ancient cities

esources (e.g., financial capital, knowledge, production
inputs) that can be accessed by making use
of networks of coethnics. To some extent, other
sets of resources (notably financial and human
capital) can be substituted by ethnic capital. Even
more than “common” social capital, coethnic networks
are seen as generators of trust—as was the
case in the historic diasporic trade networks. Trust
lowers transaction costs as formal contracts can be
much shorter and even be done away with, making
dealings between coethnics cheaper. This also
holds especially true for the production inputs, as
lending money and employing workers without the
red tape can cut costs significantly. These strategies
based on trust, more generally, facilitate informal
economic activities that can be crucial for a business
to survive in these markets.
Ethnic Markets
Ethnicity may also bestow advantages on businesses
in another way. Members of a particular
ethnic group typically have the knowledge and the
trappings that are necessary to sell products
strongly associated with their culture (e.g., foodstuffs,
music, books, and magazines) to a clientele
of coethnics. These so-called captive markets are
usually too small for large firms and constitute
attractive niches for ethnic entrepreneurs. A captive
market may give a head start to a business, but
it also entails the risk of eventually getting trapped
in a stagnant market as coethnics may leave or
assimilate, or as large firms may enter the scene
and adapt to these consumer tastes.
Opportunity Structure
The first studies were focused on single cases of
ethnic entrepreneurship. Some of them were liable
to suffer from a myopic view tracing all kinds of
behavior back to some essentialist interpretation of
“ethnicity.” In the second wave, more comparative
studies were undertaken and the approach that
puts the entrepreneur and his or her resources at
the center of the ethnic market proved to be insufficient
to grasp differences in patterns of ethnic
entrepreneurship. Similar ethnic groups showed
rather divergent patterns of entrepreneurship in
different places. The local and national context
had to be brought in, because the kind of business
Ethnic Entrepreneurship
259
an immigrant starts and its subsequent role in the
immigrant’s process of incorporation are not determined
just by the resources this aspiring entrepreneur
can mobilize but are also decided by time- and
place-specific opportunity structures. Not just the
supply side but also the other part of the equation,
the demand side—or in other words, the set of
opportunities that can be discovered and exploited
by individual entrepreneurs—have to be taken into
account to explain entrepreneurship.
In capitalist societies, opportunities are related
to markets for goods and services. The opportunities
in these markets have to be, first, legally accessible
(e.g., no discriminatory formal rules or
informal practices banning certain groups from
starting a business in general or in a particular line
of business) and, second, they should match the
resources of the aspiring ethnic entrepreneurs. If,
as in many cases, ethnic entrepreneurs are on average
less well endowed in terms of human and
financial capital, they are dependent on opportunities
with low thresholds with respect to educational
qualifications and start-up capital.
On the national level, institutional frameworks
generate, along path-dependent ways, different
opportunity structures with diverging sets of openings
for small businesses. Different welfare regimes
can create different economic opportunity structures
(types and sizes of economic sectors) by
creating or hampering markets. If, for instance,
(full-time) female labor participation is relatively
low due to institutional obstacles (e.g., as in Italy),
the potential openings for new firms in personal
services that could substitute household production
(e.g., child care, catering, cleaning) are concomitantly
small. Opportunities may also be
relatively modest if the state is strongly present
(e.g., Sweden) and is crowding out chances for
small businesses. In the United States, by contrast,
outsourcing by households has created a sizeable
demand for low-end services (e.g., housecleaning,
catering, dog-walking services). Other components
of the institutional framework, such as the tax
system and the labor relations, may also impinge
on the opportunity structure and either foster or
impede business start-ups.
On the level of individual cities, the specific
trajectory of the local economy (orientation and
dynamics) is important in determining the set of
opportunities. A city struggling with its legacy of