Communities in business ownership

One characteristic of the rebirth of the small business sector within the UK economy over the past two decades is the growing presence of members of ethnic minority communities in business ownership. Critically evaluate the impact of this (if any) on our understanding of enterprise and entrepreneurship. The last twenty years has seen a significant growth in the small business sector. However just under 3/4 of this growth was made of one-person businesses, with no employees. 3. 7 million Small to Medium Enterprise’s represent 99. 8% of all UK businesses.

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They account for over half the UK’s economic activities. (Hewitt, 2000) Therefore it’s not surprising to find business owners from ethnic minority communities among these large figures. Entrepreneurs from specific ethnic communities are now an apparent part of the small business sector in most developed countries. Ethnic businesses make a significant contribution to the UK economy. For example 12% of all business start-ups now feature ethnic enterprises (November 2002). Historically, entrepreneurship has emerged in specific groups organized along ethnic, religious, or other sub cultural lines.

Several reasons have been suggested for an ethnic identity. Disadvantage and Discrimination Explanations Entrepreneurship of this form may arise from a lack of suitable labour market opportunities, owing to language barriers and discrimination, or the non-acceptance of educational qualifications obtained in other countries. On the other hand the high amounts of ethnic minority ownership may be a survival strategy stemming from continual prejudice. Culturalist Explanations It’s argued ethnic minority groups posses unique characteristics that influence them culturally and psychologically towards entrepreneurship.

Some cultures have a distinct spirit of self-sacrifice, self-denial and hard work fuelling entrepreneurship. Certain religions are said to place an emphasis on strong work ethic, diligence and frugality facilitating entrepreneurial characteristics. A growing co-ethnic community of contacts is a source of competitive advantage. It may create opportunities with the sharing of advice, market information and a network of suppliers. Ethnic business owners often enter into labour intensive sectors e. g. clothing, catering and convenience retailing.

Or businesses connected with their cultural identity e. g. the role of Indian women is often associated with the home and food so Meena Phatak and her involvement with Phatak’s an Indian food company was instinctive to her gender and more importantly culture. Businesses are sometimes family run however this can be a problem as well as an advantage. Funds for business start up may possibly come from family e. g. Shami Ahmed, founder of Joe Bloggs, started in business with his parents when he was 14 years old.

Community credit associations may well exist, where finance is provided at favourable rates. Research indicates ethnic groups have greater resource disadvantage then labour market disadvantage. This may help explain why some ethnic groups seem to be more entrepreneurial than others. A desire to accumulate wealth and possibly return to one’s homeland may be another reason to set up business. (Aldrich and Waldinger 1990). When asked as to why the ethnic minorities are successful in Britain? Rueben Singh says it was due to the fact that they came here in survival mode to make something of themselves.

Such entrepreneurs often retain their distinct ethnic identity and form close links with co-ethnic workers and consumers, while choosing to remain separated from the mainstream business culture. Taking risks is a desired trait of an entrepreneur, and by immigrating to the UK first generation ethnic minorities unquestionably took risks. Making a start from nothing also helped breed a hard work ethic. Many ethnic shopkeepers for example, work around eighteen hours a day to help provide for their children’s education and build their business. They fear failure and so compensate for this by working every hour necessary.

The new generation of ethnic minorities consider themselves very much integrated into UK society. The industries that were traditionally associated with ethnic minorities are no longer exclusive to retail, pharmacy, textiles and the restaurant trade but cover every area of industry and business by demonstrating the money-making skills needed in today’s job market. The new generation no longer want to rely exclusively on their family for success, and with traditional sectors slowly declining, they are actively equipping themselves with viable skills in order to succeed in today’s society.

Despite the importance of cultural factors, traditional theories of entrepreneurship give only slight attention to ethnic minority communities in business ownership. The dominant economic and psychological factors that are usually used in texts are limited in explaining entrepreneurship and business strategies among ethnic groups. However, some literature on ethnic entrepreneurs’ entrepreneurial motivations, formation of enclaves, use of ethnic and class resources, and the tendency to specific business forms is found in sociology (Aldrich and Waldinger 1990; Bonacich 1973; Light 1972).

The largest ethnic groups in the UK are Indian, Pakistani, Chinese and Black Caribbean. It is however Asian communities that have the highest rate of self-employment, in relation to the national figure. This is mainly due to a strong motivation to be independent and a keen interest in entrepreneurial activity. But what is it that makes Asians such good business people? A close family upbringing and involvement in the family business from young helped the second and third generation to become business oriented.

The first generation created the stereotype of the corner shop and brought their children up in a house where business was always discussed. This helped them learn the values of hard work and owning your own business. (Gidoomal et al. ) This view of Asian self-employment has however been increasingly questioned for offering too one-sided a view of Asian business development. The real choices that ethnic minorities may make in deciding to go into business and also the line of business they will enter isn’t acknowledged (Werbner 1990).

An alternative approach to understanding Asian entrepreneurship has been put forward which has been referred to as the ‘cultural resources’ approach. Werbner, in a study of Pakistani entrepreneurship, argues that the critical factors in the success of Pakistani businessmen are their cultural heritage, which stresses thrift, overdue gratification, conscientiousness and self-reliance (Werbner 1990). Such attributes rather than the wider environment are seen as central to the development of Asian business.