Enterprise and Small Business Principles

Ethnic minority business and enterprise support

Encouraging ethnic minority communities into self-employment has been a discernible feature of national and local policymaking since the early 1980s (see Chapter 4). There appear to be two particular reasons for this policy direction. First, the civil distur­bances in many inner-city areas that occurred in the early part of the decade focused attention on the often dire position of Black racialised minorities (Cross and Waldinger,

1992) . Following Lord Scarman’s pronouncements in the wake of the disturbances in Brixton, promulgating self-employment among the Black population was seen as an important means of tackling disadvantage and maintaining social harmony in urban areas. Second, some minority communities, notably South Asians, Chinese and Cypriots, have come to dominate particular sectors and local economies. Often this position of prominence has been achieved without the assistance of business support agencies (Marlow, 1992).

A consistent finding of previous research on EMBs is their low propensity to use mainstream business support agencies, often relying instead on self-help and informal sources of assistance (see Deakins et al., 2003; Ram and Jones, 1998; Ram and Smallbone, 2002 for reviews; and Chapter 4 for a fuller discussion of support agency usage). Of course, it could be that the low take-up of business support from formal agencies reflects a low level of perceived need or a lack of interest by ethnic minority business owners in receiving external assistance. However, growing evidence (Marlow, 1992; Deakins et al., 2003) suggests that the low level of use of mainstream business support agencies cannot necessarily be put down to the lack of interest on the part of the business owners. ‘Supply-side’ issues - for example inability to reach out to firms, inadequate databases and the inappropriateness of the ‘product-oriented’ approaches used by many support agencies - are also pertinent factors.

The ostensibly low take-up of formal sources of business support draws attention to the capacity of mainstream business support agencies to cater adequately for the needs of ethnic minority firms. The ‘equality of access’ approach which professes to ‘treat all businesses the same’ seems to founder on the reluctance of many EMBs to utilise the services of mainstream agencies and is severely constrained on the practical grounds that such agencies often fail to capture the most basic data on the scale, dynamics and issues facing EMBs.

A key issue in the debate on appropriate policy support for EMBs is the extent to which their ‘needs’ are similar to, or different from, those of other SMEs. In practical terms, one of the distinctive characteristics of EMBs in the UK that has important potential implications for business support policy is their concentration in particular sectors, for example retailing, catering and personal services. This is important because the prospects for business development are heavily influenced by market and demand trends and the degree of competition in each of these sectors.

Size is another important characteristic of EMBs, which has implications for their access to finance and business support. Although the absence of comprehensive, large - scale business databases that include an ethnic variable makes it impossible to paint a totally accurate picture, it is widely accepted that most EMBs are not just small, but very small firms; this means they share many of the characteristics, problems and sup­port needs of micro enterprises more generally. These include frequent problems in raising finance to start a business and/or expand (particularly in the early stages), as well as deficiencies in certain core management competencies, such as marketing and financial management skills. One of the consequences of their very small average size is that most EMBs fell outside the main target group of the mainstream business sup­port agencies in England (i. e. Business Links) during the 1990s, when such organisa­tions were mainly concerned with firms employing more than five (or ten) employees with growth potential (Ram and Smallbone, 2002) - see Chapter 4.

Location is a further characteristic of EMBs, which may influence their support needs. Most EMBs are located within Britain’s inner cities, reflecting ethnic settlement patterns more generally. The negative consequences of such a location for trade has been documented since the first major study of Asian businesses in 1978 (Aldrich et al., 1984), and reinforced in more recent studies of other minority groups (see Ram and Smallbone, 2002, for a review). Local environmental conditions such as physical dilapidation, inadequate parking and vandalism are commonplace in such settings.

Furthermore, locational factors can add to the difficulties faced in raising finance, which is compounded by the tendency for minority entrepreneurs to cater for local residents where customers have relatively low spending power.

In interpreting such findings about EMBs, it is important to recognise the reluctance of small firm owners per se to utilise external assistance. This resistance stems from doubts about value for money, scepticism of generalist advice (particularly where this is offered by advisers that lack detailed sectoral knowledge) and an emphasis on auto­nomy, which some owner-managers perceive is threatened by the use of external advice. This may result in a greater use of informal rather than formal channels of support, particularly in cases where managers lack formal management training or qualifications, reflecting the importance of trust-based relationships in the effective delivery of advice and consultancy to small firms, regardless of the ethnicity of the owner (Ram and Smallbone, 2001).

10.3 Chapter summary

The increasing importance of self-employment among ethnic minorities has been one of the marked features of labour market change internationally over the past 20 years. As in many advanced industrial societies, EMBs are now an established and growing feature of contemporary Britain. In addition to fulfilling an important economic and social role for the minority communities themselves, ethnic enterprise has also made a significant contribution to both the revival of the small business population and the revitalisation of depressed urban retail landscapes. There is little doubt that particular areas of economic activity, such as retailing, clothes manufacture and catering, have been transformed by the dynamic presence of minority communities. Groups like the South Asians, Chinese and Greek-Cypriots have been notably conspicuous in effecting such transformations in often adverse competitive environments. Although African - Caribbean ‘under-representation’ in self-employment has precipitated much speculation, there is little doubt that they are an emerging presence on the small business scene. Recent evidence on African-Caribbean entrepreneurship (Curran and Blackburn, 1993; Ram and Deakins, 1996) points to the promising growth potential of this com­munity in business.

In this chapter, we have attempted to scrutinise the growing literature on ethnic minority enterprise with a view to assessing some of the key debates that have domin­ated this subject. The processes that underpin small business formation have been shown to extend beyond pure culturalist arguments that, for instance, depict South Asians as natural entrepreneurs and African-Caribbeans as uninterested in entre­preneurial activities. The influence of the socio-economic context, or ‘opportunity structure’, continues to affect the life-chances of Britain’s ethnic minorities and its impact upon the decision to enter self-employment can rarely be detached.

Investigation of family and co-ethnic labour inside the ethnic small business further exposes the fragility of popular stereotypes. It is undoubtedly the case that in terms of hours worked, entrepreneurial rewards and commitment to the business, ethnic minorities (African-Caribbeans as well as the more commonly noted South Asians) are remarkably industrious. But it is equally evident that such practices are characteristic of the harshly competitive economic sectors that such minority groups trade in rather than a culturally specific work ethic. Moreover, when the capacity of family labour to constrain business development and the often unequal nature of gender relations is highlighted, the image of the cosy, consensus-oriented ethnic minority firm becomes even more illusory. This is not to deny the importance of particular ethnic resources, which can often serve as an important source of competitiveness. Rather, it serves to reinforce the importance of the context in which such firms operate. Hence, a com­prehensive synthesis of the multi-faceted nature of ethnic minority business enterprise is incomplete without an elaborate understanding of the intricacies of economic change and how and why the proclivity to entrepreneurship in advanced market economies varies between ethnic groups.

An important part of this context is the relationship with external agencies crucial to small firm development, notably the high street banks. Debate continues on whether the reported problems between ethnic minority firms and the banks are business or ‘race’ related. However, there is little doubt that under-funding remains one of the most seri­ous problems facing ethnic minority small businesses. In attempting to assist with these and other problems, the ‘mainstream’ business support agencies appear to be con­strained by major obstacles that seem endemic to the burgeoning ‘enterprise’ industry. These include a lack of clarity over objectives, inter-agency competition, scarce resources, inappropriate services and a lack of networking.