Enterprise and Small Business Principles

The business entry decision

One of the most keenly debated issues within the ethnic business literature concerns the decision to become self-employed. Various explanations have been advanced outlining the processes that give rise to EMB ownership. Jenkins (1984: 231-4), for instance, has identified three basic explanatory models of ethnic involvement in business. The ‘economic opportunity’ model regards EMB activity as essentially no different from routine capitalist activity, relying on the market for its fortunes. The ‘culture’ model asserts that some cultures predispose their members towards the successful pursuit of entrepreneurial goals. Finally, the ‘reaction’ model views self-employment by members of ethnic minority groups as a reaction against racism and blocked avenues of social mobility, a means of surviving at the margins of white-dominated society. Waldinger et al. (1990) have developed a more interactive approach for understanding ethnic business development. Essentially, they argue that ethnic enterprise is a product of the interplay of opportunity structures, group characteristics and strategies for adapting to the environment.

A steady stream of studies since the 1980s has stressed the importance of external factors in their explanations of the proliferation of particularly South Asian-owned small enterprises (Aldrich et al., 1981, 1982, 1984; Jones, 1981; Jones et al., 1989; Mullins, 1979; Nowikowski, 1984; Robinson and Flintoff, 1982). According to this perspective, self-employment is a survival strategy borne out of the persistent discrim­ination that ethnic minorities face within the wider labour market. Compelling evid­ence for this view is presented by Jones et al. (1992) in their national study of 178 South Asian, 54 African-Caribbean and 171 White small business owners. More than a quarter of South Asian owners turned to self-employment because of blocked oppor­tunities or unemployment. Furthermore, Jones et al. (1992: 186) believed this to be an underestimate: ‘Since there were also many other Asian respondents who had experi­enced periods of unemployment or unsuitable employment even while giving positive entry motives like money or independence, we take this as a sure sign that Asians in Britain are no more culturally predisposed or voluntaristically oriented towards enter­prise than any other group.’

In contrast, there are strong proponents from a more ‘culturalist’ tradition who privilege what they regard as distinctively ethnic resources in their accounts of business formation (Basu, 1995; Srinavasan, 1992; Werbner, 1980, 1984, 1990). For example, Werbner (1984) identifies a distinctive Pakistani ethos of self-sacrifice, self-denial and hard work that serves to fuel entrepreneurial activity. Basu (1995) also located a particu­laristic South Asian ‘entrepreneurial spirit’ in her survey of 78 South Asian retailers.

Basu (1995: 16) maintained that: ‘It is difficult to support the hypothesis that the small businessmen in our sample were driven or pushed into self-employment as the only alternative to escaping unemployment.’

The controversy shows little sign of abating. But, nonetheless, it is clear that the simple concept of ‘push’ versus ‘pull’ (which has featured in some of the more quantitatively oriented studies of ethnic enterprise) are unlikely to grasp fully the complexity of entrepreneurial decision making. As Granger et al. (1995: 513) note in their study of freelancers in the book publishing sector, ‘research designs which simply focus on the moment of transition from one labour market state to another, without exploring back­ground career histories, are unlikely to grasp the real dynamics of self-employment career changes.’

This point is given added resonance by Ram and Deakins’ (1996) study of African - Caribbean entrepreneurs. From a reading of employers’ initial responses (using pre-set statements), the findings indicated that African-Caribbean entrepreneurs had in com­mon with White small business owners largely positive motivations for entrepreneur­ship (Curran, 1986b). But more qualitative accounts from respondents were also elicited; this revealed that an unfavourable opportunity structure, in the guise of menial jobs or limited prospects at work, still had a bearing on the business-entry decision.

From this review of the evidence, then, it would seem that pure culturalist explana­tions are not adequate in accounting for small business formation in ethnic minority communities. Indeed, more recent studies of entrepreneurial motivations suggest that ethnic culture is often overridden by class culture, a set of values common to all small entrepreneurs (including Whites) in which independence and the desire to be one’s own boss are paramount in the decision to enter and continue in business (Ram et al., 2003). Where inter-ethnic differences do apply, what is of more significance is the nature of the opportunity structure and what Light (1984) has called class resources. This refers to tangible material resources like property and accumulated finance, which can be used to spin off new firms or branches, and less tangible properties such as con­tacts and information networks and the self-confidence that goes with the possession of all these assets together with a track record. As noted above, such resources are not evenly spread across ethnic minority groups, though the signs are that a more educa­tionally qualified and professionalised British-born generation of business owners is steadily acquiring these resources (Ram et al., 2003).

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