The economic context, embeddedness and immigrant entrepreneurs

Citation

Rath, J. and Kloosterman, R. (2002), "The economic context, embeddedness and immigrant entrepreneurs", International Journal of Entrepreneurial Behavior & Research, Vol. 8 No. 1/2. https://doi.org/10.1108/ijebr.2002.16008aaa.001

The economic context, embeddedness and immigrant entrepreneurs

AbstractJan Rath is at the Institute for Migration and Ethnic Studies (IMES), University of Amsterdam, The Netherlands. Robert Kloosterman is at the Amsterdam Study Centre for the Metropolitan Environment (AME), University of Amsterdam, The Netherlands. Eran Razin is in the Department of Geography, Hebrew University of Jerusalem, Mount Scopus, Jerusalem.

Keywords: Immigrants, Entrepreneurialism, Ethnic groups, Economic conditions

The last few decades have shown a remarkable reappraisal of the small business sector. Since the 1970s, the gloomy orthodoxy notwithstanding, a large number of people have set up shop and managed to survive in an increasingly global economy. Their role in the economy has been publicly acknowledged by now, as has been amply demonstrated by the drastic liberalization of their regulatory environment. The dramatic shift from an economy based on manufacturing to one based on services, the fragmentation of markets, the rapidly declining costs of information technology as well as changes in the political approaches regarding small businesses are key factors that help explain the recent development of the small businesses sector. Another factor contributing to that development – often overlooked in general reports about the SME sector – is the cross-border mobility of people. Virtually every advanced economy – the timing may differ from place to place – has experienced mass immigration, especially from Third World countries, but increasingly also from other, more developed countries. A significant number of these immigrants possess specific skills and resources. Although the vast majority gravitates to wage labor, quite a few of them – and this may vary from group to group – enter self-employment. The latter evidently make a distinct presence in many advanced economies. Some sectors such as garments, restaurants and construction would, in many cases, barely stand a chance of survival without the immigrants' entrepreneurial drive. In the same vein, many working-class neighborhoods would be impoverished if immigrant businesses ceased to exist.

Sociologists, anthropologists and geographers rather than business economists have acknowledged the significance of immigrant entrepreneurship. Since the early 1970s, academic researchers from the USA and Britain, but also from Canada, Australia and the European continent, have built up a distinct body of literature. As is the case in any other branch of social science, they have not reached consensus as to the factors and processes that account for the emergence of immigrant entrepreneurship and the particularities – if any – of immigrant entrepreneurs' daily business operations. Some researchers, notably the British geographers David McEvoy and Trevor Jones, emphasized structural factors, while others put more explanatory value into cultural factors. Despite a collaborative attempt in the late 1980s to accommodate these differences in one "integrative model" (Waldinger et al., 1990), the focus of much research has been put on characteristics of the entrepreneurs and the ethnic group they belong to. One immensely popular line of theoretical thought in this respect revolves around issues of social embeddedness. Following economic sociologists such as Granovetter, researchers look for the entrepreneurs' social connections to relevant (ethnic) others and attribute the success of their business ventures, or lack of it, to particularities of their embeddedness in social networks. While accepting that social networks are important, a growing number of researchers strike a critical note and argue that the adherents of this approach show a tendency to overstate ethno-social features and understate matters of political economy. Besides, this approach hardly lends itself to international comparative research, as it does not fully appreciate the significance of the economic environment and the politico-regulatory framework in which entrepreneurs operate.

Mixed embeddedness was intended to incorporate just that and to enable comparative research (Kloosterman et al., 1999). Although mixed embeddedness was not defined very neatly at first, we now have a more focused understanding of this concept. In our view, mixed embeddedness is an attempt to combine factors that operate at a micro, meso and macro level in a meaningful way that allows (cross-border) comparison. The current embeddedness approaches, although very fruitful, tend to stick too much to the micro and the meso level by focusing on actors and social networks. There is nothing wrong with that but this has severe limitations, especially if you want to engage in international comparative research. You have to go beyond this and include not only actors and networks but broader socio-economic, political and institutional structures as well. This is the room where an individual actor makes his or her choices and where social networks may provide resources or may hamper further advancement. Waldinger and his associates also wanted to go down this road, but they never problematized or conceptualized the opportunity structure in a way that would allow operationalization within a (cross-border) research framework.

This implies that we have to link up with broader debates on how employment and self-employment are structured along different trajectories that emerge in post-Fordist/post-industrial regimes. Esping-Andersen made a heroic attempt in 1990 with his Three Worlds, spelling out how ideal-typical institutional (mainly social policies) conditions may impact on employment structures. This framework can be used as an example of how different post-Fordist/post-industrial (self-) employment trajectories may be understood in a more abstract way. The quintessence of mixed embeddedness is to take on board these notions and to position actors (and social networks) in broader structures (similar to Giddens' structuration theory). To be able to use mixed embeddedness in empirical research, we advocate the construction of another heroic typology that describes how different broader institutional frameworks and related socio-economic processes of change generate opportunity structures along path-dependent trajectories. This gives researchers a handle on the shape of the three crucial variables of the opportunity structure (i.e. the size of the market domain, accessibility of markets and growth potential of markets). This, then, can be linked to, for instance, Engelen's (2001) contributions on breaking in and breaking out strategies, and subsequently on various social network and actor theories.

Mixed embeddedness can now be elaborated in a middle-range theory that can capture cross-country variations in a meaningful way. It is nevertheless clear that the conceptualization and operationalization are still matters of debate. Researchers in Europe and increasingly also from North America and Australia have been spelling out the theoretical and practical implications of mixed embeddedness in a series of international exchanges, sponsored by the European Commission. One such exchange focused on the impact of the economic context on entrepreneurship among immigrants. A number of papers are presented in this special issue of the International Journal of Entrepreneurial Behaviour & Research.

In their article, Giles Barrett, Trevor Jones, David McEvoy and Chris McGoldrick ascertain that immigrant-owned businesses in Britain are concentrated in trades that are in decline and/or labor intensive, and argue that the accumulation of class resources rather than ethnic ones holds the greatest promise for entrepreneurs who want to move away from these acute competitive pressures and want to become more successful. Nonja Peters assesses the relevance of the mixed embeddedness approach based on an empirical study that spans a number of economic periods and includes both genders and a number of generations. She argues that while the "mixed embeddedness" approach gives a more comprehensive explanation than previous models, it nonetheless fails to explain the wide-ranging inter-ethnic variation in entrepreneurial concentration observed among immigrant groups around the world. She attributes this to the approach's lack of historical perspective, focus on the lower end of the market and lack of appreciation of the agency of individuals. Izhak Schnell and Michael Sofer present an inquiry into the Arab industry in Israel and suggest that the form and degree of embeddedness of any given firm is affected by the existence of both separate economic milieus: Arab and Jewish. They suggest that Arab firms that are over-embedded in the local milieu operate under the influence of kinship structures and a petrified supportive tissue that downgrades networks into cohesive coalitions opposing structural changes. They, moreover, argue that firms that are under-embedded manage to develop and maintain a wide inter-ethnic dependent set of networks, but fail to transform them into more rewarding exchanges due to lack of power. Ewald Engelen, in a more conceptual paper, explores the innovativeness of immigrant entrepreneurs in The Netherlands. He constructs a framework of assessment based on the divergent capitalisms approach of Richard Whitley and associates, and concludes that despite the rise of small businesses, the Dutch institutional setting is not very conducive for value creating innovations. Instead, it seduces firms, especially small and medium enterprises, to follow reactive strategies. Daniel Hiebert presents an empirical investigation into the relationship between ethnic labor market segmentation and ethnic entrepreneurialism in Canada. He demonstrates that immigrants who are drawn to niches that offer few opportunities for self-employment have low rates of entrepreneurship and, conversely, those who are over-represented in niches with considerable scope for self-employment are inclined to establish their own businesses. This shows that the propensity for self-employment is, to an important degree, determined in the regular labor market. He concludes that entrepreneurship should not be seen as an intrinsically cultural phenomenon, but instead as arising out of the opportunity structure associated with wage and salary labor.

Jock Collins explores the experience of Chinese entrepreneurs in Australia from the earliest days till the present. He argues that it is necessary to investigate how ethnicity, gender and class have intersected to shape changing patterns of Chinese entrepreneurship in the Australian Chinese Diaspora. He also suggests that the dynamics of Chinese immigration and Chinese entrepreneurship in Australia have been shaped by the changing dynamics of globalisation, the state and the racialization of Chinese immigrants in the Australian labour market and society as a whole. In her contribution, Maggi W.H. Leung challenges the popular culturalistic view that Chinese migrants enter the catering business simply because they are Chinese. She explores how important factors such as Chinese immigrants' access to alternative employment, the development of in- and out-migration policies in Germany and East Asia, changing consumer demand and market conditions, as well as availability of set-up capital, shape the volume and forms of Chinese restaurant trade, the kinds of food served, hiring practices and other business strategies. Ching Lin Pang also examines Chinese restaurateurs, albeit from a different angle. She looks into the relation between white customers and immigrant restaurant entrepreneurs in the city of Antwerp, Belgium. Immigrant/ethnic restaurants provide, in many instances, an avenue for social mobility, thereby overcoming the general constraints facing immigrants such as insufficient financial capital, low educational levels, linguistic handicap, etc. This entrepreneurial success is fraught with ambivalence, which in its most extreme manifestation may turn into what cultural studies scientist Frank Chin called "food pornography". The two dimensions are both present in Chinese immigrant restaurant ventures for they provide opportunities with a series of social costs.

In the final contribution, Eran Razin wraps up the special issue. He argues that the concepts of embeddedness, which acknowledges that economic action is embedded in the structures of social relations, and mixed-embeddedness, which incorporates both roles of co-ethnic networks and linkages between immigrants and the broader society, could have a major role in explaining entrepreneurial variations. On the one hand, he criticized these concepts as being fuzzy and hard to verify empirically, and as presenting an idealistic image on the favorable role of intra-ethnic networks. On the other hand, he points to a number of aspects that help to flesh out the embeddedness and mixed-embeddedness concepts.

Jan Rath and Robert Kloosterman

ReferencesEngelen, E. (2001), "'Breaking in' and 'breaking out"', Journal of Ethnic and Migration Studies, Vol. 27 No. 2, pp. 203-23.Kloosterman, R., van der Leun, J. and Rath, J. (1999), "Mixed embeddedness. Immigrant businesses and informal economic opportunities", International Journal of Urban and Regional Research, Vol. 23 No. 2, June, pp. 253-67.Waldinger, R., Aldrich, R., Ward, R. and Associates (1990), Ethnic Entrepreneurs. Immigrant Business in Industrial Societies, Sage, Newbury Park, CA.