own ideas To lead an organization To manage people To invest personal capital To obtain personal capital Prestige/status To create something of my own Other Note: * 0.001; **   0.05.

African (%)

Indian (%)

European (%)

2

41.4 27.9 52.3 37.8 19.8 30.6 55.9 29.7 22.5 28.8 34.2 24.3 55.9 0.9

70.3 64.1 55.5 30.4 38.4 41.4 56.2 26.9 18.7 53.1 56.4 30.5 47.2 1.1

87.2 81.2 70.3 30.8 33.3 48.3 80.0 36.7 12.0 16.7 45.2 23.2 71.8 12.0

47.889* 59.659* 9.087** 2.508 10.008** 6.765 17.561* 2.557 2.973 22.706* 12.956** 2.096 13.799** 17.618**

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more money (52.3 per cent). For the Indian respondents the most common motivation factors were personal independence (70.3 per cent), and economic independence (64.1 per cent). For the European respondents, 87.2 per cent were motivated by the need for personal independence, and 81.2 per cent by the need for economic independence. On the need for personal independence, 41.4 per cent of the Africans saw this as a motivation factor, and only 27.9 per cent of them saw economic independence as a motivation factor. With regard to the factor ‘to invest personal capital’, more than half of the Indian respondents saw this as a motivation factor, whereas fewer than 30 per cent of the African and 20 per cent of the European respondents were motivated by this factor. Source of start-up capital Table 42.3 presents results of various sources the entrepreneurs used to capitalize their current businesses. The entrepreneurs were asked to rate the methods (1
the most important; 2
the next most important, etc). The results reveal that, for all respondents, one’s own savings were the most important source of start-up funds. Comparing the results illustrates significant differences between the three groups. Approximately twice as many Indian respondents (n
107) used their own savings than did African respondents (n
45) and European respondents (n
60). There were also significant differences in the use of loans from relatives/friends and loans from banks. More than three times as many African respondents used loans from relatives/friends (n
61) than did Indian respondents (n
17), and more than double European respondents (n
24). Loans from banks were used more by Indian respondents (n
45), than European (n
34) and African respondents (n
28). Table 42.3

Source of start-up capital

Statement Use of manager’s credit card Loan from relatives/friends Loan from banks Loan from agencies Partnerships Own savings Business angels Credit rotating associations Relatives working for less salary Use of interest on overdue payment Borrow equipment from others Share equipment with others Lease equipment Delay payment to suppliers Choose customers who pay quickly Share premises with others Share employees with others Other Note: * 0.001; **   0.05.

African

Indian

European

F statistic

2.88 2.28 2.25 2.05 2.50 2.02 3.10 3.47 2.00 3.33 2.89 2.74 3.27 3.83 3.83 2.36 1.71 2.50

2.00 1.82 1.64 1.00 1.57 1.21 1.00 1.60 2.00 1.00 2.00 2.00 2.44 1.91 2.04 2.11 4.00 1.00

3.0 1.17 1.59 0 1.80 1.57 0 0 1.75 0 2.75 3.00 4.50 2.00 2.46 3.33 0 1.00

0.264 3.263** 2.960** 0.196 1.267 6.430* 0.676 1.107 0.114 0.403 0.405 0.450 1.644 2.209 0.765 1.647 0.350 1.043

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Obstacles in doing business The study was also concerned with the obstacles that the entrepreneurs faced in doing business in the context of South Africa. Respondents were asked to judge on a six-point scale (1
not problematic; 6
very problematic) how problematic different policy areas were for doing business. Looking at the second column of Table 42.4, which represents the overall mean scores, one notices that crime and theft, with a value of 3.95, inflation (3.65) and tax regulations and high taxes (3.59) were perceived as the most problematic policy areas. Labour relations (3.23) and corruption (3.15) were also seen as obstacles in doing business. Looking specifically at the African group, financing, labour regulations as well as crime and theft were seen as the most problematic. For the Indian entrepreneurs, crime and theft, tax regulations and labour regulations were perceived as the most problematic in doing business. Crime and theft, inflation as well as high taxes were the major obstacles identified by the European respondents. Based on the results of ANOVA tests, there are a number of significant differences between the three ethnic entrepreneurial groups with regard to perceived obstacles in doing business. Financing as an obstacle was significantly different between the groups (F
10.245; 
0.001), with it being very problematic for the African group, who had an average score of 3.42, but far less of a problem for the Indian group, who only averaged 2.35 and the European group (2.90). There were also significant differences regarding tax regulations between the groups (F
12.252; 
0.001), with the Indian group seeing it as a major obstacle in doing business, more than Africans and Europeans. Inflation was also a major problem for the Indian and European respondents, but less so for the Africans. There were significant differences between the groups with regard to the issue of crime and theft (F
9.966; 
0.001). The Indian group scored on average 4.40, the European group 4.30 and the African group 3.18, respectively. Table 42.4

Obstacles in doing business

Statement Crime and theft Inflation Tax regulations and/or high taxes Labour regulations Corruption Uncertainty on costs of regulation Financing Safety/environmental regulations Foreign currency regulations Inadequate infrastructure Policy instability Regulations for starting business Terrorism Other

Overall

African

Indian

European

3.95 3.65 3.59 3.23 3.15 2.91 2.87 2.85 2.71 2.58 2.52 2.48 2.47 2.21

3.18 2.91 2.97 3.39 3.24 2.94 3.42 2.84 2.93 2.99 2.82 2.64 3.23 2.75

4.40 3.95 4.20 3.28 2.96 2.61 2.35 2.82 2.48 2.15 2.18 2.24 1.91 1.36

4.30 4.19 3.56 3.00 3.36 3.41 2.90 2.91 2.77 2.71 2.64 2.65 2.15 2.75

Note: * 0.001; **   0.01; ***   0.05.

F 9.966* 13.105* 12.252* 2.235 1.691 4.584** 10.245* 0.247 2.116 7.820* 4.770** 2.168 12.574* 13.475*

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Table 42.5

Comparison of network activity variables (based on ethnic group)

Question With how many people did you discuss your business? How many hours per week developing contacts? How many hours per week maintaining contacts?

African

Indian

European

F

4.50

11.70

10.24

7.671*

6.68

6.76

6.22

0.077

6.33

7.27

7.74

0.501

Note: * 0.001.

Utilization of networks The study looked at network activity, density and diversity of the three ethnic entrepreneur groups. Network activity and size In Table 42.5, differences in activity and size of networks of South African entrepreneurs classified according to ethnic group of the entrepreneur are presented. In response to the question, ‘With how many people did you discuss your business?’, the mean score for African entrepreneurs was 4.50, whereas the score for the Indian group was 11.70, and 10.24 for the European group. At the 
0.001 level, there was a significant difference between the three groups, with the Indian and European entrepreneurs on average discussing their business with almost three times more people than their African counterparts. The scores in response to the question, ‘How many hours per week did you spend developing contacts?’ gave very similar results with all the groups spending about six hours per week developing contacts. The responses to the question, ‘How many hours per week did you spend maintaining contacts?’ again revealed similar results, with the three groups spending between 6.33 and 7.74 hours maintaining their contacts. The ANOVA results indicate no significant differences between the three ethnic groups on the number of hours spent developing and maintaining contacts. Network density Table 42.6 presents three variables measuring different aspects of network density: how well the entrepreneur knows his contacts’ network, the number of years the entrepreneur has known the contacts and how well the contacts know each other. The table also includes the results that indicate how these contacts were made. At 0.001, the ANOVA results show that there are significant differences between ethnic groups on the three variables measuring network density. European entrepreneurs know their contacts better and have known their contacts for a longer period of time compared to their Indian and African counterparts. Members of the European entrepreneurs’ network also knew each other better, when compared to the Indian and African entrepreneurs’. Overall, Indian respondents had better results than Africans when it came to all three network density variables. Furthermore, Table 42.6 presents the results of the cross-tabulation analysis of how network contacts were met with respect to ethnic group. European entrepreneurs have slightly more referrals (28 per cent) than Africans (22 per cent) and Indians (25 per cent).

Ethnic entrepreneurship in South Africa Table 42.6

695

Comparison of network density variables (based on ethnic group)

Statement

African

Indian

European

F

How well network of contacts are known Number of years contacts are known How well contacts know each other

1.1340

1.6477

1.8931

10.547*

8.7481

13.1372

13.3156

21.669*

How contacts (Own) were met (Referral)

2.3 78% 22%

2.55

3.0

75% 25%

72% 28%

4.267*

Note: * 0.001.

Table 42.7

Distribution of relationships with contacts (based on ethnic group)

Relationship Friend Family Colleague Professional acquaintance

African

Indian

European

F

41.58 35.64 22.77 0.00

34.10 42.49 23.12 0.29

43.66 28.17 23.24 4.93

10.547* 21.669* 4.267*

Note: * 0.001.

Network diversity Table 42.7 presents the distribution of relationships with contacts. The ANOVA results reveal that, at 0.001, there are significant differences in the distribution of relationships with contacts according to the ethic groupings. All ethnic groups except the Indians have more friends in their networks than other types of relations. Indians have a higher percentage of family members in their networks while Europeans have a higher percentage (4.93 per cent) of professional acquaintances compared to their Indian (0.29 per cent) and African (0 per cent) counterparts. The results in Table 42.8 show how similar or dissimilar the entrepreneur is to his network contacts in terms of personal characteristics. The Chi-square result indicates that entrepreneurs from the three ethnic groups have predominantly more males comprising their networks, with Indians having the highest per centage of males in their network. Comparing this to the gender distribution of the sample shown in Table 42.1, the results imply that the gender distribution of the sample and their corresponding network is very similar (except for the European sample). The Chi-square results also show that, at 0.001, entrepreneurs from all ethnic groups predominantly have network members that are of the same ethnicity as them. Lastly, for age, the average age of the European entrepreneurs’ network member is 31.13 years, which is slightly higher than the African (26.38) and Indian’s (25.85). The results mean that entrepreneurs tend to favour on the average people younger than they are to be part of their network. A majority of the African entrepreneurs are aged between 31 and 50, while Indian and European respondents were primarily between the ages of 41 and 60.

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Table 42.8 Variable Gender Male Female

Comparison of network diversity variables (based on ethnic group) African

Indian

European

5.983a 60.94 39.06

72.82 27.18

64.32 35.68 437.889*a

Ethnic group African Indian European Other

94.88 1.88 3.04 0.2

2.6 89.98 6.34 1.08

2.94 1.34 94.16 1.56

Age

26.38

25.85

31.13

Notes:

2 /F

4.320*b

* 0.001; a chi square value; b ANOVA value.

Multiple regression of demographic data and network variables In order to determine whether the demographic data (from Table 42.1) can predict the respondent’s scores on the network variables, a stepwise multiple regression analysis was conducted. The scores on network activity (number of people the entrepreneur has discussed his business with, number of hours per week developing contacts, number of hours per week maintaining contacts) served as the dependent variables. The entrepreneur’s demographic data were used as independent variables (gender, age, education, marital status and entrepreneurs in the family). Of the three regressions performed on network activity variables, the variance of only one variable was found significantly explained by demographic variables. Only about 9 per cent of the variation of ‘With how many people did you discuss your business?’ (NUMPEO) as the dependent variable was explained by close relative and age variables with R2
9.2 per cent. Analysis of variance indicated that F
11.120, 
0.000 for the model. Of the three regressions performed on network density variables, the variance of all three variables was found significantly explained by demographic variables. Table 42.9 illustrates the findings of the multiple regression analysis with ‘How well network of contacts are known’ (AVECON) as the dependent variable. The best solutions for the AVECON dependent variable, in terms of R2, significance of t and significance of F were obtained with model 1 (Table 42.9). About 32 per cent of the variation of AVECON was explained by ethnic group with R2
32.1 per cent. Analysis of variance indicated that F
100.693, 
0.000 for the model. The t value of the coefficient for ethnic group was significant at the 1 per cent level (t
10.035.961, 
0.000). The best solutions for the ‘number of years contact is known’ (AVEKNOW) as the dependent variable, in terms of R2, significance of t and significance of F was explained by age and ethnic group variables with R2
16.2 per cent. Analysis of variance indicated that F
23.538, 
0.000 for the model. The t value of the coefficient for age was significant at the 1 per cent level (t
4.174, 
0.000), and significant at the 1 per cent level for ethnic group with t
3.892, 
0.001, respectively.

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Table 42.9 Regression of network density variable (AVECON) and selected demographic data Analysis of variance

DF

Sum of squares

Mean square

F

Sig.

Regression Residual

1 213

26.423 55.894

26.423 0.262

100.693

0.000

B

Standard error of B

Beta

t

Sig.

0.567

8.006 10.035

0.000 0.000

Variables in the equation Constant Ethnic group Multiple R R2 Adjusted R2 Standard error

0.702 0.436

0.088 0.043 0.567 0.321 0.318 0.51226

The best solutions for ‘how well contacts know each other’ (AVEREL) as the dependent variable, in terms of R2, significance of t and significance of F was explained by the variable age with R2
2 per cent. Analysis of variance indicated that F
4.299, 
0.039 for the model. The t value of the coefficient for age was significant at the 5 per cent level (t
2.073, 
0.039). Use of social capital To determine whether there were significant differences in the various social capital variables among the three ethnic groups, an analysis of variance (ANOVA) was performed. The results are shown in Table 42.10. Of the 20 items included in the questionnaire, at 0.001, 12 were found to be statistically significant when ethnic groups was used as a differentiating factor. The results of Table 42.10 indicate that African respondents have two of the highest means and nine of the lowest means in the 12 significant items. They scored the highest in joining a local community action to deal with an emergency and thinking that multiculturalism makes life better. They scored the lowest in feeling valued by society, satisfaction with the meaning of one’s life, believing that by helping others one helps oneself, attending a local community event, feeling that the local community is like home, going outside the community to visit family, running into friends and acquaintances when shopping, knowing where to find information to make a life decision, and feeling free to speak out when one disagrees with everyone else. As for the Indian respondents, the results indicate that they scored the highest in five items and lowest in three items. They scored the highest in the following items: feeling valued by society, satisfaction with the meaning of one’s life, attending a local community event, going outside the community to visit one’s family, and running into friends and acquaintances when shopping. They scored the lowest on being in a management or organizing committee for any local group or organization, joining local community action to deal with an emergency, and thinking that multiculturalism makes life better. The results of the European entrepreneurs indicate that they scored highest in five items and lowest in none. The five highest scoring items were believing that helping others helps

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Table 42.10 Mean scores from questions on social capital Question Do you feel valued by society? If you were to die tomorrow, would you be satisfied with what your life has meant? Do you believe that by helping others you help yourself ? Do you help out a local group as a volunteer? Do you feel safe walking down your street after dark? Do you agree that most people can be trusted? Does your area have a reputation for being a safe place? Have you attended a local community event in the past 6 months (e.g. fête, concert)? Are you an active member of a local organization or club (e.g. sport, social club)? Does your local community feel like home? Do you go outside your community to visit your family? When you go shopping in your local area are you likely to run into friends and acquaintances? If you need information to make a life decision, do you know where to find that information? Are you on a management committee or organizing committee for any local group or organization? In the past three years, have you ever joined a local community action to deal with an emergency? Have you taken part in a community project? Have you helped organize new service in your area? If you disagree with what everyone else agreed on, would you feel free to speak out? Do you think that multiculturalism makes life better? Do you enjoy living among people of different lifestyles?

African

Indian

European

F value

2.66 2.38

3.56 3.49

3.11 3.04

14.934* 19.846*

3.02

3.60

3.80

14.383*

2.32 2.07

2.60 1.78

2.35 1.56

1.138 4.555

2.15 2.31

1.77 1.95

2.07 2.44

3.505 5.198

2.31

3.45

2.98

18.719*

2.21

1.88

2.32

3.460

2.40 2.53

2.73 3.79

3.27 3.69

9.625* 48.957*

2.62

3.78

3.69

44.883*

2.67

3.29

3.62

17.188*

2.10

1.57

2.22

6.905*

2.35

1.65

1.89

7.936*

2.38 2.34 2.83

2.08 2.02 3.40

2.31 1.89 3.61

1.209 2.557 11.916*

2.87

2.22

2.81

8.923*

2.96

2.62

2.84

3.361

Note: * 0.001.

oneself, feeling that the local community is like home, knowing where to find information, being in a management or organizing committee for a local group or organization, and feeling free to speak out when one disagrees with everyone else. A factor analysis was also performed on the social capital questions. Findings from the factor analysis illustrated in Table 42.11 show the emergence of a six-factor solution that

Ethnic entrepreneurship in South Africa Table 42.11

699

Rotated factor structure for social capital

Factors

Factor loading

Factor 1 Participation in community activities Joining local community action to deal with emergency Participating in community project Being in a management/organizing committee of local group Helping organize new service in the area Being an active member of local organization or club Helping out a local group as a volunteer

0.756 0.746 0.711 0.699 0.623 0.488

Factor 2 Proximity of network members Attending local community events Running into friends and acquaintances when shopping Going outside community to visit family Feeling that the local community is like home

0.715 0.704 0.649 0.484

Factor 3 Perceptions of contribution to society Feeling valued by society Feeling satisfaction with what life means Believing that helping others helps yourself

0.825 0.799 0.544

Factor 4 Attitude towards multiculturalism Enjoying living with people of different lifestyles Thinking that multiculturalism makes life better

0.864 0.862

Factor 5 Perceptions of safety and trust Feeling safe walking down one’s street after dark One’s area having a reputation of being a safe place Agreeing that most people can be trusted

0.783 0.740 0.542

Factor 6 Access to and freedom to provide information Knowing where to find information when making life decision Feeling free to speak out when disagreeing with everyone else

0.766 0.525

Notes: Extraction method: Principal Components Analysis; this table is based on Varimax Factor Rotation; six factors extracted/only items that loaded with absolute values greater than 0.35 are shown.

accounts for 63.078 per cent of the variance. The six factors identified in the factor analysis are shown in the table. Factor 1 Participation in community activities This factor had six item loadings and included the following items: joining local community action to deal with emergency, participating in community project, being in a management/organizing committee of local group, helping organize new service in the area, being an active member of local organization or club, and helping out a local group as a volunteer. This factor deals with the entrepreneurs’ level of participation in community activities. The component loadings ranged from 0.488 to 0.756. Factor 2 Proximity of network members This factor had four item loadings ranging from 0.484 to 0.715, and included items such as attending local community events,

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running into friends and acquaintances when shopping, going outside the community to visit family, and feeling that the local community is like home. This factor related to the proximity of entrepreneurs’ network members. Factor 3 Perceptions of contribution to society This factor had three item loadings ranging from 0.544 to 0.825 and included the following items: feeling valued by society, feeling satisfaction with what life meant, and believing that helping others helps yourself. This factor deals with the entrepreneurs’ perceptions on his/her contribution to society. Factor 4 Attitude towards multiculturalism This factor had two item loadings ranging from 0.862 and 0.864 and included items such as enjoying living with people of different lifestyles, and thinking that multiculturalism makes life better. Factor 5 Perceptions of safety and trust This factor had three item loadings and included items such as feeling safe walking down one’s street after dark, one’s area having a reputation of being a safe place, and agreeing that most people can be trusted. This factor deals with the respondents’ perceptions of how safe one’s area is as well as how trustworthy people generally are. The component loadings range from 0.542 to 0.783. Factor 6 Access to and freedom to provide information This factor had two item loadings ranging from 0.525 and 0.766, and included the following items: knowing where to find information when making a life decision, and feeling free to speak out when one disagree with everyone else. The initial-components factor analysis method was used to determine the number of possible factors present. From the eigenvalues greater than one (refer to Table 42.12), it was decided to have six factors because the eigenvalues of the seventh factor onwards was less than one. In order to determine a finer selection of factors, an orthogonal varimax rotation Table 42.12 Factors, eigenvalues, percentage of variance, cumulative percentage of variance and alpha coefficients

Factor Participation in community activities Proximity of network members Perceptions of contribution to society Attitude towards multiculturalism Perceptions of safety and trust Access to and freedom to provide information

Eigenvalue

Variance (%)

Cumulative variance (%)

Alpha coefficient

4.100

20.499

20.499

0.7746

2.931

14.654

35.154

0.6823

1.936

9.678

44.831

0.7255

1.436

7.182

52.013

0.7975

1.205

6.025

58.037

0.5226

1.008

5.040

63.078

0.5035

Ethnic entrepreneurship in South Africa Table 42.13

701

Classification matrix for discriminant analysis Predicted group

Actual group African Indian European Predicted group size

Actual group

Percentage

African

Indian

European

Size

Correctly classified

65 8 15 88

3 84 25 112

6 26 54 86

111 121 90 322

58.56 69.42 60.00 63.04

was completed. The factor loadings for each of the six factors are greater than 0.35. All the eigenvalues for the respective factors are greater than 1.0, which fulfils the Kaiser criterion (SPSS, 1990, 1999). The six factors and their relative contribution to variance are presented in Table 42.12. It can be seen that all the six factors have an eigenvalue of above 1, ranging from 1.008 to 4.100. Factor 1, participation in community activities, contributes a variance of 20.499 per cent, followed by factor 2, proximity of network members, which contributes 14.654 per cent. Perceptions of contribution to society, factor 3, contributes 9.678 per cent of the variance, while factor 4, attitude towards multiculturalism, explains 7.182 per cent of the variance. Factor 5, perceptions of safety and trust, contributes 6.025 per cent in explaining the variance while factor 6, access to and freedom to provide information contribute 5.040 per cent. The total cumulative variance explained by the six factors is 63.078 per cent. The data collected were also subjected to item analysis. The Cronbach’s alpha coefficient () was calculated to determine the internal consistency of the items on the scale. The alpha value for the entire social capital scale was found to be 0.7757, which indicated that the internal consistency was quite high. Cronbach’s alpha coefficients for each factor of the scale were as follows: factor 1
0.7746; factor 2
0.6823; factor 3
0.7255; factor 4
0.7975; factor 5
0.5226; and factor 6
0.5035. Discriminant analysis was also performed on the data to determine whether the social capital scale can accurately classify the respondents according to their ethnic groupings. The results of the analysis are presented in Table 42.13. The results indicate that using the social capital scale, the overall classification accuracy (hit ratio) is 63.04 per cent. Of the 111 African entrepreneurs, 65 were correctly classified, accounting for 58.56 per cent. Among the 121 Indian respondents, 84 were correctly classified, corresponding to 69.42 per cent. As for the Europeans, of the 90 respondents, 54 were correctly classified, equivalent to 60 per cent. A measure of classification accuracy is the maximum chance criterion which is simply the hit ratio obtained if we assign all the observations to the group with the highest probability of occurrence. In the computation, this results as 37.58 per cent. Compare this figure to the overall per centage correctly classified. Based on the maximum chance criterion, therefore, the model is very good. Discussion and conclusion This chapter has attempted to look into five aspects of entrepreneurship, based on a survey of 325 entrepreneurs from Durban, South Africa. An analysis of the data revealed that the Indian group was predominantly male and the majority of them were married.

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Quite surprisingly, the African and European ethnic groups were better educated than the Indian group. However, even though the Indian group is not as highly educated, the majority of them had completed their high school education. Assuming that higher education levels improve one’s chance of getting employment in the formal sector, the African respondents would have found it less difficult than the Indians to find a job. Assuming that higher education levels improve one’s chance of accessing formal sources (e.g. financing) the African respondents would have found it less difficult than Indians or Europeans to find resources needed for the business. This could explain the higher levels of social capital mobilization for Indians and Europeans. With regard to having family members who are entrepreneurs, fewer than 20 per cent of all the groups had an entrepreneurial parent. However, when asked if they had a close relative that was an entrepreneur, 68.6 per cent of the Indians and 66.7 per cent of the Europeans responded in the affirmative. Less than one-quarter of the African group had a close relative who was an entrepreneur. This result partly explains why the level of entrepreneurship is lower in the African ethnic groups. Being related to an entrepreneur by blood or marriage most facilitates one’s own entrepreneurship when one can take over a parent’s or relative’s business relationships and reputation (Light and Gold, 2000). Other research has supported the view that what is lacking in African communities is entrepreneurial role models, on whom nascent entrepreneurs can model their careers. The first issue that was investigated was entrepreneurial motivation. The study revealed that African entrepreneurs are motivated to start their own business for financial reasons. This is supported by an earlier study in rural South Africa, which showed that financial survival was crucial (Mitchell, 2003b). The Indian and European entrepreneurs, on the other hand, become entrepreneurs because of their need for personal and economic independence. European respondents were also motivated by being able to implement their own ideas, while, for the Indian respondents, being able to invest personal capital was an important motivation factor. The second issue emerging from the study is the diversity of sources used to access finance, and the differences between the ethnic groups. The study revealed that, for all entrepreneur groups, one’s own savings were the most important source of start-up funds. For the Indian and European entrepreneurs, significantly more respondents used this source of funds than did African respondents. Furthermore, African respondents relied on loans from relatives/friends considerably more than their Indian and European counterparts. This indicates that, regardless of ethnic group, entrepreneurs in South Africa tend to rely on internal sources of capital (that is, personal savings and loans from friends and family) rather than external sources (that is, loans from financial institutions). Indian and European entrepreneurs, however, are more creative in utilizing various bootstrapping methods to supplement their capital. These methods include use of interest on overdue accounts and hiring relatives and paying non-market rate salary. Thirdly, the results of the investigation indicate that institutional risk factors exert a powerful negative influence on entrepreneurship in South Africa. The majority of entrepreneurs believed that crime and theft represented serious problems that increased the cost of doing business. An overwhelming number of the African, Indian and European groups complained about the uncertainty of government laws and policies, specifically labour relations (Mitchell, 2003a). The three labour laws that have been passed (the Labour Relations Act, the Employment Equity Act and the Basic Conditions of Employment Act)

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have all added to the inflexibility of the labour market and increased the cost of doing business. Tax rates and regulations were also perceived as major obstacles, because South African corporate tax rates are among the highest in the world. The fourth issue addressed in this study relates to the utilization of networks. The findings suggest that, overall, the European respondents perform networking better than their African and Indian counterparts. They spend more time maintaining contacts, know their contacts better and for a longer period of time, as well as knowing each other better. They also tend to have more network members who are not family. Indian entrepreneurs, however, discuss their business ideas with more people, spend more hours developing contacts and have more family members as part of their network. The last issue that concerned this investigation refers to the use of social capital. The findings indicate that the African entrepreneurs do not mobilize social capital as well as their Indian and European counterparts. These results support Godsell’s (1991) findings that Indian entrepreneurs access social capital better than Africans. The method of accessing social capital also differs according to the respondent’s ethnic grouping. European entrepreneurs tend to access social capital in more formal avenues such as participation in management or organizing committees for local groups. Indians tend to rely on more informal means of gathering social capital, such as through family, friends and acquaintances. It is quite interesting to note that African respondents scored the highest in the item related to joining a local community action to deal with an emergency. This could indicate that Africans only mobilize social capital when there is no choice and do not make a conscious effort to cultivate and maintain relationships that would help in this aspect (Mitchell and Co, 2004). To conclude, this chapter has attempted to add to our understanding of ethnic entrepreneurs in South Africa. The results show that various factors internal and external to the individual affect his or her decision to start a firm. The individual’s entrepreneurial motivation (whether ‘push’ or ‘pull’) will determine the urgency and importance of proceeding with the entrepreneurial activity. The availability and sources of capital will determine how easy or difficult it is to start the business. External concerns such as tax and labour regulations will either foster or hinder business performance. Lastly, the utilization of networks empowers the entrepreneur to access social capital. References Ahwireng-Obeng, F. and D. Piaray (1999), ‘Institutional obstacles to South African entrepreneurship’, South African Journal of Business Management, 30(3), 78–98. Aldrich, H. and R. Waldinger (1990), ‘Ethnicity and entrepreneurship’, Annual Review of Sociology, 16, 111–35. Aldrich, H. and C. Zimmer (1986), ‘Entrepreneurship through social networks’, in R. Smilor and D. Sexton (eds), The Art and Science of Entrepreneurship, New York: Ballinger. Aldrich, H., A. Elam and P.R. Reese (1997), ‘Strong ties, weak ties, and strangers: do women business owners differ from men in their use of networking to obtain assistance?’, in S. Birley and I. MacMillan (eds), International Research on Entrepreneurship, London: Routledge. Aldrich, H., B. Rosen and W. Woodward (1987), ‘The impact of social networks on business foundings and profit: a longitudinal study’, Frontiers of Entrepreneurship Research, 7, 154–68. Allie, F. and L. Human (1998), ‘Africa: South’, in A. Morrison (ed.), Entrepreneurship: An International Perspective, Oxford: Butterworths. Basu, A. and A. Goswami (1999), ‘South Asian entrepreneurship in Great Britain: factors influencing growth’, International Journal of Entrepreneurial Behaviour and Research, 5(5), 251–75. Bates, T. (1994), ‘An analysis of Korean-immigrant owner small business start-ups with comparisons to African American and nonminority-owned firms’, Urban Affairs Quarterly, 31, 206–25. Boissevain, J. (1974), Friends of Friends, Oxford: Basil Blackwell.

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Bonacich, E. (1973), ‘A theory of middleman minorities’, American Sociological Review, 38, 685–92. Bonacich, E. and J. Modell (1980), The Economic Basis of Ethnic Solidarity, Berkeley: University of California Press. Boshoff, A.B., C.P.T. Scholtz and G. Roodt (1995), ‘Measuring attitudes as a way of differentiating entrepreneurs’, South African Journal of Economic and Management Sciences, 4, 27–42. Bourdieu, P. (1986), ‘The forms of capital’, in J.G. Richardson (ed.), Handbook of Theory and Research for the Sociology of Education, New York: Greenwood. Brown, B. and J.E. Butler (1993), ‘Networks and entrepreneurial development: the shadow of borders’, Entrepreneurship and Regional Development, 5, 101–16. Burt, R. (1992), Structural Holes: The Social Structure of Competition, Cambridge, MA: Harvard University Press. Byers, T., H. Kist and R.I. Sutton (1997), ‘Characteristics of the entrepreneur: social creatures, not solo heroes’, in R.C. Doff (ed.), The Handbook of Technology Management, Boca Raton, Florida: CRC Press. Coleman, J. (1988), ‘Social capital in the creation of human capital’, Journal of Sociology, 94, 95–120. Dana, L.P. (1993), ‘An inquiry into culture and entrepreneurship: case studies of business creation among immigrants in Montreal’, Journal of Small Business and Entrepreneurship, 10(4), 16–34. De Klerk, A. (1998), ‘Variables distinguishing entrepreneurs and non-entrepreneurs from different ethnic groups in the South African environment’, Unpublished D.Com thesis, University of South Africa, Pretoria. Fadahunsi, A., D. Smallbone and S. Supri (2000), ‘Networking and ethnic minority enterprise development: insights from a North London study’, Journal of Small Business and Enterprise Development, 7, 228–39. Flap, H., A. Kumcu and B. Bulder (2000), ‘The social capital of ethnic entrepreneurs and their business success’, in J. Rath (ed.), Immigrant Businesses: The Economic, Political and Social Environment, Basingstoke: Macmillan. Fukuyama, F. (1995), Trust: The Social Virtues and the Creation of Prosperity, New York: Free Press. Galbraith, C.S., C.H. Stiles and C. Rodriguez (2003), ‘Patterns of trade in ethnic enclaves: a study of Arab and Hispanic small businesses’, Journal of Small Business and Entrepreneurship, 16(3/4), 1–12. Godsell, G. (1991), ‘The social networks of South African entrepreneurs’, Unpublished PhD thesis, Boston University Graduate School, Boston. Granovetter, M. (1973), ‘Strength of weak ties’, American Sociological Review, 78, 1360–80. Granovetter, M. (1985), ‘Economic action and social structure: the problem of embeddedness’, American Journal of Sociology, 91(3), 481–510. Iheduru, O.C. (1998), ‘Black entrepreneurs in post-apartheid South Africa’, in A. Spring and B.E. McDade (eds), African Entrepreneurship: Theory and Reality, Gainesville: University of Florida Press. Johannisson, B. (1990), ‘Economics of overview – guiding the external growth of small firms’, International Small Business Journal, 9, 32–44. Johannisson, B. (2000), ‘Networking and entrepreneurial growth’, in D.S. Sexton and H. Landstrom (eds), The Blackwell Handbook of Entrepreneurship, Oxford: Blackwell Publishers. Kinunda-Rutashobya, L. (1999), ‘African entrepreneurship and small business development: a conceptual framework’, in L. Kinunda-Rutashobya and D.R Olomi (eds), African Entrepreneurship and Small Business Development, Dar es Salaam: University Press. Kloosterman, R. and J. Rath (2001), ‘Immigrant entrepreneurs in advanced economies: mixed embeddedness further explored’, Journal of Ethnic and Migration Studies, 27(2), 1–14. Kloosterman, R., J. Van Der Leun and J. Rath (1999), ‘Mixed embeddedness: (in)formal economic activities and immigrant businesses in the Netherlands’, International Journal of Urban and Regional Development, 23(2), 252–66. Kobonyo, P.O. (1999), ‘Flexible specialisation and small enterprise development in Kenya: issues and problems’, in L. Kinunda-Rutashobya and D.R. Olomi (eds), African Entrepreneurship and Small Business Development, Dar es Salaam: University Press. Lekota, J. (1995), ‘The role of SMEs in economic development in South Africa’, Development Southern Africa, 12(1), 11–13. Light, I. (1972), Ethnic Enterprise in America, Berkeley: University of California Press. Light, I. (1980), ‘Asian enterprise in America: Chinese, Japanese, and Koreans in small business’, in S. Cummings (ed.), Self-Help in Urban America. Patterns of Minority Business Enterprise, New York: Kennikat Press Publications. Light, I. and E. Bonacich (1988), Immigrant Entrepreneurs: Koreans in Los Angeles, Berkeley: University of California Press. Light, I. and S.J. Gold (2000), Ethnic Economies, San Diego: Academic Press. Light, I. and S. Karageorgis (1994), ‘The ethnic economy’, in N. Smelser and R. Swedberg (eds), The Handbook of Economic Sociology, Princeton University, New York: Russell Sage Foundation. Marger, M. (2001), ‘The use of social and human capital among Canadian business immigrants’, Journal of Ethnic and Migration Studies, 27(3), 439–453.

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Massey, D.S., J. Arango, G. Hugo, A. Kouaouci, A. Pellegrino and J.E. Taylor (1993), ‘Theories of international migration: a review and appraisal’, Population and Development Review, 19(3), 431–66. Mbaku, J.M. (2000), Governance, Wealth Creation and Development in Africa. The Challenges and the Prospects, 4(2), http://web.africa.ufl.edu/asq/v4/v4i2a3.htm. Menning, G. (1997), ‘Ethnic enterprise in the decentralized textile industry of Surat, India’, Journal of Entrepreneurship, 6(2), 141–64. Mitchell, B. (2003a), ‘Ethnic entrepreneurship: preliminary findings from a South African study’, Journal of Small Business and Entrepreneurship, 17(1), 47–62. Mitchell, B. (2003b), ‘African entrepreneurs: an analysis of their motivation for starting their own business’, South African Journal of Economics and Management Sciences, 6(4), 724–43. Mitchell, B. and M.J. Co (2004), ‘The utilisation of social capital among ethnic entrepreneurs’, Proceedings of the International Council for Small Business (ICSB) Conference, Johannesburg, South Africa. Nahapiet, J. and S. Ghoshal (1997), ‘Social capital, intellectual capital and the creation of value in firms’, Academy of Management Proceedings, 35–9. Nahapiet, J. and S. Ghoshal (1998), ‘Social capital, intellectual capital and the organisational advantage’, Academy of Management Review, 23(2), 242–66. Olomi, D.R. (1999), ‘Entrepreneurship characteristics and small firm performance: knowledge gaps and priority research issues’, in L. Kinunda-Rutashobya and D.R. Olomi (eds), African Entrepreneurship and Small Business Development, Dar es Salaam: University Press. Onyx, J. and P. Bullen (2000), ‘Measuring social capital in five communities’, Journal of Applied Behavioral Science, 36(1), 1–24. Phizacklea, A. and M. Ram (1995), ‘Ethnic entrepreneurship in comparative perspective’, International Journal of Entrepreneurial Behaviour and Research, 1(1), 48–58. Portes, A. (1995), ‘Economic sociology and the sociology of immigration: a conceptual overview’, in A. Portes (ed.), The Economic Sociology of Immigration: Essays on Networks, Ethnicity, and Entrepreneurship, New York: Russell Sage Foundation. Portes, A. (1998), ‘Social capital: its origins and applications in modern sociology’, Annual Review of Sociology, 24, 1–24. Portes, A. and R.G. Rumbaut (1990), Immigrant America: A Portrait, Berkeley: University of California Press. Portes, A. and J. Sensenbrenner (1993), ‘Embeddedness and immigration: notes on the social determinants of economic action’, American Journal of Sociology, 98(6), 1320–50. Putnam, R. (1993), Making Democracy Work: Civil Traditions in Modern Italy, Princeton, NJ: Princeton University Press. Putnam, R. (1995), ‘Tuning in, tuning out: the strange disappearance of social capital in America’, The 1995 Ithiel de Sola Lecture. Political Science and Politics, 664–83. Ram, M. (1991), ‘The dynamics of workplace relations in small firms’, International Small Business Journal, 10(1), 44–53. Ram, M. (1994), ‘Unravelling social networks in ethnic minority firms’, International Small Business Journal, 12(3), 42–53. Ram, M. (1997), ‘Ethnic minority enterprise: an overview and research agenda’, International Journal of Entrepreneurial Behaviour and Research, 3(4), 149–56. Ram, M., T. Abbas, B. Sanghera and G. Hillin (2000), ‘Currying favour with the locals: Balti owners and business enclaves’, International Journal of Entrepreneurial Behaviour and Research, 6(1), 41–55. Sanders, J.M. and V. Nee (1996), ‘Immigrant self-employment: the family as social capital and the value of human capital’, American Sociological Review, 61(2), 231–49. Singh, R.P. (2000), Entrepreneurial Opportunity Recognition Through Social Networks, New York: Garland. SPSS (1990), SPSS Advanced Statistics Guide, 4th edn, Chicago: SPSS. SPSS (1999), SPSS Base 9.0 User’s Guide, Chicago: SPSS. Van Vuuren, J.J. and A.B. Boshoff (1994), ‘Entrepreneurs: are they different? A re-analysis of a South African data set’, in H. Klandt, J. Mugler and D.M. Bohling (eds), Internationalising Entrepreneurship Education and Training, Cologue-Dortmund: Forderkreis-Grundungsforchung. Waldinger, R. (1986), Through the Eye of the Needle: Immigrants and Enterprise in New York’s Garment Trade, New York: New York University Press. Waldinger, R. (1996), Still the Promised City? African-Americans and New Immigrants in Post-industrial New York, Cambridge: Harvard University Press. Waldinger, R. and M. Bozorgmehr (eds) (1996), Ethnic Los Angeles, New York: Sage. Waldinger, R., H. Aldrich and R. Ward (1990), ‘Opportunities, group characteristics, and strategies’, in R. Waldinger, H. Aldrich and R. Ward (eds), Ethnic Entrepreneurs: Immigrant and Ethnic Business in Western Industrial Societies, Newbury: Sage. Wilson, K.L. and A. Portes (1980), ‘Immigrant enclaves: an analysis of the labor market experiences of Cubans in Miami’, American Journal of Sociology, 86, 295–319.

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Woolcock, M. (2001), ‘Microenterprise and social capital: a framework for theory, Research and Policy’, Journal of Socio-Economics, 30(2), 193–7. Yoo, J.K. (1998), Korean Immigrant Entrepreneurs. Network and Ethnic Resources, New York: Garland Publishing. Yoo, J.K. (2000), ‘Utilisation of social networks for immigrant entrepreneurship: a case study of Korean immigrants in the Atlanta area’, International Review of Sociology, 10(3), 347–63.

43 Entrepreneurship among Ghanaians in South Africa Vivian Besem Ojong

Introduction An increasing number of African women from other African countries have established themselves as migrant entrepreneurs in South Africa since the end of apartheid. This has not gone unnoticed by researchers. Although such research has brought to light interesting facts about African migrant entrepreneurship in general, it has not contributed a great deal to our understanding of female African migrant entrepreneurship (Rogerson, 1997; Dodson, 1998). Migrant female entrepreneurship in the new South Africa requires a sophisticated understanding of the dynamics in which these forms of business operate. For scholars of migrant entrepreneurship, it is now time to consider our approaches in order to contribute to a new understanding which will portray a clearer representation of the activities of these women. In this chapter, I hope to contribute to these new challenges, by illustrating the multiple dimensions of the driving forces behind Ghanaian women’s entrepreneurial activities in South Africa. Female migrants entering into entrepreneurship in South Africa Evidence in many countries suggests that entrepreneurship is important to economic development and that women have been pivotal in contributing to this economic development by their trading activities. The word ‘entrepreneur’ is derived from the French word ‘entreprendre’ meaning ‘to undertake’. Bridge et al. (1998: 23) see an entrepreneur as someone with the foresight and confidence to operate in conditions where costs may be known but rewards are uncertain. This word has been used in a broader sense as meaning any person who has the ability to search the environment to identify opportunities for improvement, to mobilize resources and implement action to maximize those opportunities (Cronje et al., 1996). Entrepreneurs innovate and take risks. They employ people, provide services and, through new combinations of materials, create new products for the market. The key role the entrepreneur plays in economic development is job creation. Harper (1987) has remarked that female-owned trading enterprises have a long history in many parts of the world, such as West Africa. Among Africans, a very large share of market trading, selling as well as buying, is left entirely to women (Boserup 1970: 87). For Ghanaian women, like other African women, activities have not been limited to their national boundaries. The end of apartheid has brought a ‘pool’ of Ghanaian women to South Africa. With this trend of immigration, the question we need to ask is ‘which sector of the South African economy is easily accessible to these immigrant women?’ This question needs to be addressed especially because of the xenophobic attitudes towards immigrants from the other African countries. Many South Africans believe that immigrants are ‘stealing’ their jobs. These perceptions were confirmed by a survey in 1994 by the Center for Policy Studies in Johannesburg, which found that anti-foreigner sentiment was 707

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growing in black communities and was not limited to a few malcontents but was widespread among the general public (Minnaar and Hough, 1996: 178). The above-mentioned xenophobic attitudes are focused on the educational and industrial sectors of the South African economy and are unjustified, especially because more and more Ghanaian women are setting up shops and boutiques. From in-depth interviews with 30 Ghanaian women and 20 informal contacts made for an earlier study (Ojong, 2002), it is evident that self-employment among Ghanaian migrant women is prevalent. Their numbers are increasingly growing in the business sector in South Africa. As migrant entrepreneurship keeps growing in South Africa, Ghanaian hairdressers and fabric retailers are featuring prominently. Considering the history of market trading in West Africa (Boserup, 1970), these women have a special ability to perceive opportunities in South Africa, which South Africans do not see or do not care about. Basically, these women see a need and then bring their skills, materials and capital required to meet that need. More importantly, entrepreneurship for Ghanaian women in South Africa is being used to narrow the gap between poor and rich immigrants. Entrepreneurship is indeed becoming an inevitable part of African migration to South Africa. Writers have claimed that hawking is typical of businesses that are run by African migrants (Rogerson, 1997; Dodson, 1998). Contrary to this view, I have found that hawking among Ghanaian women is used as a stepping stone, thanks to which money is saved for future investment in businesses, as Agatha (one of the Ghanaian migrant women) told me. It should be emphasized here that hawking among these women is a form of ‘disguised’ employment strategy used in the first few months or years of stay in South Africa, and not the ultimate form of employment. Most of the women entrepreneurs I have studied ended up owning shops and boutiques where African fabrics are sold. Small businesses in South Africa have reduced the probability of immigrants staying unemployed for longer periods and this sector is absorbing more and more women of African origin. Small businesses such as hawking are simple to operate in South Africa since it allows operation at any level without fixing any limits for investments. However, when these women move on to open shops for hair salons, trading licences and shop rentals put ‘a strain on the pockets’ of the migrant women entrepreneurs. Despite the fact that migrant women use small businesses as a means of utilizing their skills, writers like Dasgupta (1992) have established that petty traders in the Third World are mainly poor and marginalized people who are trying to eke out a living with most of them trapped in this activity out of desperation to survive. Among Ghanaian migrant women in South Africa, for instance, I found that women venture into small businesses by their own choice (this decision is taken while they are still in their home countries) and also because of the opportunities available in South Africa for migrant small businesses and not because of lack of other employment. Exploiting the opportunities, obtaining higher incomes and gaining personal autonomy were some of the reasons given to me by women for going into entrepreneurship in South Africa. Another question which needs to be answered is ‘what drives Ghanaian women into entrepreneurship in South Africa?’ The reasons are complex and no one theory can fully explain this behaviour. Literature on female migrant entrepreneurs is scarce. African women migrants in South Africa have continued to remain on the ‘hidden side’ of the success story of immigrant entrepreneurship, yet it is now conventional wisdom that women represent an essential group of successful migrant entrepreneurs. Most research

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has been carried out without addressing gender concerns. The picture has been one-sided: research has been dominated by researchers who have focused solely on street vendors and hawkers (Peberdy and Rogerson, 2001; Dodson, 1998). This suggests that women migrant entrepreneurs in South Africa have remained, to some extent, invisible. Methods of research Research for this study employed in-depth interviews, life histories and participant observation methods. The key sample for the study was made up of a core of 30 women, with ten being key informants from Ghana (West Africa). The key informants were those who had insights into the history of Ghanaian women’s involvement in hairdressing in South Africa. During this period of in-depth interviewing, I asked specific questions but was also sensitive to allow my informants, especially those who showed particular interest in the subject under discussion, to give me more information. Because of the nature of my informants’ activities, I was also careful not to ask too many questions at a time when they seemed very busy. This, I believed, would put them off my research. I did not want a situation whereby they would feel reluctant to talk to me or, the worst scenario, even be reluctant to see me. This proved very useful and, during those periods when they were very busy, I stopped interviewing and instead helped them with whatever they wanted me to help with. I got involved in all the activities in the hair salons such as washing customers’ hair, rolling hair and braiding. However, collecting money from the customers is reserved only for close kin, or the owners. For this study, the snowball method of sampling was used. I used personal contacts, to build up my sample. This proved particularly useful because most of the women were in contact with one another (they were all hairdressers). Having spoken to three women from Ghana whom I met during my previous research, they passed me on to others they knew. Naturally, thanks to the network principles, most of them ended up coming from the same area of Ghana, Akan. This was not an accident, but happened because the snowball method introduced them to me. Such a sample cannot be representative since, to have any chance of being included in the study, one must be part of a network of personal contacts. But, to study such a group of women, it was not easy to use other ways of obtaining a sample. Information was collected from each woman on life in Ghana and South Africa, including accounts of memorable events. Data were collected over a period of 12 months. Each set of interviews was arranged for a particular month, even though I always went back to the informants when I needed more information. Usually their homes and their hair salons were used as the venues for the interviews. Cultural factors Is there something within some migrants that makes them disposed to and prepared for entrepreneurship? History tells us that entrepreneurs are associated with values of innovation, achievement, personal gain and profit, hard work and success. These values could be seen as learned predispositions held by either individuals or a group of people. These values are complete embodiments of beliefs and practices. Hofstede (1994) maintains that beliefs and practices are broad tendencies to prefer certain states of affairs over others. To have a value is

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to maintain an enduring belief that a specific mode of conduct, or end-state of existence, is preferable to other alternatives. Since values are seen as preferred modes of conduct, different groups of people will therefore have different values. These views, however, suggest that different groups of people with different patterns of beliefs and practices would, if put under the same circumstances, behave differently. Thus the learned predispositions held by different groups of people would either inhibit or promote their desires for entrepreneurship. If we agree that the a vital ingredient to initiating businesses across borders lies within certain groups of people, it becomes apparent that certain groups carry within them some collective similarities, inherent in their beliefs and practices, which creates the drive to business ownership. There seems to exist a significant relationship between the act of business ownership and the beliefs and practices of a people. This relationship becomes important in discussing entrepreneurship because it determines the attitudes of individuals towards starting and running businesses. Thus it can be proposed that the culture of certain groups of people will certainly influence the degree to which businesses are initiated and the manner in which they are run. Personality theorists like Gibb (1987: 6) consider that it is the personality of the individuals that pushes them into entrepreneurship. If we accept that migrant entrepreneurs require ideas, opportunities, skills and resources for them to succeed, the situations to which they were pre-exposed in their home countries will have an impact on the choice process. It should be noted that, while personality theories tell us about the kind of people who become entrepreneurs, they do not tell us much about the process by which cultural factors actually influence the decision to become an entrepreneur. This section argues that the cultural milieu in which individuals were initially nurtured becomes crucial in explaining entrepreneurial success. It emphasizes the enormous cultural variation in the way in which migrant entrepreneurship is symbolized and in which this symbolism relates to culturally constructed notions of business. It becomes clear that, in order to understand the way Ghanaian female entrepreneurial success is viewed, it is important to understand how cultural factors are incorporated into this form of business. This is one aspect which has often been neglected by researchers of migrant entrepreneurship in South Africa. As a result, Ghanaian hairdressers have commonly been seen solely from economic perspectives. It is only when we fully understand the cultural matrix in which Ghanaians operate their businesses that we can understand why they succeed in South Africa. Culture consists of the abstract values, beliefs and perceptions of the world that lie behind people’s behaviour and that are reflected by their behaviour. Hofstede (1994) attributes culture to the environment in which a child grows up and states that this reinforces the dominant patterns of thinking, feeling and acting in other spheres. He also sees culture as a collective programming of the mind which distinguishes the members of one group of people from another. In other words, he regards culture as a collective phenomenon that is shaped by individuals’ social environment, not their genes. On his part, Hall (1996) provides a simple explanation of culture as the pattern of taken-for-granted assumptions about the way a given set of people should think, act and feel as they go about their daily affairs. The question is ‘how does the culture of a people encourage, promote or discourage entrepreneurship?’ It should be emphasized that entrepreneurial behaviour cannot be

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determined by cultural factors alone, but culture plays a significant role. Waldinger et al. (1990) assume that some migrants have a cultural ‘predisposition for business’ or a mentality that favours commercial success. According to them, some migrants tend to work harder, save their money and dedicate their lives to their business. This explains why many immigrants go into business and why they are usually successful in their business undertaking. They also argue that some groups bring with them a trade culture that favours entrepreneurship. The above suggests that the relationship of certain cultural factors to the initiation of entrepreneurship is significant. This may mean that many people from a certain society tend to exhibit collective similarities in their commercial activities. Douglas (1992: 192) argues that ideas of esteemed behaviour are generated collectively. What an individual is going to want is not entirely his/her idea, but consists largely of a set of desires that the social environment inspires in him/her. According to my key informants, the culture of the Akan peoples in Ghana incorporates a long history of hair culture. According to this, different hairstyles signify different status in the society. For example, there were different hairdos to signify when a woman was married, single, menstrual and post-menstrual. My informants relate that the Akan women were known for having healthy hair and, even before the colonial masters colonized Ghana, sheabutter was produced traditionally. It was processed and used in making hair grow long and strong. Colonialism brought (and added) technology by putting different fragrances into the sheabutter. Cecilia Yebua, one of my key informants (45 years old) recounts how, as a child, she was exposed to hairdressing. When I was ten years old, my mother’s grandmother who was about one hundred and fifty years (150 years) used to dress her hair. At times I heard her saying that she was going to get her hair done by my mother’s sisters. They used an iron comb which was put in a coal stove for it to get hot. When it was hot, they applied shea butter on the hair and combed it out. This comb was called a stretching comb. The shea butter was used in preventing the hair from burning since the comb was very hot and was also used to strengthen it since the heat exposed the hair to breakage. Initially, after stretching the hair, they would plait the hair in a particular manner and, the following day, it was combed out. When it was combed, it looked like the contemporary styles from the salons. I remember also how my mother’s mother and my mother used to use a soap in stretching their hair called Senior J. I also used it when I was a young girl. I was told that Senior J was the name of the Ghanaian man who introduced this soap. Immediately it was applied on the scalp, it had to be washed within five minutes else it would burn the scalp. This was the second method after the stretching comb before hair relaxers were introduced. Since Western education had been introduced, women collected pens (old or used pens) and cut them into three pieces which they used in rolling the hair. At other times, they collected injection strings from waste bins in the hospitals or through the mid-wives which were then used in rolling hair with hair pins. When the hair was combed out, it looked like waves and it was from there that they learned how to style the finger waves which has made them popular.

According to these women entrepreneurs, their culture also stipulates that a woman through specialization is to be engaged in profitable employment to take care of herself. It is inconceivable for a woman according to this culture to sit at home idling. That is why the informal sector in Ghana is so strong and dominated by women. Being a matrilineal

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society, the Akan women have a great deal of freedom and are highly respected. It is common to find sisters pooling their resources to start a business (this aspect was observed during the period of my data collection, whereby the Grace hair salon in Durban is owned by two sisters. For these two sisters, working together makes it effective because when one of them goes back to Ghana to buy products – or should one of them fall ill – the salon runs as usual and business will not be interrupted). My informants maintain that a Ghanaian woman’s pride is that she makes a lot of money. These women have as one of their roles that of intermediary in the distribution network and, since the early twentieth century, they have been engaged in trade (Sudarkasa, 1973). Their increased involvement in the distribution sector began with the commencement of the colonial era. The Akan women, prior to the twentieth-century expansion of the exchange economy, were cultivators, which greatly increased the number of positions available within the internal market. The fact that trade by women has a long history amongst Akan women, coupled with the expansion of trade avenues, triggered the modern economy, and maybe accounted for the fact that all uneducated Akan women and even many of those who are educated are traders. Trading skills are passed on to the younger generation for continuity and as a means of survival. When a girl child is growing up in Ghana, she is taught certain trading skills to take care of herself. This prepares her for uncertainties in the future. ‘Nsano dwuma’ (meaning learning to use your fingers to make money) is what drives women. They are encouraged to have ‘Nsano dwuma’, which makes them unafraid to migrate. According to their culture, they are expected to seize any opportunity to make money and the culture supports it. One of the Akan proverbs is ‘anoma antua obuada’, meaning ‘a bird that stays in the nest stays hungry’. My key informants indicated that Akan women are expected to move out from their homes and look for opportunities. Under the influence of cultural factors, these women choose hairdressing as a challenge and an adventure, with the urge to be involved in a profitable employment. This is illustrated by the story of Amina, a hairdresser from Ghana, living in Durban and working at Umlazi, a large township outside Durban. Amina migrated to South Africa in 1993. Before emigration from Ghana, she had studied as an apprentice in a hair salon for three years. Back in Ghana, apprenticeship skills are taught for specificity and technicality and apprentices learn firstly by observation and subsequently by ‘trial and error’ (Fluitman, 1992). After completing her course, she was unable to raise enough capital to start her own business and, as a result, her elder sister, Asa, who is a dress designer in the Eastern Cape province of South Africa, invited her to the country. When Amina decided to open a hair salon in KwaZulu-Natal, she went to Durban and rented a flat to live in. After realizing that there were too many hair salons in central Durban (too many for a newcomer to make a profit) she went to Umlazi, and bought a movable shipping container for R25 000. She rented a piece of land for R250 per month where she placed the container. This is a busy spot known as ‘skebenga’, a Zulu word meaning a place where there are many thieves. This was a very challenging and risky venture, but her idea was to take her business close to her customers. In 1993, Asa opened a hair salon for Amina in Port Elizabeth, which is in the Eastern Cape Province where she worked for four years. Asa was paying Amina R500 per month. The agreement was that Amina was not going to pay for rent, food and the electricity bill, among other things. She was supposed to save the money she received every month, which

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she did. Amina worked and lived there for four years and when she realized that she had saved enough money to open her own salon, she decided to leave Port Elizabeth and come to Durban. While in Port Elizabeth, apart from the R500 that she earned every month, she used to sell hair products from Ghana and other cosmetics. Whenever she saw someone going to Ghana, she would send money to buy the products, which she sold in the hair salon. Later, like other Ghanaian women, Amina used her connections to open a salon in Durban. Ghanaian women entrepreneurs in South Africa are highly eclectic. They are experts at drawing upon connections and relationships, or at building them if they do not exist. This eclectic characteristic is a valuable weapon used to enhance their entrepreneurial success. They use both inter-cultural and inter-personal relationships to their advantage. They use both the concepts of ‘bounded solidarity’ (the unification of a group of people that comes about owing to the existence of a common experience) and ‘enforceable trust’ (the existence of social obligations that provide group members with economic advantage and opportunities) to succeed entrepreneurially (Portes and Sensenbrenner, 1993). They are quick to use their connections and ties with countrymen/women or fellow immigrant entrepreneurs for assistance in tapping into niche markets and are able to use their intercultural skills to carry out their businesses among the South Africans. This is exemplified by the fact that, in every hair salon that is owned by a Ghanaian in Durban, there are always Ghanaians as well as South Africans employed. One of the reasons why South Africans are employed, I was told by all of my informants, is to facilitate communication with customers who cannot express themselves in English. Before Amina came to Durban, she had a friend called Margaret who is also a migrant woman from Ghana. Margaret first had a hair salon at Ulundi (a city in KwaZulu-Natal province) before moving to Durban to open a bigger hair salon. Margaret encouraged Amina to open a salon in Durban. She told her that she would make more money working in there. In Margaret’s hair salon, there was a local woman working called Phumla who advised Amina to go to the townships to see if she could find a place to put her container. Since Amina was not familiar with the environment, coupled with the fact that she could not speak Zulu, Phumla accompanied her to Umlazi. Her idea of buying a container came from the fact that, in Ghana, a container can be used as a vehicle for doing different things, such as selling food, or as a boutique. With this in mind, she did not hesitate to buy one. When she went ahead and bought it, she had no idea where she was going to place the container. When the salon was opened at Umlazi, it meant that she had to commute every day to work because the flat she rented was in Durban. Amina said that she has been running this hair salon for just four years and has accomplished a lot. From the money which has come from the hair salon, she has been able to pay for the air ticket of another woman from Ghana, who is a professional in braiding, and of her younger brother who is also a hairdresser. All of them live in town and pay R10 for transport every day to work. She has also been able to employ some Ghanaians who migrated to South Africa but were unable to raise capital to start their own businesses. She has also employed South African hairdressers, but said that she pays the Ghanaian hairdressers working in her hair salon more than the South Africans. She explained that, with the other migrants in the salon, even when she is not there the salon still runs well. But if she leaves only the South African

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hairdressers, most of her customers go away. Customers always want their hair to be done by foreigners. At the end of each month, Amina pays Ada (the lady she brought to work in her salon) R1000. She pays two other Ghanaians R1200 each and pays her barber R600. At the end of each month, her own income after all the people have been paid is R7000 and, from this amount, she saves R2000 every month. Amina and other Ghanaian women are able to succeed in hairdressing not only on account of their cultural drive, but also because of the opportunity that is available in South Africa for such business activity. Entrepreneurial opportunities for Ghanaian migrant women Migrant women’s entrepreneurship does not necessarily begin with the introduction of a new product or service into the South African market. Writers on migrant entrepreneurship in South Africa have claimed that migrant entrepreneurs succeed because they introduce a wide procurement of goods and services which are not readily available in South Africa (Peberdy and Rogerson, 2001; Dodson, 1998; Rogerson, 1997). Many analysts note that a major reason why immigrants become self-employed and seek out entrepreneurial niches is that they suffer economic disadvantages, either resource disadvantages, because they lack the requisite human capital (language, skills and contacts) to compete for better employment, or labour market disadvantages in the country of abode, and therefore have little choice but to pursue self-employment. While such views do not deny the fact that migrant women involved in business actually generate economic gains for themselves, the disadvantage perspective essentially sees migrant self-employment as deriving from economic deprivation. The rationale in this view leads to the expectation that immigrant women entrepreneurs are a disadvantaged group (of entrepreneurs). It does appear probable on the basis of observation that Ghanaian migrant women are ‘opportunists’. Their entrepreneurial activities start with an opportunity and these opportunities are readily available in the South African environment. It is also true that, for an individual to be able to see an opportunity and utilize it, requires a set of skills. Evidence which I collected for this study among Ghanaian entrepreneurs strengthens my argument that the opportunities in place are partly responsible for the entrepreneurial success of Ghanaian migrant women. It was found that the attitude of many South Africans towards Ghanaian hairdressers is partly responsible for migrant success. Many South Africans believe that Ghanaians are the best hairdressers. This attitude is a kind of opportunity that Ghanaian women find when they enter South Africa, which had been laid down by the earlier immigrants who came during the apartheid era. This opportunity results from the complex way in which Ghanaian women have gained entrance into the South African business sector as well as making the hairdressing field their speciality over the years. This attitude enables the entrepreneurs to survive in segments of the South African business sector where, as a rule, local entrepreneurs battle or cannot succeed. Such opportunities occur and these migrant entrepreneurs seize them. Kloosterman and Rath (2001) emphasized that migrant entrepreneurs are not just responding to static opportunity structures but are able to change and mould them through innovative behaviour and thereby create opportunities that until then did not exist. Migrant entrepreneurship, although becoming more and more diverse, is still strongly oriented toward specific segments of the host population. Rath and Kloosterman (2000) explain that such opportunities are already

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in place, which migrant women use and manipulate for social and economic gains. The emphasis is one which seems appropriate and crucial in explaining the entrepreneurial success of African women in general and Ghanaian entrepreneurs in particular, as I will show. One of the major reasons why Ghanaian women are succeeding in this entrepreneurial sector is the opportunities that are available for such businesses in post–apartheid South Africa. Hair care has become a major indicator of modernity for black women. Marshall (1994: 7) associates modernity with the release of the individual from the bonds of tradition, with the progressive differentiation of society. The need for black women to differentiate themselves from those women who can not afford to dress and style their hair in particular ways demonstrates this new modernity. Black hair breaks easily because it has been stretched with relaxers and therefore needs specific products to maintain it in its current form. Women, therefore, to keep up with this new modernity of relaxing and styling hair, have to visit a hair salon once every week or twice a month. Naidoo (2004) in an article in the Sunday Times, high-lighted the fact that fresh wealth among women has spawned a new class at hair salons as clients now pay a fortune to be pampered and preened every week. Some women even visit every second day to ensure that they are looking their best, paying up to R150 a time for attention. This makes this entrepreneurial area that Ghanaian women have gone into a considerable area for growth. Many black women in post-apartheid South Africa work as salaried employees, and one of the ways they spend their money is by keeping up with the latest hairstyles, which indicate twenty-first century modernity. Having the latest hairstyle distinguishes the woman as stylish and fashionable, more than it will do for a white woman. Ghanaian women have used this entrepreneurial opportunity and made quite a lot of money in a short time which they use in building houses back home or sending remittances. As black educated women strive to distinguish themselves by strengthening and styling their hair, the demand for such businesses keeps growing and the Ghanaian presence is rapidly increasing and felt everywhere in South Africa. Ghanaian migrant women: hairdressing as a route to wealth Ghanaian women already have a reputation among black South Africans as the best hairdressers. This is because, during the apartheid era, black South African women were not allowed into the white hair salons and did not have the opportunity of doing their hair in what seemed like Western fashion. So, when the first Ghanaians who came to South Africa to teach in Lesotho and Swaziland brought their wives, these women had very long and healthy hair which was highly admired by black South African women. They wanted their hair to look like that of the Ghanaian migrant women. This all started in the Transkei because it was the first homeland to gain independence, and Ghanaians moved to other cities with the end of apartheid, when Transkei united with the Republic of South Africa. Through in-depth interviews and informal contacts I had during the period of this study, I was able to trace how Ghanaian women gained entry to South Africa during the apartheid era and established themselves in hairdressing. Most of the Ghanaians who were the pioneers in South Africa have established themselves in Cape Town and the Eastern Cape. Thanks to social networks which link people across space and time, I was able to meet the first Ghanaian woman who introduced hairdressing in South Africa. The information provided below, despite being written in my words, was obtained through

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informal contacts with Ghanaians, both men and women, who did not form part of my sample, except for one woman who came from the Transkei (Cecilia) and another, Mary, who came in 1985 but directly from Australia and had no contact with those from Transkei. During the process of data collection, I realized that there was a missing link which my informants could not provide. This missing link was the history of Ghanaian presence in South Africa. This is because most of the women who form my sample came to South Africa just before or immediately after the fall of apartheid. As I said above, those who came around the early 1980s have remained in the Cape. The first Ghanaians who came to South Africa were men who migrated by road through Uganda, Congo, Zimbabwe and, finally, were either working in Lesotho or in Swaziland. These men came through Transkei (meaning after the Kei River) which was the first homeland to gain independence under the Bantustan system and Ciskei (meaning before the Kei River), the second homeland to gain independence. Upon attaining independence, the government of Transkei sent officials to Lesotho and Swaziland to recruit foreign skills, specifically in teaching in the secondary schools. At that time there were no universities. In 1983, these men came to these areas and were asked to present their certificates, which they did. The government officials sent them to the various principals in the secondary schools and, if they principals wanted them, they had to report to the education officials who gave them contracts.1 These men were not allowed to work anywhere else and their wives were not allowed to work under that system. At that time, hairdressing was an area which did not attract much attention, specifically because it threatened no one’s interest. These women, who were the spouses of the employed Ghanaian men, who could not get employment anywhere, started dressing black South African women’s hair in their various homes. Around 1983, there were no black hairdressers. Following the apartheid system that was in place and that prohibited black people from going to white areas, black women did not have access to hairdressing. They could not go to the white-owned salons. The whites, on the other hand, did not have the technical know-how on black hair texture and type of chemicals that are needed for such hair. Most of the women who came at that time were professional hairdressers and they brought in their products from Ghana, which were used in dressing black hair. Their homes were the venues for hairdressing at this stage. When the business started booming and the Ghanaian women were becoming popular, their houses could no longer contain the large numbers that were queuing in the residences for their hair to be done. These women had to look for a means of opening a shop. The first hair salon to be opened was in Bisho. This was facilitated by the fact that Magdalene, the wife of one of the teachers, who was also the first Ghanaian woman to be employed by the municipality, had her legal status. She brought in her sister, Cecilia, one of my key informants, to work in that salon. Magdalene now lives in King Williams Town and manages three hair salons across the Cape. Newcomers from Ghana were easily attracted to hairdressing since it had become a major source of income and proved reliable. Some learned how to dress hair only when they arrived in South Africa and, after a few months, they too started attracting many customers. For these women, hairdressing was not new and they could remember, even as children, how their mothers or grandmothers were dressing their hair before the colonial encounter. My informants referred to Ghana, formerly The Gold Coast, as a model African colony and the most advanced of all the British colonies in Africa. The British administration

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introduced a Western form of education and dressing during the early years of colonialism. They introduced the Kingsway London stores immediately after the Second World War. Margaret Sappor, the current president of the Ghanaian Hairdressing Association, was the first Ghanaian woman who went to London to the Maurice School of Hairdressing to learn how to do hair. She spent two years in London and, when she came back from London, she opened many hairdressing schools alongside the Kingsway stores. Learning how to do hair became easy for the average Ghanaian woman. Upon completion of training at these schools, they received certificates with references from the Maurice School in London. From then on, any girl whose parents could not afford high school education or university education went to the hairdressing schools. It was an excellent opportunity for girls who fell pregnant at school to have a qualification. These women indicated that Ghanaians are not afraid to migrate because their culture encourages them to do so; as they migrate, they utilize these skills. I observed during the period of fieldwork that when I walked into any black hair salon in Durban, Ulundi, or Empangeni, whenever I found a large crowd queuing for service, the probability that the owner of the salon is a migrant woman from Ghana was high. The fact is that most black South Africans I spoke to saw these women as the best hairdressers, thus giving them the opportunity to make hairdressing their field. Based on this belief, many Ghanaian women, even those who never did professional hairdressing back in Ghana, are using this opportunity to enhance their entrepreneurial aspirations. Mary is amongst those who started hairdressing based on this belief. In 1982, Mary’s husband got a job at the University of Natal, Pietermaritzburg. They moved from Australia and she stayed at home from then till 1984, when she opened her first hair salon. Here is her account of her experience: I didn’t go to any school to learn how to dress hair. I just realized that, everywhere I went, black South African women were asking me to do their hair because they said they have heard that any woman who comes from Ghana knows how to dress hair. I realized that it was an opportunity for me to be engaged in an activity that will bring income. I didn’t know very much about hairdressing at that time, except putting relaxers on natural hair and combing it out. I just remembered that, at home, you push yourself to do something which you have never done before. My instinct taught me what to do. While my husband was lecturing at the university, I opened my salon and employed one girl. At that time, there were only three hair salons in Pietermaritzburg. The different hairstyles at that time were not as complicated as they are now. All I did was relax women’s hair and set it for them. As time went on, the business grew and I employed one other girl, a South African who had learnt hairdressing, who could style hair using the tong. That was in 1998. In 2000, we moved to Durban because my husband was given the position of Head of Department of Housing. I sold that salon for R45 000 and was lucky to find a place in West Street in Durban. Over the years, I have learnt new skills and I am still learning. I have learnt to stimulate the curiosity of some of my customers and I am able to stay in business. For most of my customers, once they see someone with very long and beautiful looking hair, they will immediately want to use the same products that the person uses, not knowing that different hair textures requires different products. I try to explain to them that the same product will not have the same effect on their hair. When they don’t agree, I pretend to use the product they requested and, when their hair looks beautiful, they always come back to me. Should I use the product they request and the hair come out ugly, they will say that I don’t know how to dress hair and not blame it on the wrong hair relaxer they requested. This is a tactic my South African counterparts don’t use. They use whichever product the customer requests and, if the hair doesn’t

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look beautiful, it is up to the customer. I have realized that what a customer needs is satisfaction and most of them come to the salon to dress their hair without even knowing the colour of the products. Apart from the above, I have learnt to improvise some styles. When I see a new style, I don’t copy it the same way, I style something around that style. This makes it look different. Most of the styles, I copy from Ghana apart from the catalogue. Each time I go home, having become a specialist, I just look at the styles and I immediately know what to do. In copying a style, I try to use other chemicals to make it look different. For instance, if styling gel was used in styling I will use buffer shampoo to achieve the same goal. I always stock good products like Ladine and Excel products produced locally as well products from Ghana. Most of my customers think that Ghanaians are more professional in the way they do hair than their South African counterparts. Since they think we are, we try to prove it and that is why we succeed.

Having had this unique opportunity, these migrant entrepreneurs bring fellowcountrywomen from Ghana, as well as employing those who are already in South Africa but unable to raise money to start their own businesses, and also South Africans. This, according to Amina (one of my informants), is a strategy which they use to work on the mindset of South Africans. She explained that, with other migrants working in her salon, even when she is not available at her business site, the business still runs well. On the other hand, should she leave only South African hairdressers in her salon, most of her customers will go away. Customers always want their hair to be done by a foreigner. Conclusion African migrant women have successfully established themselves as migrant entrepreneurs in South Africa and are succeeding in certain areas such as hairdressing where, as a rule, local entrepreneurs battle or cannot succeed. The findings lend a strong illustrative support to the proposition that entrepreneurial success is an interplay between economic and socio-cultural factors. The opportunity structures in South Africa and the Ghanaian culture are strong driving forces for Ghanaian women’s entrepreneurial success. These women entrepreneurs continue to be essential, stepping stones for the introduction of new hairstyles and products, and are important as far as job creation is concerned. Their involvement in the business sector in South Africa is far from being recognized or, better still, covert. Migrant hairdressers and fabric retailers need to enjoy greater visibility to stimulate their entrepreneurial potential and the South African government needs to improve awareness of women’s role in these fields. Note 1. Interview held on 31 June 2003, from 2:15 to 4pm, with Joseph Kodjo in Port-Elizabeth.

References Boserup, E. (1970), Women’s Role in Economic Development, New York: St Martin’s Press. Bridge, S., K. O’Neill and S. Cromie (1998), Understanding Enterprise, Entrepreneurship and Small Business, New York: Palgrave. Cronje, G.J. et al. (1996), Introduction to Business Management, Johannesburg: International Thompson Publishing. Dasgupta, N. (1992), Petty Trading in the Third World, Aldershot: Avebury. Dodson, B. (1998), Women on the Move: Gender and Cross-border Migration to South Africa, SAMP migration series no. 9, Cape Town. Douglas, M. (1992), Risk and Blame. Essays in Cultural Theory, London: Routledge.

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Fluitman, F. (1992), Traditional Apprenticeship in West Africa: Recent Evidence and Policy Options, International Labour Organisation. Gibb, A.A. (1987), ‘Enterprise culture – its meaning and implication for education and training’, Journal of European Industrial Training. Hall, S. (1996), ‘Cultural identity and diaspora’, in S. Hall (ed.), Questions of Cultural Identity, London: Sage. Harper, M. (1987), Small Business in the Third World, New York: John Wiley & Sons. Hofstede, G. (1994), ‘Defining culture and its four dimensions’, European Forum for Management: Focus: CrossCultural Management, 94(1), 4. Kloosterman, R. and J. Rath (2001), ‘Immigrant entrepreneurs in advanced economies: mixed embeddedness further explored’, Journal of Ethnic and Migration Studies, special issues on immigrant entrepreneurship, 27(3), 189–202. Marshall, B.L. (1994), Engendering Modernity. Feminism, Social Theory and Social Change, Oxford: Polity Press. Minnaar, A. and M. Hough (1996), Causes, Extent and Impact of Clandestine Migration in Selected Southern African Countries with Specific Reference to South Africa, Pretoria: Human Science Research Council. Naidoo, S. (2004), ‘Cash blows a new wave into hair care’, Sunday Times, 24 October. Ojong, V.B. (2002), ‘A study of Independent African migrant women in KwaZulu-Natal: their lives and work experiences’, University of Zululand, Unpublished MA dissertation. Peberdy, S. and C. Rogerson (2001), Creating New Spaces? Immigrant Entrepreneurship in South Africa’s SMME Economy, Cape Town: SAMP Policy Series. Portes, A. and J. Sensenbrenner (1993), ‘Embeddedness and immigration: notes on the social determinants of economic action’, American Journal of Sociology, 98(6), 1320–50. Rath, J. and R. Kloosterman (2000), ‘ “Outsiders Business”. Research on immigrant entrepreneurs in the Netherlands’, International Migration Review, 34(3), 656–80. Rogerson, C. (1997), International Migration, Immigrant Entrepreneurs and South Africa’s Small Enterprise Economy, SAMP Migration Policy Series, no. 3. Sudarkasa, N. (1973), ‘Where women work: a study of Yoruba women in the market place and the home’, Museum of Anthropology, University of Michigan, no. 53. Waldinger, R.D., H. Aldrich and R. Ward (1990), Ethnic Entrepreneurs: Immigrant Business in Industrial Societies, London: Sage Publications.

44 Exploring the relationship between culture, communication and entrepreneurship in New Zealand Zhu Yunxia

Introduction This study explores the relationship between culture, communication and entrepreneurship. Specifically it examines cultural differences relating to fear of failure on starting businesses. Five ethnic groups in New Zealand are studied, including European New Zealanders, Maoris, Europeans, Chinese, Indians and Pacific Islanders. It has been found that European New Zealanders, Europeans and Maoris have indicated a much lower level of fear of failure as compared to Chinese, Indians and Pacific Islanders. It has also been found that different levels of fear are closely related to communication and networking patterns and cultural perceptions towards entrepreneurship within each ethnic group. The interaction of culture and entrepreneurship has long drawn researchers’ attention. Literature in this regard can be found in immigrant businesses (Basu, 1998) and entrepreneurial activities across cultures (Foster, 1962; Herbig and Miller, 1992; Morrison, 1998; Shane, 1993). The major theoretical framework so far lies largely in defining culture and identifying different components of culture and attitudes towards entrepreneurship. Another source looks at examining entrepreneurial activities from the economic perspective such as the implementation of social policies. Yet little research has been done to examine this topic from an intercultural perspective, and even less has focused on its relationship with communication. This study fuses existing literature on entrepreneurship with intercultural and communication theories to examine the impact of communication and culture on entrepreneurial participation. As a starting point, it compares cultural differences relating to fear of failure on starting businesses. This is also an important area for entrepreneurial research. One of the major motives for business entry and self-employment is the desire to take risk and a spirit of adventure (Knight, 1921). Five ethnic groups in New Zealand are studied, including European New Zealanders, Maoris, Chinese, Indians and Pacific Islanders. Maoris, who were the earliest settlers in New Zealand, are also known as the indigenous culture. The Pacific Islanders mainly relate to the Samoans, Tongans and Cook Islanders in this research, confined by the available research data to be detailed later in this chapter. These ethnic groups, in general, are also reflective of the New Zealand society to a certain extent. New Zealand is a multicultural society composed of immigrants from many parts of the world. According to the 2001 Auckland census, the ethnic breakdown is 63 per cent Pakeha/European, 11.6 per cent New Zealand Maori, 7 per cent Samoan, 6 per cent Chinese, 3 per cent Indian, 3 per cent Tongan, and 2.8 per cent Cook Island Maori. This can give some indication of how multicultural New Zealand is, thus further highlighting the imperative to study ethnicity and entrepreneurship. The theoretical framework will be based on intercultural communication such as Hofstede’s uncertainty avoidance and individualism and collectivism (1991, 1995) and the 720

Culture, communication and entrepreneurship in New Zealand 721 psychological typology of successful entrepreneurship (Miner, 1997). The second source of literature is related to ethnicity and entrepreneurship (Basu, 1998; Basu and Goswami, 1999). The majority of the research findings in this area focus on exploring the impact of economic and social policy on the practice of immigrant business. This chapter, however, goes beyond this dimension and aims to explore differences in cultural dimensions and networking systems across the ethnic groups. To identify the determinates of culture and communication for entrepreneurial success, I include and examine the NZ GEM (Global Entrepreneurship Monitor) data of 2003, including the cultural and networking variables. In order to provide an in-depth analysis for ethnicity and entrepreneurship, entrepreneurial attitudes, networking and communication patterns will be examined and the follow questions proposed: 1. 2. 3.

What are the cultural differences in attitudes and perception towards uncertainty and innovation across the ethnic groups? What are the preferred communication networking patterns of each ethnic group to deal with uncertainty? Above all, how to help ethnic groups to reduce the level of uncertainty and enhance their entrepreneurial participation?

The discussion will revolve around these research questions and is organized in this manner. First, this chapter provides a theoretical overview about the relevant literature in intercultural communication and ethnic entrepreneurship. Second, it details research methods involving both surveys and interview results. Finally, it analyses findings and substantiates them with entrepreneurs’ views from each target ethnic group, followed by conclusion and implications for further research. Literature review According to Hofstede (1995), culture is the collective programming of the mind. This definition points to the knowledge each culture shares. Hall (1976) defines culture from a communication’s perspective: communication is culture and culture is communication. The interrelatedness of culture and communication is also reinstated in Hofstede and Bond (1992). People create and interpret meanings through communication in their social activities. In a similar way, entrepreneurship is culturally defined and is closely related to communication. Therefore it is important to study entrepreneurial activity in relation to culture and communication. Entrepreneurship and intercultural dimensions Entrepreneurship involves innovation and taking risks (Barnett, 1953; McClelland, 1961; Basu, 1998). There is a close relationship between culture and innovation as well as a link between culture and entrepreneurial spirit. Culture influences tolerance of new ideas and inquisitiveness. According to Miner (1997), the psychology of entrepreneurial success lies in innovation and dealing with uncertainties. Different cultures have different attitudes towards business formation. Three major factors of innovation and entrepreneurship have been identified, which include willingness to face uncertainties and take balanced risks, urgency and timeliness and readiness to accept change and a dynamic long-term orientation. Among these three

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factors, two are clearly related to dealing with uncertainties and taking risks. Thus we need to look at innovation and uncertainty and communication patterns based on intercultural theories. Hofstede’s (1991) uncertainty avoidance dimension can be applied to fear of starting up a business. Cultures differ in the extent to which they tolerate ambiguity and cope with changes, as can be substantiated by Hofstede’s uncertainty avoidance index (UAI). Among the ethnic groups, only three cultures are on Hofstede’s index list and they are New Zealanders, Indians and Chinese. These three cultures will therefore be the focus of discussion for this section. European New Zealander has a low rating of UAI which means that they tend to be tolerant of changes and uncertainties. Hofstede’s ratings of Taiwan and Hong Kong can be used as a reference here to represent the Chinese culture. Taiwan has a much higher rating than Hong Kong, which means that the people from Hong Kong may indicate a higher level of tolerance of changes and uncertainties than those from Taiwan. We can assume that mainland Chinese share a similar level of rating with Taiwanese if we attribute the low rating of Hong Kong to Western influences. In other words, Chinese on the whole tend to prefer to avoid uncertainty. Maori culture or Pacific Island cultures are not on the list, and these cultures will be discussed in other sections of the chapter. In the light of this intercultural framework, this paper poses the following hypothesis: Hypothesis 1 Low-level uncertainty avoidance countries tend to indicate a lower level of fear on starting up businesses than the high-level uncertainty avoidance countries. Individualism and collectivism Hofstede’s collectivism and individualism dimension is discussed to highlight the relationship between group orientations and communication patterns. Research findings in this regard can be used for understanding uncertainty avoidance strategies. For example, collectivistic cultures tend to have a stronger group orientation and the opposite is true with individualistic cultures. Within each culture, people tend to follow certain communication patterns in dealing with changes. Based on this, the second hypothesis is developed: Hypothesis 2 Collectivistic cultures tend to indicate a higher level of fear of starting up businesses when they settle in an individualistic culture because of the changed patterns of the supporting and networking systems. Networking system and entrepreneurship success Very little research has been done on changes in communication pattern or networking systems when people migrate to another country. It is assumed that migrants from individualistic cultures would find it easier to cope with changes when migrating to an individualist society than those from collectivistic cultures. For example, there is the desire to keep a similar pattern of networking system one is familiar with in a new culture. Migrants will face challenges if these patterns are interrupted for one particular ethnic group. More challenges will occur when this group interacts with other ethnicities which may not share their rules for social networking. Bonacich (1973) points out that sojourners (or immigrants in today’s terms) are more likely than settlers to become entrepreneurs since the former encourage thrift and hard

Culture, communication and entrepreneurship in New Zealand 723 work. Thrift and hard work, are however, only part of the reasons for immigrant success. Basu’s study of migrant entrepreneurs indicates that they also have an established network system which helps them to promote their business, thus pointing out a possible link between entrepreneurial success and communication networks. Based on this, this research question is proposed: in what way can we develop a healthy networking system to help ethnic groups to deal with uncertainty and fear when starting up businesses? Research method Data for this study are drawn from two sources. The first source includes a GEM survey of 2000 adult New Zealanders aged 18 to 64, where ethnic identity is asked, using the standard New Zealand census question. We are able to distinguish demographic and other variables by ethnicity and total entrepreneurial activity. Altogether there were 1406 European New Zealanders, 160 Maoris, 37 Chinese, 42 Indians and 41 Pacific Islanders. The GEM data, which were collected by an independent survey company, apparently had limitations regarding the pre-set survey questions and specific groups of people surveyed. Generally speaking, the researcher had no control over the survey from the demographic perspective. This would help explain why the five ethnic groups were chosen. In order to help overcome the limitations of the GEM data, specific interviews with each ethnic group were conducted. Thus, the second source involves 15 in-depth telephone interviews (three from each ethnic group) with entrepreneurs from the five ethnic groups identified in the general population survey. Among the interviewees, seven were from the contacts provided by the GEM data and the rest of them were individual entrepreneurs ranging from restaurant owners to education providers. They were contacted through personal connections. The GEM interviews questions were used focusing on fear about starting up businesses and their communication patterns. The interviews results were also used to further substantiate findings and provide viewpoints of all the five target ethnic groups. Discussion of research findings Level of fear of failure when starting up businesses It has been found, in the GEM database, that European New Zealanders and Maoris tend to have a much lower level of fear of failure as compared to Chinese, Indians and Pacific Islanders (see Figure 44.1). This diagram details the participants’ responses to this survey question: fear of failure would prevent them from starting a business. As indicated in Figure 44.1, European New Zealanders and Maoris indicated a relatively weaker uncertainty avoidance level and the opposite is true of Indians, Chinese and Pacific Islanders. This phenomenon has also been consistent with the GEM 2001 data. To some extent, this finding corresponds to Hofstede’s uncertainty avoidance index, such as with the New Zealand and Chinese cultures. However, the rating of the Indian culture somehow contradicts Hofstede’s findings. In Hofstede’s UAI, Indian culture was rated relatively high, involving one of the countries that do not tend to prefer to avoid uncertainty. This finding from the GEM data has thus only partly supported Hypothesis 1 and Hofstede’s UAI can only apply to some ethnic groups. This finding also contradicts some existing research findings. For example,

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Per cent

50.00 40.00 30.00 20.00 10.00 0.00 Yes

No New Zealander of European descent New Zealander of Maori descent Chinese Indian Pacific Islander

Figure 44.1

Fear of failure when starting business between ethnicities

overseas Chinese and Indians such as those in London are very often known as highly successful entrepreneurs and ready to take risks (Basu, 1998). The findings so far have supported the second hypothesis since the migrants from the collectivistic cultures tend to have a higher rating when they settle in individualistic cultures. According to Hofstede, New Zealand is an individualist society. The analysis will focus on the reasons for the high level of fear with the ethnic groups. Several factors are discussed to see if they may have an impact on the level of fear of failure. They include education, religion and beliefs in entrepreneurial activities. Networking systems Coleman (1988, 1990) points out that obligations, networking channels and social norms can help reduce risks of uncertainty. Here networking systems are examined to see in what way they are related to reducing uncertainty or fear of failure. There is only one question related to networking in the GEM survey, which is about the source of loans received. The survey results indicate different preferences across the ethnic groups when seeking financial assistance. For example, Indians, Chinese and Pacific islanders have a higher rating than the European New Zealanders and Maoris for approaching their friends or relatives for financial support. Since no other variables can

Culture, communication and entrepreneurship in New Zealand 725 be found in this regard, more detailed attention will be given to communication networking systems through findings in the existing literature on networking systems. European New Zealanders tend to view relationship building as goal-oriented. The social–historic condition in New Zealand also helps Pakeha to network in a quite fluid and informal manner, like the cultural ambience in the golf club. The Samoan community, as one important component of Pacific Islander communities, value the family ties and connections. The wide use of kinship terms indicates the close bond of its community members. According to Metge (1995), Maori culture and utu (reciprocity) and whänau (family ties) are a particular means of relationship building. Mataira (Maungatu-maungaora, 2001) points out the significance of whänau (family ties) to Maori businesspeople, who evaluate the long-term effects of their business on their families as a prominent issue, ‘an important part of their work’. Chinese culture tends to stress the importance of guanxi wang (connections) (Zhu, 2003). The 2001 census indicates that 75 per cent of the Chinese population in New Zealand are overseas-born. Nowadays, the Chinese community is becoming increasingly diverse. Besides the local-born Chinese, they are roughly grouped into four strands, namely, the immigrants from Hong Kong, Taiwan, Chinese mainland and the Southeast Asian countries, such as Malaysia and Singapore (Ip, 2003a). One facet of their guanxi (connections) is evident in the growing number of their associations and community groups, which sustain and expand the social networks, although the intra-community communication and resource integration are far from perfect owing to their different origins, dialects, political systems of places of origin and migration histories (Ip, 2003b). Indian entrepreneur culture emphasizes cheap family labour, finance from within the community and the values of hard work and thrift (Waldinger et al., 1990). The examination of the small businesses of Kenyan Indians suggests the importance of family ties as actual and potential resources of ‘social capital’ to entrepreneurs (Esuha and Fletcher, 2003). Networking is a crucial means of recourse-raising and critical to enterprise creation and growth for Indian entrepreneurs. Ramachandran and Ramnarayan’s (1993) analysis of 67 cases of small-scale entrepreneurs published in two Indian business journals reveals that inner-circle contacts (family and friends) supplied necessary resources such as capital and technology for pioneering and innovative Indian entrepreneurs. These entrepreneurs not only benefited greatly from their networks by adopting suggestions or ideas, but synthesized them into substantial learning. Such cultural support also helps them to attain both business and non-business (personal) goals. An article in Unlimited magazine also illustrates how networking boosted the business development of Satish Shetty, an Indian restaurateur in Auckland (Rotherham, 2003). There appeared to be a certain preferred way for networking within each ethnic group. The level of fear when starting up business for one particular ethnic group is likely to increase once the networking system they were familiar with is discontinued in the new sociocultural environment. The lack of a well-maintained networking system can contribute to some of the inconsistencies in the hypotheses identified earlier. Networking systems thus play a critical role for entrepreneurs in immigrant communities. It not only provides material and symbolic connections between the community members, but tends to enhance family ties and individual well-being. Thus it can alleviate entrepreneurs’ fear of failure and boost their self-confidence.

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Discussion of interview results Interview results are discussed to further substantiate the cultural differences identified in the GEM survey. As noted earlier, all the five ethnic groups (European New Zealanders, Maoris, Indians, Chinese and the Pacific Islanders) were interviewed, and the discussion about each culture focuses on the significant findings only. Direct quotes are sometimes included, better to reflect the views of the entrepreneurs from each ethnic group. European New Zealanders European New Zealanders indicated willingness to take risks and run businesses. They are also familiar with the information and networking system. All this contributes to a lower level of fear when starting up businesses. In their words, Kiwis are known as having willingness to take risks: ‘This is very important for success and something that is very common in New Zealand.’ The interview results thus have substantiated the findings in the GEM survey and these views are followed by a detailed discussion. Maori entrepreneurs According to the interviews with Maoris, they are also as innovative and willing to take risks as European New Zealanders. However, they have a very different networking and mentoring system in which care and guidance play an important role. For example, they developed ‘networks and mentoring helpful for guidance and being able to bounce ideas off others’. This system is well established and maintained in the New Zealand society so that they can cope with uncertainty successfully. This also supports the survey findings about the lower level of fear for starting up businesses. Their established mentoring system clearly contributes to this finding. Chinese entrepreneurs One Chinese entrepreneur commented, ‘We have continued fear or worry, not knowing how to seek the right information for retaining or developing business.’ To them, the major fear of failure is related to lack of communication with mainstream culture as well as with other cultures, thus highlighting the need for effective communication with mainstream cultures as well as other cultures. Indian entrepreneurs Indian entrepreneurs also pointed out the link between communication and entrepreneurship. As they commented, ‘Our major fear is related to the scale of the market, which is extremely limited in New Zealand.’ Besides this, ‘There is a lack of support from professional bodies such as we were used to having back home.’ The Indian entrepreneurs’ comments further confirmed the uncertainty about running businesses and they also offered the major reason for such uncertainty. In particular, the supporting system which was essential for them has not really been well developed here, as compared with other cities, such as London (Basu, 1998). Pacific Islander entrepreneurs The importance of effective communication was also stressed by the Pacific Islander entrepreneurs. As one of the interviewees stated clearly, ‘We are socialized and religious people. Once we start a business they got very heavy loading to support the family. We

Culture, communication and entrepreneurship in New Zealand 727 don’t have the updates of information, and don’t have the networking system as in our home country.’ Their views indicate that their fear of failure was very much related to ‘face’ and family ties. There seems to be a strong support within their community and they tend to approach their own community when doing business. In addition, religious activities also seem to contribute to strengthening the ties within their community. Conclusion This study has explored the relationship between ethnicity, communication and entrepreneurship. The survey and interview results, in general, have suggested a close link between fear of failure and communication across cultures. For example, all interviewees thought it was imperative to promote communication across cultures, and it was especially true with those who showed a higher level of fear when starting up businesses. The findings generally support the hypothesis that migrants from collective cultures tend to have a higher level of fear when starting up a business. It can be inferred from this that entrepreneurs will face high levels of such fear when settling down in a new environment with a changed pattern of networking systems. Therefore effective networking systems are an important means of alleviating the fear of failure for both local entrepreneurs and entrepreneurs from immigrant communities. On the other hand, a broad and holistic approach in education should be adopted to promote entrepreneurship and encourage business innovations across all ethnicities. The implications of this study are two-fold: it sheds light on the importance of education about entrepreneurial success to both mainstream cultures and immigrants and highlights the impact of culture and communication on entrepreneurial success from an intercultural perspective. Effective communication, with a focus on setting up networks through religious and other community activities across ethnicities, will help coping with uncertainties about starting up new businesses. Further research, however, needs to be done to include a range of ethnic groups. More ethnic groups, such as from the Middle Eastern, Latin American and African countries, should be included as New Zealand is becoming increasingly multicultural. In addition, a survey should also target successful entrepreneurs and explore specifically how they have conquered their fear of failure. We could then can achieve a better understanding of successful entrepreneurial participation across cultures. References Barnett, H.G. (1953), Innovation: The Basis of Cultural Change, New York: McGraw-Hill. Basu, A. (1998), ‘An exploration of entrepreneurial activity among Asian small businesses in Britain’, Small Business Economics, 10(4), 313–26. Basu, A. and A. Goswami (1999), ‘South Asian entrepreneurship in Great Britain: factors in fleecing growth’, International Journal of Entrepreneurial Behaviour and Research, 5(5), 251–75. Bonacich, E. (1973), ‘A theory of middleman minorities’, American Sociological Review, 38, 583–94. Coleman, J.S. (1988), ‘Social capital in the creation of human capital’, American Journal of Sociology, 94, S95–S120. Coleman, J.S. (1990), Foundations of Social Theory, Cambridge, MA: Harvard University Press. Esuha, J. and D. Fletcher (2003), ‘Case study analysis of social capital and family firms in Kenya’, online, available at www.sbaer.uca.edu/research/2003/icsb/papers/87.doc; accessed 7 November. Foster, G.M. (1962), Traditional Cultures and the Impact of Technological Change, New York: Harper & Row. Hall, E.T. (1976), Beyond Culture, Garden City, NY: Anchor. Herbig, P.A. and J.C. Miller (1992), ‘Cultural aspects of innovation’, Journal of Global Marketing, 6(3), 23–45.

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Hofstede, G. (1991), Cultures and Organisations: Software of the Mind, London: McGraw-Hill. Hofstede, G. (1995), ‘Managerial values’, in T. Jackson (ed.), Cross-cultural Management, New York: McGrawHill, pp. 150–65. Hofstede, G. and M.H. Bond (1992), Cultures and Organisations, London: McGraw-Hill Europe. Ip, M. (2003a), ‘Chinese in Auckland: historic and diverse’, paper presented at Migration City: Migration and ethnic diversity in Auckland, 5 August, University of Auckland; online, available at http://www2.auckland. ac.nz/ipa/Ip%20Lecture%202003.doc; accessed 13 November. Ip, M. (2003b), ‘New Zealand’s new Chinese communities. Diversity and mobility’, paper presented at Subethnicity in Chinese Diaspora Conference, 12–13 September, University of Toronto; online, available at http://www.chass.utoronto.ca/
salaff/conference/papers/NewZealand-Ip.pdf. Knight, F.H. (1921), Risk, Uncertainty and Profit, New York: Houghton Mifflin. McClelland, David C. (1961), The Achieving Society, Princeton: Van Nostrand. Maungatu-maungaora (2001), ‘Maori entrepreneurship’ (featuring Peter Mataira); online, available at http://maungatu-maungaora.com/archive/Jan-2002.htm, accessed 12 November 2003. Metge, J. (1995), New Growth from Old : the Whanau in the Modern World, Wellington, N.Z.: Victoria University Press,. Miner, J.B. (1997), A Psychological Typology of Successful Entrepreneurs, London: Quorum Books. Morrison, A. (ed.)(1998), Entrepreneurship: An international Perspective, Oxford: Butterworth Heinemann. Ramachandran, K. and S. Ramnarayan (1993), ‘Entrepreneurial orientation and networking: some Indian evidence’, Journal of Business Venturing, 8(6), 513–24. Rotherham, F. (1 June 2003), ‘Silver lining’, online, available at http://www.unlimited.co.nz/unlimited.nsf/0/ 87F6C529145F54BACC256D2E0013A77C?OpenDocument, 11 November. Shane, S.A. (1993), ‘Cultural influences on national rates of innovation’, Journal of Business Venturing, 8(1), 59–73. Waldinger, R., H. Aldrich and R. Ward (1990), Ethnic Entrepreneurs: Immigrant Business in Industrial Societies, London: Sage. Zhu, Yunxia (2003), ‘Intercultural training for organisations – the synergistic approach’, Development and Learning in Organisations: An International Journal.

45 Immigrant cultural capital in business: the New Zealand experience Noel Watts, Andrew Trlin, Cynthia White and Nicola North

Introduction Since the late 1980s, changes in New Zealand’s immigration policy have opened doors to immigrants from a wider range of countries than had previously been the case. Recognizing the need to increase human capital to further economic and social development, New Zealand has competed actively with other countries of settlement (particularly Australia, Canada and the United States) to attract immigrants with high-level skills and those capable of contributing entrepreneurial ability and investment, irrespective of their countries of origin. The combined effects of the abolition in 1986 of the preference for immigrants from Western Europe (Burke, 1986) and the introduction of a pointsbased merit system in 1991, were a rapid increase in the number of immigrants in the General Skills and Business categories in the 1990s, particularly from China, India, Korea and other Asian countries. This inflow has had important demographic consequences for New Zealand, contributing to an increase in the country’s Asian population, from 99 756 (3 per cent of the total population) in 1991 to 237 459 (6.6 per cent of the total population) in 2001 (Statistics New Zealand, 2002). In addition to their qualifications and skills, many of the new immigrants from Asia, as well as those from Africa, the Middle East and other regions, bring with them certain cultural behaviours and understandings that differ considerably from those considered the norm in New Zealand. These different values, insights, tastes and appreciations developed in other cultural settings may be represented as their immigrant ‘cultural capital’. In this chapter we first define more precisely the components of immigrant cultural capital. Then, drawing on the New Zealand experience, particular attention will be paid to perceptions of the value of immigrant cultural capital and the ways in which this form of capital is utilized in the New Zealand business context both by mainstream companies and by immigrant entrepreneurs who have set up their own enterprises. An argument will be advanced that immigrant cultural capital offers considerable potential for business development but that much more could be done to gain the full benefits of such capital in New Zealand. Immigrants and cultural capital ‘Culture’, as Smith (2000) points out, is a term with multiple connotations, interpretations and symbolic associations. In a narrow sense, culture can refer to major achievements in the creative arts (high culture or Culture with a capital C). The more favoured interpretation, however, is that culture encompasses the distinctive features of the everyday life of people who form a particular social group. The Universal Declaration on Cultural Diversity (UNESCO, 2001: 2), for example, states that: 729

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. . . culture should be regarded as the set of distinctive spiritual, material, intellectual and emotional features of society or a social group, and that it encompasses, in addition to art and literature, lifestyles, ways of living together, value systems, traditions and beliefs.

These traditions, beliefs, values, norms, routines and habits form the basis of the cultural capital of different groups of people. According to Bourdieu’s (1986) classic distinction, cultural capital is one of the three main forms of capital that people possess, alongside economic capital (money and property rights) and social capital (rights and privileges arising from social relationships). In Bourdieu’s view, cultural capital exists in embodied, objectified and institutional forms. Embodied cultural capital manifests itself in the aesthetic, cognitive and moral preferences, propensities, standards, norms, routines and habits that govern the collective behaviour of individuals. Objectified cultural capital is expressed in cultural goods and objects such as works of art, books, machines and instruments. Institutionalized cultural capital involves places of learning where knowledge may be acquired and credentials obtained. However, whereas Bourdieu emphasizes the classlinked nature of cultural capital and the disadvantages faced by those outside the dominant culture, other schools of thought place cultural capital in a wider human capital framework (see, amongst others, Becker, 1996; de Bruin, 1998; Throsby, 2001; Trueba, 2002). According to such an approach: ‘the emphasis shifts to the way cultural capital shared by non-dominant groups can, under certain conditions, provide positive resources and the basis for opportunity’ (Firkin, 2003: 64). This view of cultural capital as representing a potential ‘resource’ and ‘opportunity’ for immigrants is the one followed in this chapter. As with economic capital, cultural capital can cross borders as people gain access to other ideas and experiences through books, journals, newspapers, radio, television and cinema, and the Internet. Trade and tourism provide further opportunities for interaction with people of different cultures. Migration, however, has the potential for producing the most profound and long-lasting effects on cultural transfer. As Sowell (1996: 388) maintains, the historic role of migration in spreading knowledge and different practices has been ‘monumental in its consequences’. Snowman (2002: 373) endorses this view and claims that migration provides a means ‘by which a society refreshes itself and avoids the dangers of cultural stagnation’. As well as ideas and skills, immigrant attributes include various attitudes, beliefs and values. De Bruin (1998: 11) counts as immigrant assets ‘cultural energy’ and a determination to succeed. This view is shared by Sowell (1996: 3): ‘Sometimes it is not so much specific skills as a set of attitudes toward work and toward risk-taking, which may lead immigrants to excel in fields in which they had no experience before immigration.’ For Trueba (2002: 23) an important aspect of immigrant cultural capital is ‘a general resiliency associated with the ability to endure hardships and overcome obstacles’ and the capacity to cross successfully cultural divides. In his view, such abilities are ‘crucial for success in a modern diversified society’. How, then, does cultural capital link with the business activities of immigrants? It is recognized that there is considerable diversity both between and within immigrant groups, and that a variety of circumstances affect not only the quality and quantity of the cultural resources that individuals have at their disposal but also the extent to which they are able to draw on them for economic advantage. Age, gender, social class, education and

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family situation are but some of the factors that have a bearing on the possession of or access to cultural capital (Light and Gold, 2000). In general terms, however, amongst some of the culturally-related resources that may be available to certain immigrants for positive economic outcomes are the following: 1.

2.

3.

4.

5.

6.

Bilingual/multilingual language skills. Immigrants from countries where English is not the main language are often proficient in one or more languages other than English. Native-speaker competence in these languages may have importance not only in catering for the needs of local ethnic communities but also in promoting trade links and tourism ventures involving countries where the languages are spoken (see, for example, Kipp et al., 1995; Watts, 1998). Educational background. Immigrants may have gained advanced business qualifications and professional training pre-migration. In New Zealand, for example, studies of self-employment typically show high levels of education amongst recent Asian immigrants, which is unsurprising in view of the points-based criteria used for immigrant selection that place a high priority on educational attainment (Lidgard and Yoon, 1999; Ho et al., 1999). Work experience. Immigrants who have had previous experience in the business field in their countries of origin (or in other countries where they have resided) are likely to possess insights into the business environment in these countries, including knowledge of the regulatory systems involved as well as an understanding of the cultural context in which business operates (courtesy protocols and procedures, hierarchical structures, status relationships and so on). Family and friendship connections in countries of origin. Many immigrants have extensive networks of family members and friends in their home countries. These networks have competitive potential in assessing marketing opportunities as well as in making connections with suppliers and clients. In some cases immigrants may retain their business interests in their countries of origin and use return visits to consolidate or extend these networks. Such transnational business links have been a feature of Chinese business immigrants to different countries (Ip et al., 2000; Tracy et al., 2001). Links with co-ethnics in the host country. Ties with those with whom they have cultural affinity in the host country can provide support and encouragement for immigrants embarking on entrepreneurial activities. Contacts made through ethnic associations, church groups and the rest may be a source of advice and, in some cases, financial assistance. Examples of the roles played by ethnic links are provided by, amongst others, Greene (1997) for Ismaili Pakistani immigrants in Southwestern USA; Ip (1999) for Chinese immigrant entrepreneurs in Brisbane, Australia; Leonard and Tibrewal (1993) for Asian Indians in Southern California; Teixeira (1998) for Portuguese immigrants in Toronto, Canada; and Razin (1993) for immigrant entrepreneurs in Israel, Canada and California. Attitudes, values and beliefs. Finally, there are the attitudinal aspects of cultural capital. The cultural backgrounds of immigrants may favour business entreprise through diligence, probity and preparedness to take calculated risks: see Sowell’s (1996) description of successful immigrants from China and Japan in the United States and other countries.

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Cultural capital and business in New Zealand To what extent is New Zealand capitalizing on the inflow of people with different cultural backgrounds? More particularly, how is the business sector utilizing immigrant cultural capital? In what ways are immigrants drawing on their cultural resources in entrepreneurial activities? To answer these questions we will draw on the results of research carried out as part of Massey University’s New Settlers Programme (NSP) during the period 1998–2004, and focus on three areas: general perceptions of the value of immigrant cultural capital contributions; use of immigrant cultural resources in companies; and the use of immigrant cultural resources in self-employment and entrepreneurship. Perceptions of the value of immigrant cultural capital contributions An NSP survey carried out in 2003 was designed to elicit views on the value of the cultural capital contribution of immigrants to New Zealand (Watts et al., 2004). The participants in this study were senior faculty members in charge of teaching programmes in New Zealand tertiary education institutions (universities, polytechnics and so on). Senior faculty members were chosen as they have key roles in helping to realize the government’s vision of New Zealand as a knowledge-based economy (see Frederick et al., 1999) by broadening the intellectual and cultural horizons of students and adding to their knowledge and experience. In addition, senior staff members may be expected to have personal experience of immigrant issues since tertiary institutions have become increasingly more diverse by attracting students from around the world as well as recruiting staff in a competitive, international market. The teaching units involved in the survey covered a wide range of disciplines, including business studies and economics. The main data-gathering instrument for the study was a questionnaire mailed to heads of teaching units in New Zealand’s main tertiary education institutions in March–April 2003. Of 351 questionnaires sent out, 159 completed questionnaires were returned: 90 from universities, 54 from polytechnics and 15 from other institutions offering degreelevel courses (private training establishments, colleges of education not attached to universities and so on). In general, the heads of teaching units that did not return completed questionnaires were in disciplines related to the pure and applied sciences and may not have felt that the survey was relevant to their subject areas. The second phase of the study comprised in-depth face-to-face interviews with a sub-set of 17 respondents in different institutions. An overwhelming majority of the participants (152 out of 159, or 95.6 per cent) believed that immigrants had made a positive impact on aspects of New Zealand life in the past decade, and of these 68 (44.7 per cent) assessed this as a ‘great impact’. The main areas of immigrant cultural capital influence were perceived to be in cuisine and hospitality, ethnic relations, education and training, social life and the creative arts as well as other areas of industry and commerce. With respect to cuisine and hospitality, many participants added comments referring to the increasing number of Chinese, Indian, Thai, Malaysian and other ethnic food outlets and the wider range of food products available not only through specialist shops but also on supermarket shelves. This proliferation of ethnic food suppliers may be interpreted as a response to both the demands of a growing ethnic clientèle as well as a developing interest in ‘exotic’ foods among New Zealanders which has been nurtured by opportunities for overseas travel as well as media influences (television cooking programmes, international

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dining features in newspapers and magazines and so on). It may also be an indicator that some immigrants, particularly those from Asian countries, have turned to setting up small restaurants or ‘take-away’ food outlets because of difficulties experienced in establishing businesses in the commercial areas in which they were engaged in their countries of origin or because of other labour market problems (see Ho et al., 1999). The senior faculty members also recognized that subtle social changes were occurring as the result of immigration. As far as ethnic relations and social life were concerned, a number of the participants pointed to the fact that New Zealanders are having to face up to the realities of living in a more multicultural society. They were aware, however, that for some native-born New Zealanders the emerging multiculturalism was a source of anxiety, distrust or resentment. As some of the participants pointed out, monocultural attitudes are still deeply entrenched in some sections of the population. Regarding cross-cultural exchanges, the participants considered that personal experience, either through personal interaction with immigrants in social life or in the workplace, was the most important means of gaining access to different cultural ideas and perspectives. They assessed this personal contact as being more important for cultural transmission than the media (television, radio, newspapers, Internet and the rest). This result is in keeping with the model of innovation diffusion proposed by Rogers (1995). In Rogers’s model the media play a role in the knowledge acquisition stage but interpersonal contact is more important at the critical persuasion stage when people form attitudes that may persuade them to accept and/or adopt new ideas or practices. Almost two-thirds of the participants (113 out of 159, or 64.8 per cent) considered that New Zealanders were aware to at least a ‘moderate extent’ of the cultural impact of immigrants in recent years. However, fewer than half (74 out of 159, or 46.6 per cent) were of the opinion that New Zealanders welcomed this cultural impact to at least a ‘moderate’ extent. Some of the participants thought that this lack of appreciation on the part of some sections of the general public could be attributed to failure at the government level to promote the positive social, cultural and economic benefits of immigration. Only 17 of the 159 participants (10.7 per cent) considered that the promotion of public understanding of immigration had been ‘helpful’. In addition, the participants considered that the potential benefits of immigration were undermined by the lack of well-defined government policies to assist new arrivals in their settlement and to help them obtain appropriate employment. Overall, the results reflected a concern that New Zealand has failed to capitalize fully on its efforts to attract quality immigrants and that considerably more could be done to provide an environment in which immigrants felt welcome, valued and encouraged to engage fully in society. The 17 follow-up interviews included both New Zealand-born academics (ten) and those who had been recruited from other countries (seven). A key point emerging from these interviews was the conviction that skilled immigrants bring to New Zealand valuable personal qualities, in addition to their qualifications and experiences. These qualities include commitment, diligence and a will to succeed. The common view expressed was that such qualities not only help immigrants to adapt to life in New Zealand but also strengthen the work ethic in the occupational activities in which they participate. Immigrant contributions to innovation were another theme in the interviews. Specific examples were given of ways in which immigrants had contributed to new developments. For example, the head of a technology department, who had emigrated to New Zealand

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from South Africa, recounted his work experiences after he arrived. He was appointed as a member of the team involved in the design of a new version of a household appliance. The design team at the time included Asian, British and South African as well as New Zealand members. In his opinion, New Zealand has produced creative thinkers but industry needs the contribution of people from other countries with experience in developing ideas to meet the demands of competitive world markets. In other words, innovation needs to be linked with practicality and feasibility. While those interviewed endorsed the value to New Zealand generally of an injection of different skills and experiences, there were doubts whether the country was taking full advantage of the cultural capital resources of immigrants. Unemployment and underemployment were identified as the most serious obstacles to immigrant contributions. The interviewees gave a number of examples of well qualified, skilled immigrants, especially those who came from Asia, who had experienced extreme difficulty in securing appropriate employment in New Zealand. These difficulties obviously limited their ability to share with New Zealanders the skills, insights and experiences that they had developed over many years pre-migration. An example was a young architect with a degree from Lebanon who (in the opinion of the senior faculty member concerned) had excellent credentials and should have been readily employable in his profession. However, because of problems experienced in securing employment in New Zealand, he had ended up having to seek employment in Australia. The concerns voiced in the interviews were very similar to those expressed in other studies of the employment in New Zealand of skilled immigrants from Asian and other non-Western regions (see, for example, Basnayake, 1999; Boyer, 1996; Department of Internal Affairs, 1996; Henderson et al., 2001; Trlin et al., 2004; Watts and Trlin, 2000). The studies identify a number of employment barriers faced by immigrants, ranging from problems in having qualifications recognized in the marketplace and gaining registration from professional bodies, to the reluctance of employers to hire people without New Zealand work experience and non-native-speakers of English. By concentrating on the supposed ‘deficiencies’ of immigrants, the New Zealand business sector may be failing to recognize the positive features of the cultural capital that they possess: their diverse educational and work experiences, contacts and networks overseas, expertise in applying innovations, and their cross-cultural and multilingual skills. It is these cultural aspects that are the focus of the next study reviewed. Use of immigrant cultural resources by New Zealand companies The findings of the 2003 study are consistent with the overall results of an earlier NSP survey conducted in 1998 (Watts and Trlin, 1999). The main aim of this survey was to determine the extent to which mainstream New Zealand companies engaged in business activity in the international marketplace made use of immigrant resources. A comprehensive questionnaire was designed which included questions on the numbers of immigrants currently in the companies’ workforce, policies concerning their recruitment, training and support and the ways in which their languages, cultural knowledge and understanding and links with their countries of origin were utilized in business operations. Of 460 companies contacted in this postal survey, 187 agreed to provide the information sought: 88 firms involved in exporting, 88 in tourism and 11 in other areas of international business (such as consulting and finance). Follow-up interviews were held

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with 19 companies to obtain richer data, particularly relating to best practice in managing diversity in the workforce and effective use of immigrant cultural resources. This study of company policies and practices was complemented by a small survey of 52 young immigrants from non-English-speaking backgrounds (NESB) who had gained tertiary-level New Zealand business qualifications. The main object of this study was to gather information on their experiences and to elicit their views on the value placed on their cultural insights and understandings in the New Zealand business environment. Survey of company policies and practices Of the 187 companies in the main survey, 130 (69.5 per cent) reported that they had NESB immigrants in their workforce. The main languages of the immigrant employees were Chinese languages/dialects, followed by Japanese, Samoan and German. Ninety-seven (74.6 per cent) of the 130 companies employing immigrants indicated that their NESB employees used their native languages at work in some way. Companies in the tourism category had the greatest interest in drawing on the language skills of their NESB immigrant employees. Fifty-seven (91.9 per cent) of the tourism companies that employed NESB immigrants said that use was made of their native languages, compared with 32 (55.2 per cent) of the companies involved in exporting and eight (80 per cent) of those engaged in other areas of international business. In the main, the multilingual language resources within the companies were drawn upon for tasks involving assistance to clients visiting New Zealand, translating documents, handling correspondence, interpreting for other staff and assisting with product marketing. There were, however, indications that the multilingual resources available to companies could be used more effectively. Twenty (15.4 per cent) out of the 130 companies employing NESB immigrants reported that there were employees in their companies whose native speaker skills could be better utilized. One exporting company, for instance, acknowledged that much more use should be made of its Chinese-speaking employees in securing new business in China. In general, the results of the 1998 NSP survey are in accord with other studies of the use of languages in business in New Zealand (see, amongst others, Aitken and Hall, 2000; Enderwick and Gray, 1992; Watts, 1987, 1992, 1994). These studies indicate that although there is movement towards making greater use of the languages of overseas customers, New Zealand falls short of the efforts made by countries such as Australia (Stanley et al., 1990; Kipp et al., 1995), and the United Kingdom (Hagen, 1989). The Watts and Trlin (1999) study also found that use of the cultural knowledge and understanding of immigrant employees was even less common than that of immigrant languages. Less than half of the 130 companies signalled that they utilized the cultural knowledge and understanding of their immigrant employees. The main use of this cultural knowledge and understanding was in staff development programmes intended to promote better understanding of the requirements of overseas customers. Other ways in which the cultural background knowledge of immigrant employees was seen to be of advantage to the companies concerned were meeting and welcoming overseas visitors; providing advice for staff posted abroad; briefing sales and marketing staff on customer preferences; advising on protocols when hosting senior management from foreign affiliate companies; and preparing translations of publicity, technical information and so on. Specific examples were given of areas in which it was vitally necessary in recruitment to

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target people with particular cultural backgrounds. For example, companies involved in the hospitality industry referred to the importance of cultural input in both the planning of menus and the preparation of food to suit the dietary preferences of international tourists. Meat-exporting companies sought Muslim personnel to follow Halal customs in preparing meat for export to Middle Eastern markets, while in-bound tourism companies recruited Chinese, Japanese, Korean and other Asian tour guides to accompany tour parties from their particular homelands. Cultural networks were the least tapped immigrant resource. Only 38 (29.2 per cent) of the 130 companies with NESB immigrants in their workforce indicated that they made use of the overseas contacts and networks of their immigrant employees. Twenty (32.3 per cent) of the tourism companies which employed NESB immigrants reported that use was made of these connections, compared with 17 (29.3 per cent) of the exporting companies and one (10 per cent) of the companies in the ‘other’ category. This result suggests that New Zealand companies may be overlooking the fact that many skilled immigrants have had considerable work experience pre-migration and have retained strong links with former colleagues as well as friends and family members involved in business in their countries of origin. By failing to exploit these connections, New Zealand companies may be missing out on an important source of competitive advantage. With respect to staff recruitment and promotion, the failure to make effective use of immigrant cultural capital in the workforce would seem to reflect a view that competence in languages other than English and understanding of other cultures are far less important than other attributes. Overall, the three factors considered most important by the companies surveyed were personal features (personality, ability to fit into the company organization and so on), New Zealand qualifications and training, and New Zealand work experience. These criteria may be seen to work against those who come from different cultural backgrounds and favour the local-born. This situation bears out the observation made by Collins (2003: 64) that the ‘labour market more often penalizes rather than rewards [immigrant] cultural capital’. The follow-up interviews with 17 of the participating companies that expressed most interest in immigrant resources shed further light on the asset that many of the other companies were overlooking. Best practice examples provided by these 17 companies included actively seeking immigrant workers who possessed the skills and experience sought by the company; providing prospective applicants with clear information on work and living conditions in New Zealand; and assisting in their settlement after arrival by finding accommodation and so on. Best practice also involved well-planned induction programmes that helped to familiarize new employees with the company’s operations and their particular area of work. Companies that made best use of immigrant resources included in their human resources databases information about the linguistic and cultural backgrounds of new staff members and made use of this information when the need arose. An example of effective use of immigrant resources was a malting company that employed the Spanish-speaking skills of a staff member from Panama to monitor cooperative barley breeding projects in Uruguay, while a Swedish-speaking staff member contributed to the development of joint venture projects in Northern Europe. Immigrant employees in this company were also involved in international marketing, as well as accessing and disseminating useful information that appeared in foreign language scientific and technical publications.

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Survey of qualified immigrants To gain further information on the use of immigrant cultural resources in business activities, this time from the perspectives of immigrant employees or potential employees, a small survey of qualified immigrants was conducted. Carried out with the co-operation of the alumni associations of Massey University and the University of Auckland, the target group comprised immigrants from countries where English is not the main language, who had completed university business degrees through business schools in these two New Zealand universities since their arrival. The assumption was that such graduates (with their combination of New Zealand business qualifications, high levels of competence in English proven through successful completion of studies in an English-medium university environment) should be well placed to obtain employment in New Zealand. Fifty-two graduates consented to participate in the survey and completed and returned the questionnaires sent to them. They were mainly male, aged under 40 years and of Asian ethnicity. Most had been in New Zealand for less than nine years. The majority had masters degrees or above, completed between 1994 and 1998, and had had some business experience before coming to New Zealand. Despite their high qualifications and previous work experience, at the time of the survey only 41 (78.8 per cent) of the 52 graduates were in employment. Twenty-seven were employed in companies with international customers or clients or were self-employed in areas that related to international business. Fourteen were employed in companies that were solely New Zealand-based. As far as their language backgrounds were concerned, 29 reported that they made use of their native-speaker skills at work in some way, but in the majority of cases the incidence of use was quite low (up to three times a month). Fourteen of the participants currently employed said that their cultural background knowledge was considered to be of relevance in their work activities. Only seven reported that their cultural networks were drawn on in their employment. In general, the immigrants were of the view that their skills in languages other than English and their experience and cultural links could be used to better advantage. As one immigrant employee commented: ‘If in the past my world view had been recognised, my employers would be better off.’ The participants also drew attention to a range of problems that they believed impeded the effective utilization of immigrant resources. These included the apparent reluctance of some employers to hire immigrant staff. The graduates attributed this reluctance to perceptions that cultural differences constituted a handicap that made it difficult for immigrants to fit into the New Zealand working environment. There was also, in their opinion, a widespread belief in the business community that NESB immigrants lacked appropriate levels of competence in written English, and that clients disliked dealing with nonnative-speakers of English as they found it difficult to adjust to their different accents. On the basis of their personal experience, they were of the opinion that discrimination against ‘foreigners’ adversely affected their employment opportunities. Together, these two surveys highlight the lack of recognition by New Zealand companies of immigrant cultural capital as a resource. Rather, the cultural capital of immigrants, including their linguistic and cultural competencies, overseas qualifications and work experience, and contacts and networks in other countries, are at best overlooked, and at worst regarded as a handicap. For skilled immigrants facing barriers to and in some cases discrimination in finding employment in their field, an option is self-employment.

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Use of immigrant cultural resources in self-employment How, then, do the experiences of immigrants employed in New Zealand companies compare with those of immigrants who are in self-employment with respect to use of their cultural resources? Information enabling such comparisons to be made was obtained in a multi-case study involving in-depth interviews with immigrants who were managing their own businesses (North and Trlin, 2004). Participants for this study were mainly skilled immigrants who entered New Zealand after the points system was introduced in 1991, all from non-traditional source countries, and who were recruited with the assistance of local council initiatives in business development, immigrant associations and agencies, and through networking. The main purpose of the study was to identify the reasons why immigrants start up businesses in New Zealand and the factors that affect their business performance. Of the 26 immigrants who participated in the study, six had businesses in a provincial city (Palmerston North) and 20 in a larger metropolitan area (Auckland). The majority of the participants were 41 years of age or over and relatively recent arrivals, principally from Asia, South Africa, Europe and the Middle East. Males (18) outnumbered females (eight). As a group the participants were well qualified, with 16 of the 26 having university degrees. They were also proficient in a range of languages: 23 reported that they were able to speak, read and write in two to three languages and/or dialects, while three claimed proficiency in four or more languages. Their businesses were almost all small in size but covered a wide range of activities principally connected with manufacturing, the wholesale and retail trade and hospitality. Despite the small size of the businesses, about half reported that they had overseas business dealings, mainly involving their regions of origin: seven were importing raw materials or products, four exported products and a further six were preparing to export products. Most had taken up self-employment within two years of their arrival in New Zealand. Only four of the participants had taken on self-employment because of a lack of success in finding other employment. In fact, almost half had left another work position in New Zealand in order to embark on self-employment. This result is in contrast to some of the other studies of self-employed immigrants that have identified employment barriers as a main motivation for starting one’s own business (see, for example, Boyer, 1996; Henderson et al., 2001; Ho et al., 1999; Lidgard and Yoon, 1999). For most of the participants, the reasons for going into business were a combination of push factors (previous work was not secure, not fulfilling, inadequately remunerated) and pull factors (seeing market opportunities, using business experience gained pre-migration, wanting more autonomy and control over hours of work, and so on). The participants identified a number of factors that they believed placed them at a disadvantage compared with New Zealand-born business people. These included many of the difficulties identified in the Forsyte Research study of business immigrants (Forsyte Research, 1998). Unfamiliarity with the New Zealand business environment, lack of knowledge of regulatory conditions, uncertainty as to where to go to obtain legal and financial advice, and restricted contacts with members of the local business community had all hindered the establishment and/or start-up phase of their business operations. English language difficulties also featured highly as non-native speakers of English faced linguistic and cultural barriers in dealing with New Zealand officials, suppliers and customers. In particular, accent, idiomatic expressions and culturally-embedded concepts in

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language expression created difficulties. Specific examples of other difficulties experienced ranged from problems in dealing with financial institutions after arrival as they did not have a credit history in New Zealand, and with immigration authorities concerning both their own visas and the recruitment of other immigrants as workers. There were also cases of racial abuse and harassment. Despite these perceived linguistic, cultural and commercial handicaps, most of the selfemployed immigrants had generally positive views regarding their business ventures. Indeed, with one exception, all the participants considered that they had made the right decision to go into business in New Zealand. All were meeting regular payments, including salaries/wages, bills and loans. In addition, more than two-thirds reported that they had plans to expand or diversify in the coming year. However, most of the participants also wanted to enjoy the more relaxed lifestyle that had attracted them to New Zealand. Only a few of them indicated that they had ambitions to be wealthy or influential. Part of the reason for their generally positive outlook on business may be found in compensatory factors linked to their own cultural capital resources. Similar to immigrants in business in Australia, as described by Ip (1999) and Lever-Tracy et al. (1999), these New Zealand self-employed immigrants derived benefit from their cultural background as well as connections with members of their cultural group both in the country of origin and in New Zealand. These links through family, friendship and business networks helped provide access to suppliers, agents, distributors and clients. In some cases venture capital had been obtained through these networks and partnership arrangements made. While immigrant communities in New Zealand are small in comparison with those found in countries such as the United States (see Light and Bhachu, 1993), they still play an important role in assisting community members and their business enterprises. Apart from giving emotional and psychological support, they provide a potential pool of employees. Seventeen (65.4 per cent) of the 26 self-employed immigrants in the study recruited staff mainly from their own ethnic group (including family members), while a further five recruited staff from both their own ethnic group and the general population. Local immigrant/ethnic communities also provided certain niche marketing opportunities, though it was necessary for most of the participants to look to the needs of the wider population. For only six of the participants their own immigrant/ethnic community was predominantly or exclusively their business market. Nineteen (73 per cent) reported that they had encouraged or assisted other immigrants (mainly from their own country of origin) to start up their own businesses. Fifteen (57.7 per cent) indicated that they were mentoring other immigrants who were running their own businesses or who were considering self-employment as an option. It was apparent from the interviews that there could be negative as well as positive aspects to involvement with local immigrant/ethnic communities. Some references were made to strong market competition from other immigrants or co-ethnics, while rivalries and personality clashes could lead to lack of support from some community members. Some of the participants were of the view that their own community group could be more helpful in a number of respects. This was found especially among immigrants from South Africa who felt that the benefits of experience were not being passed on. In all, nine of the 26 participants (34.6 per cent) felt that immigrant/ethnic communities could be much more active in supporting immigrant businesses with their custom, and in providing advice and other assistance.

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As far as the role played by immigrants in the country’s development was concerned, the participants emphasized the importance of the contribution of immigrant entrepreneurs socially and culturally as well as economically. They considered that the introduction of overseas products and services added colour and choice to the domestic market and generally enriched social life. They also saw the potential of combining the traditional knowledge of their country of origin with local expertise to produce and market improved products to world markets. A number had received awards for such improvements or innovations: three had received awards that recognized technological innovations; one had received two New Zealand awards, ‘Best New Business’ and ‘Best Innovative Business’; and one had received a technical award for the product produced and a patent from a trade fair in the People’s Republic of China. Implications This chapter has examined views and experiences of immigrant involvement in New Zealand business activity and the use of immigrants’ cultural capital resources. Data have been drawn in the main from three studies conducted as part of Massey University’s New Settlers Programme. The three studies have provided different perspectives on immigrant cultural capital: general perceptions of immigrant cultural influences; use of immigrant cultural resources in companies involved in international business, trade and tourism; and use of immigrant cultural capital in self-employment. The first two studies provided data that suggest that the cultural assets that immigrants bring to the country are inadequately recognized or appreciated. It seems clear that New Zealand has not as yet capitalized fully on the increased diversity in its population that is the result of a more open, liberal immigration policy. In this regard one can compare the New Zealand experience with that of its near neighbour, Australia. In Australia, a productive diversity strategy has been developed to identify immigrant cultural capital potential and to use this resource effectively (Department of Immigration and Multicultural Affairs, 1998, 1999). As part of this strategy the business community is encouraged to draw on the diverse language skills, cultural insights and perspectives of their employees. By doing so, the country gains a ‘diversity dividend’ (Cope and Kalantzis, 1997: 170). There is obviously scope for more determined efforts in New Zealand to develop a coordinated strategy of this kind. The productive use of immigrant cultural capital was more apparent in the third study that investigated the views and experiences of self-employed immigrants. It was clear that some of the business disadvantages suffered by people who are new to the country could be mitigated by their ability to call on their cultural reserves. Their links with those with whom they had cultural affinity in their countries of origin and in New Zealand were valuable business resources, as were the ideas, insights and experiences that they brought with them. These attributes helped them to be innovative and to seize new market opportunities when they arose. Their enterprise brought choice and variety to the marketplace, added colour and vitality to New Zealand life and helped the country to be better equipped for the challenges of a more global world. In general, the results of this study bear out the view of Cameron and Massey (1999) that immigrants who are successfully running their own enterprises not only contribute to the economic well-being of the country but also enrich New Zealand socially and culturally by introducing new ideas, insights and experiences.

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It follows that such enterprise deserves support from the New Zealand community as a whole. Such support demands the attention of different organizations and groups at different levels. At the national level there is a need for immigration policies that regulate entry into the country, to be complemented by well planned and co-ordinated settlement policies that provide assistance for immigrants when they arrive in the country. Such assistance should include more help for people wishing to set up in business in terms of provision of information and advice. In addition, as Trlin (1993) pointed out, an integrated institutional structure of immigration also requires a comprehensive ethnic relations policy deigned to promote understanding of cultural diversity and celebrate its advantages. Immigrant businesses are more likely to flourish in an environment where newcomers feel welcome and accepted and their contribution is valued. The business sector also has a role in supporting immigrant/ethnic enterprises, as it is to the advantage of New Zealand business in general to have in its midst people with contacts with the outside world and who bring in new ideas and experiences. Similarly, local authorities have a role to play in helping immigrants to make contacts with people who could offer them assistance in finding employment or setting up businesses. Finally, the immigrants themselves must share responsibility for forging links with co-ethnics as well as engaging with the wider community. It is in their interests to help New Zealand society become more aware of the unique cultural resources that they possess and to demonstrate how these can contribute to the enrichment of life in the host country. Conclusion While self-employed immigrants demonstrate the business potential of the cultural capital that they possess by drawing on this resource in developing their own businesses domestically and/or internationally, mainstream New Zealand companies appear to have been slow to recognize and utilize the cultural backgrounds of immigrant employees. In many respects immigrant cultural resources still remain a hidden asset. Even in the case of self-employed immigrants, the potential can be hampered by the lack of acknowledgment of the value of immigrant cultural capital that is pervasive in New Zealand society. As long as this attitude persists, New Zealand will continue to miss out on reaping the full economic benefits that should accrue from its targeted immigration programme. Acknowledgement The New Settlers Programme, of which this chapter is a part, has been supported with grants from the New Zealand Foundation for Research, Science and Technology. References Aitken, Carmen and C. Michael Hall (2000), ‘Migrant and foreign skills and their relevance to the tourism industry’, Tourism Geographies, 2(1), 66–86. Basnayake, Asoka (1999), Employment Experiences of Sri Lankan Migrants in New Zealand, Auckland: Equal Employment Opportunities Trust. Becker, Gary S. (1996), Accounting for Tastes, Cambridge, MA: Harvard University Press. Bourdieu, Pierre (1986), ‘The forms of capital’, in John Richardson (ed.), Handbook of Theory and Research for the Sociology of Education, New York: Greenwood Press, pp. 241–58. Boyer, Tania (1996), ‘Problems in paradise: Taiwanese immigrants to Auckland, New Zealand’, Asia Pacific Viewpoint, 37(1), 59–79. Burke, Kerry (1986), Review of Immigration Policy, August 1986, Wellington: Government Printer. Cameron, Alan and Claire Massey (1999), Small and Medium Enterprises: A New Zealand Perspective, Auckland: Longman.

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Collins, Jock (2003), ‘Australia: cosmopolitan capitalists down under’, in Robert Kloosterman and Jan Rath (eds), Immigrant Entrepreneurs Venturing Abroad in the Age of Globalization, Oxford: Berg, pp. 61–78. Cope, Bill and Mary Kalantzis (1997), Productive Diversity: A new Australian Model for Work and Management, Annandale: Pluto Press. De Bruin, Anne (1998), ‘An examination of the approach to human capital: a note on cultural capital’, Department of Commerce, Massey University, Albany. Department of Immigration and Multicultural Affairs (1998), Cultural Diversity at Work, Canberra: Department of Immigration and Multicultural Affairs. Department of Immigration and Multicultural Affairs (1999), Productive Diversity: Australia’s Competitive Advantage, DIMA Fact Sheet 12, Canberra: Department of Immigration and Multicultural Affairs. Department of Internal Affairs (1996), High Hopes: A Survey of Qualifications, Training and Employment Issues for Recent Immigrants in New Zealand, Wellington: Department of Internal Affairs. Enderwick, Peter and Denise Gray (1992), ‘Foreign languages in international business: the case of New Zealand’, Journal of Teaching in International Business, 4, 49–68. Firkin, Patrick (2003), ‘Entrepreneurial capital’, in Anne de Bruin and Anne Dupuis (eds), Entrepreneurship: New Perspectives in a Global Age, Aldershot: Ashgate Publishing Limited, pp. 57–75. Forsyte Research (1998), Experiences of Recent Business Migrants in New Zealand, report prepared for the New Zealand Immigration Service, Auckland: Forsyte Research. Frederick, Howard, David Beattie and Don McIlroy (1999), The Knowledge Economy, submission to the New Zealand Government by the Minister for Information Technology’s Information Technology Advisory Group, Wellington: Information Technology Advisory Group. Greene, Patricia G. (1997), ‘A resource-based approach to ethnic business sponsorship: a consideration of Ismaili Pakistani immigrants, Journal of Small Business Management, 35(4), 58–71. Hagen, Stephen (1989), Languages in British Business, London: CILT. Henderson, Anne M., Andrew D. Trlin and Noel Watts (2001), ‘Squandered skills? The employment problems of skilled Chinese immigrants in New Zealand’, in Roy Starrs (ed.), Asian Nationalism in an Age of Globalization, Richmond: Curzon Press, pp. 106–23. Ho, Elsie, Richard Bedford and Joanna Goodwin (1999), ‘Self-employment among Chinese Immigrants in New Zealand’, in Philip S. Morrison (ed.), Labour, Employment and Work in New Zealand: Proceedings of the Eighth Conference, 26th and 27th November 1998, Wellington: Institute of Geography, Victoria University of Wellington, pp. 276–86. Ip, David (1999), ‘Network as capital: PRC immigrant entrepreneurs in Brisbane’, in Yen-Fen Tseng, Chilla Bulbeck, Lan-Hung Chiang and Jung-Chung Hsu (eds), Asian Migration: Pacific Rim Dynamics, Interdisciplinary Group for Australian Studies, Monograph No. 1, Taipei: National Taiwan University, pp. 149–64. Ip, Manying, Sophie Kang and Stephen Page (2000), Migration and Travel between Asia and New Zealand, Albany: Asia-Pacific Migration Research Network. Kipp, Sandra, Michael Clyne and Anne Pauwels (1995), Immigration and Australia’s Language Resources, Canberra: Australian Government Publishing Service. Leonard, Karen B. and Chandra S. Tibrewal (1993), ‘Asian Indians in Southern California: occupations and ethnicity’, in Ivan Light and Parminder Bhachu (eds), Immigration and Entrepreneurship: Culture, Capital, and Ethnic Networks, New Brunswick and London: Transaction Publishers, pp. 141–62. Lever-Tracy, Constance, David Ip and Noel Tracy (1999), ‘Old ties abroad, new friends at home: networks of Australian Chinese entrepreneurs’, in Yen-Fen Tseng, Chilla Bulbeck, Lan-Hung Chiang and Jung-Chung Hsu (eds), Asian Migration: Pacific Rim Dynamics, Interdisciplinary Group for Australian Studies, Monograph No. 1, Taipei: National Taiwan University, pp. 97–116. Lidgard, Jacqueline and Hong-key Yoon (1999), ‘The employment experiences of recent Korean immigrants in New Zealand’, in Philip S. Morrison (ed.), Labour, Employment and Work in New Zealand: Proceedings of the Eighth Conference, 26th and 27th November 1998, Wellington: Institute of Geography, Victoria University of Wellington, pp. 263–75. Light, Ivan and Parminder Bhachu (1993), Immigration, Capital, and Ethnic Networks, New Brunswick: Transaction Publishers. Light, Ivan and Steven J. Gold (2000), Ethnic Economies, San Diego: Academic Press. North, Nicola and Andrew Trlin (2004), ‘Immigrants in business: a study of self-employed immigrants and their businesses in New Zealand’, New Settlers Programme Occasional Publication Number 10, Massey University, Palmerston North. Razin, Eran (1993), ‘Immigrant entrepreneurs in Israel, Canada, and California’, in Ivan Light and Parminder Bhachu (eds), Immigration and Entrepreneurship: Culture, Capital, and Ethnic Networks, New Brunswick and London: Transaction Publishers, pp. 97–124. Rogers, Everett M. (1995), Diffusion of Innovations, New York: The Free Press. Smith, Mark J. (2000), Culture: Reinventing the Social Sciences, Buckingham: Open University Press.

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Snowman, Daniel (2002), The Hitler Émigrés: The Cultural Impact on Britain of Refugees from Nazism, London: Chatto and Windus. Sowell, Thomas (1996), Migrations and Cultures: A World View, New York: Basic Books. Stanley, John, David Ingram and Gary Chittick (1990), The Relationship between International Trade and Linguistic Competence: Report to the Australian Advisory Council on Language and Multicultural Education, Canberra: Australian Government Publishing Service. Statistics New Zealand (2002), 2001 Census of Population and Dwellings. Asian People, Wellington: Statistics New Zealand. Teixeira, Carlos (1998), ‘Cultural resources and ethnic entrepreneurship: a case study of the Portuguese real estate industry in Toronto’, Canadian Geographer, 42(3), 267–81. Throsby, David (2001), Economics and Culture, Cambridge: Cambridge University Press. Tracy, Noel, David Ip and Constance Lever-Tracy (2001), ‘Winners and losers – the crisis strategies of diaspora Chinese capitalists’, in Leo Douw, Cen Huang and David Ip (eds), Rethinking Chinese Transnational Enterprises: Cultural Affinity and Business Strategies, Richmond, Surrey: Curzon, pp. 262–81. Trlin, Andrew (1993), ‘The social effects and institutional structure of immigration in New Zealand in the 1980s’, Asian and Pacific Migration Journal, 2, 1–25. Trlin, Andrew, Anne Henderson and Nicola North (2004), ‘Skilled Chinese and Indian immigrant workers’, in Paul Spoonley, Ann Dupuis and Anne de Bruin (eds), Work and Working in Twenty-first Century New Zealand, Palmerston North: Dunmore Press, pp. 205–19. Trueba, Henry T. (2002), ‘Multiple ethnic, racial, and cultural identities in action: from marginality to a new cultural capital in modern society’, Journal of Latinos and Education, 7(1), 7–28. UNESCO (2001), Universal Declaration on Cultural Diversity, Paris: UNESCO. Watts, Noel (1987), ‘Foreign languages in exporting: results of a survey of the use of foreign languages by New Zealand exporters in 1986’, Department of Modern Languages, Massey University, Palmerston North. Watts, Noel (1992), ‘The use of French in exporting and tourism: report on surveys conducted into the use of French in exporting and tourism in New Zealand in 1992’, Department of Modern Languages, Massey University, Palmerston North. Watts, Noel (1994), ‘The use of foreign languages in tourism: research needs’, Australian Review of Applied Linguistics, 17(1), 73–84. Watts, Noel (1998), ‘New Zealand’s multilingual skills base: is effective use being made of this resource?’, in Rolf Panny (ed.), People – People – People: Proceedings – Comments – Essays, Third National Conference 1997, New Zealand Federation of Ethnic Councils, Christchurch: New Zealand Federation of Ethnic Councils, pp. 81–4. Watts, Noel and Andrew Trlin (1999), ‘Utilisation of immigrant language resources in international business, trade and tourism in New Zealand’, New Settlers Programme Occasional Publication Number 1, Massey University, Palmerston North. Watts, Noel and Andrew Trlin (2000), ‘Diversity as a productive resource: employment of immigrants from nonEnglish-speaking backgrounds in New Zealand’, Social Policy Journal of New Zealand, 15, 87–101. Watts, Noel, Cynthia White and Andrew Trlin (2004), ‘The cultural capital contribution of immigrants in New Zealand’, New Settlers Programme Occasional Publication Number 7, Massey University, Palmerston North.

46 Enterprising Indian women in New Zealand1 Edwina Pio

Introduction There are an estimated four million residents in New Zealand, with people from over two hundred countries represented (Statistics New Zealand, 2003). Just under 20 per cent of New Zealand’s residents recorded an overseas birthplace, this being one of the highest proportions of overseas born in the population of any country in the OECD, behind Australia’s 24 per cent, but ahead of Canada’s 17 per cent and the USA’s 10 per cent (Bedford, 2003). Immigration is the foundation on which New Zealand is built (Department of Labour, 2004) and, in the last 20 years, many immigrants have come from non-traditional source countries such as China and India. The 2001 Census revealed an Asian population of approximately 6.6 per cent, projected to grow to 13 per cent by 2021. In this Asian group are Indians, who form approximately 1.7 per cent of the total population of New Zealand (Statistics New Zealand, 2003). In a multicultural society such as New Zealand, it is crucial to unravel the strands which make for economic success, in order to absorb and integrate migrants in the rubric of the host country and pave the way for choice, inclusion, fulfilment and wealth creation. It is noteworthy that The National Immigration Settlement Strategy has set forth goals for migrants among which are the obtaining of employment appropriate to their qualifications and skills and the ability to access appropriate information and responsive services that are available to the wider community (New Zealand Immigration Service, 2004). Within this context of immigration is the consideration that New Zealand is seen to be one of the most entrepreneurial countries in the world, with 13.9 per cent of the adult population of 2.4 million, counted as entrepreneurs (Frederick, 2004). Self employment and business ownership make a significant contribution to the economic activity of New Zealand, with self-employment constituting a significant proportion of the New Zealand labour market: 382 000 or 22 per cent of the total employment (Goodchild, Sanderson and Leung-Wai, 2003). While there is a growing body of scholarship on entrepreneurship in New Zealand (Frederick, 2004; Crothers, 2002; AREDS, 2002; Frederick and Carsewell, 2001), including research on Chinese immigrants (Lui, 2000; Ho, Bedford and Goodwin, 1999; Ho and Bedford, 1998), there seems to be a dearth of research on Indian entrepreneurs in New Zealand. This chapter specifically explores Indian women entrepreneurs in New Zealand, and emerges from a larger project investigating Indian women in work and enterprise (Pio, 2004a). The focus in this particular chapter is less on gender issues and more on ethnic entrepreneurship. In line with the OECD, entrepreneurship is defined as ‘the act of identifying and seizing new business opportunities’ (OECD, 2003, p. 34). Interestingly, the ‘contribution 744

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of minority entrepreneurs to national economies around the world is widely recognized as important, but poorly understood’ (Greene, Carter and Reynolds, 2003, p. 239). This research contributes to the burgeoning stream of ethnic minority entrepreneurship,2 by exploring the entrepreneurial journey of Indian women in New Zealand, utilizing the theoretical framework of mixed embeddedness. The rich layered data garnered through interviews illustrate the many frontiers that such women have to traverse in order to set up their enterprise and contribute to their families and the New Zealand economy. Theoretical perspectives Ethnic, immigrant or migrant entrepreneurship refers to business undertaken by individuals of different ethnic origin as compared to the majority host country. It has been defined as ‘a set of connections and regular patterns of interaction among people sharing common national background or migration experiences’ (Waldinger et al., 1990, p. 33). Immigrant entrepreneurship comes in all hues, shapes and sizes, flowing from changing demographics, and is located at the intersection of a number of rather different scientific disciplines, such as ethnic studies, sociology and urban studies, general and business economics, economic geography, management, political and policy studies (Rath and Kloosterman, 2000). Each of these vantage points presents diverse perspectives on immigrant entrepreneurship. There are also increasing numbers of women entering the work force and studies that look at female entrepreneurs (Loscoco and Robinson, 1991; Moore and Buttner, 1997), who primarily remain in traditional areas such as retail and personal services (Sullivan and McCracken, 1988; Devine, 1994). Yet the number of studies on women entrepreneurs lags greatly behind research that assesses their male counterparts, and minority women entrepreneurs also trail those studies on white women entrepreneurs (Smith-Hunter, 2003). The rise of immigrant or ethnic minority business ownership is an international trend (Ram and Smallbone, 2003), with literature synthesizing the structuralist and culturalist perspectives by focusing on local market opportunity structures and ethnic resources (Waldinger et al., 1990); and the interplay of the macro–micro structures in mixed embeddedness (Kloosterman, van der Leun and Rath, 1999; Kloosterman, 2002). Mixed embeddedness meshes opportunity structures and community networks with country-specific frameworks of policies, regulations and institutions to determine the nature of ethnic entrepreneurship (Kloosterman and Rath, 2003). In other words this theoretical perspective takes into account the actors themselves within the wider societal context of the host country which has institutional frameworks and hence different opportunity structures for its population, which includes immigrant entrepreneurs. Further, such frameworks also determine the regulation and inclusionary or exclusionary rules thus serving as enabling and/or constraining forces. Hence mixed embeddedness takes into account ‘the characteristics of the supply of immigrant entrepreneurs, the shape of the opportunity structure, and the institutions mediating between aspiring entrepreneurs and concrete openings to start a business in order to analyse immigrant entrepreneurship in different national contexts’ (Kloosterman and Rath, 2003, p. 9). Research in this vein is necessarily contextual in nature and thus predisposed to more qualitative approaches. The present chapter illustrates the experiences of a group of Indian women entrepreneurs in the host country, New Zealand.

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Studies show that, if immigrants face high barriers on the formal labour market, they may have a disproportionately high chance of becoming unemployed (Kloosterman, 2003; Kloosterman and Rath, 2003). Moreover, the structures of immigrant groups within the host society often place them at a relative disadvantage in the labour market (Light, 1972; Bonacich, 1973). Even when there is sufficient educational attainment beyond that of the host culture, the immigrants’ credentials are not recognized by the primary labour market, with discrimination and hostility that transcend the labour market (Aldrich et al., 1981). Such experience facilitates the discovery of entrepreneurial opportunity in co-ethnic niche markets (Iyer and Shapiro, 1999). Immigrant-owned firms also create employment for their owners and for co-ethnic employees without displacing workers of the host culture. Migrant networks can thus function as the entrepreneurial resources that expand the economic opportunities immigrants confront in destination economies (Light, Bhachu and Karageorgis, 2004; Menzies, Brenner and Filion, 2003). This chapter sheds light on both the actor and the opportunity structures, focusing on the psycho-social and economic frontiers within the dynamic interplay of the macro–micro processes that Indian women entrepreneurs face on their entrepreneurial journey. Methodology Emanating from the interpretive tradition with the researcher-as-interpretive-bricoleur, the findings presented and discussed in this chapter are drawn from the author’s interactions with Indian women entrepreneurs in New Zealand. Semi-structured face-toface in-depth interviews were conducted with seven Indian women entrepreneurs in New Zealand. All the women had been educated through the English medium of instruction and were university graduates; all were born outside of New Zealand, and were between 30 and 50 years of age. The snowballing technique was used to identify participants as well as the author’s contacts with the Indian community in New Zealand. This approach is in line with the theoretical sampling technique wherein participants to be interviewed are selected sequentially on the basis of earlier information. The first contact with these women was on the telephone, informing them about who had referred them, advising them of the nature of the research, seeking their consent for an interview, and fixing a mutually convenient time and place to interview them personally. The interview protocol was informed by a discussion guide that included questions on the thoughts and feelings of these women as they went about setting up their enterprise, the nature of the enterprise, the opportunities they saw, the influence of their pre- and post-migration experiences in setting up their enterprises in New Zealand, their successes, challenges and future plans. The duration of the interviews varied from 45 to 120 minutes in length. For all the women interviewed, this was their first enterprise in New Zealand, and it primarily served their own ethnic community. Many were solo enterprises though some had co-ethnic employees, the maximum number being seven. The fertile data were examined using both theme and content analysis. The transcripts were read several times to let the themes emerge. Next, primacy was given to mixed embeddednesss in the rereading of the transcripts, with coding and summaries in terms of the overall patterns.

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Patterns emerging from the interviews An analysis of the interviews revealed certain trends in the entrepreneurial process of the Indian women entrepreneurs, and generally supported the pre-eminence of ethnic networks and the perception of limited opportunity structures for employment in organizations in New Zealand. This general scenario involved the women perceiving greater chances of success through tapping into their own ethnic community, and setting up enterprises primarily serving their own ethnic community. The drivers for this movement into entrepreneurship primarily seemed to be the need to contribute to family resources, and through that to the New Zealand economy. Another crucial driver was self-efficacy or the mix of self-worth and self-confidence. The women interviewed seemed to feel that, in setting up their own enterprise, their self-efficacy increased, particularly for the majority who had unpleasant experiences in their contacts with the employment market. While this could mean moving from low pay to initially low profits, this was more than offset by the increase in self-efficacy in setting up and managing their own enterprise. The typical patterns consisted of the following (roman type will be used to represent the women’s words, in a composite way, in order to preserve the confidentiality of those interviewed): 1.

2.

Difficulty in finding suitable employment owing to being a visible minority, an Indian accent when speaking English, and lack of Kiwi experience. ‘They see the name when they receive the CV, hear the accent on the phone, and say we will get back to you, but they don’t. My name is not a typically known Indian one, so sometimes I get called for an interview, and I can literally see the shock on their faces, when they see that I am Indian. Of course, then they say I am over qualified! I have files of regret letters, and some employers do not even get back to let you know the status of your application. Yes, this has reduced my feelings of confidence. I have shed buckets of tears, mostly in private, because I do not want my family to see how disturbed I am. This has led me to question my own competence, even though I have many years of experience in complex challenging jobs. But I am determined to succeed. After all I have not come here as a refugee, but applied through the regular immigration channels. Of course, when one has just arrived, it is impossible to have the required Kiwi experience!’ Difficulty in sustaining employment owing to qualifications and experience not being recognized and the consequent low paying, low challenge jobs, as well as unwritten rules. ‘I was in charge of more than twenty people back home in India, and here I cannot even get in at the lowest rung as an office assistant. My qualifications were recognized by the NZQA before I came here – the immigration authorities said they wanted quality migrants, with the necessary skills and qualifications. However employers here in New Zealand apparently do not recognize our qualifications and discount our experience. I eventually managed to get into an assistant’s job in an organization. Over the months my work was found to be of a high standard, so my employers sent many of the staff to me to mentor, but my designation and salary remained the same, and I began to feel used. I was never promoted, though the others from the majority culture, many of whom I mentored, moved quickly up the ladder.’

748 3.

4.

5.

6.

7.

Handbook of research on ethnic minority entrepreneurship Utilization of initial Kiwi experiences to set up one’s own enterprise, rather than face the consequences of being continuously marginalized. ‘I was very conscious that I should join an organization where I would get some amount of local experience, which would help me in starting up my own enterprise. Hence I accepted the regular snide remarks about my ethnicity, held my peace, got my experience, and then left to start my own enterprise.’ Some women continued to hold jobs along with the running of their enterprise. ‘I stay on in the job, irrespective of the comments of colleagues and the low salary, because I need the money and it’s a regular source of income, but as my enterprise grows, I hope to be able to give up my job and be involved in the business full-time.’ Employment primarily of co-ethnics, owing to ease of communication, understanding the products and services, and common value systems. Many of the enterprises were self-run or the women were self-employed, with no other employees. Where the enterprises had employees, they were of the same ethnicity. ‘We understand each other, and training is easy as they understand the products and services as well as the customers. For many of the people I employ, it is their first job. Some of them land in New Zealand, and when they hear about my business, they come and ask me if I have work for them. I am happy to be of service, and in a position to facilitate their work experience in New Zealand. Besides we have similar values like respect for elders, observance of religious festivals, and the importance of drawing boundaries particularly as a child is growing up. However for sub-contracting a job, I will use the person/service with the most competitive price and the quality I require, irrespective of their ethnicity.’ Servicing of one’s own ethnic community through various products and personalized services. The enterprises consisted of food and catering (curries, biryani, vindaloo, sorpotael, potato chops3); beauty (facials, henna application, mehendi4); art (rangoli, diyas5); hair (styles that were used back home or a synthesis between this country and home, care of the hair); crèche (looking after children the way Indian parents would, as well as understanding the Indian parenting skills); retail store (ethnic foods, snacks, recipe books). The perception of minimally permeable frontiers in the country of resettlement, and the manoeuvring of knowledge and skills from the country of origin to set up, grow and sustain their enterprises. ‘It is difficult to get employment in my line. It is far easier to set up an enterprise serving my own community, but one must have a passion for what one does.’ Some of the women had prior experience of running similar enterprises in their country of origin, and this ‘definitely facilitated the business here. I knew the substance of the business, so essentially I just had to learn the ropes or the rules and regulations here. It is possible to do very well in New Zealand, to find a niche and then climb the ladder of success. You have to be determined, count failures and put-downs as stepping stones to success, and keep your goal in sight.’ Minimal training or access to information on entrepreneurship in the host country. ‘I do not know of any entrepreneurship courses, barring the papers offered at universities. I have done no entrepreneurial training here.’ Some of the women had done short courses in New Zealand in the specific area of their business, so that they would fall in line with the New Zealand requirements such as courses in child care, beauty; but

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none had followed any specific course on entrepreneurship or running a small business. Some of the women said they would be delighted to attend such a course, though many felt that they now knew the market, had been through their struggles, and hence had sufficient knowledge and expertise to sustain and grow their business. ‘However we never know what the future may hold in store for us, so maybe sometime on the distant horizon, such a course may be useful.’ The dream and reality of turning their tenuous business steps into thriving enterprises. All the women wanted to grow their business and some felt that this growth would come about with an expansion of their customer base, to include not only customers from the Indian ethnic group, but also from the majority host community. ‘There is a growing interest in things Indian; after all we were the jewel in the crown of the British Empire. Besides there is a trend in the United Kingdom to partake of the food, art and clothing of India, so I suppose this trend is being emulated here – and yes, it is a definite boost to our business.’

Discussion and implications From the above interviews it can be seen that Indian women initially seem to face many barriers that prevent their contribution to the economy in New Zealand, such as being a visible minority, qualifications and experience not being recognized, an accent when speaking English, unwritten rules and lack of Kiwi experience. These challenges seem to be the rule rather than the exception for the majority of Indian women aged 35 years plus, irrespective of the fact that they have been educated in the English medium of instruction, and are graduates (Pio, 2004a; Pio, 2004b). Such experiences seem to push the women into entrepreneurship in their effort to contribute to family resources. Hence, being placed at a relative disadvantage in the labour market within the host society drives them to self-employment, and finally to a more established business (Greene, Carter and Reynolds, 2003; Bonacich, 1973; Light, 1972). In the findings on Asian immigrants in the USA, it has been noted that Asian immigrants have faced racial hostility that seems to go beyond the labour market (Aldrich et al., 1981). Some of the women interviewed had similar experiences. Unfortunately, such encounters of being bruised and challenged seem to be typical of the pathway to ethnic entrepreneurship. The interviews indicate painful experiences with the issue, concern and challenge being to find a quicker route to permeable frontiers, possibly through socio-economic and politico-institutional frameworks. Such frameworks would make the goals for migrant settlement enunciated by the New Zealand Immigration Service (2004) for obtaining employment and responsive services a reality. Further research, in the area of increasing the permeability of employment frontiers through mechanisms initiated and institutionalized by the Government and New Zealand employers, is a crying need in a multicultural society. Despite the minimally permeable frontiers in the country of resettlement, these women seem able to manoeuvre their knowledge and skills from the country of their origin, by recognizing and seizing opportunities within New Zealand, to set up viable enterprises primarily serving their own ethnic community; for example ethnic foods, crèche facilities, hair dressing cum beauty services. The entrepreneur is seen as a part of the community providing supportive kinship, and these networks provide both regular customers and

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employees (Aldrich and Waldinger, 1990). Across studies, regardless of ethnic group, country or industry type, the use of co-ethnic employees is very common, providing the obvious advantages of language, culture and relationships with customers (Menzies, Brenner and Filion, 2003). Further such ties are strengthened by the shared experiences, including problems like discrimination and alienation (Saxenian, 1999; Greene, 1997). As the tastes and preferences of the majority culture for ethnic products develop, ethnic entrepreneurs find opportunities outside of their regular ethnic customers (Masurel, Nijkamp and Vindigni, 2004). With the passage of time, some of these women have turned their tenuous business steps into thriving enterprises, for ethnic entrepreneurs each bring different gifts to the host country. In fact, ethnic entrepreneurs make a contribution at the micro level by fulfilling the needs of ethnic customers, as well as at the macro level, through the creation of a ‘self supporting and self regenerating system . . . often completely devoid of any government support’ (Iyer and Shapiro, 1999, pp. 92–3), ‘creating employment for their owners and for co-ethnic employees without displacing indigenous workers’ (Light, Bhachu and Karageorgis, 2004, p. 31; Kloosterman and Rath, 2003). Immigrant entrepreneurship highlights the possibility of ‘the institutional environment and wider policy contexts as key elements in an analysis of immigrant or ethnic business development, incorporated within a mixed embeddedness perspective’ (Ram and Smallbone, 2003). Conceivably, such a stance also means policies need to be aimed at larger institutional structures, to increase opportunities instead of focusing solely on the self-employed migrants themselves (Kloosterman, 2003). The implications of creating such structures and opportunities and their utilization by migrants is an area for future exploration. Interestingly, the New Zealand Government ‘appears to have no explicit economic policy directly promoting entrepreneurship’ (Frederick, 2004). However, it is laudable that the funding approved by the Government from the 2004 Budget consists of $8.977 million for 2004/5, as part of the New Zealand Immigration Settlement Strategy, which includes the development of a network of migrant services, and careers advice and support for unemployed former migrants (New Zealand Immigration Service, 2004). Thus perhaps one can look forward to policies and goals reaching the individuals for whom they were intended, with a shorter time frame, particularly so that permeability in the labour market can be increased as well as the provision of appropriate resources for ethnic women entrepreneurs. Perhaps emphasis needs to be given to providing timely training and skills development with appropriate employment as the key rather than a benefit system, to convert rhetoric to reality. Such key moves may also make the privilege of being an immigrant in New Zealand a less daunting challenge, and in the process address the quintessential questions of acceptance. This research is an initial exploratory step into the domain of ethnic entrepreneurship among Indian women migrants in New Zealand, with an awareness of the need to expand the sample size for future studies as well as the possibility of longitudinal studies in this area focusing on the growth of ethnic enterprises, and the implications of specific entrepreneurship programmes for ethnic women entrepreneurs. Future research could explore other minority ethnic groups in New Zealand, Indian male entrepreneurs and a comparison of migrant entrepreneurs from the Indian diaspora in other countries around the world. It is no secret that many of the highly successful Silicon Valley entrepreneurs are

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Indian migrants (Naroola, 2001). In this context, questions can be raised: Why do frontiers exist? What keeps them in place? What can be done to increase the permeability of such frontiers? Conclusion This chapter has sought to illustrate the psycho-social and economic frontiers that Indian women entrepreneurs traverse in New Zealand and contributes to the literature and theory of ethnic entrepreneurs, with implications for policy development and practice. The study is in line with the concept of mixed embeddedness, with an acknowledgement and appreciation of the complexity of the phenomenon and the need for a deeper understanding of the many dynamic layers of the psycho-social, politico-institutional aspects within which Indian women entrepreneurs are embedded. The struggles and determination to achieve economic independence and self-efficacy in the country of resettlement serve as a testimony to the possibility of permeable frontiers to facilitate ethnic enterprise. Maybe it is not asking too much to expect high permeability with speed that matches the intake of migrants into the beautiful, safe, tiny island nation of New Zealand. Such measures could forge a shared body of people, rewriting the script and crafting a different story for ethnic women entrepreneurs and, in the process, for all the people of New Zealand. Acknowledgements Heartfelt thanks to Léo-Paul Dana, James Woods, Lady T, Robyn Ramage and my son Isaac for their constant faith in my work. Notes 1. This chapter is based on Pio, E. (2007), ‘Indian women entrepreneurs in New Zealand’, International Journal of Business and Globalisation, 1(3), 345–56. 2. The terms ‘self-employed’ and ‘entrepreneurship’ are used interchangeably, in line with the common usage on immigrant business in the literature. 3. Ethnic foods, which also have the influence of the Portuguese, Dutch, French and the British, who colonized India at various moments in history. 4. Typical Indian beauty requirements, with paste made from leaves and applied on the hair, and also intricate designs on the hands. 5. Art forms and objects to welcome the divine, and pay homage to the divinities.

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Devine, T. (1994), ‘Changes in wage and salary returns to skill and the recent rise in female self-employment’, Economic issues for work and family, 84(2), 108–13. Frederick, H. (2004), ‘The Unitec Global Entrepreneurship Monitor 2003/04: toward high growth enterprise in New Zealand’, Unitec New Zealand’s Centre for Innovation & Entrepreneurship Research Report Series, vol. 3, no. 1, Unitec New Zealand, Auckland. Frederick, H.H. and P.J. Carsewell (2001), Global entrepreneurship monitor: New Zealand 2001, Auckland: UNITEC New Zealand Centre for Innovation & Entrepreneurship. Goodchild, M., K. Sanderson and J. Leung-Wai (2003), Self-employment and Small Busainess Succession in New Zealand, Wellington: Business and Economic Research Ltd. Greene, P.G. (1997), ‘A resource-based approach to ethnic business sponsorship: a consideration of Ismaili–Pakistani immigrants’, Journal of Small Business Management, 34(4), 58–71. Greene, P.G., N.M. Carter and P. Reynolds (2003), ‘Minority entrepreneurship: trends and explanations’, in C. Steyaert and D. Hjorth (eds), New Movements in Entrepreneurship, Cheltenham, UK and Northampton, MA, USA: Edward Elgar. Ho, E. and R. Bedford (1998), ‘The Asian crisis and migrant entrepreneurs in New Zealand: some reactions and reflection’, New Zealand Population Review, 24, 71–101. Ho, E., R. Bedford and J. Goodwin (1999), ‘Self-employment among Chinese immigrants in New Zealand’, in P.S. Morrison (ed.), Labour, Employment and Work in New Zealand, Wellington: Victoria University of Wellington, pp. 276–86. Iyer, G.R. and J.M. Shapiro (1999), ‘Ethnic entrepreneurial and marketing systems: implications for the global economy’, Journal of International Marketing, 7(4), 83–110. Kloosterman, R.C. (2002), ‘Mixed embeddedness and postindustrial opportunity structures; trajectories of migrant entrepreneurship in Amsterdam’, in W. Salet (ed.), Human Capital, Amsterdam: AME. Kloosterman, R.C. (2003), ‘Creating opportunities. Policies aimed at increasing openings for immigrant entrepreneurs in the Netherlands’, Entrepreneurship & Regional Development, 15, 167–81. Kloosterman, R. and J. Rath (eds) (2003), ‘Introduction’, Immigrant Entrepreneurs: Venturing Abroad in the Age of Gobalization, Oxford: Berg, pp. 1–16. Kloosterman, R.C., J.P. van der Leun and J. Rath (1999), ‘Mixed embeddedness, migrant entrepreneurship and informal economic activities’, International Journal of Urban and Regional Research, 23, 253–67. Light, I. (1972), Ethnic Enterprise in America, Berkley and Los Angeles, CA: University of California Press. Light, I., P. Bhachu and S. Karageorgis (2004), ‘Migrant networks and immigrant entrepreneurship’, in I. Light and P. Bhachu (eds), Immigration and Entrepreneurship: Culture, Capital and Ethnic Networks, London: Transaction Publishers. Loscoco, K.J. and J. Robinson (1991), ‘Barriers to women’s small business success in the United States’, Gender & Society, 5(4), 511–32. Lui, W. (2000), ‘An exploratory case study of Chinese immigrant entrepreneurship in New Zealand’, MBS/Massey University, Palmerston North. Masurel, E., P. Nijkamp and G. Vindigni (2004), ‘Breeding places for ethnic entrepreneurs: a comparative marketing approach’, Entrepreneurship & Regional Development, 16 January, 77–86. Menzies, T.V., G.A. Brenner and L.J. Filion (2003), ‘Social capital, networks and ethnic minority entrepreneurs: transnational entrepreneurship and bootstrap capitalism’, in H. Etemad and R. Wright (eds), Globalization and Entrepreneurship: Policy and Strategy perspective, Cheltenham, UK and Northampton, MA, USA: Edward Elgar Publishing. Moore, D. and H. Buttner (1997), Women Entrepreneurs: Moving Beyond the Glass Ceiling, Thousand Oaks, California: Sage Publications. Naroola, G. (2001), The Entrepreneurial Connection, New Delhi: Tata McGraw-Hill. New Zealand Immigration Service (2004), ‘New Zealand immigration settlement strategy’, downloaded 16 November 2004, from http://www.immigration.govt.nz/community/stream/support/NZimmigrationsettlement. OECD (2003), Entrepreneurship and Local Economic Development, Paris: OECD. Pio, E. (2004a), ‘Harder for us, easier for them: work experiences of first generation immigrant women and their daughters’, International Journal of Diversity in Organizations, Communities and Nations. Pio, E. (2004b), ‘Indian women immigrants in New Zealand’, http://www.eeotrust.org.nz/docs/EEOIndianWomen.doc. Ram, M. and D. Smallbone (2003), ‘Editorial: ethnic minority enterprise: policy and practice’, Entrepreneurship & Regional Development, 15, 99–102. Rath, J. and R. Kloosterman (2000), ‘Outsider’s business: a critical review of research on immigrant entrepreneurship’, International Migration Review, 34(30), 657–81. Saxenian, A. (1999), Silicon Valley’s New Immigrant Entrepreneurs, San Francisco: Public Policy Institute of California. Smith-Hunter, A. (2003), Diversity Entrepreneurship, New York: University Press of America Inc. Statistics New Zealand (2003), ‘Census reports accessible from its website’, http://www.stats.govt.nz.

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Sullivan, T. and S. McCracken (1988), ‘Black entrepreneurs: patterns and rates of return to self-employment’, National Journal of Sociology, 167–85. Waldinger, R., H. Aldrich, R. Ward and associates (eds) (1990), Ethnic Entrepreneurs, London: Sage.

47 Lebanese entrepreneurs in New Zealand Michèle E.M. Akoorie

I do not hesitate to say, that in my opinion the so-called Assyrian hawker is almost as undesirable a person as John Chinaman himself . . . They do not add to the wealth of the country. They do not even produce wealth from the earth as the Chinese do. They simply carry on a retail hawking trade. They do not contribute to the revenue in the way that our traders contribute. They do not lead sanitary lives. They are not a moral people. They are not a civilised people, and in no sense are they a desirable people. (W.P. Reeves, Minister of Labour, 22 August 1895)

Introduction It is difficult to appreciate in multicultural New Zealand in the twenty-first century the opprobrium which existed in nineteenth-century New Zealand against non-European settlers, classified as ‘foreign aliens’. This group included Chinese and Assyrians (or Syrians) and, in an apparent case of mistaken identity, Sikhs from the Punjab,1 who were also described as ‘Assyrians’. New Zealand was one of the last territories to be colonized by the British. Between 1831 and 1876, four million emigrants were recorded as leaving the British Isles, of whom 804 366 came to Australia and New Zealand. Although migrants to New Zealand from Australia far outnumbered those arriving direct from the United Kingdom, there was an increase in mass, direct migration from the 1870s. Of those who entered New Zealand as immigrants in the century to 1960, more than half had done so before 1890 (Simpson, 1997). Probably in excess of 90 per cent of nineteenth-century immigrants to New Zealand came from the British Isles and Ireland. Small groups of non-British migrants also arrived during this period, such as the Chinese, Germans, Danes, Swedes, Norwegians, and Italians and Lebanese. Over the period 1871–1891–2, these groupings were relatively small, in the case of the Lebanese not exceeding 150 persons (Department of Internal Affairs, 1948). New Zealand was initially a Crown Colony, but the British government, without even much reluctance, conceded representative and responsible government almost simultaneously in the 1850s. Although defence and native affairs were partly the responsibility of the Governor-General (the Queen’s representative) until the 1860s, and full control over external affairs was delayed much longer, for most purposes New Zealanders controlled their own destiny as a parliamentary democracy from the 1870s (Hawke, 1985). Representation in the Legislative Council, the House of Representatives and the provincial governments (until 1876) was drawn from the predominantly British migrants, therefore it is not surprising that legislation controlling immigration on ethnic criteria should reflect British interests in attracting migrants who would assimilate seamlessly into the New Zealand environment. The purpose of this chapter is to examine the experiences of a single group of nonEuropean migrants to New Zealand – the Lebanese (often mistakenly referred to as Assyrians or Syrians and for legislative purposes classified as Asiatics until 1920). The Lebanese migration to New Zealand consisted of a small number of families and mainly arrived during the period 1860–90, with the large influx of late 1899 being the biggest for 754

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any single year. Migration virtually ceased during World War I (1914–18) as Mount Lebanon was part of the Ottoman Empire (Turkey) and Syrians and Turks were classified as enemy aliens. A further small group of Lebanese arrived during the 1920s and 1930s as part of the chain migration process. The contribution of the Lebanese as entrepreneurs in business in New Zealand has never been systematically explored. Evidence of the Lebanese contribution in the community and to business can only be inferred from the various studies of individual families. It is the purpose of this chapter to make some modest attempt to address this fascinating area in a more comprehensive fashion. The remainder of the chapter is organized in the following way. The first section examines immigration to New Zealand in the nineteenth and early twentieth centuries, using the frameworks of immigrant entrepreneurship and the sociology of immigration. The second section examines the background to Lebanese migration to New Zealand, in particular the notion of ‘chain migration’ which is characteristic of much of New Zealand’s non-European migration. The third section presents the results of case analyses of specific Lebanese families. Their propensity to start entrepreneurial firms in New Zealand was based on their aspirations for themselves and their extended families, and their ability to use their trading expertise to make the transition from ‘hawkers’ to merchants, and ultimately run their own businesses. The contribution of such a small group of people, given their social and religious diversity from the dominant British migrant group, deserves to be recognized. A final section concludes the chapter. Immigration to New Zealand: a framework for analysis In developing a framework for the analysis of immigrant entrepreneurs to New Zealand, there are certain obstacles to be overcome. The first and most obvious obstacle is the intellectual divisions between various disciplines such as economics, social science, history and political science and management which attempt to describe the same phenomena. As Casson (1995: 3) puts it, the different disciplines seem to produce conflicting analyses of similar aspects of a problem rather than complementary analyses of different aspects, as they should. It is nowhere more obvious than in this study. Economic analyses of the motivations for immigration seem to conflict with the sociologists’ perspective of immigration. Management theorists in entrepreneurship allude to entrepreneurship as the activities of firms as an actor, rather than individuals as actors. Casson (1995) attempts to bridge this divide between economics and sociology by considering the crucial links between entrepreneurship and business culture. It may therefore be helpful to consider these three contributions in turn: the economic perspective, the sociology of immigration perspective and the entrepreneurship perspective. Mainstream economic thinking offers a straightforward analysis of the origins of migration as a result of international differences between demand and supply of labour. Countries with large labour supplies and small amounts of capital produce low equilibrium wages. The opposite is the case for countries where labour is scarce and capital abundant. Migration of the factors occurs until wages decline in sufficiently capital-rich countries and rise sufficiently in labour-rich nations to provide a new international equilibrium (Simon, 1989). At the macro level, migration stems from a cost–benefit calculation of the differential productivity and returns to human capital in different settings (Portes, 1995).

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Early classical scholars such as Say (1803) and Ricardo (1817) opposed the idea of emigration, asserting that it is detrimental to the home economy, a postulate challenged by colonizers such as Wakefield, who was the proponent of planned colonization in New Zealand, suggesting that colonization would have at least three advantages for the home economy: increased markets for its (home-produced) products, relief from overpopulation and the promotion of foreign investment (Thomas, 1973). J.S. Mill (1900) supported the notion of planned colonization, where the proceeds of land sales could be put towards emigration. The economic benefits from immigration to a ‘new’ colony were, first, that they were an aid to the work of settlement and brought with them new capital. Second, planned settlements could be a reciprocal economic arrangement. New settlements required the construction of roads, drainage, bridges and telegraph lines. Immigration labour could be employed to construct such infrastructure and then benefit from its use. Third, immigrants would contribute to the economic system by virtue of being consumers. Depending on the size of the influx, this increase in demand would be met by rapid expansion of industries in the colony, or the addition of new firms. Local industries and commercial undertakings rose to the expansion in market demand by providing supplements and substitutes for imported commodities (Stone, 1973). Hunter et al. (2003) note that a further economic benefit of immigration was ‘characteristic of particular migrant groups’. They cite Brooking’s (1985: 173) study of the Scots in New Zealand as an example of entrepreneurial contribution: Scots and English entrepreneurs by ‘taking risks, seizing initiatives and employing labour, assisted the state to transform a virtually undeveloped colony into a prosperous capitalist nation’. Brooking (1985) suggests that the Jews were the only group of European migrants who were more successful as entrepreneurs. Neither Hunter et al. (2003) nor Brooking (1985) offer any explanation as to why some migrant groups were more ‘entrepreneurial’ than others. This suggests a weakness in the purely economic arguments as an explanation of immigrant entrepreneurship. So why is it that some migrants were more entrepreneurial than others? The sociologists of immigration challenge the economic explanations for immigration by suggesting the labour migration occurs in countries at an intermediate stage of development and the poorest are not the first to migrate. Generally, it is people with some resources, small rural proprietors, urban artisans and skilled workers who commonly initiate and sustain the movement. The contribution from the sociology of immigration is that it provides some understanding of the ‘group’ effect of ethnic immigration, where members of groups and participants in broader social structures bring with them these social networks, which they use to recreate spatially clustered social networks in the country of destination (Portes, 1995). Studies on the nature of entrepreneurship offer some insights into the characteristics of entrepreneurs. Casson (1982) cites the earliest definition of an entrepreneur as that of Cantillon (1755), who defines an entrepreneur as someone who specializes in taking judgmental decisions about the coordination of scarce resources. Judgemental decisions are decisions for which no a priori procedures exist; they are decisions made in complex and novel conditions, in situations where the potentially adversarial reactions of other people must be taken into account (Casson, 1990). The emphasis on scarce resources suggests that decisions are made with economic considerations in mind, but the emphasis on coordination rather than allocation of resources emphasizes the dynamic aspect of entrepre-

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neurial activity: coordination changes the allocation in order to improve the situation (Casson, 1995). Knight’s (1921) definition of entrepreneurship emphasizes the entrepreneur’s ownership of the resources of production and responsibility for decision making. The entrepreneur is the owner of all real wealth, and ownership involves risk; the coordinator makes decisions, but it is the entrepreneur that accepts the consequences of decisions (Knight, 1921: 45). Schumpeter (1976: 132) emphasizes the aspect of entrepreneurial behaviour in the firm, defining [the] . . . function of entrepreneurs as those who reform or revolutionise the pattern of production by exploiting an invention or . . . an untried technological possibility for producing a new commodity or producing [a] new commodity or producing an old one in a new way, by opening up a new source of supply of materials or a new outlet for products, by reorganising an industry and so on.

However, the act of entrepreneurial behaviour does not help identify why some groups of migrants may be more entrepreneurial in their behaviour than others. Casson’s (1995) writing on the role of entrepreneurship and business culture offers some useful insights here. Culture, defined as a shared set of values, norms and beliefs, implanted during childhood and reinforced through religious training and secular education, means that groups within a particular community acquire broadly similar values and beliefs. Religion, in particular is a key influence on culture. Religions that emphasize the value of hard work, personal achievement, social competitiveness and upward mobility are more likely to encourage entrepreneurship than ‘working class’ values of conformity and solidarity with fellow-employees. The single most important set of beliefs, he suggests, relate to the question of who can be trusted within society (Casson, 1995). Societies with high levels of trust between them can sustain complex interdependencies between firms sustained by arm’slength contracts and reliance on the loyalty and integrity of employees. Casson’s (1995) study setting of entrepreneurship, regional development and minority language, is the region of Wales (the United Kingdom). However, his insights on domestic migration within Wales can also be usefully applied to the concept of the minority ethnic immigrant entrepreneur to New Zealand. Casson makes a distinction between ‘high-level’ entrepreneurship (such as major technical innovations) and ‘low-level’ entrepreneurship such as market trading or local shop keeping. Those who have the requisite qualities for ‘high-level’ entrepreneurship will make a decision as to where they will use these qualities – inside or outside the region/country where they were brought up. Casson (1995) suggests that recent immigrants are more likely to achieve advancement in the private sector than in the public sector, because advancement in the public sector often requires local contacts and empathy with local attitudes. Emigration also selects between entrepreneurs and non-entrepreneurs, as entrepreneurs are more likely to emigrate from a declining region/country than non-entrepreneurs, since entrepreneurs are more aware of outside opportunities and confident of their own ability to exploit them. Emigrants, by establishing themselves elsewhere, provide a base for subsequent entrepreneurs, developing a social network of ‘chain’ migrations that can lead to an agglomeration of regional exiles elsewhere. Moreover, for ‘foreign’ immigrants, lack of familiarity with the local language may be a barrier to assimilation, but at the same time can function as an exclusion mechanism. Assimilation requirements discourage second generation

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migrants from speaking their own language; conversely, retaining fluency in the minority language can also function as a means of communicating within a group, when in the presence of others. Immigrant ‘minority’ group entrepreneurs have the advantages of cooperation and association through the establishment of social networks. This culture of association is markedly different from the aggressive enterprise culture of competition and individualism, which characterizes the culture of capitalism in the Western concept of it. Casson (1982) suggests that there is a close link between the entrepreneur and the economic success of the firm as measured by its growth and profitability, a personalized view of the firm which has been pursued extensively in the sociological literature. Personal qualities in a society are influenced by the latent abilities of ethnic groups in the population, their level of education and the prevailing culture and morality. Casson suggests that successful entrepreneurs are frequently drawn from minority groups in society – groups that find alternative avenues of social advancement closed to them. This would certainly be the case for the Lebanese entrepreneurs, since, as was explained earlier in this chapter, they were subject to racial discrimination, and for that reason it would also appear that they kept a ‘low profile’ in the community, to the point of being described by McGill (1982) as ‘the quiet ones’. The other point about the Lebanese entrepreneur is the value that they place on social institutions (clan families) to provide capital, to protect information on which he (the entrepreneur) believes that his superior judgement is based. If the entrepreneur fails to maintain secrecy about his business plans, the terms on which he can negotiate contractual arrangements may be less favourable. Hence the predilection of minority groups to hire members of immediate and extended family into the business. It is also a means of avoiding or bypassing restrictive labour regulations and for ensuring that the inheritors of the business (family members) work for their share of the business that they will eventually inherit. Thus we find evidence of patriarchal structures in Lebanese family businesses. The characteristics of ethnic of foreign entrepreneurs form the basis for a framework identifying the characteristics of immigrant entrepreneurs, with particular emphasis on the Lebanese entrepreneur in New Zealand. The characteristics of these Lebanese entrepreneurs are compared with those of British-born entrepreneurs, which formed the majority of immigrants in New Zealand colonial society. Hunter, Lineham and Wilson (2003) studied the 113 immigrant entrepreneurs who were active in the latter half of the nineteenth century in New Zealand, using a sampling frame of biographical dictionaries, Who’s Who, newspaper reports, company histories and biographies. Using Knight’s (1921) and Schumpeter’s (1976) definitions of entrepreneurs, their study identifies only six out of 113 entrepreneurs in their sampling frame who were non-European. Of these, two were Lebanese, Shifefie Coory (b. 1865) whose primary venture was a retail store and ‘Fancy Goods Shop’ and Assid Corban (b. 1864) whose primary venture was as a winemaker. Their study concerns mainly entrepreneurs from Australia, England, Wales, Scotland and Ireland. Although this study provides a number of insights into the predominantly Europeanborn entrepreneurs it does not discuss the ethnic entrepreneur as a separate category but applies the findings from the predominantly British study to the activities of businesspeople from foreign countries. Their conclusions, however, do have some relevance for this present study, since they suggest that these entrepreneurs did not arrive as ready-money

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capitalists or unskilled labourers; they arrived as printers, boot makers, chemists, merchants, butchers, brewers, engineers and the like (Hunter et al., 2003: 23). Their greatest asset was not their financial wealth but their human and social capital; should they wish to start a business they were well-equipped to do so. New Zealand as an immigrant destination New Zealand, as a colonial destination, laboured under a disadvantage. It was remote and insignificant when compared with Canada or the United States of America, which had been the main centres of emigration from the United Kingdom throughout the first half of the nineteenth century. These destinations had taken up the bulk of the ‘pauper migrants’ who were a consequence of the distressing social conditions in the middle of the nineteenth century in England, Scotland and Ireland, and for whom the only means of alleviating their distressed conditions was to seek new homes overseas. There were three main types of immigration to New Zealand in the late nineteenth century. Table 47.1 shows the total number of migrants classified by country of origin, the United Kingdom, assisted and unassisted, the Australian colonies and other places. First, there were the assisted migration schemes, carried out by private companies, such as the New Zealand Company from 1840 to 1850. Overall, they sent out to New Zealand about 12 000 settlers, but this only accounted for about half of the European population by the end of the decade. The remainder had settled in non-company centres, principally Auckland (Simpson, 1997). The second assisted migration scheme was carried out by Table 47.1

Arrivals into New Zealand, 1874–93

Year

Govt assisted

Unassisted

Australian colonies

Other places

Total

1874 1875 1876 1877 1878 1879 1880 1881 1882 1883 1884 1885 1886 1887 1888 1889 1890 1891 1892 1893

31 774 18 324 8 242 5 298 6 580 10 311 2 689 103 726 5 902 3 888 1 072 917 1 286 485 91 144 44 — —

4 626 3 444 2 890 2 337 2 629 6 424 5 825 3 404 2 479 4 496 5 972 6 169 5 976 3 620 3 635 3 184 2 668 2 391 2 555 2 929

5 504 6 328 4 956 4 500 6 348 6 413 5 899 5 579 6 975 8 056 9 064 7 899 8 133 8 035 8 784 11 212 11 539 11 144 14 647 22 351

2 061 3 641 2 326 852 706 809 741 602 765 761 1 097 1 059 1 075 748 684 905 677 852 893 855

43 965 31 737 18 414 12 987 16 263 23 957 15 154 9 688 10 945 19 215 20 021 16 199 16 101 13 689 13 606 15 392 15 028 14 431 18 122 26 135

Source:

New Zealand Official Yearbook (1894).

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provincial governments, which had been established in 1850, and lasted for 20 years, reflecting the problems of communication and the local focus of much of the economic activity. The last assisted migration scheme was promoted by central government. Premier Julius Vogel’s grand scheme, of building an infrastructure for the colony, principally railways, was financed by heavy borrowing on the London market. Money was also required to finance his immigration schemes. More than 200 000 people entered New Zealand as immigrants between 1870 and 1880. The Immigration and Public Works Amendment Act of 1871 was the means by which the central government took over the control of immigration to hasten the development of public works and develop secondary industry. The second minor groups of assisted immigrants were the non-British migrants. The colony was prepared to look further than traditional sources such as Britain, extending their promotional activities to Denmark, Sweden and Germany. Scandinavians were considered particularly suitable since they could become a self-supporting population upon the land which public works (that is, railways) rendered accessible and productive. Of the 100 000 settlers introduced between 1870 and 1890 there were some 3000 Germans and 3500 Scandinavians, with a small inflow of settlers from Italy and France (Borrie, 1991). In the year 1898, of the 1631 persons from foreign countries classified as European, 859 were born in Austria, 187 in Germany, 177 in the United States, 147 in France, 99 in Italy, 34 in Sweden, seven in Norway and 121 in other countries (New Zealand Official Yearbook, 1899). These migrants provided a type of settler that was as near the ideal as could be found among British and European migrants. They were enduring of hardships, frugal and independent, developing small farms which subsequently became important factors in the development of New Zealand’s agricultural and dairying industries. Although accounting for no more than 1.25 per cent of the whole population of New Zealand, they, like the Dutch migrants post-World War II, were assimilated into the community and were ready to adopt the outlook and culture of their adopted country. The final group of immigrants were those who were not assisted migrants. This group represented by far the largest proportion of migrants. The rationale for immigration in this case was a combination of ‘push’ and ‘pull’ factors. The ‘push’ factors were the desire to escape from unattractive economic conditions in the country of origin, and/or political and religious persecution. The ‘pull’ factors were not due to distress but to the hope of advancement in life. The initial pull factors for immigration were the alluvial gold deposits of Otago, the gum fields north of Auckland, and expanding wool production and investment in railway building in the 1870s. Immigration was the dominant source of population increase for the colony of New Zealand from the 1850s until the end of the 1870s. Net migration, that is the excess of immigrants over emigrants, was most substantial in the two decades of the 1860s and 1870s. In the ten years from 1860 to 1869, net migration was 116 192; in the ten years from 1870 to 1879, this had increased by 14 per cent, to 133 079 (Hunter et al., 2003). Restrictive legislation towards immigration It is useful to bear in mind that, until 1899, immigration to New Zealand was completely unrestricted. Settlers of any type, class and origin were free to come to the colony and contribute to its economic development. Foreign aliens were not separately classified by

Lebanese entrepreneurs in New Zealand Table 47.2

Birthplace of immigrants classified as race aliens in New Zealand, 1897–1918

Year

China

Syria

1897 1898 1899 1900 1901 1902 1903 1904 1905 1906 1907 1908 1909 1910 1911 1912 1913 1914 1915 1916 1917 1918

13 28 26 27 75 69 132 235 239 247 255 538 171 209 546 348 325 511 265 327 272 256

9 13 65 4 27 4 12 3 6 30 3 32 23 12 9 20 19 9 3 1 2 1

Total

5 352

307

Source:

761

India & Ceylon

Japan

Fiji

Pacific Islands

Other

20 4 16 15 3 3 1 4 34 45 20 24 157 80 190 325 133 257 13 92 92 138

3 9 — 2 1 4 8 10 1 10 3 3 7 1 4 9 17 13 13 26 11 30

— 3 5 3 1 1 1 3 1 73 — 11 22 9 24 51 48 8 10 28 44 44

— 21 8 51 17 12 — 22 40 28 28 11 18 7 25 24 4 6 6 537 295 30

9 — 3 9 7 1 4 28 7 8 5 12 14 6 6 26 43 19 12 2 8 3

1 666

185

390

1 190

232

New Zealand Official Yearbooks 1897–1919.

country of origin until 1897. Table 47.2 shows the arrivals of ‘race aliens’ classified as persons of other than European descent, from 1897 to 1918. There were three groups of migrants who, for a variety of reasons, came to represent an ‘undesirable’ element in immigration to New Zealand. Unlike the European minorities of the 1870s, these immigrant groups were not part of government-initiated schemes to attract and support settlers who would be easily assimilated into the New Zealand colonial picture. Two of these groups, the Dalmations and the Chinese, were attracted to New Zealand by opportunistic motives, to earn sufficient income to enable them to return to their homelands, although, of course, a number did migrate permanently and eventually settled and were assimilated into New Zealand society. The problems of assimilation of these two groups had a direct impact on another group, the Lebanese immigrants who came to New Zealand from 1860 to 1918. Legislation introduced in the form of The Asiatic Restriction Act of 1899 to prevent a supposed ‘influx’ of Chinese had a probably unintended consequence for Lebanese immigration because, for the purposes of the Act, Lebanese were also classified as Asiatics. Dalmations, because of their visibility in gum field operations, also faced separate employment restrictions designed to ring-fence ‘anticompetitive’ behaviour in their work practices, which culminated in the Kauri Gum Industry Act of 1898 which created gumfield reserves exclusively for ‘British’ diggers.

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The ‘long depression’ of the 1880s triggered by increasing government indebtedness, financial stringency, decreasing land values and the collapse of export prices (for wool) since the export of frozen meat was insufficiently far advanced to compensate meant that, over the decade of the 1880s, there was a 78 per cent fall in migrants staying in New Zealand. Hunter et al. (2003) suggest that the economic depression and population exodus provided opportunities for aspiring entrepreneurs, and that natural increase in the population supplemented and sustained demand. Roy (1970) points out that there were four general factors present in New Zealand society during the nineteenth century in particular, which underlie the demand for restrictive legislation controlling immigration on ethnic criteria. The dominant motive was fear of cheap labour depressing an already uncertain income level, the result of the instability of a primary producing economy dependent on world markets with fluctuating prices. The second motive was primarily a middle-class fear of competition in retail areas, reinforced by the notion that non-European presence was a threat to bourgeois ‘respectability’. The third motive was political – racist attitudes on the part of politicians who were quite willing to make political capital of public fears, and to reinforce them should these fears showed signs of waning – even to the extent of conveniently ignoring information on the numbers and extent of actual migration, if it did not suit their purposes. Finally, there was the stereotypical hostility of condemnatory judgment on anyone who was ‘foreign’, an attitude that had been adopted by already prejudiced immigrants who had acquired their attitudes in England. While British immigrants and the proto-British Northern European settlers were welcome, the attitudes towards other European settlers such as the Dalmations, the Chinese, Indians and the Lebanese were quite different. Attitudes toward these groups were enshrined in restrictive legislation by 1899. Although the legislation was principally aimed at the Asiatics, the preamble of the Act was to ‘safeguard the racial purity of the people of New Zealand by preventing the influx into the colony of persons of alien race’ (New Zealand Statutes, Asiatica Restriction Act 1899). The situation of the Lebanese immigrants is discussed in more detail in the second section of this chapter, but their situation and further immigration was also directly affected by the legislation introduced to restrict Asiatic immigration. For the purposes of the Act, Lebanese were now defined as Asiatics. As a consequence of the 1899 Act, the numbers of Chinese immigrants dropped steadily, but the appearance of hawkers,2 from Australia in small numbers in cities and small towns in New Zealand started to arouse concern. For some unaccountable reason, they were dubbed ‘Assyrians’ (Roy, 1970) and their presence was deemed to be as great a public menace as the Chinese. These changes must be viewed in context. It was not until 1916 that the system of passport entry was introduced for all foreigners, European as well as race aliens. In 1919, the Undesirable Immigrants Exclusion Act was introduced, which did not deal specifically with Asiatics, but was directed mainly against ex-alien enemies with views subversive to the established order (Borrie, 1991). By 1920, further pressure for restricted legislation came from two influential sections of the population: the Returned Servicemen’s Association, who were concerned that nothing should come in the way of government assistance for their members, and the Trade Unions, who took the view that further undesirable immigration (from China and Fijian Indians seeking to immigrate) was an attempt by capitalists to recruit cheap labour and depress the wages of local workers.

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The Immigration Restriction Act passed in 1920 hinged on the principle that met all the objections of a world where opinion was moving towards the condemnation of overt displays of racial prejudice. By allowing free entry to persons of exclusively British (including Irish) descent and investing the Minister of Customs with sole discretionary power to permit to disallow the entry of persons of any other origin, this effectively got rid of the slur of racially prejudiced immigration policy, while in practice it was exercised by discretion. Apart from several minor adjustments such as group migration schemes with the Netherlands Government after World War II, and the special interest groups in the South West Pacific, the immigration policy of ‘White British New Zealand’ held sway until the mid-1960s. Chain migration by non-assisted settlers For non-assisted settlers, it was a combination of push and pull factors which initiated immigration. We can relate this to the emergence and persistence of the phenomenon known as chain migration: Chain migration can be defined as that movement in which prospective migrants learn of opportunities, are provided with transportation and have initial accommodation and employment arranged by means of primary social relationships with previous migrants. (Macdonald and Macdonald, 1964: 82)

Many potential migrants learned of opportunities initiated either through letters or from successful migrants who had returned to their homes. They raised passage funds by loans or mortgages from money-lenders. On arriving at their destination, these migrants were helped by fellow-countrymen with whom they were previously acquainted or who were recommended to them by relatives and friends. Chain migration has its roots in the careers of pioneer migrants who wandered round the world in search of wealth, world and adventure (Trlin, 1979) and to escape economic, social and political pressures. As Trlin suggests a peasant who emigrated took with him a set of mature, social, economic and political values developed in his homeland. The Lebanese in New Zealand There is no definitive study of the early immigration of the Lebanese community in New Zealand; although the non-European settlers such as Poles, Greeks, Yugoslavs and Asians were the subject of a study by Thomson and Triln (1970), unaccountably the Lebanese were left out. They were, however, included in a book describing ‘other New Zealanders’ by McGill (1982). There are some unpublished sources of single communities of Lebanese in Dunedin (Farry, 2000; Sanders, 1980; Tabar, 2004; Thornton, 1968). The other published sources are family histories of particular Lebanese communities such as the history of the Farry family (Page and Farry, 1990) the Bouzaid family (Bouzaid, 1993) and the Corban family (Scott, 1977). The Dictionary of National Biography (DNB) offers some information on the Moodabe family. There are two possible reasons for this lacuna. First, the Lebanese community in New Zealand were amongst the earliest non-assisted migrants in New Zealand, the first, or initiating, families arriving in 1891 and 1893, and, as was the case with many entrepreneurial migrants, went first to Australia and then to New Zealand. All of these initiating entrepreneur migrants became naturalized within one or two years of arrival. The chain

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migration process of bringing out extended families continued for only a short period: up to 1918. From then on, Lebanese migration virtually ceased, since by World War I the Lebanese in New Zealand were technically Turkish by nationality and therefore enemy aliens, reporting to the police, not permitted to travel more than 20 miles without a permit, and so on (Page and Farry, 1990). Under the 1920 Immigration Act, local Lebanese, even if one parent was New Zealand-born, were counted as Asiatics and denied Family Allowances and Pensions in 1926 until the advent of the Labour Government in 1935. Census classification as late as 1926 was as ‘Syrians’. As well as official discrimination, there was also the uninformed prejudice that arises when a cultural group is distinctly different, through language, modes of dress and dietary habits. During the early years, marriages, without exception, took place within the community, and it was not common for even New Zealand-born Lebanese to return to Lebanon to marry and bring wives back with them. Therefore, the chain migration process was truncated, and the different communities, although all Lebanese, because of geographic separation and religious differences were not a homogenous community.3 The second reason for the absence of a systematic study is that the Lebanese in New Zealand were religiously and geographically diverse. First, there were no geographically proximate migrations, as was the case with the Dalmations. Second, the Lebanon did not become a separate country until 1946. There is evidence of confusion in the recording of the nationality of these migrants. The country of origin is variously stated as Mount Lebanon, State of Syria or, sometimes, Turkey (Naturalisation of New Zealanders to 1948, National Archives). The Mount Lebanese villages from which the Lebanese came were Zahle, Becharre, Schweir and Akoura, via Tripoli. The political history of the Lebanon and its religious diversity shows that these ‘clan’ families were highly interrelated through inter-marriage, but they were not interrelated with other clans; indeed, they were distinctly different. Religious diversity in the Lebanon Hitti (1962) describes the Lebanon as a land rich in time but poor in space. Variously, from the thirteenth century  to 1946, the Lebanon had been invaded by Egyptians, Assyrians, Babylonians, Greeks, Romans, French, English and Arabs. The Lebanese trace their economic roots back to the Phoenician traders, beginning in about 2500 . Phoenicia developed several industry clusters in purple dye manufacture and ship building. Factories along the Mediterranean shore made the purple dye from the murex shellfish. This coveted dye was used for magisterial and royal robes and a highly specialized Phoenician garment industry exported over a thousand different items to Thebes, Troy, Rhodes, Babylon and ‘every bazaar of the ancient world Canaan’s traders were able to reach’ (Moore and Lewis, 1999: 276). The Phoenicians were exporting cedar wood to Egypt in 3000  and their descendants have maintained this tradition of commerce over the centuries. The history of Lebanon, which until after World War 1 was part of Syria, has been largely determined by its geography. The Muslim rulers who dominated Syria/Lebanon from the seventh century concentrated on the coastal cities and a few inland mountain routes leaving the mountainous interior, Mount Lebanon, to its own devices. The mountain villages relied on income from agriculture and engaged in trade through the coastal

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cities. When the Ottoman Turks began their four centuries of rule from 1516, responsibility for governance was vested in a local prince. The history of the Lebanon is characterized by religious differences between Christian (Orthodox, Melekites and Maronites) and Muslims (principally the Druzes). The Maronites were an offshoot of the Syriac-speaking church whose liturgy antedates any Greek or Latin liturgy.4 It is undoubtedly the earliest in the history of Christianity. There were two other offshoots of the Syriac Church, the East Syrian branch, which accepts monotheism (that in Christ the divine person and the human were joined in harmony of action, but not in the unity of a single individual), and the West Syrian branch, which followed in its theology the Monophysite (single nature creed). Besides these Syrian churches there was a small community who followed Greek theology emanating from Antioch and Constantinople and who, by following orthodoxy, escaped excommunication and gained the protection of the state. Their Syrian Christian rivals in the time of Justinian II (685–95) were Melkites – or Royalists. Gradually Syriac was replaced by Greek as the language of ritual and Syriac liturgy gave way to the Byzantine. In time they came to be called Greek Orthodox. The Pope was recognized as the head of the Maronite Church, although this did not outlast Frankish rule. Through their association with Rome, the Maronites, 150 years after the Crusaders left, strengthened their bonds with the Roman church, culminating in the founding of a Maronite College at Rome by Gregory . This college produced a series of scholars whose learning infiltrated the local Church, enabling the Maronites to develop intellectual superiority over their neighbours. By 1736, through the offices of Joseph Assemani, a council was established which virtually achieved a union of the Roman Catholic Church and the Maronites. Though the Maronites recognize the Pope as Head of the Church, and have adopted various Roman usages and symbols, they continue to permit the marriage of priests, take the rite of confirmation immediately after baptism, and retain their own fasts, saints and the Syriac liturgy. Dating from the Arab conquests of 633–8 , culminating in the capitulation of Jerusalem in 638, the Arabs engulfed inner Syria and the maritime plain. The victory of Moslem arms in the Eastern Mediterranean, achieved in about a decade, was the victory of Arab nationalism, of Islam the state. Between the seventh and eleventh centuries, two important Muslim minorities, the Druzes and the Metwalis, had made their way into Southern Lebanon (Fedden, 1965). The Druzes and the Metwalis were heretical offshoots of Islam and were united in their opposition to Muslim orthodoxy. When they rebelled against the Muslim government following the departure of the Crusaders in 1396, the Maronites, by keeping their neutrality, were able to extend their control over the villages which the Druzes had deserted and grew virtually independent by the second half of the fifteenth century. For nearly four hundred years of Turkish rule, the Maronites and Druzes maintained an understanding to unite against the divisive effects of Turkish rule. However, by the nineteenth century, this relationship began to break down, as the Western powers had intervened increasingly in Turkish–Lebanese politics; the French were bolstering the Maronites; the Turks were exploiting Druze jealousies and apprehension thus created, aided and abetted by the English. Emir Bechir (1667–1850) and Emir Fakr-edDin, had between them adroitly managed the balance of power and security of Mount Lebanon, until after Bechir’s capture by the Turks and subsequent death in 1850. The Druze massacre of the Maronites in 1860, preceded by flare-ups in 1842 and 1845,

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accounted for the wholesale slaughter of some 12 000 Christians over a period of just a few months. This event precipitated the intervention of the European powers, which through European pressure and a French military expedition compelled the Turkish government to recognize officially the semi-autonomy of a Maronite enclave in the Greater Lebanon, a mutesarrifate or privileged sanjak (administrative region) within the Ottoman system, under an international guaranty, with a Christian governor (Salibi, 1993). This situation persisted until the collapse of the Turkish Empire after the World War I (Fedden, 1965). The massacres had an indirect effect on the subsequent migratory activities of the Lebanese. With greater security and a new constitution, the population of the Maronites in the mountain regions began to increase. Since the numbers that the mountains can support are limited, this increase led to a tide of emigration. The decline of the silk industry in the early 1890s had a significant impact on the economy of the mountain region because entire villages relied on silk reeling as a primary source of income. With declining prices for silk, many Lebanese had difficulties in maintaining their sustenance. The Lebanese had no access to the fertile plains of Biqa, Sidon and Tyre, and the rest of Syria was unattractive to them because of its economic backwardness and its lack of political and economic security. Thus they turned their attention to emigration (Farry, 2000). In 1914–18, famine, the result of the mobilization of farmers and the failure of cereal crops, struck the Lebanon. Allied fleets blockaded the coasts of Syria, stopped the importation of foodstuffs and, because production was insufficient to feed the population, the Ottomans seized food to feed the army and left the mountain region without aid (since they were not convinced of their loyalty). The infrastructure of the country had collapsed and death from starvation and hunger-related diseases claimed the lives of 500 000 people in the Greater Syria region. Lebanon became a French mandate after the World War I and achieved independence after the defeat of the Vichy garrison (pro-German) by the allies during World War II. The Lebanon became an independent state by 1946. For a generation the Christian community dominated the country, but friction between these and the Muslims, the influx of Palestinian refugees and repeated Middle Eastern wars, continually destabilized the country, leading to intermittent and then continuous civil war, and military intervention by her neighbours, effectively destroying the country’s main source of income, international trade and commerce, with Beirut as the commercial capital of the Middle East. Of all the Ottoman districts, Mount Lebanon plays a pioneering role in emigration. There is virtual consensus that the Christians (Orthodox and Maronites) were the first to emigrate. Salibi (1985) estimates that about 5000 emigrants had settled in the United States by 1899 and about 1000 in Canada by 1901. Others went to Australia, New Zealand and the countries of South America. Of a population estimated at 442 000 in 1913, Mount Lebanon had lost more than 100 000 to emigration by 1914, more than one-fourth of its population. Probably about 4000 Syrian emigrants had settled in Australia by 1903 (Farry, 2000). The successful emigrant sent back remittances to family at home (estimated to have reached four million pounds a year by the 1920s) and retiring Lebanese returned to their roots in the mountains, bringing with them a wider outlook and a higher standard of living. Chain migration contributed greatly to emigration from Lebanon. A member of the village or kinship group would emigrate somewhere and when set up would send for

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family members or convince other villagers to take advantages of economic opportunities, and assisted them financially with their passages (Sanders, 1980). The success stories of fellow-villagers abroad provided an incentive to emigrate. The return to the Lebanon was also seen as a way of finding suitable brides for foreignborn Lebanese males, in terms of religion and culture, and cementing family ties further. The outward flow declined by the 1930s, when conditions abroad and the growth and stability of the Lebanese economy made emigration less tempting (Fedden, 1965). The Lebanese as entrepreneurs What did the Lebanese do? Many of the Lebanese who immigrated to New Zealand had come via Australia. In Australia, the principal occupation of the Lebanese was ‘hawking’, particularly on the gold fields. This had aroused much ill-feeling and eventually a Hawkers’ Act was passed, which gave magistrates the power to refuse to grant ‘Assyrians’ licences to hawk. Therefore many Lebanese had no alternative but to immigrate to New Zealand, where they could continue the relatively prosperous (and non-taxable) occupation of hawking. Hawking, or travelling, as it sometimes euphemistically called, entailed the practice of ‘Selling or offering for sale, goods carried about on the person, or on any animal, or in any moveable conveyance, whether by land or water, in any city, town, street, road or place within the colony’ (Hawkers and Pedlars Bill, 1894, NZPD). The Lebanese community established in Dunedin travelled throughout Otago, Southland and Canterbury, eventually deciding on a permanent route. Hawkers sold ‘fancy goods’ such as toilet articles, towels and pillowcases, camphor, jewellery, ribbons and men’s shirts (Page and Farry, 1990), to make up for the absence of retail stores in rural areas. In colonial rural New Zealand, women made garments by hand until the 1860s. Humbler settlers continue to make garments by hand, even after treadle sewing machines became available, as the cost was out of the reach of most settler families. Women relied on the pedlars for supplies of materials, notions (sewing implements) and other ‘necessities’. From the Lebanese perspective, occupational independence was important. Although ‘trading’ has been the successful Lebanese occupation since Phoenician times, there is no tradition of Lebanese travelling door to door. It is most likely that Lebanese chose the occupation of hawking because they did not like to work for wages (and the pay for labourers was low) and shops were expensive to buy and maintain. Hawking was the best way of making money quickly, and provided an opening to increased prosperity. Even during periods of national unemployment there was little competition from New Zealand workers, since hawking, along with other occupations, although financially rewarding, was not highly regarded in New Zealand. New Zealanders associated some jobs such as domestic service with inferior personal servitude, and hawking would fall into the same category, associated with a loss of personal status. In 1916, of the 267 ‘Syrian’ males in New Zealand, 56 were general merchants, 37 were dealers and 11 worked in textiles and fabrics. By 1921, the Census reported that Syrians were occupationally dispersed, although most were to be found in commercial pursuits, particularly that of dealing in clothing or drapery. By 1936, as Table 47.3 shows, the numbers of Lebanese recorded as working on their own account remained fairly stable throughout the period. The most significant change in pattern is the increase in wage-earners. The second generation of Lebanese moved out of the traditional occupation of hawking to various skilled

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Table 47.3

Grade of occupation, 1916–36

Grade of occupation Employer Working on own Relative assisting Wage-earner Wage-earner* Not applicable Not specified

1916

1921

1926

1936

M

F

M

F

M

F

M

F

26 113 5 52

2 13 4 10

27 91

7 10 5 32

69 2

162 1

38 93 7 156 13 217 1

3 11 7 70 1 344

54 102 10 179 70 248 5

7 15 9 102 5 428 1

80 14 166

275

Note: * Unemployed; in 1936, 56 out of the 75 unemployed were on relief work. Lebanese, as ‘race aliens’, were prevented from seeking unemployment relief until 1936. Source: Census of New Zealand for these years.

and unskilled occupations. Female employment, while insignificant in 1916, increased as a number of Lebanese women entered the workforce as employees. If New Zealand-born, the old taboos about the traditional roles of the Lebanese wife and mother, confined to cooking and child-rearing, had probably weakened. Lebanese women from the traditional Mount Lebanon region were expected to get married at an early age, look after their husband and family and be a hospitable hostess (Sanders, 1980). Family links showed their strength in customs observed with the main landmarks of life, birth, marriage and so on. Institutionally, the family ties of respect, pride and tradition bound families together, accounting for the social distinctiveness of the Lebanese community in Dunedin, where there were a large number of families. Elsewhere in New Zealand, the Lebanese families socialized within their own family groups, divided by religious affiliations. There were a very few women who undertook entrepreneurial activities, since the traditional Lebanese family structure was patriarchal, although there were some notable exceptions, especially when there was no male provider. Little dislocation was experienced by Lebanese families. Unlike the New York Jewish communities, the younger Lebanese generation did not come to see their immigrant parents as inadequate in dealing with the new situation, and there was subsequently no generational conflict or marginal characters (Sanders, 1980: 70). The desire of older Lebanese to maintain group cohesion and the influence that they had on their children directly affected the marriage patterns of the second generation. The majority of Lebanese in Dunedin married within the community; a few went to Lebanon and returned with Lebanese wives. In the Maronite Church it was possible to obtain a dispensation to marry a first cousin. In contrast to Catholics, Maronites commonly married within the family. Those who crossed the religious boundaries incurred the displeasure of their families. Since there were opportunities (at least in Dunedin) to meet other Lebanese, it was expected that one would marry within the community. Since family and fidelity were most important, the pitfall of a mixed marriage was to be avoided. Other reasons for marrying within the community were that Lebanese brides would have to accept the traditional position of women, Lebanese customs and, most importantly,

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religious affiliation (which included the children of the marriage). Women marrying nonLebanese males was also discouraged, since some New Zealand males were not considered as ambitious as Lebanese. Despite marrying out, even ‘unsuccessful’ mixed marriages did not result in divorce. Although separation might occur, marriages were seldom formally dissolved. The incidence of Lebanese divorce was negligible up to 1936 (Saunders, 1980). Patterns of business activity diverge by religious grouping. Orthodox Lebanese, who aligned themselves with the Anglican Church (Protestant) tended to be employees, then tradesmen, and generally prospered (Sanders, 1980). By contrast, the Maronite Catholics (who aligned themselves with the Roman Catholic Church) tended to be hawkers, then businessmen. Hawking was a profitable and reliable occupation, to be continued with while experimenting with new ventures. Children of Maronite Catholics in turn acquired a tertiary education and became well-represented in the professional groups. Clan family Lebanese entrepreneurs in New Zealand This study draws on the biographical histories of two immigrant Lebanese families in nineteenth-century New Zealand. They are the Corban family and the Moodabe/Akoorie family. There were of course other Lebanese entrepreneurs in New Zealand, but the information on these families is more readily available. Other families, not included in this study, are the Bouzaids, the Farrys (Fakhrys), the Bahouts, the Anthonys, the Alexanders and the Murrays. The Corban family history draws on Scott’s (1977) study and the Moodabe/Akoorie family history draws on information in the Dictionary of National Biography (Moodabe, 2005) and family information compiled by the descendants of the Akoorie family. Two case histories of clan families in the Lebanon Two case histories have been selected for the study sample. Each offers an example of Lebanese entrepreneurship. This is not to say that there were not other Lebanese entrepreneurs, but the enduring nature of these clan families and their business success makes them a typical example. Each clan family was Christian, although the Corban family were Orthodox Greeks, who, on arrival in New Zealand, aligned with the Anglican Church. The other clan family, the Moodabes, and their cousins the Akoories, were Christian, but Maronite Catholics, subsequently aligning themselves with the Roman Catholic Church. Both families, although in totally different industry sectors (Corbans, wine making) and Moodabes (cinemas) formed public companies, and although they were bought out by larger domestic or international interests, their descendants have retained interests in their respective industries, as well as, ironically, being involved in business advisory activities. The Corbans The Corban family patriarch was Assid Abraham Corban, born in Shweir, Mount Lebanon in 1864, the son of a winemaker. In 1890, following the death of both his parents, he roamed the outback as a pedlar, then departed from Australia, crossing to New Zealand in 1892, carrying on his trade throughout the Coramandel Peninsula, Waikato and the Bay of Plenty. In 1895, he opened a shop in Queen Street, Auckland, advertising himself as an importer of Fancy Goods, Jewellery, Drapery and so on. In the same year he was naturalized and sent for his wife and two children to join him in New Zealand.

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The family wine business began with the purchase of a ten-acre block in Henderson. His first three and a half-acre vineyard was established with classic red varieties, Syrah, Meunier and Cabernet Sauvignon. Reflecting his origins, the vineyard was named Mt Lebanon Vineyards. The family and his property expanded steadily, with a further eight children being born to the Corbans in New Zealand, and a further 20 acres being purchased in 1909. The whole family worked in the vineyard and their wine depot in Auckland City. The Corban children worked in the orchards, the vineyards and the cellars, and the women assisted in child minding, subsequently taking over the office activities. While the vineyards were being established, Assid and his son Khaleel carried on with ‘hawking’, using a horse and cart to sell goods to small communities. The income earned from this trade was ploughed back into the business (Scott, 1977). The ‘clan’ family concept and the ability to continue to earn income from other sources (such as fruit, vegetables and bird lime) no doubt enabled the family to ride out the tide of prohibitionist sentiment. A prohibition majority in West Auckland led to the closure of all five hotels between Henderson and Auckland. A dry vote in Masterton caused the destruction without compensation of 7000 vines. It even seemed likely that winemakers in a no-licence area might be prohibited from selling wine elsewhere. Fortunately for the Corbans, this did not prevail in Henderson. Corbans established a depot, across the electoral boundary, where it was legal to sell wine from the cellar. However, it was illegal to sell wine indirectly from the cellar. An even greater threat to the progress of the wine industry (and the economic well-being of the family) came in 1918, when national prohibitionist zealots were confident of a victory in the national liquor referendum (only narrowly averted by the returned servicemen’s votes). Interest in winemaking was waning. As winegrowers elsewhere turned cattle onto vineyards, Corbans by default became the largest winemaker in New Zealand. Of four prewar vineyards larger than Mt Lebanon, three had disappeared by 1923. Winemaking had enjoyed a vogue among run-holders in the 1870s. As the hobbyist interest waned, Corbans were able to buy the cellar equipment of one of Hawke’s Bay’s notable vineyards, Greenmeadows, in 1923. By all accounts, Assid Corban remained a patriarch in the old Lebanese tradition and believed in the virtues of hard work and staunch adherence to the Greek Orthodox Church (Cooper, 1996). In traditional extended Lebanese family tradition, sons Wadier and Annis married two Lebanese sisters from Shweir, and moved with their eventual offspring to the large homestead built by Assid Corban in West Henderson. They were later joined by the youngest son, Najib, and his wife, Ruby Corban (a cousin) in 1937. Food was bought in bulk, all the women took turns in cooking and meals were eaten at a common table. No-one drew wages: all income was pooled for vineyard development and cellar improvements . . . in the allocation of costs each adult counted as one unit and every two children as one unit. (Scott, 1977: 105)

Assid Corban died in 1941, but his sons and his widow carried on with the winemaking business, bringing in a third generation of four grandsons in the 1950s, working in the different functional areas of the firm, winemaking, operations, vineyard management and office administration. Alex Corban entered the firm, gaining a Diploma in Oenology from Roseworthy, South Australia, a qualification not available in New Zealand at the time.

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After 50 years, Corbans were still making the same type of fortified wine: sherry and port. Demand for table wines was almost non-existent since the punitive licensing laws stipulated a minimum purchase of two gallons and the trade restrictions meant that wine shop licences were not freely available. In 1955, the minimum quantity limit on sales of table wines was reduced to a single bottle and wine shop licences were to be freely granted without heed to liquor trade objections. Restrictions on the importation of wines and spirits, along with new developments in oenology such as German techniques of cold fermentation under controlled pressures, were transforming the industry in Australia, but the extensive capital investment and new plantings and expansion of vineyard-carrying capacity for new varieties put financial pressures on a traditional family-owned winery to keep up. Demand for table wines from classic vitis vinifera grapes was stimulated in the 1960s by New Zealand residents, who, in the new age of jet aircraft travel, had visited and experienced the astonishing marvels of continental wine consumption habits: the habit of wine with meals, in licensed restaurants, making wine drinking a pleasant social activity, far removed from the New Zealand habit of rapid consumption of alcohol, mainly beer and spirits, until the bars closed at 6 p.m. After a decade of unprecedented planting in Gisborne, Whenupai and Hawke’s Bay, Corbans owned 650 acres of vineyards, a fifth of the national total. Under Alex Corban as winemaker, Corbans were the first to adopt such wine-making techniques as cultured yeasts (for sherry) and refrigerated stainless steel tanks (for cold fermentation under pressure). In 1963, A.A. Corban and Sons, a partnership owned by the four sons, was converted into a limited liability company, Corbans Wines Limited, which reorganized its capital base in 1964 by bringing in a 19 per cent shareholding from wine and spirit merchants. Further expansion of national wine output in 1969 saw Corbans commit themselves to further expansion, increasing the paid-up capital to NZ$1.25 million, with the wine and spirit merchants increasing their shares proportionately. New wine maker Montana Wines was challenging Corbans for top place in industry production (Scott, 1977). During the 1970s, the wine-making companies in New Zealand were under pressure from inflationary costs, and heavy capital expenditure had taxed industry liquidity to the limit. Gradual lifting of the onerous liquor licensing laws fuelled increasing demand for and growth in the burgeoning wine industry (Enderwick and Akoorie, 1996). Brewery interests were bidding for old-established wine and spirit merchants and probing for entry into a new growth industry – wine making. Montana became an instant giant through a series of manoeuvres (absorbing the 50-year-old Wohnseidler family business) assisted by NZ Wines and Spirits. Montana sought financial aid from Seagrams of New York, but its foreign-owned invested share was limited to 40 per cent by government regulation. Seppelts of Australia moved on Vidals, the 67-year-old Hawke’s Bay wine-making family. For Corbans, attempting to remain independent, the problem was the inability to compete against firms with commercial intelligence networks and sophisticated techniques to project future marketing and cost patterns. They had met their expansion costs with loans from private sources, Rothman Industries Corporation and the Development Finance Corporation (Scott, 1977). The corollary of this investment was that managerial control would pass to the lender. Rothmans Industries Ltd was the New Zealand subsidiary of the parent company Rembrandt-Rothman of South Africa.

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As a company with more than 25 per cent of foreign shareholding in 1972, Rothmans was classified under Reserve Bank regulations as an overseas company, and was therefore subject to restrictions in takeover activities. Through the European arm of the parent company, Rothmans International, a private share placement of New Zealand shares was organized to free itself from this control. Nominal capital was increased to NZ$10 million by the creation of six million new shares, a manoeuvre which poised the company for takeovers and investments in a wide spectrum of the New Zealand economy, including transport, merchant banking, property development and winemaking. Over this critical time, the Corban family had come to the conclusion that, along with health issues, the speed and nature of the developments in the liquor industry meant that the family could not provide finance, itself, to maintain its leading position as winemakers. The alternative, of retrenching to a medium-sized operation, was not an option. Death duty issues imposed other pressures and, by the selling of its wine interests to Rothmans, in 1975, Corbans wines passed out of family hands. Corbans remained one of the winemaking giants in New Zealand until it was absorbed by Montana in 2000, which in turn was bought by British drinks giant Allied Domecq. Allied Domecq are now owned by Pernod Ricard of France, making it the second-largest global wine and spirit company after Diageo (Akoorie and Scott-Kennel, 2005). The grandson of A.A. Corban, Brian Corban, has carried on the family wine making at Ngatawara winery in Hawke’s Bay, jointly owned by winemaker Alwyn Corban, a great-grandson of A.A. Corban. In addition to his winemaking interests, Brian Corban is a prominent businessman, Waitangi Tribunal Member and professional company director and Chairman – the Corban family celebrated a century of winemaking in New Zealand in 2002 (Cooper, 2002). The Moodabe clan family Michael Joseph Moudabber was born in Sydney, Australia, the eldest son and fifth child of Ferris Moudabber and his wife Elizabeth Ann Akoorie. His parents had emigrated from the Lebanon in the mid-1880s, leaving their four daughters in the care of relatives, with the intention of making enough money to be able to return home. They carried on the trade of hawking in Australia, but, like other Lebanese in Australia at the time, found that the restrictive laws on hawking and the attitudes towards the Lebanese in particular, forced them to reconsider a future in Australia, and they came to New Zealand in 1899. On the advice of a member of the local community they changed the spelling of their name to Moodabe. A second son, Joseph Patrick, was born in that same year. The Moodabe sons were Australian and New Zealand-born, respectively, so their nationality was not a problem. Elizabeth Moodabe was naturalized a New Zealand citizen in 1924 (Moodabe, 2005). Ferris Moodabe died in 1901, leaving his wife penniless, with two young sons, although she inherited the family grocery store, and was by the early 1920s somehow able to amass a small amount of savings which she used to finance Michael Moodabe in his first cinema venture. In the absence of a male head of the family, Elizabeth assumed the role of matriarch and provider. At a very early age, Michael Moodabe (MJ) was forced to go out to work, although he did receive some schooling from the Marist Brothers in Ponsonby, MJ sold peanuts from a cart in and around Queen Street that his mother would roast over a small oil-fired stove the previous evening.

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MJ’s first job in the cinema business was as a cleaner and caretaker at the King George Picture Palace in Queen Street, Auckland. The Globe Continuous Picture Theatre opposite was owned by a Canadian dentist, F.J. Rayner, who offered MJ a half-share in the Globe for £500. Financed by his mother’s savings, in 1924, MJ became a partner in the renamed Hippodrome Picture Company, with the title of manager and a salary of £6 10s per week. When Rayner left New Zealand in the late 1920s, MJ began to expand the company, assisted by his brother Joseph (JP) and, in August 1928, Hippodrome Pictures became Amalgamated Theatres (Moodabe, 2002). Entrepreneur Thomas O’Brien, who built the iconic Civic Theatre in Auckland, went bankrupt in 1932, and the Moodabe brothers took over O’Brien’s other Auckland theatres, including the Princess (later the Plaza), the Rialto in Newmarket and the Tivoli in Karangahape Road. These cinemas, and later the National Picture Theatre (formerly the King George) gave Amalgamated a strong base in New Zealand’s largest city. However, the Civic was to remain beyond their full control until 1945, when, against stiff competition from both the American company, Warner Brothers Pictures and their other local competitor, Kerridge-Odeon, Amalgamated obtained a 50-year lease (Moodabe, 2005). Until the mid-1950s, the Civic Theatre was not only a cinema but had a night club and cabaret on the ground floor, called the Wintergarden. With a full orchestra on a gondola with a hydraulic lift and a dance floor, the Wintergarden was, by the standards of its time, a sophisticated night spot in Central Auckland. In 1936, in order to guarantee film supply, MJ persuaded American Twentieth Century Fox Film Corporation to buy a half interest in Amalgamated. By 1938, the company’s circuit had grown to 65 cinemas throughout New Zealand and attendances that year were said to be five million, equivalent to three visits by every New Zealander. Although the Moodabe family consisted of six children, there were only two sons. Mindful of family responsibilities, when Elizabeth Moodabe’s brother, Abraham Akoorie, wrote to her in the early 1930s suggesting that his sons might be assisted by the family to immigrate to New Zealand and work for the brothers, the family responded positively. There was an earlier connection with New Zealand since Elizabeth’s brother, Abraham Joseph Akoorie, then in his early twenties, had immigrated to New Zealand in about 1880 and had owned a small bicycle repair shop in Christchurch. He was never naturalized and, selling the business in Christchurch, he decided to return to Tripoli, Lebanon, just before World War I, requesting relatives (as was customary) to find him a suitable wife. His reasons for returning were not dissimilar to those of other Lebanese. There were no suitable wives to be found among other clan families in New Zealand. It is also possible that he was aware of the possibility of being interned as a race alien, in the event that Turkey was to be embroiled in war. Abraham married Labibe Courtbani, then 16, when he was in his forties, returning to his original trade of stonemason. They had five living children, four sons and one daughter. As economic conditions in the Lebanon during the 1930s were not encouraging for the future prosperity of the family, Abraham suggested that the oldest sons Joseph (Joe) and Samuel (Sam), then 18 and 20, should come to New Zealand. Arriving in the mid-1930s, the Moodabe brothers assisted with arranging immigration papers (and possibly passages) to New Zealand. The other advantage of assisting family members is that it imposes reciprocal obligations. The migrating family members would be under an obligation to work

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for the family in New Zealand as a condition of arranging their immigration, and they, in turn would be trusted and honest employees for the family (Akoorie, 2003). Both sons were well-educated, having attended schools in Tripoli run by the French brothers, and spoke French, Arabic and English. Working first as cleaners and ushers, they were then promoted to theatre managers. An employment contract between Amalgamated Theatres and Joseph Akoorie, dated 13 April 1942, shows that Joseph Akoorie was employed as a Theatre Manager when he was 26 years old, seven years after his arrival in 1935, taking up his first position as manager of the State Theatre in Palmerston North and then of the Century Theatre in Auckland. He also managed the Civic Wintergarden cabaret in the evenings, after his move to Auckland in 1951. Other members of the family followed, ostensibly to work for the Moodabe brothers, although two brothers, Anthony and Emil, subsequently left for United States and Mexico (Emil joining a younger brother, Michel) where they founded their own family businesses in clothing and the restaurant trade. The only surviving sister of the family stayed in New Zealand. As was the case with other Lebanese clan families, migrant sons sent remittances home. One of the sons, Joseph, sent between four and ten pounds per month to his father and then his mother, after Abraham died in 1948, over a period of ten years – a not inconsiderable sum for those days for a salaried wage earner with a young family. The two brothers worked for the Moodabe family as theatre managers, until Sam’s death in the 1958, at which time he was manager of the Cinerama Theatre in Queen Street. Joseph left the employment of Amalgamated Theatres in 1960. Joe retained his connections with the cinema business by managing the Capitol Theatre in Balmoral for Eddie Green of Independent Theatres Ltd, on a part-time basis, working for John W. Andrews as an office manager during the day until his retirement in 1981. In 1960, the remaining half-share of Amalgamated Theatres was purchased by Twentieth Century Fox; Fox had agreed to the deal on condition that the Moodabe family remained in management control. In 1962, the Moodabe brothers MJ (the showman and marketing half of the partnership) and JP, the financial watchdog, retired from the cinema chain they had created, leaving the executive management (with Fox’s agreement) to MJ’s three sons, Royce, Michael and Joseph. MJ died in 1975 and his brother JP in 1985 (Moodabe, 2005). The Moodabe family are still involved with the cinema business – Royce Moodabe with Twentieth Century Fox film distributors and Joe Moodabe as Chief Executive Officer of the SkyCity Village Force cinema chain. In 1998, Manukau Cinemas Pty Ltd sold its Village 8 Multiplex Cinema in Auckland for $NZ36 million in order to lease them back. The cinemas were purchased by Village Force Cinemas (50 per cent owned by Village Roadshow Ltd of Australia and 50 per cent by Force Corporation Ltd of Aotearoa) (www.canterbury.cyberplace.org.nz). Characteristics of Lebanese clan families Social networks or clusters of kin, in the case of the Lebanese migrant community, were institutionally and historically embedded by their experience in the home country. On arrival in New Zealand, these historical ties were replicated locally through multiple working, religious and recreational ties, all linked to one another by residential proximity, occupational pursuits and church activities. In these situations community norms proliferate and violations of reciprocity obligations carry heavy costs (Portes, 1995). Solidarity

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within family cliques is intensified as a way of differentiating them and protecting them from a web of ‘outside’ relations. Individuals can mobilize a significant amount of resources, creating social structures in which economic action is embedded and also forms part of larger aggregates. The social capital thus realized may include price discounts, interest-free loans or intangibles like information about business conditions, arranging work permits, immigration papers and generalized goodwill in market transactions. These resources have the character of ‘gifts’ since they are not expected to be repaid in a given period of time, but impose a guarantee of reciprocity to other members of the clan. Resources acquired through social capital have, unlike the expectations involved in market transactions, a diffuse time horizon and may involve a ‘currency’ of a different nature from that in which the original gift was made. In Table 47.4 we draw on the Portes (1995) framework to illustrate the concepts in the case of the Lebanese clan families. As explained earlier, the religious, family and geographic diversity of Lebanese migrants meant that the clan families only interacted with each other, not across clan families, which makes the Lebanese migration behaviour somewhat less homogenous than has hitherto been realized. Even within the same location, Table 47.4

Social capital and its types

Definition

Sources

Donor’s motivation

Effects

Examples

Ability to command scarce means by virtue of membership of social structures

Bounded solidarity

Altruistic

Transferring resources to others because of identification with in-group needs and goals

Gifts to co-ethnics: sending passage money, arranging accommodation on arrival; gifts to the Church (Moodabe/Akoorie)

Reciprocity

Instrumental

Transferring resources to others on the expectation of commensurate returns by beneficiaries

Favours to business associates, arranging permits for extended family to work in family business (Moodabe/ Akoorie case)

Enforceable trust

Instrumental

Transferring resources to others on the expectation of higher community status and commensurate returns by beneficiaries subject to collective sanctions

Concessionary loans; waiving of contractual guarantees for members of the same ethnic or religious community (Corban case)

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religious differences (between Greek Orthodox and Maronites) meant that clan families did not interact as much as with their own groups (Farry, 2000). Conclusions This chapter makes a contribution to our understanding of the fabric of entrepreneurial society in New Zealand. The dominant immigrant grouping in New Zealand during the nineteenth century was largely a European one, which played a vital role in establishing the commercial and industrial fabric. Entrepreneurs examined in Hunter et al.’s (2003) study of European immigrants were small-scale artisans, rather than ready-money capitalists or unskilled labourers. The social and human capital they brought with them, plus the structural characteristics of the developing society, provided an environment conducive to business start-ups. These entrepreneurs had the advantages of familiarity with the language, customs and institutions of a British colony. Therefore their ability to shape economic outcomes to their advantage and create laws to underpin their positions in the social fabric was determined by their country of origin. For the ‘foreign’ entrepreneur, particularly those for whom language, customs and even religious differences were acute, there were no such advantages. As immigrants who were subject to discriminatory legislation, the early Lebanese chose the occupation of ‘hawking’ both as a way of making money quickly, which would provide an opening to increased prosperity, and because hawking was not an occupation which would be attractive to New Zealand workers. Therefore there was little competition in the trade. The early Lebanese entrepreneurs who built successful businesses, as exemplified in the case studies of the two families, were able to accumulate capital from their hawking activities and from small enterprises, to provide access to more profitable enterprises. As the case studies demonstrate, they relied heavily on the reciprocal obligations of families, sending passage money, arranging immigration permits and, through their emphasis on inter-marriage and reproduction within the extended family, ensuring the continuity of the business. Sons were expected to carry on the business of the family; if there were insufficient male inheritors, opportunities could be offered to members (male) of the extended family to participate, albeit in an inferior position, in the family business. Male dominance in business activities was the norm, but in the absence (through death) of a male head of the family, the position of matriarch/provider was assumed by a female. The chapter demonstrates that the Lebanese community and entrepreneurs were not as homogenous as has generally been thought to be the case, since clan families came from geographically dispersed parts of the Lebanon, even in the Mount Lebanon area. They were also divided by their religious affiliations, and marrying out of the clan or even out of the religion was not encouraged. Even in New Zealand the clans were geographically dispersed. The Lebanese community in Dunedin was probably the largest concentration within New Zealand, but the two family case studies examined in this chapter were both in Auckland, the largest commercial centre. The position of the Lebanese in New Zealand was, at least in the early years, an uncomfortable one. They were classified, along with the Chinese, as race aliens under the 1899 Asiatic Restriction Act and, under the 1920 Immigration Act, local Lebanese, even if one parent was New Zealand-born, were counted as Asiatics, and denied Family Allowances and pensions until 1936. The unobtrusive nature of the Lebanese people,

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allowing their ‘gliding effortlessly’ into the business and professional echelons of New Zealand society (McGill, 1982) is hardly borne out by the evidence that suggests that the early Lebanese were thought of as tramps and gypsies and therefore disreputable vagabonds: an attitude emanating from prejudices held against these groups by Scots and English immigrants.5 Since they were seen to be different it was assumed that they were worse than other New Zealanders. The Christian Lebanese considered themselves to be European, but the New Zealanders classified them (at least in the early years) as Asiatics, and therefore undesirable. What then accounts for the entrepreneurial behaviour and business success of these early Lebanese immigrant entrepreneurs? To answer this question we return to the framework offered in the first section of this chapter. They had a strong desire for achievement and recognition as being successful, despite the considerable obstacles of ‘foreignness’ placed in their path. They viewed society as a collection of autonomous individuals linked by social contract, the heart of which was the extended family and the religious affiliation to which they belonged. Within the clan families there was a strong expectation of reciprocal obligations to treat the extended family with consideration and offer them assistance. Family obligations meant that the patriarchal notion of succession ensured that the family business would be carried on by male heirs. Their judgment was astute; despite the liabilities of foreignness, they took risks in the climate of uncertainty, even when the economic viability of the family was threatened. Their ability to work long hours to earn additional income was exploited with the intention of reinvesting it in business. Additional income was contributed by family members, as waged or, in the case of the females, non-waged earners. Their bargaining skills had been developed through their experience as hawkers – bargaining skills which they used to good effect to make contractual arrangements in business on terms favourable to themselves. The linkages they developed with members of the extended family provided a base for the continuing supply of extended family members or members of the clan, assisting with immigration formalities, passages and accommodation. Repatriation of profits reinforced these linkages. All of these aspects are characteristic of Lebanese immigrant entrepreneurs in New Zealand, as the case studies have shown. This chapter concludes that, despite their small numbers, the Lebanese entrepreneurs in the two family cases examined made a significant contribution to the development of the entrepreneurial culture in New Zealand, which until now has always been assumed to be an attribute developed by the dominant British migrant population. It is hoped that this study of Lebanese entrepreneurship will offer some insights into the contributions of a largely under-regarded minority, in the creation of this entrepreneurial culture. Notes 1. The first Sikh hawker was Bir Singh Gill, who came to New Zealand in 1890, and was an itinerant herbalist in the King Country (McGill, 1982). 2. A hawker is a person who travels around selling goods: similar to ‘huckster’, a pedlar. 3. In the 1951 Census there were 204 Lebanese; in 1976, 211; and in 2001, 408. 4. The origin of the Maronite sect is said to be derived from St Maron, the fifth-century hermit whose retreat on the Orontes provided the site for the Monothelites, the name being thus, as Gibbon says, ‘insensibly transferred from a hermit to a monastery, and from a monastery to a nation’. 5. Sanders (1980) records that New Zealanders referred to the Lebanese as ‘skypoos’. The origin is unknown, although it is a derogatory reference to the Lebanese. Other interviewees considered that it was just another name for Lebanese and not an expression of strong antagonism.

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References Akoorie, A. (2003), Personal Interview, 13 August, Aliquippa, Pennsylvania. Akoorie, M.E. and J. Scott-Kennel (2005), International Business Strategy: A New Zealand Perspective, Auckland: Pearson Education. Borrie, W.D. (1991), ‘Immigration to New Zealand: 1854–1938’, Australian National University, Canberra. Bouzaid, T. (1993), ‘Bouzaid Family History’, Bouzaid Family Reunion Committee 1992, Wellington. Brooking, T. (1985), ‘Tam McCanny and Kitty Clydeside – the Scots in New Zealand’, The Scots Abroad, Capital, Labour and Enterprise, London: Croom Helm. canterbury.cyberplace.org.nz. Manukau Cinemas sells Auckland cinemas to Village Force for Leaseback, accessed 10 October, 2005 at http://canterbury.cyberplace.org.nz/community/CAFCA/cafca97/october/ 97.html. Cantillon, R. (1755), Essai sur la Nature du Commerce en Général, ed. H. Higgs, reprinted London: Macmillan, 1931. Casson, M.C. (1982), The Entrepreneur: An Economic Theory, Oxford: Martin Robertson. Casson, M.C. (1990), Enterprise and Competitiveness: A Systems View of International Business, Oxford: Clarendon Press. Casson, M.C. (1995), Entrepreneurship and Business Culture: Studies in the Economics of Trust, Aldershot, UK and Brookfield, US: Edward Elgar. Cooper, M. (1996), Wines and Wine Makers of New Zealand, Auckland: Hodder Moa Beckett. Cooper, M. (2002), ‘A Family Affair’, Sunday Star Times, 3 November. Department of Internal Affairs (1948), ‘Register of Persons Naturalised in New Zealand before 1948’, microfiche. Enderwick, P. and M.E. Akoorie (1996), Fast Forward: New Zealand Business in World Markets, Auckland: Longman Paul. Farry, M. (2000), ‘An inquiry into the cultural identity of second and third generation “Lebanese New Zealanders”,’ unpublished PhD thesis, The University of Otago. Fedden, R. (1965), Syria and Lebanon, London: John Murray. Hawke, G.R. (1985), The Making of New Zealand: An Economic History, Cambridge: Cambridge University Press. Hitti, P. (1962), Lebanon in History, London: Macmillan. Hunter, I., P. Lineham and M. Wilson (2003), ‘The entrepreneurial immigrant: migration and enterprise in a colonial economy’, paper presented at the Business History and Europe Conference, University of Canterbury, 5–6 September. Knight, F.H. (1921), Risk, Uncertainty and Profit, Boston and New York: Houghton Mifflin. Macdonald, J.S. and L.D. Macdonald (1964), ‘Chain migration, ethnic neighbourhood formation and social networks’, Millbank Memorial Fund Quarterly, 42, 82–97. McGill, D. (1982), The Other New Zealanders, Wellington: Mallison Rendel. Mill, J.S. (1900), Principles of Political Economy, with Some of their Applications to Social Philosophy, London: Longmans, Green. Moodabe, M. (2005), ‘Moodabe Joseph Patrick 1899–1985; Moodabe Michael Joseph 1895–1975’, Dictionary of National Biography, updated 7 July 2005; accessed 1 October, 2005: http://www.dnzb.govt.nz/. Moore, K. and D.A. Lewis (1999), Birth of the Multinational: 2000 years of Ancient Business History, from Ashur to Augustus, Copenhagen: Copenhagen Business School Press. New Zealand Census of Population and Dwellings (1896–1936), Wellington: Government Printer. New Zealand Official Yearbooks (1897–1919), Wellington: Government Printer. Page, D. and J. Farry (1990), The Hawkers: A Family Story, Dunedin: Shinbone Aleey Press. Portes, A. (1995), ‘Economic sociology and the sociology of immigration: a conceptual overview’, in A. Portes (ed.), The Economic Sociology of Immigration, New York: Russell Sage Foundation. Ricardo, D. (1971), The Principles of Political Economy and Taxation, New York: Penguin (first published 1817). Roy, W.T. (1970), ‘Immigration policy and legislation’, in K.W. Thomson and A.D. Triln (eds), Immigrants in New Zealand, Massey University, Palmerston North. Salibi, K. (1993), A House of Many Mansions: The History of Lebanon Reconsidered; accessed 1 October 2005: http://almashriq.hiof.no/lebanon/900/902/Kamal-salibi/. Sanders, M.C. (1980), ‘The Lebanese community in Dunedin’, unpublished BA Honours thesis, University of Otago. Say, J.B. (1803), A Treatise on Political Economy: Or, the Production, Distribution and Consumption of Wealth, reprinted New York: Augustus M. Kelly, 1964. Schumpeter, J.A. (1976), Capitalism, Socialism and Democracy, London: George Allen Unwin. Scott, D. (1977), A Stake in the Country: Assid Abraham Corban and his Family 1892–1977, Auckland: Southern Cross Books. Simon, J. (1989), The Economic Consequences of Immigration, Oxford: Basil Blackwell.

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Simpson, T. (1997), The Immigrants: The Great Migration from Britain to New Zealand 1830–1890, Auckland: Godwit Publishing. Stone, R.C. (1973), Makers of Fortune, Auckland: Auckland University Press. Tabar, P. (2004), ‘Lebanese migrants in Australia and New Zealand: An Annotated Bibliography’, Lebanese Emigration Research Center and Notre Dame University, Louaize, Lebanon. Thomas, B. (1973), Migration and Economic Growth, 2nd edn, Cambridge: Cambridge University Press. Thomson, K.W. and A.D. Trlin (1970), ‘Immigrants in New Zealand’, Massey University, Palmerston North. Thornton, C.B. (1968), ‘The Lebanese, Chinese and Dutch communities in Dunedin City’, unpublished MA thesis, The University of Otago. Trlin, A. (1979), Now Respected, Once Despised: Yugoslavs in New Zealand, Palmerston North: The Dunmore Press.

PART VI COMPARATIVE STUDY

48 A comparative, exploratory investigation into the perceptions of internationalizing firms in Singapore and the UK1 Dave Crick and Léo-Paul Dana

Introduction A wide body of literature exists on the export behaviour of small and medium-sized enterprises (SMEs). Studies have addressed a number of issues associated with managers’ international business practices and, arguably, these have largely been from an exporting perspective. These have tended to involve issues such as the following: managers’ perceptions of their overseas competitiveness; motives for engaging in international activities; barriers in operating overseas; and export assistance requirements (see, for example, reviews such as Bilkey, 1978; Miesenbock, 1988; Aaby and Slater, 1989). Nevertheless, it might be argued that many studies have been country-specific, indeed, tending to originate in a limited number of countries, noticeably the US. Furthermore, studies have tended to assume that a homogeneous culture exists in particular countries and generalized from the findings. This seems peculiar, given that the economic contribution of certain ethnic groups has been shown to be substantially different from that of others in the same country (Dana, 1995, 1996; Ward, 1991). This observation provides an identified gap in the literature together with a rationale to support a need for researchers to undertake comparative work across countries to establish the generalizability of particular findings. It is, perhaps, not too difficult to understand why there is a relatively limited body of knowledge pertaining to cross-national studies of this nature. For example, studies need to address a number of cross-cultural methodological issues surrounding emic versus etic factors (Usunier, 1996; Vijver and Leung, 1997). These include accounting for a whole host of issues ranging from cultural differences among respondents that might affect the phrasing of questions, through to industry-specific factors that might vary across countries, making the standardization of structured survey instruments difficult. Added to this is the need to develop collaborative arrangements with researchers in other countries in order to facilitate the cross-national research process. This chapter reports on a comparative, exploratory investigation into the perceptions of internationalizing firms in Singapore and the UK. The two countries were chosen since they reflect relatively developed countries in the East and West, respectively, but with a variety of sub-cultures existing within them. Additionally, the UK and Singapore have similar legal frameworks for enterprise, since the latter was a colony of the former. Furthermore, even after Singapore’s independence, the island continued to be heavily influenced by its mother country. For example, Dana (1987, 1992) addressed the utility of comparing nations with historical ties, such as Singapore and the UK, and observed that, until the UK’s entry into the EEC, Singapore relied most heavily on the UK for trade. This exploratory study therefore provides a contribution to the knowledge in the area of 783

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cross-cultural international entrepreneurial research and builds on the body of literature that exists on the topic of internationalizing firms. Background A wide body of knowledge exists on the broad issue of entrepreneurship within ethnic minority-owned firms although their activities in overseas markets have received far less attention to date. Three main theories have been put forward in existing studies to explain ethnic entrepreneurship (see Yoon, 1991, for a review, and Dana, 1997, for a more recent critique): the theory of middleman minorities, ethnic enclave theory and reactive cultural theory. The theory of middlemen minorities suggests that ethnic enterprise arises out of an orientation towards the country of origin and hostility from a native population. Within this, businesses will rely to some extent at least on suppliers from the ‘majority’ (usually white in the context of studies) and serve ‘minority’ customers. Production will tend to rely on finance from ethnic sources and family labour (Bonacich, 1973, 1987). Ethnic enclave theory suggests ethnic enterprise is a self-generating process, in so far as ethnic enterprise can act as a training system for new entrepreneurs through employment in current enterprises, the facilitation of network linkages and a growth in ethnic business institutions. Consequently, the ethnic enclave that develops can support local institutions and generate a network for informal communication that may lead to market opportunities; it also potentially provides community role models to encourage entrepreneurship (Aldrich et al., 1989; Bailey and Waldinger, 1991; Waldinger, 1989; Wilson and Portes, 1980). Reactive cultural theory suggests that ethnic enterprise is a reaction to historic and racialized labour market discrimination. Here, members of the immigrant population are forced to adopt marginal niches in the economy, using factors like sources of rotating credit from the ethnic community to assist them. In turn, this provides a means of upward social mobility (Light, 1972, 1980; Nowikowski, 1984). In the context of the investigation reported upon in this chapter, it must be recognized that all three theories are incomplete and in some cases lacking in explanatory power. Even so, they do enable the study to be placed in the context of a theoretical background that supports the assertion that cross-national studies should not treat countries as homogeneous, but rather recognize the existence of sub-cultures within them. The theories highlight potential affects on managerial strategy. Specifically, ethnic entrepreneurs may obtain a competitive advantage because of a number of factors. These involve sources of firms’ human and financial resources, markets served, effectiveness of ethnic networks and the potential effects discrimination has on strategic decisions. Ram and Hillin (1994), in a study conducted in the UK, pointed out that the unwillingness or inability of ethnic minority entrepreneurs to obtain business from outside the local ethnic community is a potential major constraint on business viability in the long term. They suggest that a need exists for firms to ‘break-out’ and tap into ‘majority’ markets. This argument is extended by Crick and Chaudhry (1996), who point out that ‘break-out’ might be either within the UK or overseas in order to sustain business in the longer term. In terms of cross-national studies, it might be the case that the particular environmental constraints within individual countries affect minority-owned firms in different ways, thus affecting their ability to ‘break out’ of local niches.

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Literature review In reviewing the literature concerning firms’ overseas business activities, several issues can be identified which have received a considerable amount of interest in previous studies, particularly from an exporting perspective. Consequently, each is considered in turn, and these involve, first, managers’ perceptions of their overseas competitiveness; second, motives for engaging in international activities; third, barriers in operating overseas; and fourth, assistance in overcoming the same obstacles. Competitiveness A review of the literature suggests that a wide body of knowledge exists on the issue of firms’ competitiveness in overseas markets (Styles and Ambler, 1994; Katsikeas, Piercy and Ioannidis, 1996; Crick and Bradshaw, 1999). Nevertheless, when considering the issue of competitiveness, it is apparent that a single agreed measurement does not exist; also, there has been an overlap between the measures and sources of the competitiveness. Within the overall ‘success’ literature, Buckley, Pass and Prescott (1988, 1990), suggest that, not only do problems exist at the unit of analysis, that is, in studies at the national, industry and firm levels, but there is also a relationship among a number of factors associated with success. To illustrate this, they suggest that any measure should incorporate not only the performance itself, but also the process by which it was achieved and the potential for future success within the firms. Therefore, both measures and sources of performance are important and these may vary across countries. Indeed, this also links in with other issues such as motives for internationalizing. For example, in the case of Singapore, Elliot and Krasnostein (1988) found that the presence of foreign competitors encouraged local firms to internationalize, in order to keep up with the competition. In terms of the measures of performance, arguably, two groups of studies can be identified from the existing literature to act as a basis for differentiating between successful and less successful firms. First, an approach has been to identify a set of criteria, from a review of the literature, and use these to distinguish between successful and less successful firms based on subjective cut-off points in the data under investigation (see, for example, Reid, 1989; Samiee and Walters, 1990; Das, 1994). Crick et al. (1994) suggest that such issues include firms’ export ratios, profitability and growth. Unfortunately, such criteria do not determine the objectives of specific managers (Cavusgil and Zou, 1994; Katsikeas et al., 1996) and therefore assumptions about performance are to some extent imposed on the data set. In the second group of studies, a predetermined group of firms that have been judged as successful by an independent body such as the Queen’s Award Committee are used as the sampling frame (Cunningham and Spigel, 1971; Michell, 1979; Styles and Ambler, 1994). However, problems exist in establishing the credibility of the selection criteria of the particular award. Indeed, whether firms meet all or just part of the overall criteria and therefore on what basis they have been judged to be successful. Additionally, whether particular awards provide a long-term indicator of success (Crick and Bradshaw, 1999). In short, both measures and sources of performance have received attention in existing studies and debate exists in the literature on the merits of approaches that have been taken suggesting that any approach will be subjective and open to criticism.

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Motives for exporting Arguably, exporting can be seen as an entrepreneurial activity. For example, Denis and Depelteau (1985) suggest that firms internationalize in order to reduce the risk of depending on a domestic market. Various issues have been identified in previous studies as providing motives for firms to engage in overseas activities. Furthermore, these have also been grouped in particular ways in order to classify them under broad headings. For example, Katsikeas and Piercy (1993) categorized these motives into certain broad areas: decisionmaker characteristics, firm-specific factors, environmental factors, firm characteristics and ongoing export motives. Alternatively, using the term ‘change agents’ to categorize various motives for exporting (Bilkey, 1978), these can be either internal or external to the firm (Wiedersheim-Paul et al., 1978), or they can be classified as being either proactive or reactive in nature (Czinkota, 1982). Using the internal and external classification system, Katsikeas and Piercy (1993) provide a summary of factors, which have been found in previous studies to motivate firms to export. Starting with internal motives, these include the accumulation of capital, the ability to use skills, differential firm advantages, available production capacity, accumulated unsold inventory, the availability of personnel, long-run stability of sales and economies resulting from additional orders. Turning now to external, environmental factors affecting firms’ motives for exporting, these include tax incentives, foreign country regulations, the availability of foreign market information, increased domestic competition, export promotion programmes, profit and growth opportunities abroad and unsolicited orders from abroad. Barriers to exporting A review of the literature suggests that previous studies have tended to treat terms such as ‘barriers’, ‘obstacles’ and ‘problems’ as somewhat interchangeable. Even so, classifications have been adopted in which various perceived exporting problems can be categorized (see, for example, Sharkey, Lim and Lim, 1989; Katsikeas, 1994; Katsikeas and Morgan, 1994; Kaleka and Katsikeas, 1995; Leonidou, 1995; Bell, 1997). Katsikeas and Morgan (1994) identified several broad areas, namely external problems, operational problems, internal problems and informational problems. However, more recent work (Kaleka and Katsikeas, 1995) developed a classification put forward by Leonidou (1995). They termed the areas as follows internal-domestic problems, internal-foreign problems, external-domestic problems, external-foreign problems and exporting problems and level of export development. First, internal-domestic problems are issues within the firm, which are experienced in its domestic country base. These include lack of personnel qualified in export marketing activities, poor organization and formalization of firms’ export departments, insufficient production capabilities, lack of managerial time, management emphasis on developing domestic market activities and aversion to risk. Second, internal-foreign problems are those that are within the firm, but are experienced in foreign markets. Examples of these include high transportation costs, transportation difficulties, difficulties in meeting product specifications of overseas customers, providing technical support and after-sales service, payment problems and delays, limited knowledge of market intelligence to research foreign markets and risks and costs in selling abroad.

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Third, external-domestic problems are those that arise from the external environment, but are experienced within the domestic market of the firm. Examples include the complexity of paperwork involved in exporting, the high cost of capital to finance exports, the lack of government assistance in overcoming export barriers and the lack of attractive export incentives and inadequate promotion programmes provided by the government. Fourth, external-foreign problems are those arising from the external environment, and experienced in a foreign market. Examples include restrictions imposed by foreign government rules and regulations, lack of information about foreign markets, difficulty in making foreign market contacts, including intermediaries, intensity of the competition, language and cultural differences, lack of competitive prices, high value of the domestic currency and unethical business requirements, such as bribery. Fifth, differences exist between firms at particular stages of export development in relation to both perceived and actual problems, although criticisms exist concerning internationalization theory (Turnbull, 1987). At the very basic level of internationalization stages, Leonidou (1995) found differences between exporters and non-exporters, while Kaleka and Katsikeas (1995) found differences between regular and sporadic exporters. Assistance requirements A number of studies have been undertaken on the broad subject of export assistance, particularly in relation to overcoming some of the previously identified perceived and actual barriers to exporting. Even so, since trade policy is regulated by international bodies such as the WTO and placed within governments’ budgetary constraints, there is only so much they can do to assist exporters. Some agencies in particular countries have been perceived as more effective than in others (see publications reviewing particular initiatives and agencies; for example, Hibbert, 1990; Seringhaus and Rosson, 1990). Indeed, Elliot and Krasnostein (1988) found that Singaporean firms do internationalize as a result of Singaporean government incentives. However, in comparative studies in line with the investigation reported in this chapter, it is important to recognize that different government assistance will be available to firms in specific countries in order to assist their competitiveness and provide motives for engaging in overseas activities, and for overcoming obstacles. Research focus The review of the literature highlighted that there are a number of factors that have been identified by previous studies as playing a major part in firms’ overseas activities, particularly from an export perspective. However, when placed within the background context outlined for this study, it was also identified that a limited amount of knowledge pertains to cross-national studies where the practices of sub-cultures within the population are specifically considered. This identified gap in the literature is addressed in this exploratory investigation, although this is only based on a two-country study. This study involves a comparative, exploratory investigation into the overseas activities within a sample of firms in Singapore and the UK. This study sought to expand on previous research into the practices of SMEs in overseas markets by offering comparative empirical data from firms in two relatively developed markets in the East and West, respectively, each with firms owned and managed by

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executives from particular sub-cultures. Four issues were specifically investigated in this study after reviewing the literature. First, managers’ perceptions of their overseas competitiveness; second, motives for engaging in international activities; third, perceived barriers in operating overseas; and fourth, assistance in overcoming the same obstacles. The aim of this study was not to generate and test hypotheses, since the exploratory nature of the cross-cultural research made this difficult to place within a positivistic methodological framework. Instead, the aim was to explore whether differences existed between the subcultures within the two countries and, if so, to identify reasons to support this possibly being the case. Method A questionnaire was developed after reviewing the literature and subsequent discussions with both managers and academics considered knowledgeable in the field of research. In establishing the appropriate methodological approach towards gathering the data within this investigation, it was originally considered ideal to obtain a matched sample that exhibited firms with varying background characteristics and levels of performance within the two countries. It was, however, apparent, on the basis of previous experience of one of the researchers who was located in Singapore, that the identification of ‘suitable’ firms, and more particularly the subsequent facilitation of their responses, would prove difficult. The idea of using a matched sample was therefore abandoned. Instead, it was decided that a more suitable way to proceed would be to gather data from managers of SMEs,2 using a non-random methodological approach. International business seminars were provided for managers of SMEs in Singapore, by one of the authors. These firms had a common basis for attending; that is, they had limited overseas business activities and were committed to overseas activities. Despite some firms having a number of years of overseas business experience, their actual international business activities were nevertheless low. The profile of the course suggested it contained an ethnic mix indicative of local managers. Furthermore, they were involved in a number of different industry sectors and operated in a range of overseas markets. Thus these executives provided a sampling frame that was purposefully diverse in coverage, albeit rather small in overall terms. The study recognized that trade sectoral issues may affect some firms (Boter and Holmquist, 1996), and this was discussed with managers in the qualitative element of the study. Allowing for potential bias using key informants (Phillips, 1981), it was a requirement to complete an anonymous questionnaire as part of the seminar in order to generate a suitable number of responses for later statistical analysis. The seminar was used as a focus group to explore issues in a discursive manner and follow-up interviews were also undertaken. The quantitative, comparative UK data were gathered via a similar seminar run in the other researcher’s institution. The characteristics of this group were similar to the overall profile described for the Singapore firms. Supplementary qualitative data were gathered in the same manner as those of the firms in Singapore. This enabled the sample conditions to remain somewhat consistent, although certain background characteristics of firms would not be evenly matched. For example, while the percentage of firms employing particular numbers of staff was consistent with the Singapore sample, other issues were not comparable. This was, to some extent, unavoidable, owing to the types of firms interested in the seminar. In particular, the data indicate differences in the ethnic mixes; this reflects the

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different proportions of sub-cultures prevalent in the respective countries. Nevertheless, while the overall sample profiles reflect a problem in the ability to generalize from the results, the approach described must be viewed in the context of the identified difficulties in obtaining samples in cross-national, comparative studies of this nature. The exploratory nature of this investigation must therefore be emphasized. Findings In presenting the comparative, quantitative empirical findings in this chapter, the Mann Whitney test was used as a widely accepted non-parametric analysis technique for relatively small uneven sample sizes (Diamantopoulos and Schlegelmilch, 1997). When interpreting the results, firms’ mean responses are detailed for both ethnic groups within the SMEs in Singapore and the UK. The Chi Square result and significance are also provided to establish whether significant statistical differences exist between the groups in relation to the issues under investigation. An asterisk indicates a statistical difference at the 95 per cent level in the respective tables. It was considered useful to establish whether firms differed in their perceived measures of performance overseas. The findings in Table 48.1 provide a comparison of the groups of firms’ perceptions in relation to their performance against objectives regarding four specific issues. Two of the four issues exhibited statistical differences, namely, overseas market share where Singaporean firms believed themselves to have performed better than their UK counterparts, while the reverse was true for overseas profitability. Therefore, some bias was apparent from the results in the investigation as regards firms not being a matched sample in relation to performance overseas and this should be reflected in generalizations that arise from the study. Indeed, it once again emphasizes the need for the study to be considered as exploratory. Turning now from the measures of performance to the sources of performance, Table 48.2 summarizes the data in relation to firms’ competitiveness in overseas markets. Statistical differences were found to exist in seven of the 28 items of competitiveness. Looking now at the findings in a little more detail, after-sales service, overseas market/ marketing knowledge, government assistance received and management commitment were rated lower by the Singaporean firms than by the UK firms. The reverse was true for personal contact with overseas intermediaries, value of currency and network of social contacts (non-business). A number of differences were observed among the ethnic groups, although, in overall terms, Asian Chinese tended to rate most items higher than Asian Other among the Singapore firms. Interestingly, among the UK firms, the Asian firms tended to rate most items higher than the white-owned firms. Looking now at firms’ motives for engaging in overseas sales, the results are found in Table 48.3. Statistical differences were found to exist between the two groups in respect of 11 of the 24 items. Firms in Singapore were clearly more motivated by a number of issues in comparison to the UK firms: competitive pressures, declining domestic sales, economies of scale from additional orders, attractive government incentives, national export promotion programmes, favourable currency movements, new information about sales opportunities overseas, opportunity to increase the number of markets and reduce market-related risk, favourable product regulations in target markets, potential for extra growth resulting from serving overseas markets, and encouragement from contacts in social networks. The reverse was true for encouragement by agents/distributors. A number of differences were

790

Notes:

3.38 3.50 3.25 3.37

Asian other

Singapore firms

3.73 3.93 3.80 1.60

Asian

Rating scale:1
very badly, 5
very well; * indicates a statistical difference at the 95 per cent level.

3.50 3.50 2.88 2.63

Asian Chinese

Firms’ perceptions of performance

Overseas sales volume Overseas sales growth Overseas profitability Overseas market share

Performance

Table 48.1

3.29 3.35 4.17 1.71

White

0.903 2.312 8.394 18.426

Chi-Square

UK firms

0.825 0.510 0.039* 0.000*

Sig

791

Notes:

3.50 3.12 3.50 3.62 3.75 3.50 3.50 3.37 3.71 3.38 3.25 3.62 3.25 3.50 3.50 3.57 2.88 3.25 2.86 3.43 3.25 3.38 3.25 3.87 3.50 3.42 3.63 3.50

Asian other 3.85 4.46 3.92 4.20 4.21 4.13 4.20 3.73 3.14 4.20 4.53 3.57 3.53 3.71 2.53 3.73 3.29 4.20 2.93 3.27 2.40 2.23 4.47 4.60 4.20 3.50 2.79 3.27

Asian 3.41 4.05 3.47 3.88 3.70 3.71 3.88 3.88 3.12 3.65 4.35 3.29 3.00 3.82 3.06 4.18 3.00 4.06 2.94 3.76 2.29 2.06 4.31 4.25 3.82 3.68 3.12 2.49

White

Rating scale:1
major disadvantage, 5
major advantage; * indicates a statistical difference at the 95 per cent level.

3.00 2.87 3.25 3.50 3.75 3.87 3.75 3.38 4.12 3.57 3.63 4.25 3.13 2.88 3.50 3.13 3.50 3.63 3.25 3.71 3.50 3.29 3.50 3.63 3.12 3.50 3.12 3.50

Asian Chinese

Singapore firms

Firms’ perceived competitive advantages/disadvantages in overseas markets

Language skills After-sales service Meetings customers’ specifications Production method/technology Product quality/control New product development Range of products Personnels’ experience & training Operating efficiency Importers’ distribution network Overseas market/marketing knowledge Company reputation Promotional efforts Assessment of overseas market developments Personal contact with overseas intermediaries Proximity to overseas market Product uniqueness/tailored product Price competitiveness Meeting delivery dates Extended credit Negotiation skills Value of currency Government assistance received Management commitment Personal visits to the market Technical sophistication of products Willingness to enter collaborative arrangements Network of social contacts (non-business)

Issue

Table 48.2

2.999 12.324 2.497 4.284 2.657 3.163 4.497 2.461 6.502 3.051 9.636 4.883 1.626 5.167 8.076 4.547 1.246 4.131 0.704 3.025 7.537 9.288 9.270 8.900 5.908 0.823 3.892 8.026

Chi-Square

UK firms

0.392 0.006* 0.476 0.232 0.448 0.367 0.213 0.482 0.090 0.384 0.022* 0.181 0.654 0.160 0.044* 0.208 0.742 0.248 0.872 0.388 0.057 0.026* 0.026* 0.031* 0.116 0.844 0.273 0.047*

Sig

792

Firms’ motives for international activities

Notes:

3.86 2.57 2.29 2.33 3.50 3.67 3.57 3.42 4.00 3.86 3.50 2.86 3.66 2.71 2.57 3.16 2.71 2.43 4.29 3.13 3.25 3.25 4.00 3.75

3.75 3.37 3.13 3.63 3.25

Asian other

3.63 2.38 3.37 2.88 3.25 3.00 2.38 3.00 3.50 3.75 2.37 3.13 4.00 3.75 3.50 4.13 4.12 4.00 3.63

Asian Chinese

Singapore firms

2.21 2.42 4.47 1.86 3.13

1.31 2.00 1.62 2.23 2.08 3.62 3.92 3.71 3.61 3.08 2.75 3.31 1.50 1.69 1.77 2.84 2.08 3.23 2.50

Asian

Rating scale:1
major disadvantage, 5
major advantage; * indicates a statistical difference at the 95 per cent level.

Competitive pressures Over production Declining domestic sales Excess capacity Saturated domestic market Exclusive information Managerial aspirations Unique products Profit advantage Marketing advantage Historical customer ties Unsolicited orders from overseas Economies of scale from additional orders Attractive government incentives National export promotion programmes Favourable currency movements New information about sales opportunities overseas Reduction in tariffs Opportunity to increase number of markets and reduce marketrelated risk Favourable product regulations in target markets Initiation of overseas business by domestic competitors Encouragement by agents/distributors Potential for extra growth resulting from serving overseas markets Encourangement from contracts in social networks i.e. non-business

Motive

Table 48.3

2.19 2.62 4.35 2.41 3.53

1.41 1.94 1.41 2.53 2.52 3.35 3.18 3.88 3.70 3.00 2.35 3.35 1.76 1.82 2.12 2.65 2.12 3.82 2.53

White

10.482 4.371 13.478 17.854 3.153

28.091 2.207 16.259 1.840 7.551 3.232 6.685 4.166 0.583 5.365 4.109 1.333 21.233 14.433 10.052 9.717 12.621 7.518 9.900

Chi-Square

UK firms

0.015* 0.224 0.004* 0.000* 0.369

0.000* 0.531 0.001* 0.606 0.056 0.357 0.083 0.244 0.900 0.147 0.250 0.721 0.000* 0.002* 0.018* 0.021* 0.006* 0.057 0.019*

Sig

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observed among the ethnic groups, but these were somewhat mixed and it was difficult to generalize in an overall sense. Turning to firms’ perceived barriers to engaging in overseas sales, the results are detailed in Table 48.4. Nine of the 24 items were found to exhibit statistical differences. Noticeable differences were evident between the groups where those in Singapore rated a number of issues highly. These were inability to offer competitive prices abroad, inability to offer technical/after-sales service, untrained export staff, keen competition in foreign markets, lack of adequate foreign distribution channels, lack of managerial personnel/time, limited information to locate/analyse foreign markets, red tape in public bodies and difficulty in obtaining insurance. However, perhaps more important was the relatively low rating in aggregate terms of all the items by the firms in the UK, that is, in comparison to Singapore firms’ rating above the mid-point on the rating scale. A number of differences were observed among the ethnic groups, although they were rather mixed and it was again difficult to generalize in overall terms. Finally, firms’ perceptions of their assistance requirements in overcoming the same barriers were compared and the results are detailed in Table 48.5. Ten of the 24 items exhibited statistical differences. Clear differences were again evident between the groups. Singapore firms rated a number of items higher than UK firms. These were difficult handling of documents/procedures, difficult to locate/obtain adequate representation, imposition of high tariff barriers, inability to offer competitive prices abroad, inability to offer technical/after-sales service, untrained export staff, keen competition in foreign markets, lack of government assistance/incentives, limited information to locate/analyse foreign markets and red tape in public bodies. A number of differences were observed among the ethnic groups, although it was once again difficult to generalize from the findings. Discussion The findings from the qualitative element of the study provided some interesting supplementary data to support the statistical findings. Questions put to respondents explored the themes in the questionnaire and allowed managers to account freely for perceptions in their own words. Owing to space limitations in this chapter, the issues are presented in a broad sense since the use of case studies would not be possible. Firms in Singapore In Singapore, ethnic-Chinese comprise the majority of the people, while the descendants of immigrants from India are a minority, amounting to less than 10 per cent of the population. While the ethnic-Chinese are Buddhist, Taoist or Christian, those of Indian descent are either Hindu or Muslim. Interesting similarities and differences exist among these ethnic groups. Both the ethnic-Chinese and Indian communities in Singapore report that they rely heavily on co-ethnics, with whom they share a common language and culture. Respondents from both ethnic origins claimed that internationalization was facilitated by vast networks abroad. We must distinguish, however, between two different types of networks. The first organized body of Indian businessmen in Singapore dates back to 1924. Its successor, the Singapore Chamber of Commerce and Industry, counted about 600 members in 2001. To encourage investment in India, the Chamber established and manages its own enterprise, Paramewara Holdings Limited. Similarly, the Chinese Chamber of Commerce,

794

Notes:

2.85 3.57 2.85 2.57 3.14 2.86 3.29 3.71 3.57 3.00 2.85 3.14 2.86 3.57 3.14 2.71 3.43 3.14 3.57 3.00 3.86 3.57 3.00 2.71

Asian other 2.50 2.79 3.07 2.85 3.14 2.29 2.57 2.50 2.21 1.50 1.38 1.46 2.93 1.86 2.07 2.29 1.86 2.92 1.86 2.57 2.71 2.36 2.21 1.79

Asian

Rating scale:1
none at all, 5
to a large extent; * indicates a statistical difference at the 90 per cent level.

3.51 3.50 3.75 3.29 3.25 3.25 3.13 3.38 3.37 3.13 3.00 2.75 3.13 3.50 3.75 3.12 3.63 3.25 3.38 3.50 3.63 3.00 3.00 2.63

Asian Chinese

Singapore firms

Firms’ perceived barriers to operating in international markets

Different foreign customer attitudes Different product standards/specs Difficult to understand business practices Difficult/slow collection of payments Difficult handling documents/procedures Difficult to locate/obtain representation Existence of language/communication problems High risks/costs in selling abroad Imposition of high tariff barriers Inability to offer competitive prices abroad Inability to offer technical/after-sales service Untrained export staff Insufficient production capacity Keen competition in foreign markets Lack of adequate foreign distribution channels Lack of government assistance/incentives Lack of managerial personnel/time Shortage of capital to finance overseas business Limited information to locate/analyse foreign markets Transport/high shipping costs Restrictions imposed by foreign rules/regulations Unfavourable exchange rate Red tape in public bodies Difficulty in obtaining insurance

Barrier

Table 48.4

2.64 2.53 3.29 3.05 2.76 2.31 2.47 2.41 2.41 2.11 1.71 1.82 2.71 2.11 2.82 2.50 2.65 2.41 1.82 2.71 2.82 2.41 1.71 1.65

White 3.958 6.038 2.525 1.251 0.987 6.694 3.373 6.315 6.690 12.866 15.855 14.514 0.802 16.593 9.718 3.592 12.519 3.636 18.874 3.048 4.912 5.637 8.968 9.382

Chi-Square

UK firms

0.266 0.110 0.471 0.741 0.804 0.082 0.338 0.097 0.082 0.005* 0.001* 0.002* 0.849 0.001* 0.021* 0.309 0.006* 0.304 0.000* 0.384 0.178 0.131 0.030* 0.025*

Sig

795

3.43 3.57 2.57 2.85 2.86 3.00 3.00 3.43 3.50 3.14 3.15 2.86 2.71 3.43 3.14 3.29 3.00 3.67 3.57 3.29 3.71 3.29 3.57 2.50

2.36 2.43 3.00 2.50 2.50 1.92 2.14 2.93 1.50 1.50 1.49 1.23 1.79 1.64 2.00 1.43 1.54 2.57 1.71 2.57 2.43 3.14 2.07 3.31

Asian

Notes: Rating scale:1
none at all, 5
to a large extent; * indicates a statistical difference at the 95 per cent level.

3.13 2.50 3.25 3.50 3.75 3.50 2.75 3.38 3.12 2.75 2.50 2.50 3.00 2.63 2.88 3.25 2.63 2.88 2.75 3.25 3.50 3.43 3.75 2.43

Asian other

Singapore firms Asian Chinese

Firms’ perceptions of areas in need of assistance

Different foreign customer attitudes Different product standards/specs Difficult to understand business practices Difficult/slow collection of payments Difficult handling documents/procedures Difficult to locate/obtain representation Existence of language/communication problems High risks/costs of selling abroad Imposition of high tariff barriers Inability to offer competitive prices abroad Inability to offer technical/after-sales service Untrained export staff Insufficient production capacity Keen competition in foreign markets Lack of adequate foreign distribution channels Lack of government assistance/incentives Lack of managerial personnel/time Shortage of capital to finance overseas business Limited information to locate/analyse foreign markets Transport/high shipping costs Restrictions imposed by foreign rules/regulations Unfavourable exchange rates Red tape in public bodies Difficulty in obtaining insurance

Issue

Table 48.5

2.24 2.50 2.71 2.65 2.12 1.88 2.35 2.59 2.47 1.71 1.65 1.53 2.29 1.82 3.06 1.76 2.41 2.47 1.88 2.88 2.65 2.35 1.71 2.94

White 5.521 4.093 1.370 3.958 9.550 12.857 3.518 2.539 12.328 13.033 14.547 17.368 6.826 12.677 7.181 18.361 7.656 3.681 11.149 1.933 5.559 4.153 17.108 3.209

Chi-Square

UK firms

0.137 0.252 0.713 0.266 0.023* 0.005* 0.318 0.468 0.006* 0.005* 0.002* 0.001* 0.078 0.005* 0.066 0.000* 0.054 0.298 0.011* 0.587 0.135 0.245 0.001* 0.361

Sig

796

Handbook of research on ethnic minority entrepreneurship

and various Chinese clan associations, have encouraged investment in China. Our findings support the research reported in Brown (1995), suggesting that networks have been critical to the internationalization of Chinese entrepreneurs. The case of Indians in Singapore is somewhat different. These respondents typically mentioned ‘social’ networks in Malaysia and in the Indian subcontinent. In contrast, the ethnic-Chinese respondents emphasized ‘business’ networks of overseas associates, who often traced their origins to the same area of China, and who spoke the same dialect. While the ethnic-Chinese and Asian Indians both have ethnic networks, we would like to underline some distinctive differences. Historically, in Singapore, Chinese clan associations were central to the development of business networks, with dialects being the common denominator among members. The Hokkiens are the largest linguistic group in Singapore. They originate in Fujian and speak Minnanhua. Fujian, the province in China with the largest representation in Singapore, is also home to Foochows (speaking Fuzhouhua), Henghuas (speaking Xinghuahua) and Hokchias (speaking Fuquinhua). A smaller group of Cantonesepeople (speaking Guangzhouhua) and Teochews (speaking Chaozhouhua) came to Singapore from Guang Dong. In addition, Hainanese immigrants (speaking Hainanhua) came from Hainan Island. Hakkas (speaking Kehua) came from Fujian and Guang Dong. In recent years, Singapore’s youth has given diminished importance to networking based on dialects. Among Indian entrepreneurs in Singapore, religion (not dialect) has been the determinant of networks. The Chettiar Temple, for instance, came to be the economic hub, with God Murugan presiding at every business meeting. In contrast to ethnic-Chinese respondents in this study (who tended to steer conversations away from the topic of religion), Indian participants tended toward an outward display of religious orthodoxy. The same was found by Saroja (1994). Given the quantitative finding that Indian respondents reported a higher perceived risk in exporting than did the ethnic-Chinese, we asked participants to elaborate on this. Although both groups claim to rely on networks, it seems that the Chinese networks are more likely to include business partners with equity participation and sharing risks. Respondents of Indian origin explained that they relied on social networks of friends rather than business partners, and friends do not share risk. Most of the Singaporean firms represented in this study had been involved in international business prior to the 1997 Asian Crisis, and many of these distinguished between the state of affairs before July 1997 and the changes that took place after that date. Entrepreneurs of Indian origin complained that a strong Singapore dollar, during the crisis, reduced their competitiveness in Malaysia, where the currency tumbled. Several ethnic-Chinese entrepreneurs explained that they lost their distribution channels in Indonesia, during the racial riots of 1998. However, most of the ethnic-Chinese respondents who were in business during the crisis claimed that they did reasonably well. They explained that this was possible thanks to their developed markets in the United States, as well as in China and Taiwan (where the crisis had less impact than elsewhere). Some argued that they were hardly affected by the crisis, thanks to their focus on ‘markets where Confucianism prevailed’, reducing the effects of the crisis. Some ethnic-Chinese respondents, in Singapore, were keen to discuss the hardships associated with the need for bribery in several countries, including Cambodia, China and Vietnam, but ethnic-Chinese and Indian respondents alike explained that they were forced

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to internationalize their firms in order to survive in Singapore’s small and saturated domestic environment. Firms in the UK It was evident that the UK firms had achieved three of their performance objectives and their marginal presence in overseas markets accounted for the low rating in respect of their market share. In comparison, overseas sales volume, growth and profitability were all viewed as acceptable given their limited involvement internationally. A cultural issue between respondents related to profitability, whereby white managers were far more likely to discuss this than were Asian managers; therefore this may account for the statistical differences in this respect. Survey instruments must therefore take special care in the framing of questions relating to profitability when dealing with Asian managers because of a cultural predisposition to avoid answering such issues. Turning now to the sources of firms’ competitiveness in respect of their performance, it was evident that Asian managers were far more likely to take advantage of the use of networks than white managers were. Indeed, this involved both business and nonbusiness networks, and particularly in respect of their importers’ distribution network. This was evidenced by the types of markets served by the Asian firms, typically East Africa and the Indian subcontinent. This compared to mainly European markets for the white managers. It was also interesting to observe, from the discussions, Asian managers’ greater likelihood to visit overseas markets, and this sometimes coincided with vacations to see relatives in the markets served. In terms of motives for exporting, it was evident that both the Asian and white firms were strongly influenced by intermediaries such as agents and distributors, although differences existed according to where these were based, owing to the previously described preferences for particular markets. There was a clear link with historical ties to certain markets through their country of origin. A noticeable difference was observable in the market-servicing strategy between the two groups. Whereas Asian firms tended to concentrate on the domestic market, their overseas sales were typically focused on a few key markets. This contrasted with the white firms who also concentrated on the domestic market, but also spread their overseas sales over a number of markets (typically European) rather than focusing on a few key ones. The poor attitude of both groups of firms in respect of government assistance was of particular interest. A key difference was apparent where the Asian managers were noticeably reluctant to try outside assistance and were therefore perhaps not in a position to say how much it might help motivate overseas sales, whereas the white firms would try it but thought it was of not much help. Turning now to the two groups of firms’ perceived barriers in overseas activities, it must be recognized that both groups of managers had relatively little international business experience and therefore their ability to comment actively on obstacles was somewhat restricted. The interviews determined that this had largely affected the quantitative findings, with most being below the mid-point on the rating scale. However, it was established that the value of sterling and its affect on competitiveness was a major concern to both groups of firms. This had largely affected their ratings in respect of the need for assistance, since managers could not specify what help they needed since they were, largely, unaware of what problems needed to be addressed. This was, of course, apart from obvious issues such as factors leading to competitiveness like the value of sterling.

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Interestingly, however, the two groups in the UK differed on the approach assistance should take. Asian managers were more keen to obtain assistance from their cultural networks such as banks and the like who they believed had a cultural affinity to their operations. This contrasted with the white firms who were not bothered about where assistance was sourced, but rather that it should better address their needs. For example, more precise assistance should be offered to individual firms that were inexperienced as a ‘hand-holding’ exercise to familiarize them with the mechanics of overseas trade. This had been a major influence on their decision to attend the seminars from which they were drawn. Avenues for further research This chapter has reported on a comparative, exploratory investigation into the perceptions of internationalizing firms in Singapore and the UK as a first step towards addressing an identified gap in the literature, namely, the limited amount of knowledge with respect to cross-cultural studies. Specifically, it focused on four issues: first, managers’ perceptions of their overseas competitiveness; second, motives for engaging in international activities; third, barriers in operating overseas; and fourth, assistance in overcoming the same obstacles. Analysis using a non-parametric technique, because of the small uneven sample sizes, established that a number of statistical differences exist between the groups of managers in relation to all four areas under investigation. The findings provide a contribution to the knowledge in the area of cross-cultural international entrepreneurial research, where the sub-culture issue has been relatively neglected, and build on the body of literature that exists on the topic of internationalizing firms. In taking this exploratory study further, a number of avenues are open to researchers. In the first instance, it is important that large-scale surveys be undertaken to ensure that statistical techniques such as LISREL can be employed to enable more sophisticated numerical associations to be found among the data. This said, however, studies might also want to employ a qualitative methodological approach to ascertain the underlying reasons behind the statistical data reported in this chapter. This might be undertaken on a longitudinal basis to determine whether attitudes change over time: for example, as barriers are broken down by the harmonization of trade policies and the introduction of technology such as the Internet. Furthermore, investigations might focus more on particular cultures within countries, especially the managers from the ethnic backgrounds reported upon in this chapter. Finally, cross-national comparisons might be undertaken concerning managers in other countries and this study provides a basis on which collaborative research may be undertaken between researchers in the East and West. Notes 1. This paper was first published in Marian V. Jones and Pavlos Dimitratos (eds) (2004), Emerging Paradigms in International Entrepreneurship, Cheltenham, UK and Northampton, MA, USA: Edward Elgar Publishing, pp. 319–42. 2. There is a large body of knowledge that discusses the definitions and characteristics of SMEs (see, for example, Storey, 1994). This study uses the criterion of 250 employees to categorize SMEs; arguably, this is in line with a number of other studies.

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References Aaby, N.-E. and S.F. Slater (1989), ‘Management influences on export performance: a review of the empirical literature 1978–88’, International Marketing Review, 6(4), 7–26. Aldrich, H., C. Zimmer and D. McEvoy (1989), ‘Continuities in the study of ecological succession: Asian businesses in three English cities’, Social Forces, 67, 920–44. Bailey, T. and R. Waldinger (1991), ‘Primary, secondary and enclave labor markets: a training systems approach’, American Sociological Review, 56, 432–45. Bell, J. (1997), ‘A comparative study of the export problems of small computer software exporters in Finland, Ireland and Norway’, International Business Review, 6(6), 585–604. Bilkey, W.J. (1978), ‘An attempted integration of the literature in the export behaviour of firms’, Journal of International Business Studies, 9(1), 33–46. Bonacich, E. (1973), ‘A theory of middleman minorities’, American Sociological Review, 38, 583–94. Bonacich, E. (1987), ‘ “Making it” in America: a social evolution of the ethics of immigrant entrepreneurship’, Sociological Perspectives, 30, 446–66. Boter, H. and C. Holmquist (1996), ‘Industry characteristics and internationalisation processes in small firms’, Journal of Business Venturing, 11(6), 471–87. Brown, R.A. (ed.) (1995), Chinese Business Enterprise in Asia, London: Routledge. Buckley, P.J., C.L. Pass and K. Prescott (1988), ‘Measures of international competitiveness: a critical survey’, Journal of Marketing Management, 4(2), 175–200. Buckley, P.J., C.L. Pass and K. Prescott (1990), ‘Measures of international competitiveness: empirical findings from British manufacturing companies’, Journal of Marketing Management, 6(1), 1–13. Cavusgil, T.S. and S. Zou (1994), ‘Marketing strategy–performance relationship: an investigation of the empirical link in export market ventures’, Journal of Marketing, 58, 1–21. Crick, D. and R. Bradshaw (1999), ‘The standardisation versus adaptation decision of “successful” SMEs: findings from a survey of winners of the Queen’s Award for Export’, Journal of Small Business and Enterprise Development, 6(2), 191–9. Crick, D. and S. Chaudhry (1996), ‘Export behaviour of Asian and indigenous-owned SMEs in the U.K. clothing industry: a research note’, International Journal of Entrepreneurial Behaviour & Research, 2(1), 77–84. Crick, D., M. Jones and S. Hart (1994), ‘International marketing research activities of U.K. exporters: an exploratory study’, Journal of Euro Marketing, 3, 7–26. Cunningham, M.T. and R.I. Spigel (1971), ‘A study of successful exporting’, British Journal of Marketing, 5, 2–12. Czinkota, M.R. (1982), Export Development Strategies, New York: Praeger. Dana, L. (1987), ‘Entrepreneurship and venture creation – an international Comparison of Five Commonwealth Nations’, Frontiers of Entrepreneurship Research, 573–83. Dana, L. (1992), ‘Entrepreneurship, innovation and change in developing countries’, Entrepreneurship, Innovation and Change, 1(2), June, 231–42. Dana, L. (1995), ‘Entrepreneurship in a remote sub-Arctic community: Nome, Alaska’, Entrepreneurship: Theory and Practice, 20(1), Fall, 55–72. Dana, L. (1996), ‘Self-employment in the Canadian sub-Arctic: an exploratory study’, Canadian Journal of Administrative Sciences, 13(1), March, 65–77. Dana, L. (1997), ‘The origins of self-employment’, Canadian Journal of Administrative Sciences, 14(1), April, 99–104. Das, M. (1994), ‘Successful and unsuccessful exporters from developing countries’, European Journal of Marketing, 28, 19–33. Denis, J.E. and D. Depelteau (1985), ‘Market knowledge, diversification and export expansion’, Journal of International Business Studies, 16(3), 77–89. Diamantopoulos, A. and B.B. Schlegelmilch (1997), Taking the Fear Out of Data Analysis, London: Dryden. Elliot, G.R. and J.P. Krasnostein (1988), ‘Export attitudes and practices of research and development-based firms manufacturing in Singapore’, Proceedings of the 1988 Academy of International Business Southeast Asia Regional Conference – Asia-Pacific Perspectives in International Business, Bangkok, Thailand, June: B39–B68. Hibbert, E. (1990), The Management of International Trade Promotion, London: Routledge. Kaleka, A. and C.S. Katsikeas (1995), ‘Exporting problems: the relevance of export development’, Journal of Marketing Management, 11, 499–515. Katsikeas, C.S. (1994), ‘Perceived export problems and export involvement: the case of Greek exporting manufacturers’, Journal of Global Marketing, 7(4), 29–57. Katsikeas, C.S. and R.E. Morgan (1994), ‘Differences in perceptions of exporting problems based on firm size and export market experience’, European Journal of Marketing, 28(5), 17–35. Katsikeas, C.S. and N.F. Piercy (1993), ‘Long-term export stimuli and firm characteristics in a European LDC’, Journal of International Marketing, 1(3), 23–47. Katsikeas, C.S., N.F. Piercy and C. Ioannidis (1996), ‘Determinants of export performance in a European context’, European Journal of Marketing, 30, 6–35.

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Leonidou, L.C. (1995), ‘Empirical research on export barriers: review assessment and synthesis’, Journal of International Marketing, 3(1), 29–43. Light, I. (1972), Ethnic Enterprise in America: Business and Welfare among Chinese, Japanese and Blacks, Berkeley CA: University of California. Light, I. (1980), ‘Asian enterprise in America: Chinese, Japanese, and Koreans in small business’, in S. Cummings (ed.), Self-Help in Urban America, Port Washington, NY: Kennikat Press. Michell, P. (1979), ‘Infrastructure and international marketing effectiveness’, Columbia Journal of World Business, Spring, 91–101. Miesenbock, K.J. (1988), ‘Small businesses and exporting: a literature review’, International Small Business Journal, 6(2), 42–61. Nowikowski, S.E. (1984), ‘Snakes and ladders: Asians in Britain’, in R. Ward and R. Jenkins (eds), Ethnic Communities in Britain, Cambridge: Cambridge University Press. Phillips, L.W. (1981), ‘Assessing measurement error in key informant reports: a methodological note on organisational analysis in marketing’, Journal of Marketing Research, 18, 395–415. Ram, M. and G. Hillin (1994), ‘Achieving “Break-Out”: developing mainstream ethnic minority businesses’, Small Business and Enterprise Development, 1(2), 15–21. Reid, S.D. (1989), ‘Expansion strategies and performance in small manufacturing firms: the internationalisation dilemma’, Dynamics of International Business, 15th Annual Conference of the European International Business Association, Helsinki. Samiee, S. and P.G.P. Walters (1990), ‘Influence of firm size on export planning and performance’, Journal of Business Research, 20, 235–48. Saroja, D.D. (1994), ‘An Indian family business: traditional strategies for commercial success’, in A.R. Walker (ed.), New Place, Old Ways, Delhi: Hindustan Publishing. Seringhaus, R.F.H. and P.J. Rosson (1990), Government Export Promotion: A Global Perspective, London: Routledge. Sharkey, T.W., J.S. Lim and K.I. Lim (1989), ‘Export development and perceived export barriers: an empirical analysis of small firms’, Management International Quarterly, 29(2), 33–41. Storey, D.J. (1994), Understanding the Small Business Sector, London: Routledge. Styles, C. and T. Ambler (1994), ‘Successful export practice: the U.K. experience’, International Marketing Review, 11(6), 23–47. Turnbull, P.W. (1987), ‘A challenge to the stages theory of the internationalization process’, in P.J. Rosson and S.R. Reid (eds), New Managing Export Entry and Expansion: Concepts and Practice, NY: Praeger. Usunier, J.-C. (1996), Marketing Across Cultures, Hemel Hempstead: Prentice-Hall. Vijver, F.J.R. van de and K. Leung (1997), Methods of Data Analysis for Cross-Cultural Research, London: Sage Publications. Waldinger, R. (1989), ‘Structural opportunity or ethnic advantage? Immigrant business development in New York’, International Migration Review, 23, 48–72. Ward, R. (1991), ‘Economic development and ethnic business’, in J. Curran and R.A. Blackburn (eds), Paths of Enterprise, London: Routledge. Wiedersheim-Paul, F., H.C. Olson and L.S. Welch (1978), ‘Pre-export activity: the first steps in internationalisation’, Journal of International Business Studies, 9(1), 47–58. Wilson, K. and A. Portes (1980), ‘Immigrant enclaves: an analysis of the labor market experiences of Cubans in Miami’, American Journal of Sociology, 86, 295–319. Yoon, I.J. (1991), ‘The changing significance of ethnic and class resources in immigrant businesses: the case of Korean immigrant businesses in Chicago’, International Migration Review, 25, 303–31.

PART VII TOWARDS FUTURE RESEARCH

49 Towards a synthesis: a model of immigrant and ethnic entrepreneurship Léo-Paul Dana and Michael Morris

Introduction Entrepreneurship and immigration represent two of the most significant global trends in these early years of the twenty-first century. Both are occurring at historically unprecedented levels throughout the world. The preceding chapters have made it clear that these are not unrelated trends. Research over the past 40 years has demonstrated that immigrants often create new ventures at a higher per capita rate than populations in general. If anything, the research in this book suggests that the trend is stronger than ever. However, current knowledge of the ways in which immigrants and other minorities create ventures, the types of ventures they create, and the outcomes of those ventures remains limited. Consequently, it becomes less clear how much we can generalize about immigrant or minority group entrepreneurship. Indeed, there are important differences among immigrant groups. The Government of Canada found that per 1000 Filipino workers in Canada, 18 were self-employed; the same reported that per 1000 Greek workers in Canada, 124 were self-employed (Dana, 1991). How can such differences be explained? Other differences are also apparent across immigrant groups. For instance, while immigrant entrepreneurs are often characterized as having been forced into entrepreneurship because of limited opportunities within a host country, the preceding chapters have demonstrated that a wide range of motives drive their behaviour. Further, countries differ significantly in the extent to which they actively encourage entrepreneurial behaviour among new arrivals. Similarly, while one might conclude that immigrants only create lifestyle or ‘mom and pop’-type ventures concentrated in the retail sector, the research contained herein suggests that significant diversity exists in the types of ventures that are being created. This closing chapter serves as a synthesis of the 48 perspectives on immigrant and minority entrepreneurship that provide the substance of this book. As a kind of metaanalysis, we have attempted to capture the dominant themes, major arguments, and key findings put forward by the outstanding collection of contributors. It is our contention that some important generalizations may be possible, based on the patterns that emerge in these chapters. Towards this end, we have formulated an integrative model of factors that explain the emergence of an immigrant or ethnic venture. Implications are drawn from the model for theory building, entrepreneurial practice and public policy. A set of priorities are proposed for future research. Developing a model of immigrant and ethnic entrepreneurship The 48 perspectives provided in these pages, when considered collectively, suggest there may be a common set of key variables that explain immigrant entrepreneurship. That is, 803

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there may be common aspects to the immigrant experience that override ethnic and cultural differences. Figure 49.1 illustrates our attempt to capture these key variables. It focuses on six key variables, each of which is summarized below. 1 The immigrant Entrepreneurship does not happen without entrepreneurs. While the literature has focused historically on the traits of these individuals, and more recently there has been considerable attention devoted to their cognitive styles, or how they think, the research in this volume has tended to emphasize the relevance of other considerations. Especially important in this vein are motives, values and skills. Motivation to create a venture can generally be categorized as ‘push’ versus ‘pull’ factors. Entrepreneurs are pushed into entrepreneurship when they have limited access to meaningful employment opportunities within existing companies. The obstacles can range from overt labour market discrimination and communication barriers to skill shortcomings. The need to make a living and support one’s family, absent opportunities with existing organizations, pushes the individual towards entrepreneurship. Similarly, having technical skills, but an inability to sell these in the labour market, pushes one to create a venture. Alternatively, recognition of opportunity and the desire to achieve a vision can pull an individual towards the entrepreneurial path. While it is generally assumed that immigrants are more pushed than pulled, we find ample evidence of immigrants driven by motives to build growth-oriented ventures and to create wealth. Values play a role as well, especially when the immigrant has a value set that is strongly tied to his or her ethnic background. Strong identification with one’s ethnicity can lead to a preference to create ventures tied to the ethnic network or enclave, but also to a motivation to serve the ethnic community. Such values will often be manifested in the business practices of the entrepreneur, including employment practices, incurrence of debt, and approach to customer service, yet there is also evidence that ethnic entrepreneurs share universal values that are unrelated to their ethnicity. Examples of such universal values include individualism, achievement, competitiveness, risk taking and a strong work ethic. The very act of emigrating may be reflective of some of these so-called entrepreneurial values. Also relevant in this realm is the relative size of what we might call the ‘ethnic gap’, or the extent of difference between the norms, values, customs, symbols and language of the host and home countries. Where this gap is larger, the immigrant is driven towards the ethnic network or enclave and towards entrepreneurship. Finally, while the role of other demographics is clear, these chapters do suggest that age and gender also represent significant considerations in the tendency to create ventures in new environments, and in the types of ventures created. 2 Host country factors While a wide range of country factors affect levels of entrepreneurship in general (for example, taxes, mandated social benefits provided by companies, regulation), our interest is in the environmental elements that most influence immigrant entrepreneurship. Judging by the range of work submitted to this volume, the role of the informal economy within the larger economy of the host country appears to be an especially salient consideration. The presence of a large population of unregistered businesses not only says something

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The Immigrant Venture

Commonality of business interests with ethnic network interests and resource

Learning/ knowledge acquisition

Access to international ethnic network Homogeneity of ethnic group Cost of membership in network/enclave Reciprocity and trust Diversity of business types Extensiveness of network Crowding within enclave Infrastructure Resources/cultural capital

Ethnic Network/Enclave

• • • • • • • • •

• Type of venture • Dependence on ethnic enclave • Relative focus on the business v. the ethnic group

Immigrant venture flowchart

Values Motives Ethnic gap (home v. new country) Age and gender Communication and networking skills Technical skills Linkage to ethnic businesses back home

The Immigrant

Host Country Factors

Role of informal economy in larger economy Host country entrepreneurial culture Cultural heterogeneity Historical role of immigration Support programmes for entrepreneurs Welfare/social benefit system Permeability of markets Regulatory constraints

Figure 49.1

• • • • • • •

• • • • • • • •

Co-ethnic Dependence over Time

• Outcomes for immigrant –assimilation –income and wealth –upward social mobility • Venture outcomes • Societal outcomes

Outcomes

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about limited opportunities within the ‘legitimate’ business sector, but also implies a culture of creating ventures to address needs, and a willingness of the government to look the other way. Countries also differ in terms of their overall entrepreneurial orientation, where the basic cultural values and norms of society are more consistent with individual initiative, personal responsibility, wealth creation, reward for hard work, competitiveness and innovation. Not only does immigrant entrepreneurship flourish in such environments, but these countries often have a history of high rates of immigration, with immigrants making major contributions to economic development. Similarly, such countries will tend to demonstrate great cultural heterogeneity. And, while cultural heterogeneity is consistent with higher levels of entrepreneurial activity, the tendency for immigrants to cluster both geographically and around certain industries appears to occur regardless of this heterogeneity. Hence, in both homogeneous and heterogeneous countries, the ethnic network plays a significant role in immigrant entrepreneurship. The entrepreneurial friendliness of a country will also be reflected in some other variables emphasized in the preceding chapters. Immigrant entrepreneurship is facilitated where markets are more permeable, regulatory constraints are limited, and specific support programmes exist, not only for entrepreneurs, but for immigrant entrepreneurs. Ironically, immigrant entrepreneurship is also facilitated by a limited welfare or social benefit system in the host country. Generous social welfare may be more of a conduit either for unemployment or for entry into the traditional labour market, as opposed to the creation of one’s own venture. 3 The venture The evidence here suggests that a large majority of immigrant and ethnic ventures are either retail or service businesses, or related to a skill or trade the immigrant brings from their home country. Most are in low entry barrier industries, where differentiation of the business is difficult, and competition is often price-based. The ethnic network or enclave can serve to offset these severe market challenges, in effect creating a workable competitive space for the entrepreneur. Yet, as noted above, there is considerable diversity in the types of ventures created by immigrant and ethnic entrepreneurs. However, dependence on the ethnic enclave may well limit growth and constrain innovation within the venture. This is not to say that there are not sizeable ventures that develop, based on the ethnic enclave, but these appear to be the exception. In fact, a perusal of the many case examples provided within the pages of this book find few highly innovative ventures that compete on the basis of continuous new product or service development. There are also few examples of high-tech or technologybased ventures. 4 Ethnic networks and enclaves A unique aspect of immigrant and minority entrepreneurship is the frequent presence of an ethnic network or enclave as a facilitator of new venture creation. In some contexts, entire sub-economies have been created that involve a given immigrant or ethic group controlling all stages of the value chain. In other instances, the ethnic network is a source of resources and legitimization. In still other cases, the network extends to the immigrant’s home country and/or is connected to a global diaspora. By viewing these ethnic networks

A model of immigrant and ethnic entrepreneurship

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and enclaves through the lens of different countries and ethnicities, we are better able to appreciate how they affect and interact with immigrant or ethnic entrepreneurs. The critical importance of ethnic networks in affecting immigrant entrepreneurship is strongly supported in country after country. They are an invaluable source of a wide range of resources (money, suppliers, employees, customers, distributors) and generate what has been termed ‘cultural capital’. Just as vital is the role of the network or enclave as a source of information and knowledge. They provide legitimacy and infrastructure, as well as the aforementioned competitive space within which the entrepreneur can survive in the early stages of the venture. And they can frequently provide connections to a larger international network. However, ethnic networks differ according to some key characteristics. The relative homogeneity of the ethnic individuals within the network is a case in point. This homogeneity may contribute to levels of reciprocity and trust within the network or enclave. The greater the reciprocity and trust, the more engrained within the network a venture is likely to become over time. Another relevant characteristic is the extensiveness of the network. Extensiveness refers, not simply to geographic scope, but to the diversity of the industries and business types represented within the network or enclave, the stages of the value chain within industries that are represented, the reach of the network or enclave into the nonprofit and government sectors, and the related political activism of the network or enclave. Homogeneity, trust and extensiveness might also be expected to affect the cost of membership within the network or enclave, including resources (money, time, goods and services) that must be reinvested by the entrepreneur in the network over time. A related variable concerns the degree of ‘crowding’ within the network or enclave, particularly among ventures providing the same basic goods or services. Crowding undermines the relative returns to the entrepreneur from depending upon the network or enclave, and limits growth prospects, yet it can be an important incentive for ultimately lessening the venture’s dependency on the ethnic network or enclave. 5 Co-ethnic dependence over time: two intervening variables The growth path followed by immigrant or ethnic ventures has not received sufficient attention from researchers. For instance, richer insights are needed regarding crossnational differences in the survival and growth rates between ventures started by immigrants or ethnic minorities and those in the mainstream economy, and the underlying reasons contributing to such differences. Further, we need to better understand the extent to which ethnicity affects strategic intent. Again, the ethnic network plays a role. The studies here suggest that ethnic networks facilitate venture start-up and short-term growth, and may reduce failure rates, but might also either limit or have no effect on longer-term growth. Hence dependency on the ethnic network, and the extent to which the entrepreneur views the venture as existing to serve the ethnic group, or views the ethnic group as a means of serving the venture, affects the firm’s growth path. Based on the work presented by the researchers in this volume, two key variables appear to influence the venture’s co-dependence on the ethnic network or enclave, and the venture’s ultimate growth path. The first of these concerns the amount of learning and knowledge acquisition that occurs over time. The more learning achieved by the entrepreneur and those working within his/her venture, the more growth occurs, while dependency

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on the ethnic network lessens. The network is initially the most critical source of information. The question is how much the entrepreneur identifies and utilizes new information sources over time, and how much he/she learns from ongoing experimentation with new products, markets and internal business processes. The second variable affecting the venture’s growth path concerns the extent to which the core interests and needs of the venture coincide with the interests and resources of the ethnic network. Over time, commonalities in interests, needs and resources can often wane, especially as the ethnic network or enclave becomes more crowded. Emerging competitive practices within the industry can force the entrepreneur to develop new competencies in areas where the ethnic network has less to offer. The development of these competencies can, in turn, lead the entrepreneur to become less dependent on the ethnic enclave and to grow more aggressively. The dynamism of the ethnic network itself becomes an important consideration. More dynamic networks or enclaves can be expected to develop new capabilities and assets continually, fostered in part by the addition to the network of new but diverse immigrant or ethnic ventures. Less dynamic and more conservative ones will only limit the potential of the venture, and give rise to the entrepreneur diversifying away from co-ethnic dependency. 6 Outcomes The immigrant and ethnic venture experience produces outcomes at three distinct but related levels. The first of these is for the immigrant or ethnic minority entrepreneur and his/her extended family. At this level, the most apparent outcome is income substitution and wealth generation, yet, given the preponderance of survival and lifestyle ventures being created, wealth generation may be limited. Further, the considerable needs of the family, combined with the need to invest in the ethnic community, may well constrain the amount of re-investment into the business. Less clear is the extent to which these ventures represent stepping-stones to employment in established companies within the mainstream economy. The opposite may often be the case, in that, by focusing on the needs of the venture, the entrepreneur does not develop skills and experiences that are in demand within the labour market. The venture serves other purposes as well. One of these is upward social mobility for the entrepreneur, but even more so for the children of the entrepreneur. An interesting issue concerns the impact of venture creation on the amount and rate of assimilation by the entrepreneur of the culture and norms of the host country. Ventures operating in relatively narrow niches and less dynamic markets may actually hinder the assimilation process. Heavy dependence on the ethnic network can also slow the assimilation process. A slow rate of assimilation can, in turn, limit the growth rate and directional path of the venture. This brings us to venture outcomes. The financial performance of these ventures over time (that is, sales growth, profit growth, growth in numbers of non-family employees) would seem to be directly associated with the variables outlined in the model. Hence ventures will perform better when based on the motives and skills of the entrepreneur, the entrepreneurial friendliness of the host country, the type of venture created, the resources, extensiveness, crowdedness and dynamism of the ethnic network or enclave, the amount of learning by the entrepreneur over time, commonality of the business interests and needs with the interests and resources of the ethnic network, and co-ethnic dependence over time.

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Lastly, the perspectives provided in this volume suggest that immigrant ventures can produce significant societal outcomes. National economic growth and vitality are chief among these outcomes. However, there is evidence to suggest that these ventures also contribute to a number of other quality of life dimensions. As these ventures are frequently started in poorer or more economically challenged neighbourhoods, they provide a source of neighbourhood stability. Further, by providing for the economic welfare of the immigrant’s extended family, entrepreneurial ventures may serve as a deterrent to criminal and gang activity. In addition to any taxes paid, immigrant entrepreneurs frequently contribute in meaningful ways both to their communities and to their ethnic networks. And, in the final analysis, these ventures add to the social, cultural and commercial fabric of society by adding diversity to communities, while also introducing new products and new business practices. Implications Five decades ago, Cochran (1960) focused on the role of cultural factors in economic growth. In 2000, the Human Genome Project claimed that race did not exist. Today, scientific teams study the genetic traits of ethnic groups. Are behaviour and ethnicity linked and, if so, how and why, and does it matter? The 48 chapters that precede this one all report on ethnic minorities and their respective entrepreneurial activities. As explained by Morris, ‘An ethnic group is a distinct category of the population in a larger society whose culture is usually different from its own. The members of such a group are, or feel themselves, or are thought to be, bound together by common ties of race or nationality or culture’ (1968, p. 167). Yet ‘Ethnic groups only persist as significant units if they imply marked difference in behaviour, i.e., persisting cultural difference’ (Barth, 1969, pp. 15–16). In some cases, ethnic groups integrate into host societies into which they have immigrated; in most cases they do not. Where groups with unlike spheres of values co-exist, the result is a pluralistic society. Barth (1963, 1966, 1967a, 1967b, 1981) is one who has placed great emphasis on the existence of different spheres of values. Central to his discussion is the notion of the entrepreneur as an essential broker, mediating boundary transfers in this situation of contacts between cultures. By being active in the transformation of a community, entrepreneurs are social agents of change. The nature of pluralism in a host society affects ethnic minority entrepreneurship. It is, therefore, useful to distinguish among (i) melting pot pluralism, (ii) structural pluralism, and (iii) fragmented pluralism: 1.

2.

When people from different cultures share activities in a secular mainstream arena, the expression of cultural differences tends to be limited to private life. Often, employment is shared in a common sphere of life, while cuisine, customs, languages and religion are a domestic concern. This form of socio-economic pluralism is referred to as ‘melting pot’ pluralism, and this is descriptive of the situation in the United States. Immigrant entrepreneurs thrive in such as scenario. In contrast, structural pluralism involves a society with different cultures that do not share a secular mainstream arena. In such a case, there is minimal interaction across cultures. Rather, each ethnic group has its distinct institutions, and members of a given community have a lifestyle that is incompatible with that of people from other

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Handbook of research on ethnic minority entrepreneurship backgrounds. This type of pluralism is prevalent in the Muslim areas of China (Dana, 2007) and in the Central Asian republics (Dana, 2002), where entrepreneurs often cater primarily (or only) to members of their own ethnic group. Fragmented pluralism is an unstable state of socio-economic pluralism from which a society can shift toward ‘ethnic cleansing’. With fragmented pluralism, distinct societies are loosely held together by a weak political unit, such as was the case with Yugoslav federalism (Dana, 2005) and each ethnic group lives a separate life. In this context, there is minimal interaction between competing ethnic groups.

Towards future research It is hoped that this book will stimulate much future research. Among the topics that could be addressed are the impact of the motives for migrating; host country factors such as the nature of pluralism; economic sectors of immigrant ventures; causal factors in patterns of growth among ethnic entrepreneurs; enclaves; and co-ethnic dependence over time. As well, more research would be welcome on the topic of ethnic networks, as pioneered by Aldrich and Zimmer (1986), on middlemen minorities, as pioneered by Bonacich (1973) and on social capital as discussed by Bates (1994). To what extent do immigrant entrepreneurs employ people from other ethnic communities? When do they cater to mainstream society? What might be the optimal strategy? Vancouver’s Pamir Grocery supplies speciality products to consumers who read from right to left, and mainstream foods to people who read from left to right (see Figure 49.2).

Figure 49.2

Ethnic minority enterprise in Vancouver, Canada (photo by Léo-Paul Dana)

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References Aldrich, H.E. and C. Zimmer (1986), ‘Entrepreneurship through social networks’, in D.L. Sexton and R.W. Smilor (eds), The Art and Science of Entrepreneurship, Chicago: Upstart, pp. 3–20. Barth, F. (ed.) (1963), The Role of the Entrepreneur in Social Change in Northern Norway, Bergen: Norwegian Universities’ Press. Barth, F. (1966), Models of Social Organization, London: Royal Anthropological Institute. Barth, F. (1967a), ‘Economic spheres in Darfur’, in Raymond Firth (ed.), Themes in Economic Anthropology, London: Tavistock, pp. 149–74. Barth, F. (1967b), ‘On the study of social change’, American Anthropologist, 69(6), December, 661–9. Barth, F. (1969), ‘Introduction’, in F. Barth (ed.), Ethnic Groups and Boundaries: The Organisation of Cultural Difference, Oslo: Universitetsforlaget, pp. 9–38. Barth, F. (1981), Process and Form in Social Life, London: Routledge and Kegan Paul. Bates, T. (1994), ‘Social resources generated by group support networks may not be beneficial to Asian immigrant-owned small businesses’, Social Forces, 72(3), 671–89. Bonacich, E. (1973), ‘A theory of middleman minorities’, American Sociological Review, 38(5), October, 583–94. Cochran, T.C. (1960), ‘Cultural factors in economic growth’, The Journal of Economic History, 20(4), December, 515–30. Dana, L.P. (1991), ‘Bring in more entrepreneurs’, Policy Options, 12(9), 18–19. Dana, L.P. (2002), When Economies Change Paths: Models of Transition in China, the Central Asian Republics, Myanmar, and the Nations of the Former Indochine Française, Singapore, London and Hong Kong: World Scientific. Dana, L.P. (2005), When Economies Change Hands: A Survey of Entrepreneurship in the Emerging Markets of Europe from the Balkans to the Baltic States, Binghamton: Haworth Press. Dana, L.P. (2007), Asian Models of Entrepreneurship – From the Indian Union and the Kingdom of Nepal to the Japanese Archipelago: Context, Policy and Practice, Singapore and London: World Scientific. Morris, H.S. (1968), ‘Ethnic groups’, in David L. Sills (ed.), International Encyclopedia of the Social Sciences, London and New York: Macmillan, vol. 5, pp. 167–72.

Index Aaby, N.-E. 783 Abaci, Kazim 464, 469 Abadan-Unat, N. 435 Abbas, T. 118, 681 Abbazzini 369–72 Abelmann, Nancy 212 Abraham, Guy 343 ACB (African and Caribbean Businesses), access to UK finance 392–3, 396–8, 402–3 acquired social capital findings among immigrants to Israel 638–9 literature 633 Actor Network Theory 380 African American entrepreneurship race and culture approach critique 161–5 elaboration 167–9 overview 157–9, 174–5 promise of 159–61 reformulation 165–7 segregation 169–74 Agenda 2010 (Germany) 472, 474 Aguiluz, Amable 262 Ahwireng-Obeng, F. 688 Aitken, Carmen 735 Akoorie, A. 774 Akoorie family, see Moodabe/Akoorie family Akoorie, M.E. 771, 772 Al-Ali, N. 441 Al Haj, M. 630 Alba, Richard D. 84, 105 Albert, David 610, 611 Aldrich, H.E. 44, 61, 62, 63, 83, 101, 104, 175, 241, 250, 279, 309, 338, 339, 340, 341, 342, 344, 346, 445, 493, 496, 513, 514, 630, 657, 669, 682, 683, 684, 784, 810 Aldrich, Howard 338 Aliens Act (UK, 1905) 365 Aliens Acts (Austria, 1992, 1997) 427 Aliens Employment Act (Austria, 1975) 426 Allie, F. 681, 688 Altinay, E. 100, 257 Alund, Aleksandra 84 Alves, M. 81 AMA International University (Bahrain) 262 Ambler, T. 785 American model welfare state regimes 616–17 Amin, A. 616

Amsterdam 1990s’ clothing industry 423 ethnic entrepreneurship comparative study case studies 327–8 customer relationships 333–4 entrepreneurs’ motivations 328–9 entrepreneurs’ personal characteristics 328 labour and capital conditions 329, 333 overview 323–4, 326–7, 334 migrant entrepreneurship, variety of 106 Ancona, D. 514 Andersen, Otto 582 Anderson, A.R. 199 Anderson, B. 367 Anderson, Kay J. 145 Ando, F. 158, 202 Andres, T.D. 259 angura 659 Ansari, Abdoulmaboud 233 Anthias, F. 456, 457 Antillean migrants, in the Netherlands 107–10 Apitzsch, U. 86, 455, 456, 457, 458 Applegate, L. 313 Ardichvili, A. 105 Armstrong, J.A. 3 Arrowsmith, J. 350 Asante, M.K. 212 Ascheberg, Carsten 480 Ashforth, B. 122, 124 Asia Center, Budapest 544–5, 551 Asian migrants, in Germany, see Germany, Asian migrants Asiatic Restriction Act (1899, New Zealand) 761 Aslund, O. 634 assimilation 3 assimilation perspective 105 ATIAD (Association of Turkish Entrepreneurs and Industrialists in Europe) 456 Aufenthaltsberechtigung 473 Ausländer (foreigners) 465–7 Aussiedler (ethnic German settlers) 465 Austin, W.G. 105 Austria 1990s’ changes 426–7 guest worker scheme 425 historical migration patterns 425–6 immigrant entrepreneurs explanatory variables 429–31

813

814

Index

overview 427–9, 432 problems faced 431–2 self-employment 429 Autler, Lilian 5 Ávila, P. 81 Avraham, M. 622 Aw Boon Haw 671 Aygün, S. 450 Baca Zinn, Maxine 228 Bach, Robert L. 162, 250, 377, 378 Backman, Michael 585 Baethge, M. 445 Baganha, M.I. 68, 80 Bager, T. 433, 443, 634 Bagrov, M.V. 534 ‘bahala na’ attitude 260 Bahay Kubo (restaurant) 262 Bailey, T. 459, 784 Baker, M.Q. 516 Baker, W.E. 669 Bales, R.F. 312 Ballard, C. 338 Ballard, R. 338 Banton, Michael 373 Bao, Luzi 537 Barlow, G. 118 Barnes, J. 129 Barnett, H.G. 721 Barney, J. 309 Baron, S. 350 Barr, P. 117, 120, 129 Barrett, G.A. 30, 31, 61, 80, 337, 340, 344, 345, 346, 349, 350, 351, 353, 392, 393, 394 Barrett, Giles 343 Barth, Frederik 363, 600, 655, 809 Bartlett, Christopher A. 596 Basch, L. 250 Basnayake, Asoka 734 Basu, A. 38, 39, 100, 120, 257, 324, 684, 688, 689, 720, 721, 724, 726 Basu, Dipannita 376, 377 Bates, T. 39, 83, 84, 158, 161, 166, 167, 261, 289, 291, 292, 293, 301, 306, 309, 325, 391, 398, 618, 632, 633, 685, 810 Batley, UK, study 351–3 Bautista, Eliseo 262 Baycan-Levent, T. 47, 102, 323, 325, 326, 327 Baz, A.F. 450 Beal, R. 126 Bean, J.J. 291, 293, 296 beaten path effect 410 Beauregard, R.A. 271 Becker, Gary S. 59, 515, 730 Bedford, R. 744

Bell, J. 786 Bell, M. 121, 123 Benzécri, J.P. 81 Berg, M. 437 Berg, N.G. 504 Bergeron, N. 105 Berglas, E. 16, 17, 20 Berry, A. 392 Berry, B.J.L. 338 Bezrukova, K. 121 Bhachu, P. 3, 63, 83, 86, 325, 457, 739 Bhattacharyya, M. 284 bi-lingualism 4, 11–12; see also English language, and globalization Bickers, K. 25 Bilkey, W.J. 783, 786 Binks, M. 392 BiParva, Ebrahim 233 Bird, B. 513 Birkinshaw, Julian M. 587, 596 Birley, Sue 669 Black Hand 367 Black Metropolis 172–4 Blackaby, D.H. 44 Blackburn, R. 393, 398 Blalock, Hubert M., Jr 216 Blaschke, J. 30, 450, 464, 471, 485 Blauner, Robert 167, 168 Blomstermo, Anders 582 Boden, R. 261 Boeker, W.H. 310 Bögenhold, D. 445, 449, 464, 468, 494 Boissevain, J. 35, 39, 44, 80, 119, 261, 669, 685 Bonacich, E. 3, 49, 62, 78, 83, 153, 162, 169, 212, 216, 219, 220, 236, 241, 242, 250, 279, 280, 309, 338, 346, 361, 433, 434, 436, 440, 548, 601, 654, 681, 683, 689, 722, 784, 810 Bond, C. 291 Bond, M.H. 721 Borgatta, E.F. 312 Borjas, Georg J. 59, 83, 107 Bornstein, David 611 Borooah, V.K. 32 Borrie, W.D. 760, 762 Boserup, E. 707, 708 Boshoff, A.B. 681 Bosma, N. 523 Boter, H. 788 Bourdieu, P. 48, 273, 685, 730 boutique hotels 658 Bouzaid, T. 763 boycotts of Korean stores 217–18, 221–2

Index organized by Korean Produce Association of NY 223 Boyd, D. 122 Boyd, R.L. 198, 615 Boyer, Tania 734, 738 Bozorgmehr, M. 83, 212, 228, 230, 231, 233, 234, 242, 244, 257, 681 Braddock, J. 158 Bradford, W.B. 293 Bradshaw, R. 785 Brah, A. 249 Brennan, G. 17 Breton, Raymond 286 Brettell, Caroline B. 84, 95 Bridge, S. 707 Bridges, William P. 158 Bridging Allowance Scheme (Germany) 448–9, 474–7 Britalian 362–3 Brooking, T. 756 Brooklyn boycott of Korean stores 217–18, 221–2 Brown, B. 689 Brown, D. 350 Brown, John 368 Brown, R.A. 596, 796 Brown, S.L. 310 Bruch, Holger 451 Brueckner, J. 17, 20 Brush, C.G. 325, 579, 631 Bryan, L. 259 Buchan, N.R. 49 Buchanan, J. 16, 17, 24 Buckley, P.J. 582, 785 Buijs, Gina 95 Bukow, W.-D. 450 Bulder, B. 686, 687 Bullen, P. 682, 685 Buraku definitions 645 Dowa districts in Osaka 646–7 economic conditions 645–6 future 649–51 problems of 645, 648–9 rural areas 647–8 traditional industries 648 Burgess, E.W. 268 Burke, Kerry 729 Burt, R.S. 18, 633, 682, 685 Business Immigration Programme (Canada 1985) 148 Butler, John E. 689 Butler, John S. 83, 102, 158, 159, 162, 171, 257, 634 Butler, Judith 505

815

Buttner, H. 745 Byers, T. 684 Byrne, D. 121, 512 Caldwell, D. 514 California Hispanics 181 Caliner, Geoffrey 3 Callon, Michael 380 Calomiris, C.W. 39 Camarota, S.A. 275 Cameron, Alan 740 Cameron, T. 46 Camino Real 178 Campbell, Persia C. 145 Canada Chinese investments in 149–52 Chinese migrants explanation of business engagement 152–4 forms of business engagement 147–9 historical patterns 145–7 post Second World War 147 Western Provinces settlement context 132–4 discrimination 138 early years 136–8 ethnic identity 140–42 Galacians 134–6 prospects 142 technological change 138–40 Cantillon, R. 756 Cape Verde migrants in Portugal age of entrepreneurs 71 arrival 68 association with personal resources 73 discrimination 69 family workers 77–8 financing 75 personal entrepreneurial strategies 78–9 capsule hotels 658 Carland, J.W. 195 Carley, K. 513 Carney, Michael 589, 595 Carpenter, M. 310 Carree, M.A. 99 Carsewell, P.J. 744 Carson, Sonny 218 Carsrud, Alan L. 669 Carter, N.M. 189, 513, 745 Casson, M.C. 755, 756, 757, 758 Castells, M. 273, 405, 406, 407 Castells, Manuel 362 Castles, S. 84, 361, 362, 368, 373, 406, 407, 421, 422

816

Index

Cater, J. 338, 350 Cater, John 338 Cavalluzzo, K. 201 Cavalluzzo, L. 201 Cavusgil, T.S. 785 Cayton, Horace 173, 174 Chaganti, Radha 25, 44, 102, 118, 129, 309 Chaganti, Rajeswararao 310 Chai, Alice Yun 85 chain migration 763 Chakkiliars 602 Chan, Janet B.L. 62, 73, 75, 80, 81, 83, 153 Chan Kwok Bun 581, 596, 671 Chandler, Alfred D., Jr 587 Chang, Grace 95 Chang, Kimberly A. 84 Char Yong Association 671 Chau, Theodora Ting 595 Chaudhry, S. 784 Chavira-Prado, Alicia 84 Chen, Gavin 158 Chen, Jen-Shyang 582 Chen, Min 589 Chen, Tain-Jy 582 Cheng, Lim Keak 673, 675 Cheng Yu-tung 593 Cherian, J. 124, 125 Cheung, Yuet-wah 62, 73, 75, 80, 81, 83, 153 Chiang, Claire See-Ngoh 581, 596, 671 Chicago School of Urban Sociology 269 Chik, Frances 5 Chin Chew Street 671 Chin, Ku-Sup 217 Chinchilla, Norma Stoltz 83 Chinese clan associations in Singapore and schools 673–5 changing role 675–6 history 671–3 overview 669–70, 676 Chinese culture 725 Chinese family firms, from Singapore, regionalization of 581–7 Chinese Immigration Acts (Canada 1885, 1923) 146 Chinese migrants in Canada explanation of business engagement 152–4 forms of business engagement 147–9 historical patterns 145–7 post Second World War 147 in Germany motivations 452 rotating credit associations 449

in Hungary Chinese market 537–40 exclusion 548–9 formation of ethnic economy 534–7 growth of ethnic economy 540–43 localization of ethnic economy 549–50 market saturation 543–5 overview 534 prospects 551–2 shops and restaurants 545–8 transnational economy 550–51 in New Zealand 726 in Portugal arrival in Portugal 71 association with ethnic resources 73 Chinese restaurants 69 co-ethnic employment 75–6 ethnic entrepreneurial strategies 73–5 financing 75 Chinese restaurants in Germany 480–81 in Hungary 546–7 in Portugal 69 viability during Great Depression 146–7 Chinese transnational entrepreneurship nature of 577–81 overview 575–7, 594–5 Chiswick, B.R. 44 Cho, Y. 189, 197 Choenni, A. 323, 325, 327 Chotigeat, T. 256, 261 Chrisman, J.J. 202, 206, 257 Christie, P.M.J. 105 Chryssochoidis, George 582 Chua Gim Siong 675 Chui, Tina 147, 149 Chulia Street 671 Chyna, Julie T. 516 Ciao Italia 455–6 Clarke, J. 407, 421 Clement, Wolfgang 464 club goods, social capital as 18–19, 21–2 club theory and ethnic economies 19–26 overview 16–18 co-ethnic advisors advantages 120–22 case against 122–4 empirical study 125–9 examples 119–20 overview 117–18, 129–30 co-ethnic employment definitions 42–3 empirical evidence 46–8 in Portuguese case study 75–6

Index overview 42–3, 58–9 policy options 58–9 reasons for 48–53 welfare effects 55–8 see also homophily Co, M.J. 703 Cobas, Jose 162 Cochran, T.C. 809 Cohen, Abner 3, 379 Cohen, R. 3, 6, 13, 249, 361, 363 Cohen, Y. 44 Cole, John 158 Coleman, D. 421 Coleman, J.S. 18, 633, 682, 685, 724 Coleman, Susan 261 Collins, J. 4, 35, 736 Collura, M. 313 Color of Freedom, The 610 COMECON markets 538 Conley, J. 17, 20 Constable, Nicole 84 Constant, A. 447, 450, 456, 457 contextual entrepreneurial strategies 66 Conway, J. 133, 138 Cooper, A.C. 103, 261, 631 Cooper, M. 770, 772 Cope, Bill 740 Coppo, Laura 610, 611 Corban family 769–72 Cornes, R. 17 Cosa Nostra 367 Coser, Lewis 212 Counihan, Carole 87 Cowling, M. 325 Cox, L.W. 189 Cox, T. 311, 515 Craft Trades Law (Germany) 474 Crafts Code (Germany) 447 Cramer, J.S. 523 Crane, K. 251, 252, 253, 256, 257, 259, 260, 262 Crick, D. 784, 785 Crisafulli, Edoardo 9 Cromie, Stan 669 Cronje, G.J. 707 Cross, M. 7, 99 cross-national studies 783, 798 Crossman, A. 350 Crothers, C. 744 CTNs (confectioners, tobacconists and newsagents) 339, 344–5, 349 Cui, G. 249 cultural capital 729–31 cultural diversity definitions 100, 104–5 overview 110–11

817

cultural theory 33, 309 culture and ethnicity 498–9 definitions 729–30 nationally designated networks 500–502 strategic transculturism 502–4 culture entrepreneurs 363–4 culture entrepreneurship, in employment 366 culture-specific skills, and co-ethnic employment 51 culture-suppressed entrepreneurism 368–9 Cunningham, M.T. 785 Curran, J. 393, 398 Czinkota, M.R. 786 Czymansky, D. 632 Dabla-Norris, E. 19 Dadzie, K.Q. 189, 197 Dahya, B. 393 Daiei Hawks 662 Daily, C. 656 Dalit entrepreneurs overview 599–600, 611–12 success stories 602–3 Dalits definitions 599 history and society 601–2 lynching of 603 see also Jagannathan, Krishnammal Dallalfar, A. 86, 228, 233, 245, 504 Dana, Léo-Paul 579, 600, 654, 655, 669, 684, 783, 803, 810 Das, M. 785 Dasgupta, N. 708 D’Aveni, Richard 310 Davila, A. 206 Davis, M. 270 Davis, William 369 De Bruin, Anne 730 De Graaff, T. 59, 107 De Klerk, A. 681 de Silva, Pauline 343 De Vos, G. 656, 658 De Vries, J. 54 Deakins, D. 44, 324, 325, 393 DeCarolis, Dona 310 Deeds, David 310 DEHOGA (German Association of the Hotel and Restaurant Entrepreneurs) 456 Demeter, Kálmán 541, 543, 547 Demsetz, H. 19, 24 Denis, J.E. 786 Denton, N.A. 99 Denton, Nancy 158, 172, 173

818

Index

Depelteau, D. 786 Der-Martirosian, Claudia 89 Deshpande, R. 124 DeSoto, H. 19 Devine, T. 745 Dhaliwal, Amarpal 86 Diamantopoulos, A. 789 diasporas 3; see also middleman minorities Diaz, Luz Marina 5 DiCarlo, L. 259, 260, 262 Dicken, Peter 3 Dienelt, K. 494 Diner, Hasia 85 Dinkins, David 222 disadvantage theory 32–3 discrimination against Chinese in Canada 146 against Dalits in India 602 against Koreans in US 219 and co-ethnic employment 51–2 as stimulus to self-employment 160 in New Zealand 760–63 see also African American entrepreneurship, race and culture approach; Buraku; racism disembedding 576 DiTomaso, J. 515 Dodson, B. 707, 708, 709, 714 Dohse, K. 446 Dollinger, Marc J. 656, 669 Dominion Lands Act (Canada 1872) 134 Donato, Katherine M. 84 Donckels, Rik 669 Donthu, N. 124, 125 ‘Double-Duty Dollar’ doctrine 174 Douglas, M. 711 Dowa, see Buraku Dowding, K. 18, 19, 25 Dower, J.W. 661 Drake, St. Clair 173, 174 Driffill, J. 101 dry cleaning, Korean immigrants in US 215 Du Soon Ja 218 Dubini, Paola 175, 669 DuBois, W.E.B 170 Dunkelberg, W.C. 103 Dunung, Sanjyot P. 669 Dyer, L.M. 262, 324 Dyer, W.G., Jr 207 Eastlick, M.A. 195, 196, 197 Eaton, A.L. 256 Echikson, William 467 economic detour theory 171 Edin, P.A. 634

education and self-employment decision 103 as sign of structural ‘push’ 340 Hispanic Americans (Latinos) 187–9 Hispanic entrepreneurs 195–6 Iranian migrants to US 232 Koreatown, Los Angeles 284–5 Roma entrepreneurs, in Hungary 555–7 Edulbehran, J. 250, 253, 259, 262 Egan, T. 121, 311, 515 Eichenberger, R. 17, 20 Eisenhardt, K. 310, 311, 514 Eitzen, Stanley D. 228 Elam, A. 682 Ellington, Lucien 661 Elliot, G.R. 785, 787 Ely, R. 121, 516 employee-customer homophily 515–16 Enchautegui, M.E. 202 enclave economy, v. ethnic economy 280–83 enclave theory 32 Enderwick, P. 735, 771 Engelen, E. 69 English language, and globalization 8–11 Ennew, C. 392 Ensel, W.M. 53 entrepreneur immigrant, definitions 151 Entrepreneurs without Borders (Unternehmer ohne Grenzen) 478 entrepreneurship, definitions 101–2, 144, 757 Enz, C. 656 Epple, D. 25 Eriksson, Kent 582 Ersöz, A. 450 Eskin, E.D. 314 Esping-Andersen, G. 99, 471, 616 Espiritu, Yen Le 85 Esuha, J. 725 Etage 21 478 ethnic attachment 212 ethnic-controlled economy 31 ethnic economy, v. enclave economy 280–83 ethnic enclave economy (EEE) as territorially circumscribed 375–7 hypothesis 375, 377–9, 387–8 overlapping spaces 387 redefinition 379–80 ethnic-enclave entrepreneurs, v. middlemanminority entrepreneurs 279–80 ethnic enclave theory, applicability to marginalized Indian castes 601 ethnic enclosures 346 ethnic entrepreneurs, characteristics 684–6

Index ethnic entrepreneurship as embedded in biographical processes 457–60 break-out strategies 325–6 definitions 30–31, 249–50, 323 ethnic characteristics in 324–5 evolution of concept 31–2 literature 683 models 34–9 theoretical framework 32–3 use of social networks 37–8 welfare effects of 54–5 ethnic groups, definitions 30 ethnic niches 378–9 ethnic-ownership economy 31 ethnic solidarity 212 Ethnic Vernacular Landscapes 272, 273–6 ethnicity, definitions 118, 249 ethnocentric ambiance 127–8 Etzioni, A. 65 European model welfare state regimes 617–18 Fadahunsi, A. 263, 681 Fagenson, E.A. 325 Fairlie, R.W. 189, 197, 207, 208, 309 Farrell, Christopher 8 Farry, J. 763, 764, 767 Farry, M. 763, 766, 776 fashion hotels 658 Fathi, Asghar 233 Favell, A. 406 Fawcett, James T. 83 Feagin, C.B. 249 Feagin, J.R. 249, 269 Fedden, R. 765, 766, 767 Fehr, E. 49 Feldman, H.D. 196, 198 Felsenstein, D. 622 femininity, construction of, in entrepreneurial action 506–7 Fernandez, Marilyn 83 Fertala, N. 519, 523 financing Hispanic entrepreneurs 198–9, 201 in Portuguese case study 75 Roma in Hungary 558–61 theoretical framework 38–9 see also UK, finance provider discrimination study Finland Turkish immigrants entrepreneurs’ own views 439–42 integration 435–7 marginalization 437–9

819

overview 434–5, 442 unemployment rate 433–4 Firkin, Patrick 730 first generation immigrants 43, 103 Fischer, E.M. 325 Fischer, Mary J. 158 Fishman, Joshua A. 9 Flanders, John 147, 149 Flap, H. 393, 686, 687 Fleischer, A. 622 Fletcher, D. 725 Floeting, Holger 464 Florida, R. 105 Flowers, M. 17 Flug, K. 620 Fluitman, F. 712 Foerster, Robert F. 364, 365 Foley, Eugene 157, 169, 170 Fong, E. 84, 439, 634 Foong Shoon Fui Kuan 671 Foong Shoon Holdings Limited 676 Foreigners Law (Germany) 446–7 Forsander, A. 433, 434, 443 Forte, Sir Charles 369 Foster, G.M. 720 founder human capital, literature 631–2 founding teams 310; see also US Internet ventures, first-generation immigrants significance in founding team Four Tigers Market 538–41, 550–51 Fowke, V.C. 134 Fox, Justin 9 fragmented pluralism 810 Franks, Julian 596 Fratianni, M. 18 Fratoe, F. 199, 206 Frazier, E. Franklin 157 Frederick, H. 732, 744 Fredriksson, P. 634 Freeman, Gary 472, 618 Freeman, S. 19 Fregetto, E. 32, 33 Freitas, M.J. 32 Freshstart Venture Capital Corporation 301 Frey, B. 17, 20 Friedberg, R.M. 633 Friedkin, N.E. 513 Friedman, N. 515 Frijters, P. 53 Fui Chew Association 671 Fukuyama, F. 4, 18, 19, 22, 49, 56, 59, 589, 682, 685 Fulton, M. 140, 141 Fung, Victor 579 future research topics 798, 810

820

Index

Gabaccia, Donna R. 85, 87, 364, 367 Gächter, S. 49 Gaglio, Connie Marie 669 Galbraith, C. 16, 18, 19, 21, 24, 26, 682 Galford, R. 122 Galster, G.C. 250, 253 Galt, V. 249, 263 Gambe, Annabelle R. 596 Gan Clan Association 673 Gant, G. 121, 127 Gardner, Robert W. 83 Garfinkel, H. 505 Gartner, W.B. 189 Gastarbeiter (‘guest-workers’) 454, 465–7 Geck, H.M. 452 Gedajlovic, Eric 595 Geertz, C. 57 gender, as factor in entrepreneurship 504–8 gender roles, and self-employment 85–6 Gerke, Solvay 596 Germany Asian migrants recruitment restrictions 480–81 right to work 479–80 Chinese restaurants 480–81 data sources 491 entrepreneurship new image 467–71 welfare regime impact 471–2 ethnic business discourse 449–51 ethnic entrepreneurship, as embedded in biographical processes 457–60 food sector 454–5, 480–81 Greek migrants 452 immigrant entrepreneurship females in 456–7 history 451–7 overview 445–6, 464–5, 483 policy 446–9, 472–9 law enforcement 481–2 non-Aussiedler immigrant entrepreneurship, history 465–7 self-employment rate 468–9 trade associations 456 Turkish migrants in as largest ethnic group 452–3, 471 as products of economy of poverty 450 history 488–91 job market 494–6 legal framework 494 networks 500–502 niche markets 496–7 overview 488 venture capital 482–3

see also Hamburg, immigrant entrepreneurship patterns Gesemann, F. 489 Ghanaian women entrepreneurs in South Africa cultural factors 709–15 hairdressing as route to wealth 715–18 motivations 708 overview 707, 718 research method 709 xenophobia towards 708–9 Ghauri, Pervez 582 Ghoshal, S. 596, 685, 686 Ghurye, G.S. 601 Gibb, A.A. 710 Gibney, Frank, Jr 661, 662 Giddens, A. 498, 504 Gieseck, A. 451 Gilbertson, Greta A. 85 Giles, Wenona 84 Gilroy, Paul 165 Gimeno-Gascon, J.F. 631 Ginsberg, T. 256, 257, 260, 261, 262 Ginsborg, Paul 370 Gitmez, A. 449, 453, 454, 455, 464, 485 Glaeser, E.L. 49 Glazer, Nathan 157 Gleichstellung 429 Glick Schiller, Nina 362, 548 Godsell, G. 681, 688, 703 Gold, Steven J. 3, 4, 6, 7, 8, 16, 31, 61, 65, 73, 75, 76, 80, 81, 83, 145, 153, 206, 280, 434, 450, 452, 456, 457, 615, 631, 632, 634, 681, 682, 683, 684, 686, 688, 702, 731 Goldberg, A. 450, 451, 455, 464, 478, 496 Golden Arches East 364 Goldenberg, S. 630 Goldfisch Aktion (Gold Fish Action) 482 Gomez, Edmund Terence 575, 596 Gonzalez, J. 178, 179 Goodchild, M. 744 Goodwin, J. 744 Gorter, C. 46 Goswami, A. 38, 39, 120, 684, 688, 689, 721 Gottdiener, M. 271 Gould, David Michael 10 Govindarajan, Vijay 596 Grady, J. 273 Gramsci, Antonio 655 Granovetter, M. 53, 500, 683, 685, 686 Gray, Denise 735 Greek migrants in Germany 452 in US, self-employment rates 213 Green, Charles H. 122

Index Green, M.B. 294, 301 Greene, P.G. 16, 25, 32, 44, 46, 102, 118, 120, 129, 189, 257, 309, 631, 634, 731, 745 Greenemeier, L. 259 Greenspan, A. 289 Greenwood, M.J. 323 Greif, A. 516 Grillo, Ralph 365 Grimm, C.M. 195 grocery stores, Korean immigrants in US 215 Grotenbreg, H. 44, 669 Groves, Julian McAllister 84 Guadalupe Hidalgo, Treaty of 179 Guarnizo, Luis Eduardo 5, 6, 7 Guerreiro, M.D. 80, 81 guest-workers Austria 425 Germany 454, 465–7 Gumpert, D. 122 Guo Jiadi 542 Guoshi Group 542 Gupta, Anil K. 596 Gutersohn, Alfred 650 Gutiérrez Rodríguez, E. 505 Haberfeld, Y. 634 Hagen, E.E. 655, 657 Hagen, Stephen 735 Haila, A. 271 hairdressing, Ghanaian 711 Haitian Economic Development Association 218 halal 604–5 Hall, C. Michael 735 Hall, E.T. 721 Hall, S. 710 Haller, William J. 6, 7 Halter, M. 83, 106 Hambrick, D.C. 313 Hamburg, immigrant entrepreneurship patterns 518–22 Hamel, G. 310 Hamilton, Gary G. 8, 587, 589 Hamilton, Nora 83 Hamilton, R.D.I. 314 Hamnett, C. 355 Handler, W. 207 Handy, John 158 Hannerz, Ulf 367, 373 Hanssab, Shideh 233 Hao, Lingxin 5 Harijans, see Dalits Harper, D. 273 Harper, M. 707 Harris, Marvin 241

Harrison, D. 121, 123 Hart, Mark 32 Hart, Myra M. 631 Hartz Commission 476 Hartz, P. 448 Harvey, D. 272, 274 Harzing, Anne-Wil 596 Hatz, G. 451 Häußermann, H. 451, 497 Hawke, G.R. 754 hawking 767–8 Hawkins, Freda 147, 153 Hayden, Dolores 274 Hearne, J. 18 Hébert, R.F. 101 Heikkila, E. 17, 19, 20 Heintz, B. 507 Heinz, Werner 468 Henckel, Dietrich 464 Hendeles, Y. 632 Henderson, Anne M. 734, 738 Henderson, C. 259 Henkes, B. 106 Hepo Corporation 675 Herbig, P.A. 720 Herk, C. 133 Herring, Cedric 83, 159, 162 Hessels, J. 106 Hibbert, E. 787 Hiebert, Daniel 4, 83 Hill, S. 121, 127 Hillin, G. 347, 681, 784 Hillmann, F. 454, 457, 464, 478, 480, 496, 505 Hinz, T. 448 Hirsch, Jennifer S. 84 Hirschauer, S. 507 Hirschman, A.O. 48 Hispanic Americans (Latinos) business ownership 190 countries of origin 180–82 definitions 177 demographic trends 182–4 education 187–9 exploited by Korean merchants 219–20 history 177–84 incomes 184–7 overview 192–4 US acquisition of Hispanic land 178–80 Hispanic entrepreneurs age and experience 196 attitudes 197 barriers 197–8, 204 culture and preferences 202 education 195–6

821

822

Index

family networks 206–7 financial capital 198–9 financial market access 201 industry choice 197 market access 201–2 opportunities 204–8 overview 208–10 path to ownership 196–7 social capital 199–201 Hisrich, R.D. 137, 634 Hitti, P. 764 Hjarnø, J. 435 Ho, Christine G.T. 84 Ho, E. 744 Ho, Elsie 731, 733, 738 Hochman, O. 17 Hoffman, Constance A. 83 Hoffman, Diane M. 233 Hofstede, G. 105, 259, 260, 709, 710, 720, 721, 722 Hokkien Huay Kuan 673, 675 Hollifield, J.F. 8, 446 Holmquist, C. 788 Holt, David H. 669 Holtzman, Jon D. 84 homophily and entrepreneurial performance 514–15 as organizing principle 513–14 employee-customer 515–16 in workplace 516 overview 511–13 study conclusion 525–6 data and variables 517–18 estimation results 522–5 model 522 Hondagneu-Sotelo, Pierrette 84 Honig, B. 631, 633 Hood, Neil 587, 596 ‘Horatio Alger’ reference 160–61, 164 Hosler, Akiko S. 83 Hough, M. 708 Houston Mexicans 181 Howenstine, E. 269 Hsiao, Hsin-Huang Michael 575, 596 Hualu 541, 543 Huck, E. 17, 25 human capital immigrants to Israel study findings 636–42 literature and hypotheses 631–5 method 635–6 overview 630–31, 642–3 Human, L. 681, 688 Humphreys, J.M. 182, 186, 187

Hungary Chinese migrants in Chinese market 537–40 exclusion 548–9 formation of ethnic economy 534–7 growth of ethnic economy 540–43 localization of ethnic economy 549–50 market saturation 543–5 overview 534 prospects 551–2 shops and restaurants 545–8 transnational economy 550–51 Roma entrepreneurs in educational background 555–7 enterprise characteristics 563–70 factors influencing income 561–3 financial strength 558–61 overview 570–71 standard of living 557–8 Hunter, I. 756, 758, 759, 760, 762, 776 Hunts Point Market 219, 223; see also KPANY Husky Oil Limited 149 Ibarra, H. 513, 514, 515 Ibrahim, G. 249, 263 Ich-AG/Me, Inc. (Germany) 448, 474, 476–7 identity perspective 105 Iheduru, O.C. 681, 688 Ilada-Andres, P.C.B. 259 Ilaiah, Kancha 603 illegal immigration, UK, see UK, illegal immigration immigrant and ethnic entrepreneurship model background 803 implications 809–10 variables co-ethnic dependence over time 807–8 ethnic networks and enclaves 806–7 host country 804–6 the immigrant 804 outcomes 808–9 the venture 806 immigrant business, definitions 144 immigrant business engagement, terminology 144–5 immigrant enclave economy, definitions 145 immigrant entrepreneurial strategies advantages over indigenous entrepreneurs 37 heuristic model 64–7; see also Lisbon Metropolitan Area case study literature 62–4 overview 61–2, 79–80 immigrant entrepreneurs, definitions 102 immigrant self-employment, definitions 145

Index immigrant women entrepreneurs biographies personal care 91–2 product markets and manufacturing 92–4 restaurants 89–91 small grocery businesses 87–9 Hispanic age and experience 196 business inheritance 197 education 196 literature 84–7 overview 94–5 immigrants definitions 43 welfare effects of 54 Immigration Reform and Control Act (US, 1986), Iranian migrants US citizenship 232 Immigration Restriction Act (1920, New Zealand) 763 Ind, Nicholas 364 Indian entrepreneur culture 725 Indian migrants in New Zealand 726 in Portugal arrival in Portugal 71 association with family resources 73 co-ethnic employment 75 family entrepreneurial strategies 77–8 ‘Rashmi S.’ biography 92–4 ‘Suma P.’ biography 87–8 women in New Zealand patterns from interviews 747–9 research method 746 theoretical perspectives 745–6 institutional capital findings among immigrants to Israel 639 literature 634 institutional ghetto 172 institutional immigrant enterprise environments 616–20 interactive model of ethnic entrepreneurship 34–7 internal ethnicity 236 internationalizing firms’ perceptions Singapore–UK comparative study background 784 firms in Singapore 793–7 firms in UK 797–8 literature 785–7 research findings 789–93 research focus 787–8 research method 788–9 Ioannidis, C. 785

823

Ip, David 5, 144, 731, 739 Ip, Manying 725, 731 Iranian migrants in US community institutions 239–40 demographics 231–3 education 232 ethnic and class resources 241–4 ethnic economy 233–6 ethno-religious diversity 236–7 history 228–31 market orientation 237–9 overview 228, 244–5 self-employment rate 233 Iranian Revolution (1978), and US immigration 229 Irmscher, J. 453 Israel 1990s’ context 620–21 economic crisis 626–7 immigrant entrepreneurs, and welfare state 615–16, 627–8 institutional environment 621–2, 623–6 public support for entrepreneurs 622–3 Italian migrants in UK Abbazzini 369–72 Britalian entrepreneurship and ethnicity 364–8 overview 360–61, 372 Iyer, G. 21, 37, 39 Jackson, J.B. 274 Jackson, Susan 121, 516 Jacobs, J. 105 Jagannathan, Krishnammal 599, 610–11 Jagannathan, S. 610–11 Jang Bong Jae 221 Jansen, M. 107, 108, 327 Japan Korean minority entrepreneurs history 656–8 lessons 665–6 name conversion to Japanese 659 overview 653–5 pachinko 658–60 responses to marginality 656 see also Lee Chon Soon; Shin Kyuk-ho; Son, Masayoshi see also Buraku Jaret, C. 656, 669 Jehn, K. 121 Jenkins, R. 61, 153, 323, 373 Jensen, Leif 378, 379 Johannisson, B. 440, 669, 683, 688

824

Index

Johnsen, E.C. 513 Johnson, James H., Jr 8 Johnson, P.J. 44, 102 Johnson, Sherrill 611 Jones, T. 33, 35, 38, 80, 337, 338, 339, 343, 345, 346, 347, 348, 350, 391, 392, 393, 394, 414, 634, 657 Jones, Trevor 338 Joronen, T. 434, 443 Josephides, Sasha 86 Joshi, A. 121 Joyce, Patrick D. 212 Jung, Martin 464, 469 Jungbauer-Gans, M. 448 KACA (Korean Apparel Contractors Association) 223–4 KAGRONY (Korean–American Grocers Association) 223 Kalantzis, Mary 740 Kaleka, A. 786, 787 Kalleberg, A.L. 513 Kalmijn, M. 514 Kalra, V.S. 351 Kaminer, Wladimir 479 Kanein, W. 446 Kao, John 577, 581, 589 Kaplan, D.H. 84, 616 Kapphan, A. 453, 490 Karacs, Imre 540 Karageorgis, S. 3, 12, 13, 228, 236, 242, 280, 281, 457, 686 Kasarda, John D. 8 Kashani, S. 657, 663 Kasir, N. 620 Katsikeas, C.S. 785, 786, 787 Kauri Gum Industry Act (1898, New Zealand) 761 Kawa, Meisei 664 Kay, N. 18 Kazakos, P. 449, 453 Kee Fatt School 673 Kee, P. 103 Keefer, P. 18 Kelleher, C. 19 Kelley, Robin D.G. 171 Kelley, Ron 233 Kempen, R. 80 Kessler, S. 505 Kets de Vries, Manfred F.R. 589 Khosravi, S. 433 Kibria, Nazli 84 kielbasa curtain 136 Kieval, Hillel J. 3 Kilvenmani tragedy 602

Kim, Claire Jean 212, 218 Kim, Illsoo 219 Kim, Kwang Chung 83, 212 Kim, Rebecca 10 King, A.D. 272 King, Rodney 218 Kinunda-Rutashobya, L. 688 Kipp, Sandra 731, 735 Kirzner, I.M. 103 Kiss, Annamária 545, 550 Kist, H. 684 Kloosterman, R.C. 8, 16, 32, 44, 61, 63, 80, 103, 262, 263, 324, 348, 471, 472, 481, 483, 617, 682, 714, 746 Knack, S. 18 Knapp, G.-A. 505 Knight, F.H. 103, 720, 757, 758 Knorringa, P. 377 KNSANY (Korean Nail Salon Association) 224–5 Ko, Eizou 658 Kobonyo, P.O. 689 Kochan, T. 121, 122, 123 Kollman, K. 18 Kontos, M. 86, 446, 449, 455, 456, 457, 458, 459, 464, 469, 470, 477, 478, 484, 485, 505 Korean Apparel Contractors Association of New York (KACA) 223–4 Korean entrepreneurs in Japan history 656–8 lessons 665–6 name conversion to Japanese 659 overview 653–5 pachinko 658–60 responses to marginality 656 see also Lee Chon Soon; Shin Kyuk-ho; Son, Masayoshi Korean Ethnic Business Association (Zainichi Kankoku Shokokai), see Osaka Kankokujin Shokokai (Osaka Korean (Ethnic) Business Association) Korean immigrants in US business-related inter-group conflicts 217–21, 225 minority neighborhood concentration 216–17 numbers 212 reactive solidarity 220–25 self-employment rates 212–15 types of business 215–16 Korean Lions Club 221 Korean Nail Salon Association of New York (KNSANY) 224–5

Index Korean Produce Association of New York (KPANY) 221, 222–3 Korean Small Business Service Center (KSBSC) 224 Korean–American Grocers Association of New York (KAGRONY) 223 Koreatown, Los Angeles 283–7 Kosack, Godula 368, 373 Koser, K. 441 Kotkin, Joel 7 Kotlowski, D. 291 KPANY (Korean Produce Association of New York) 221, 222–3 Krase, J. 267, 270, 276 Krasnostein, J.P. 785, 787 Kreta Ayer 671 KSBSC (Korean Small Business Service Center) 224 Ku Klux Klan 138 Ku, Ying-Hua 582 Kuchinke, K.P. 105 Kumar, K. 121 Kumcu, A. 686, 687 Kundnani, A. 405 Kupferberg, F. 441, 458 Kurklantzick, J. 249, 257, 260 Kwok, Stanley 593 Kwon, V. 16 Kwong, Peter 225 La Porta, Rafael 49, 596 labour market characteristics, ethnic minorities 43–6 Laguerre, Michel 3 Lai, Chuen-Yan David 145 Lai, Chunsheng 540 Lambrecht, Johan 669 Landolt, P. 5, 16, 18 Lang, K. 516 Langlois, A. 37 Latinos, see Hispanic Americans Latour, Bruno 380 Laurier, Wilfrid 133 Lavi, Y. 621 Law, John 380 Lawrence, Barbara S. 516 Lazarsfeld, P.F. 513 Lazear, Edward P. 516 Le, C.N. 250, 256, 257, 262, 263 Le Goix, R. 17 Le Méridien Hotel, Vancouver 149 Leary, M. 310 Lebanese clan families, New Zealand 774–6; see also Corban family; Moodabe/Akoorie family

825

Lebanese migrants in New Zealand literature 763–4 overview 754–5, 776–7 as entrepreneurs 767–9 Lebanon, history 764–7 LeClaire, J. 205 Lee, C. 656, 658 Lee Chon Soon 662–5 Lee, Heon-Cheol 216, 218 Lee, Jennifer 515 Lee, Ji-Ren 582, 587 Lee, K. 17, 20 Lee, L. 516 Lee, M.S. 197 Lee, S. 656, 657, 658 Lee Shau-kee 593 Lee, Tung-hai 145 Lee, Y. 46, 102, 324 Lefebvre, H. 272, 273, 376 Lehr, J.C. 135 Lekota, J. 681 Leman, J. 408 Leonard, J. 121 Leonard, Karen B. 731 Leonidou, L.C. 786, 787 Lerner, M. 632, 633, 634 Leung, K. 783 Leung, L. 260 Leung, M.W.H. 33, 447, 449, 452, 453, 457, 464, 465, 471 Leung-Wai, J. 744 Leung, Yuen Sang 670 Lever-Tracy, Constance 4, 5, 144, 577, 739 Levine, D. 121 Levitt, Peggy 83, 362 Lewis, D.A. 764 Li Ka-shing 591–3 Li, Peter S. 7, 145, 146, 147, 148, 149, 151, 152, 153 Li Qiang 540, 541 Li, Yahong 147 Lichter, Michael I. 226 Lidgard, Jacqueline 731, 738 Lie, John 5, 212 Lieberman, S. 516 Lieberson, Stanley 168, 169, 172 Light, Ivan 3, 4, 7, 8, 10, 12, 13, 16, 31, 35, 38, 49, 61, 63, 65, 73, 75, 76, 80, 81, 83, 89, 99, 145, 153, 157, 160, 164, 206, 212, 214, 216, 219, 220, 228, 233, 236, 237, 241, 242, 250, 257, 280, 281, 309, 325, 338, 346, 361, 378, 387, 393, 433, 434, 436, 450, 452, 456, 457, 601, 615, 619, 631, 632, 634, 654, 681, 682, 683, 684, 686, 688, 689, 702, 731, 739, 784

826

Index

Lim, J.S. 786 Lim, K.I. 786 Lin, N. 53 Lineham, P. 758 Link, A.N. 101 Liparulo, R. 516 Lipset, S.M. 259 Lisbon Metropolitan Area case study context 67–73 correspondence analysis model 73 ethnic entrepreneurial strategies 73–6 family entrepreneurial strategies 76–8 personal entrepreneurial strategies 78–9 Liu Xianling 536 Liverpool John Moores University ethnic minority research overview 337, 355 personnel 338–9, 343, 348, 350 press coverage 351 project funding 342 Ljungar, E. 433, 441 Lobel, S.A. 311 Lofland, L.H. 271 Logan, John R. 83, 84, 361 Lohmann, Henning 464, 473 Los Angeles, 1992 riots 218 Loscoco, K.J. 745 Lotte Confectionary Company 660–61 Lotte Dragons 662 Lotte no ayumi 30 nen (Thirty Year History of Lotte) 661 Lotte World 661 Louie, W. 257, 260 Loury, G.C. 52 love hotels 658 Lowery, D. 19 Luber, Silvia 464, 473 Lucas, R.E. 260 Lucassen, L. 106 Lui, W. 744 Lyon, M. 393 Lyon, M.H. 343 MABBP (Montreal Association of Black Business Persons and Professionals) 119–20 Mabe, Yoichi 655, 658, 660 McClelland, David C. 721 McCracken, S. 745 Macdonald, J.S. 763 Macdonald, L.D. 763 McDougall, Patricia P. 579 McEvoy, D. 33, 337, 338, 339, 340, 343, 346, 350, 353, 355, 657 McEvoy, David 338

McGill, D. 758, 763, 777 McGoldrick, C. 351, 356 McGrath, R. 195, 259, 260, 311 McGuire, M. 17, 20, 22 McKenna, W. 505 McKenzie, R.D. 268 McLeod, P.L. 311 MacMillan, I.C. 195, 311 McNaughton, R.B. 294 McPartland, James 158 McPerson, M. 512, 513, 514 McSweeney, B. 105 Mael, F. 122, 124 Maglaya, E.M. 262 Magretta, Joan 579 Maister, D. 122 Malheiros, J.M. 69 Manchester, UK, South Asian businesses 353, 381–6 Manifest Destiny 179–80 Manning, R.D. 61, 62, 83, 281 Mao, Chun 536 Marcuse, P. 270, 271 Marger, M.N. 83, 120, 682, 687 Marin, Umberto 365 Marlow, S. 118, 119 Maronites 765–6, 768 Marsden, P. 512, 514 Marshall, B.L. 715 Martes, A. 16, 20, 23, 24, 26 Martin, M. 406 Martin, Robert G. 581 Martin, W. Allen 377, 379 Martins, L.L. 311 Mason, P.A. 313 mass entrepreneurship 132 Massey, Claire 740 Massey, D.S. 7, 38, 99, 158, 172, 173, 250, 447, 687 Masurel, E. 32, 33, 38, 47, 99, 102, 103, 104, 256, 257, 261, 323, 324, 325, 326, 327, 328 Mata, F. 250 Mathews, John A. 579 Mathieu Da Costa Business Development Corporation 119 Matsuo, H. 575 Mbaku, J.M. 688 Me, Inc./Ich-AG (Germany) 448, 474, 476–7 Meager, Nigel 478 Mecheril, P. 501 Medallion Funding Corporation 301 Mehrländer, Ursula 480 Mehta, N. 457 Meisterbrief 473 melting pot pluralism 809

Index Menahem, G. 632, 633, 634 Mendosa, R. 205 Mendoza, M.L. 259, 263 Menkhoff, Thomas 596 Menning, G. 688 Mercado, J.L. 251 Merton, R.K. 513 MESBIC (Minority Enterprise Small Business Investment Companies) 291–4; see also SSBIC Mesch, G.S. 632 Metcalf, H. 343 Metge, J. 725 Mexican–American War 179 Meyer, B. 199 Meyer, Bruce D. 309 Miami Little Havana growth 377–8 intra-enclave competition 375 Michaels, M.P. 314 Michaelsen, L. 121 Michell, P. 785 middleman minorities 3–5, 216, 600–601; see also Korean immigrants, in US middleman-minority entrepreneurs, v. ethnicenclave entrepreneurs 279–80 middleman theory 32–3 Midgley, I. 351 Miellet, R.L. 106 Miesenbock, K.J. 783 migrant entrepreneurs, definitions 102 migrant entrepreneurship cultural diversity perspective 104–6 definitions 102 socio-economic perspective 102–4 migration, in modern society 99–101 migration theory, history 361–2 Milberg, S.J. 105 Mill, J.S. 756 Miller, C.J. 199 Miller, J.C. 720 Miller, Mark 84 Milliken, F.J. 311 Min, E.J. 212 Min, P.G. 257, 259, 323, 656 Min, Pyong Gap 83, 85, 212, 214, 216, 217, 218, 219, 220, 222, 223, 224, 226, 228, 233, 234, 242, 244, 283, 669 Mincer, J. 631 Miner, J.B. 721 Minnaar, A. 708 Minority Enterprise Small Business Investment Companies, see MESBIC minority entrepreneurs, definitions 102

827

minority entrepreneurship, New York 274–7 Mitchell, B. 118, 702, 703 Mitchell, J. Clyde 669 Mitchell, Katharyne 591, 592, 593 Mitter, S. 417 mixed embeddedness 348 mixed embeddedness model of ethnic entrepreneurship 35 mixed entrepreneurial strategies 67 Miyares, Ines M. 83 Moallem, Minoo 3, 13, 228, 233, 245 Modarres, Ali 233 Modell, J. 153, 162, 169, 236, 280, 309, 434, 436, 440, 683 MOFTEC (Chinese Ministry of Foreign Trade and Economic Co-operation) 480–81 Moghaddam, F.M. 105 Mokrey, B.W. 618 Momeni, Jamshid 233 Montreal Association of Black Business Persons and Professionals (MABBP) 119–20 Moodabe, M. 769, 772, 773, 774 Moodabe/Akoorie family 772–4 Moon, Vasant 610 Moonarch 542 Moore, D. 745 Moore, K. 764 Morada, H.B. 252 Morgan, R.E. 786 Morningstar, G. 137 Moroccan migrants, in the Netherlands 107–10 Morokvasic, M. 435, 457 Morris, H.S. 809 Morris, M. 21 Morris-Suzuki, Tessa 657 Morrison, A. 720 motivations findings among immigrants to Israel 638 literature 632–3 Moudabber family, see Moodabe/Akoorie family Mourdoukoutas, P. 289 Moynihan, Daniel Patrick 157 Mt Lebanon Vineyards 770 Mückenberger, U. 445 Mueller, S. 195, 260, 311 Mukherjee, S. 291 Munz, R. 405, 421, 422 Murobushi, T. 659 Murphy-Shigematsu, S. 653 Murugan (beef merchant) 603–7 Musso, J. 20 Myers, Andrew 669 Myrdal, Gunnar 173

828

Index

Nadai, E. 507 Nadvi, Khalid 376 Naficy, Hamid 233 NAFTA (North American Free Trade Agreement) 205 Nagel, C. 105 Nagy, Ildikó Emese 538, 540, 543 Nahapiet, J. 685, 686 Naidoo, S. 715 Najib, A. 433, 443 Nakajima Kenkichi 659 Nanyang Khek Community Guild 671–2 Nanyang University 675 National Immigration Settlement Strategy (New Zealand) 744 nationally designated networks 500–502 Naturalization Act (Austria, 1998) 427 Neck, H.M. 310 Nee, V. 81, 105, 145, 206, 375, 378, 393, 633, 685, 688 Nemeth, C. 516 Netherlands co-ethnic employment, empirical evidence 46–8 cultural diversity, empirical evidence 107–10 labour market characteristics, ethnic minorities 43–6 migrant entrepreneurship, overview 106–7 welfare effects of ethnic entrepreneurship 54–5 welfare effects of immigrants 54 see also Amsterdam networks findings among immigrants to Israel 639–42 literature 634–5, 683–4 see also South Africa, ethnic entrepreneurship, network utilization New York 2000 Census 267–8 Chinatown, restaurant numbers 375 minority entrepreneurship 274–7 New Zealand entrepreneurs’ fear of failure findings 723–7 literature 721–3 overview 720–21, 727 research method 723 history 754 immigrant cultural capital overview 740–41 perceptions of value of 732–4 use by companies 734–8 use in self-employment 738–40 immigration analysis framework 755–9 immigration history 759–60 immigration policy 729, 760–63

Indian migrants 726 Indian women entrepreneurs patterns from interviews 747–9 research method 746 theoretical perspectives 745–6 Lebanese clan families 774–6; see also Corban family; Moodabe/Akoorie family Lebanese immigrants literature 763–4 overview 754–5, 776–7 National Immigration Settlement Strategy 744 Ng, Michele 7 Ng, Y. 16, 17 Ngee Ann College/Polytechnic 675 Ngee Ann Kongsi 673 Nijkamp, P. 46, 47, 99, 103, 104, 323 Niknia, Zohreh Mirzadegan 233 Nikolinakos, M. 446 NMVC (New Markets Venture Capital) 292 Nooteboom, B. 50 North, D. 19 North, Nicola 738 Novatel Communications Limited 150 Nowikowski, S.E. 601, 654, 784 ‘Nsano dwuma’ 712 Nucci, A. 261 Nyíri, Pál 534, 535, 537, 538, 539, 540, 541, 549, 551 Oates, W. 25 O’Bannon, P. 310 Oc, T. 117, 118, 130, 348 Ögelman, Nedim 472, 618 Ojong, V.B. 708 Olds, Kris 580, 591, 592, 593 Oleskiw, Osyp 136 Olfert, M.R. 140, 141 Olian, Judy D. 310 Oliveira, C. 63, 64, 67, 69, 70, 72, 73, 75, 76, 77, 80 Oliver, Melvin 226 Olm, Kenneth W. 669 Olomi, D.R. 688 Olzak, S. 105 Omi, Michael 165 Ong, Aihwa 600, 666 Ong, P. 257, 260 Onyx, J. 682, 685 Ooka, E. 7, 84, 439, 634 O’Reilly, C. 121, 311, 515, 516, 526 Osaka, Dowa districts 646–7 Osaka Kankokujin Shokokai (Osaka Korean (Ethnic) Business Association) 658

Index Osterland, M. 445 Ostrom, E. 22, 23 Ostrom, V. 22, 23 Oswald, I. 451, 497 Ouseley, H. 340 Overing, Joanna 362 Oviatt, Benjamin M. 579 Owen, M. 32 ‘own group’, definition 103–4 Özcan, V. 433 pachinko 658–60 Pacific Place Development project 150 Padon, A. 17, 24, 25 Page, D. 763, 764, 767 Paires, Sonia 5 Pakistani migrants ‘Fatema M.’ biography 94 ‘Rashmi S.’ biography 92–4 Pallars 602 Palmer, Robin C.G. 360, 361, 362, 363, 364, 365, 366, 367, 368, 369, 370, 373 Pang, C.L. 455 Papadimitriou, S. 289 parai 607; see also thappu Pareto, Vilfredo 27 pariah capitalism 3 Pariyars 602 Park, In-Sook 214 Park, R.E. 268 Participating Securities (US) 291 Pass, C.L. 785 Patterson, Sheila 373 Pattison, J. 18 Paulson-Box, Elaine 343 Peberdy, S. 709, 714 Pécoud, A. 437, 479 Peixoto, J. 71 Pelled, L.H. 311 Pendakur, R. 250 Peng, Xiaoming 480, 482 Penninx, R. 106 perogy line 136 Perrault, S. 105 Perroni, C. 18 personal entrepreneurial strategies 66 Pessar, Patricia 84 Peters, M.P. 137 Peters, N. 35, 67 Peterson, M.F. 45 Pfeffer, J. 516 Philippine migrants in US entrepreneurship 253–6, 257–61 numbers 252–3

829

opportunities and challenges 256–7 strategy recommendations 261–3 Philippines, emigration 250–52 Phillips, L.W. 788 Phillipson, Robert 9 Phizacklea, A. 117, 433, 504, 681 photography, for recording social change 273, 276 Piaray, D. 688 Pichler, E. 449, 453, 454, 456 Pieke, Frank N. 534 Piercy, N.F. 785, 786 Pio, E. 744 Piore, M. 16, 26 pizza 363–4, 454–5 pluralism 809–10 Polish markets 538 Pollock, T. 310 Porter, M. 301 Portes, A. 5, 6, 7, 16, 18, 19, 20, 45, 48, 57, 61, 62, 73, 76, 83, 84, 145, 162, 249, 250, 257, 261, 267, 281, 324, 362, 377, 378, 379, 440, 493, 500, 548, 601, 619, 634, 654, 681, 682, 683, 685, 687, 713, 755, 756, 774, 775, 784 Portugal, see Lisbon Metropolitan Area case study Post Office Ltd 349 Povrzanovi´c Frykman, M. 441 Praag, C.M. van 523 Prahalad, C.K. 310 Prakash, A. 18, 22 Pratt, Jeff 365 Pred, A. 338 Prescott, K. 785 Price, Charles A. 361 Price, K. 121, 123 Pripp, O. 433, 435, 437 private goods 22 ‘problematic of capital’ argument 158, 165–7, 174–5 property rental, Manchester 385 pseudo-public goods 24 public goods 22–3 Putnam, R. 49, 682, 683, 685 Puttnam, David 261 Pütz, R. 34, 35, 447, 450, 451, 453, 457, 464, 473, 491, 492, 493, 496, 497, 499, 501, 502, 503, 504 quasi-public goods 23 Raban, Jonathan 368 Racine, Jean-Luc 602, 610 Racine, Josianne 602

830

Index

racism in Germany 453 see also Ku Klux Klan Raes, S. 423 Raffles, Sir Thomas Stamford 670 Rafiq, M. 44, 394 Raijman, R. 83, 189, 198, 202, 206, 261, 630, 633 Rajaraman, I. 39 Ram, M. 38, 46, 103, 117, 118, 120, 129, 257, 260, 261, 263, 324, 337, 347, 348, 350, 353, 390, 391, 393, 408, 410, 411, 412, 413, 414, 417, 617, 618, 634, 681, 684, 688, 689, 745, 784 Ram, Monder 387 Ramachandran, K. 725 Ramnarayan, S. 725 Rangachari, K. 608 Rapley, J. 117 Rapport, Nigel 362 Rasheed, A. 21 Rasheed, H.S. 257 Rath, J. 8, 16, 32, 44, 61, 63, 69, 102, 104, 106, 263, 348, 483, 493, 616, 682, 714, 746 Razin, E. 32, 35, 37, 99, 104, 257, 615, 620, 621, 622, 627, 731 RCA (rotating credit associations) 39 Redding, S. Gordon 144, 587, 588, 589, 590, 595, 596 Reese, P.R. 682 Reeve, D.E. 351, 356 Reeves, F. 344, 393 Reeves, W.P. 754 Reid, S.D. 310, 785 Reinken, Kurt 478 Reiss, A.J., Jr 338 Reize, Frank 464, 468, 469, 475, 476, 477, 485 Rekers, A. 80 relational embeddedness, example 500 Renmin Ribao 536 research topics, future 798 Reskin, Barbara F. 514, 526 Rettab, B. 99, 103, 104 Reynolds, P. 189, 195, 632, 745 Rezaei, S. 433, 443, 634 Rhineland model welfare state regimes 617–18 Ricardo, D. 756 Rieger, J.H. 273 Rigby, A. 611 Rinder, Irwin 216 Ritzer, George 364 Roach, Elizabeth M. 5 Robb, A.M. 257, 261, 262 Roberts, E.B. 207 Robinson, J. 745

Robinson, P.B. 631 Rock, R. 445 Rodriguez, C. 16, 24, 26, 682 Rogers, Everett M. 733 Rogerson, C. 707, 708, 709, 714 Roma entrepreneurs in Hungary educational background 555–7 enterprise characteristics 563–70 factors influencing income 561–3 financial strength 558–61 overview 570–71 standard of living 557–8 Rondinelli, Dennis A. 8 Ronstadt, R.C. 207 Roodenburg, H. 54 Roodt, G. 681 Roquebert, J. 45 Rose, H.M. 338 Rosen, B. 669, 683 Rosen, M. 17 Rosenfeld, M. 206 Rosenfeld, R. 633 Rosenhek, Z. 621 Rosenstein, Carolyn 80, 214, 378, 619, 632, 634 Ross, C.A. 262, 324 Rosson, P.J. 787 rotating credit associations (RCA) 39 Rotherham, F. 725 Roy, W.T. 762 Rubin, J.S. 290 Rudolph, H. 454 Rumbaut, R. 249, 250, 619, 681 Rusholme, UK, South Asian businesses 353 Russell, J. 188, 206 Sabagh, Georges 228, 230, 233 Sagatz, K. 482 Sahin, M. 99 Sakurai-city, Nara prefecture 647–8 Salibi, K. 766 Salt, J. 407, 421 Salvadoran migrants ‘Angelica S.’ biography 90–91 ‘Gloria G.’ biography 88–9 Samiee, S. 785 Samuelson, P. 16 Sanchez, Arturo Ignacio 5 Sanders, J.M. 81, 145, 206, 375, 378, 393, 633, 685, 688 Sanders, M.C. 763, 767, 768, 769, 777 Sanderson, K. 744 Sandic 542 Sandler, T. 16, 17, 19 Sanghera, B. 118, 681

Index Sangili (musician) 602–3, 608–10 Santokhi, S. 80 Sapienza, H.J. 195 Saroja, D.D. 796 Sassen, S. 8, 405, 408, 472 Saw Swee Hock 670, 671 Saxenian, A. 249, 250, 253, 259, 262 Say, J.B. 756 SBA (Small Business Administration) 290, 292–3 SBIC (Small Business Investment Companies program) 290–91; see also SSBIC Schaeffer, P.V 46 Schaper, M. 36, 37 Scharf, K. 18 Scheinberg, D. 620, 621, 627 Scherer, P. 482 Schiffauer, W. 501 Schlegelmilch, B.B. 789 Schmid, G. 448 Schmidt, C.G. 46 Schmidt, D. 451 Schmitz, Hubert 376 Schneider, B.H. 105 Schofeld, J.W. 514 Scholtz, C.P.T. 681 Schoonhoven, C.B. 310, 514 Schreiber, V. 504, 506, 507 Schrover, M. 106 Schumpeter, J.A. 103, 138, 757, 758 Sciorra, J. 274 Scott, D. 763, 769, 770, 771 Scott, W.L. 202 Scott-Kennel, J. 772 Scully, Judith A. 311 second generation immigrants 43, 103 segregation, African Americans 169–74 Seidel-Pielen, E. 455, 456 Seifert, W. 433, 451 self-categorization theory 122 SemiTech Microelectronics Incorporated 149–50 Sen, F. 450, 455, 464, 478 Sensenbrenner, J. 16, 19, 500, 682, 687, 713 Sequeira, J. 21 Seringhaus, R.F.H. 787 Sexton, E.A. 631 Sexton, R. 17 Shachmurove, Y. 450, 456 shadow governments (economic clubs) 24–5 Shane, S. 632, 720 Shapero, A. 656 Shapiro, J. 21, 37, 39 Sharkey, T.W. 786 Sharma, D. Deo 582

831

Shaw, S. 353 sheabutter 711 Shigemitsu Takeo, see Shin Kyuk-ho Shim, S. 195, 196, 197 Shin Dong-bin 660 Shin Kyuk-ho (Japanese name: Shigemitsu Takeo) 660–61 Shleifer, Andrei 587 Shulruf, B. 105 Shurniak, William 592–3 Sifton, Clifford 135 Sik, Endre 539 Silin, Robert H. 589, 590 Silj, Alessandro 7 Silverman, R. 119 similarity-attraction hypothesis 121–2 Simmel, G. 32, 212, 440 Simon, G. 99 Simon, J. 539, 755 Simon, Rita James 95 Simpson, T. 754, 759 Sims, Henry P., Jr 310 Singapore Chinese clan associations and schools 673–5 changing role 675–6 history 671–3 overview 669–70, 676 Chinese family firms, regionalization of 581–7 history 670–71 Singapore Char Yong Association 671 Singapore Federation of Chinese Clan Associations 676 Singapore Hokkien Ong Clansmen General Association 673 Singapore Kang-Tau Ong Clansmen Association; 673 Singapore Kiung Chou Hwee Kuan 673 Singapore Teo Chew Poit Ip Huay Kuan 674 Singer, Audrey 83 Singh, R.P. 683 Sison, A.J. 259, 260 Siu, Wai Sum 581 Sivanandan, A. 407, 409, 414 Sklair, Leslie 592 Slangen, L. 18 Slater, S.F. 783 Small Business Investment Companies program (SBIC) 290–91; see also SSBIC Small Business Investment Company Act (US, 1958) 290 Small Business Service (UK, SBS) 392 Smallbone, D. 263, 391, 396, 681, 745 Smart, Alan 5

832

Index

Smart, J. 256, 261 Smart, Josephine 5 SME Basic Law (Japan) 649 Smith, G. 339 Smith-Hefner, Nancy J. 83 Smith-Hunter, A. 745 Smith, Ken A. 310 Smith, Ken G. 310 Smith-Lovin, L. 512, 513 Smith, Mark J. 729 Smith, Robert C. 362, 367 Snowman, Daniel 730 So, Y. 656, 657 Soar, S. 393 social capital and co-ethnic employment 48–9 and employee management problems 50–51 and ethnicity 686–7 as a club good 18–19, 21–2 as a quasi-public good 22–3 literature 685–6 uses by South African ethnic entrepreneurs 697–701 social cohesion, and migrant entrepreneurs 104 social entrepreneurial strategies 66 Softbank Corporation 661–2 Soja, Edward W. 376 sojourner theory 309 Sombart, W. 32 Son, Masayoshi 661–2 Sonfield, M.C. 289 Song, Michael 545 South Africa ethnic entrepreneurship context 688 entrepreneur characteristics 690–91 entrepreneur motivations 691–2 literature 683–7 network utilization 694–7 obstacles faced 693 overview 681–3, 701–3 research method 689–90 social capital utilization 697–701 start-up capital 692 Ghanaian women entrepreneurs cultural factors 709–15 hairdressing as route to wealth 715–18 motivations 708 overview 707, 718 research method 709 xenophobia towards 708–9 South Texans 181 Sowell, Thomas 157, 730, 731 Spanish–American War 180 Spear, Allan H. 172

Specialized Small Business Investment Company program, see SSBIC Speckesser, S. 448 Spigel, R.I. 785 Srinivasan, R. 261 Srinivasan, S. 261 SSBIC (Specialized Small Business Investment Company program) investment patterns 296–306 overview 289–92, 306 study data 294–6 Staber, U. 494 Stabler, J.C. 140, 141 Staebler, M.B. 291 Stanley, John 735 Staring, R. 406, 407, 410 Stavans, I. 177 Stavrinoudi, A. 447, 449, 452, 453, 454, 455, 457 Stayman, D. 124 Stechishin, Julian 135, 136, 138, 141 Stein, R. 25 Steinberg, Stephen 164, 169 Stephen, W.L. 105 Sterbenz, C. 17 Sternberg, R. 519 Stiglitz, J.E. 101 Stiles, C. 16, 21, 682 Stone, R.C. 756 Storey, D. 392, 798 strategic transculturism 502–4 straw bosses 447 Strawczynski, M. 621 structural pluralism 809–10 Strüder, I. 504 Stuart, M.S. 171 Stults, Brian J. 84 Styles, C. 785 Sudarkasa, N. 712 Sullivan, T. 745 Super, I. 99 Supri, S. 681 Surinamese migrants, in the Netherlands 107–10 Sutton, R.I. 684 Swinton, David 158 Sykes, Allen 596 Symbolic Capital 273 Szanton, D.L. 259 Tabar, P. 763 Tajfel, H. 515 Tanaka, H. 657 Tang, Jie 590 taxi cab medallions 293, 301

Index taxi driving, UK, Asians 386 Taylor, M. 325 Tchoudinovskikh, O.S. 537, 552 Techtronic International Company Limited 150 Teckler, M.D. 290, 291 Teece, D. 18 Teixeira, Carlos 731 Tejanos 180–81 telekura 659 Telok Ayer Street 670–71 Tesser, P.T.M. 103 Texas Central Americans 181 thappu 599, 607–10 Third Spaces 270 Thomas, A.S. 195, 260, 311 Thomas, B. 756 Thomas, C.J. 348 Thomas, D.A. 121, 127, 516 Thompson, E.C. 256 Thompson, J.H. 136, 137 Thomson, K.W. 763 Thornton, C.B. 763 three generation model of Chinese capitalism 576, 587–91, 594–5; see also Victor Li case study Throsby, David 730 Thurik, A.R. 99, 103 Thurik, R. 99 Thurston, Edgar 608 Tibrewal, Chandra S. 731 TIDAF (Association of Turkish-European Entrepreneurs associations) 456 Tiebout, C. 16, 17 Tienda, M. 83, 189, 198, 202, 206, 250, 257, 260, 261, 263, 630, 633 Tiesdell, S. 117, 118, 130, 348 Tiessen, J.H. 312 Timbermann, D. 259 Timmons, J.A. 312 Timur, M. 406 Tinguy, Anne de 534 Tinjacá, M. 182, 184, 190, 205, 206 TMT (top management team) research 309 Tong, Chee Kiong 590, 591 Torres, J. 207 Tóth, Judit 547, 551 Toulouse, J.-M. 655 Tracogna, J. 117 Tracy, Noel 144, 731 Tran, Kelly 147, 149 transmigrants 5; see also transnationalism transnational entrepreneurs proportion of immigrant community 6–7

833

see also Chinese transnational entrepreneurship transnational entrepreneurship, nature of 577–9 transnationalism definitions 5 from above/below 5–6 and globalization 5–8, 11–12 Trlin, Andrew 734, 735, 738, 741, 763 Trompenaars, F. 105 Trong, Pham Duc 480 Tropman, J.E. 137 Trueba, Henry T. 730 Tsang, Eric W.K. 588 Tschirhart, J. 16, 19 Tseng, Yen-fen 83 Tsui, A. 121, 311, 515 Turkish migrants business characteristics 491–3 in Germany as largest ethnic group 452–3, 471 as products of economy of poverty 450 history 488–91 job market 494–6 legal framework 494 networks 500–502 niche markets 496–7 overview 488 in the Netherlands 107–10 Turnbull, P.W. 787 Turner, J.C. 515 Tyree, A. 635 Ueltzhöffer, Jörg 480 Uhlaner, L. 103 Ui, Shiri 84 Ujlaky, György 537 UK Afro-Caribbean firms 343–4 ethnic group populations 390–91 ethnic minority businesses diversity 344–5 typology 346–8 finance provider discrimination study case study evidence 398–9 conclusions 400–403 context 390–92 data sources and method 394–5 interviews with bankers 399–400 previous research evidence 392–4 survey evidence 395–8 illegal immigration catering trade 409–17 clothing trade 417–21 employer pressures to hire 410–14, 417–21

834

Index

employers’ perspective 416–17 global context 406–8 migrant motivations and mode of entry 409–10 overview 405–6 policy implications 421–4 wages 410–11, 417 workplace experiences 414–16, 421–4 institutional context 348–50 Italians in Abbazzini 369–72 Britalian entrepreneurship and ethnicity 364–8 overview 360–61, 372 National Minimum Wage compliance 411–12 prompting employment of illegals 419–20 South Asian firms change over time 342 characteristics 339, 345–6 clustering 346 customer ethnicity 340–42 enclave economy 380–87 geographic distribution 340 history 337–8 Manchester study 353, 381–6 motivations 339–40 Rusholme study 353 taxi driving 350–51 Ukrainian migrants, see Canada, Western Provinces settlement Undesirable Immigrants Exclusion Act (1919, NZ) 762 UNITEIS 456 Untouchables, see Dalits Urban Ecology 268–73 US 2000 Census 267–8 small business investment programs 289–90 see also SSBIC US Internet ventures first-generation immigrants significance in founding team overview 309–10, 317–19 research propositions 310–13 study design 313–14 study results 314–17 Usunier, J.-C. 783 Utt, R. 207 Valtonen, K. 433 van de Woude, A. 54 van Delft, H. 46, 102, 104, 323, 324, 325, 618 Van den Tillaart, H. 55 van der Leun, J. 44, 682, 745

Van Fleet, D. 289 Van Fleet, E. 289 Van Kempen, R. 270, 271 van Naerssen, Ton 480 Van Parijs, Philippe 10 Van Praag, C.M. 101 Van Stel, A. 108 Van Vuuren, J.J. 681 Vaughn, J.C. 53 Veciana, J.M. 102 Veenman, J. 103 Venkataraman, S. 632 Verbeke, W. 105 Verbrugge, L.M. 514 Vergara, C.J. 273 Verheul, I. 99, 101, 102, 104, 107, 325 Vermeij, Lotte 105 Vernacular Ethnic Landscapes 272, 273–6 Vesper, K. 514 Vezda, László 539 Victor Li case study 591–3 Vietnamese migrants ‘Donna N.’ biography 92 ‘Vivian T.’ biography 89–90 Vijver, F.J.R. van de 783 Villemez, Wayne J. 158 Viramma, Josianne Racine 610 Vishny, Robert W. 587 Visual Methods 273 Visual Sociology 273 Visual Studies 273, 276–7 Vitéz, F. Ibolya 539 Vitsaxis, Vassilis G. 606 Volery, T. 36, 37 von Loeffelholz, Hans Dietrich 451, 453, 460 Vos, J. 409 Wahlbeck, Ö. 434, 435, 437, 441, 442 Wainer, H. 207 Waldinger, R.D. 16, 30, 31, 33, 34, 38, 44, 46, 61, 62, 63, 73, 75, 76, 80, 81, 83, 89, 100, 101, 102, 104, 168, 169, 216, 226, 228, 233, 241, 249, 250, 256, 279, 281, 309, 323, 324, 346, 378, 440, 445, 459, 493, 496, 514, 548, 601, 630, 634, 654, 681, 683, 711, 725, 745, 784 Walker, G. 633 Walker, Juliet E.K. 171 Walters, P.G.P 785 Walton-Roberts, Margaret 4, 83 Ward, Anthony 590 Ward, R. 44, 61, 62, 100, 153, 323, 344, 373, 393, 445, 493, 496, 630, 783 Waters, Tony 8 Watson, James L. 361, 364, 373

Index Watson, W. 121, 122, 123 Watts, Noel 731, 732, 734, 735 Weber, M. 32, 673 Weiss, Monique 467 welfare state regimes 616–18; see also Israel, institutional environment Welsch, W. 499 Welter, Friederike 464, 469 Wennekers, S. 99 Werbner, P. 95, 100, 339, 343, 376, 377, 381, 388, 393, 456 Werlen, B. 498 West, B.J.M. 343 West, C. 505 Westcoast Petroleum 150 Westwood, S. 457 Wheatly Price, S. 44 Whetten, David A. 669 Whistler, M.J. 290 white ethnic, terminology 165 Whitewater investment scandal 291 Whitley, Richard 588, 590, 596 Why I Am Not a Hindu 603 Wickmann, H., Jr 290 Wiedersheim-Paul, F. 786 Wikipedia 100, 105 Williams, K.Y. 526 Williamson, O. 18, 50 Willis, D.B. 653 Wilpert, C. 447, 449, 452, 453, 454, 455, 457, 458, 464, 473, 485 Wilson, F. 200, 261 Wilson, K.L. 45, 62, 145, 281, 324, 377, 378, 379, 548, 601, 634, 654, 683, 784 Wilson, M. 758 Wilson, William J. 286 Wimmer, Andreas 362, 548 Winant, Howard 165 wine making, New Zealand, see Corban family Wink 542 women, see immigrant women entrepreneurs; New Zealand, Indian women entrepreneurs; South Africa, Ghanaian women entrepreneurs Wong, Bernard 4, 83, 375 Wong, Gilbert Y.Y. 588 Wong, Lloyd L. 5, 7, 147 Wong, Siu-lun 144, 576, 588, 590, 594, 596 Woo, C.Y. 631 Wooders, M. 17, 20 Woodward, W. 669, 683

835

Woolcock, M. 18, 22, 687 Worchel, S. 105 workplace homophily 516 Wright, L.T. 261 Wrigley, N. 350 Wu, S.-Y. 445 Wui Chiu Hui Kuan 671 Xin, K.R. 311 yakuza 659 Yang, Ban 538 Yasuda, Takehito 653, 666 Yebua, Cecilia 711 Yen, Ching-Hwang 670 Yeung, Henry Wai-chung 7, 575, 576, 577, 579, 580, 581, 582, 584, 585, 586, 587, 589, 593, 595 Yin Sin School 673 Ying Foh Fui Kuan 671 Yinger, J.M. 249, 279 Yinger, M.J. 30 Yong, Pit Kee 590 Yoo, Jin-Kyung 656 Yoo, J.K. 681, 688, 689 Yoon, Hong-key 731, 738 Yoon In-Jin 83, 85, 212, 241, 242, 600, 632, 634, 654, 784 Young, M. 118 Yu, Eui-Young 212 Yu Jun 536, 540 Zach, T. 44 Zaheer, Srilata 575 Zainichi 655, 657–8 Zainichi Chosenjin 657–8 Zainichi Kankokujin 657–8 Zainichi Kankoku Shokokai, see Osaka Kankokujin Shokokai (Osaka Korean (Ethnic) Business Association) 658 Zenger, Todd R. 516 Zhao, Xinluo 534 Zhou, M. 61, 250, 256, 257, 261, 361, 634 Zhou, Min 10, 83, 84, 145, 281, 282, 287 Zhou, Y. 262 Zhu Yunxia 725 Zhulin, A.B. 537, 552 Zimmer, C. 83, 241, 669, 682, 684, 810 Zimmerman, D. 505 Zlotnik, H. 406, 407 Zou, S. 785 Zukin, Sharon 271