Measuring Entrepreneurial Success. – Review – book reviews - Higher Education


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Measuring Entrepreneurial Success. – Review – book reviews

by Barbara M. Scott

Race, Self-Employment, and Upward Mobility: An Illusive American Dream

By Timothy Bates

The Woodrow Wilson Center Press, 1997 Washington, D.C.

288 pages

Hard cover: $47.95

Paperback: $16.95

An important component American value system is the belief in
“competitive individualism” — the way to be successful is to work
hard, strive for goals, and compete well against others. This
philosophy of individualism and self-help has fueled conventional
notions and popular myths about entrepreneurship in American society.

In a modern-day version of Horatio Alger, the model of the
“successful Asian immigrant small business owner” is used to perpetuate
the notion that small-business ownership is the route to upward
mobility in America for those who work hard and live frugally. African
Americans have done very poorly in this regard, so the theory goes,
because of a lack of initiative and know-how, an aversion to hard work,
some sort of cultural deficiency, and innate traits that prevent them
from having what it takes to be an entrepreneur.

However, the literature in this regard is varied and inconclusive
as to what extent African Americans lag behind other groups in terms of
successful small-business ventures. And more importantly, why this
might be the case.

Race, Self-Employment and Upward Mobility: An Illusive American
Dream is a well-organized and well-written study of minority-owned
businesses. Author Timothy Bates develops a comprehensive analysis and
comparison of entrepreneurship that focuses on the self-employment
patterns of African Americans and Asian American immigrants.
Occasionally, Bates takes swipes at sociological analyses of small
businesses, pointing out methodological and analytical flaws. In turn,
he claims to address these deficiencies through the use of a number of
sophisticated databases that describe small businesses and their owners.

The most comprehensive of these databases is the massive
Characteristics of Business Owners survey compiled by the U.S. Census
Bureau. The survey provides nationwide information that describes
self-employed people as individuals and describes various
characteristics of the businesses they own, such as volume of sales,
amount of financial capital invested in the firm, number of employees,
nature of the markets served, profits, and success and survival
patterns. These data, he contends, are paramount in making
generalizations about individual small business owners.

According to Bates, success or failure in small business
enterprises is historically contingent on the prevailing social,
economic, and political circumstances. Thus, any analysis of minority
small-business patterns only makes sense in the context of changes in
prevailing constraints and opportunities, impact self-employment entry,
types of business opportunities, and so forth — contentions that are
uniquely sociological.

Bates’s analysis, then, focuses on who becomes self-employed, what
factors encourage continuing self-employment, and how people avoid
failure in small business ventures. He also addresses the place of
entrepreneurship in upward mobility among less-advantaged people and
the role of government in assisting them. While acknowledging factors
such as discriminatory access to bank loans as important in shaping
self-employment patterns, Bates concentrates on three factors: class
resources, social resources, and blocked opportunities shaping
self-employment patterns.

Bates says that Asian immigrants have been prominent in low-profit,
high-risk businesses in high-risk inner city communities, not entirely
by choice but because they are often pushed into these types of
business ventures because of blocked opportunities — poor English
language skills and problems with credentials. If managerial and
professional jobs are inaccessible to highly educated Asian immigrants
because of such deficiencies, then self-employment becomes an
attractive alternative to accepting low-wage service and blue-collar
jobs. When Asian immigrants can secure other employment, they do so.
They also often encourage their children to enter the mainstream
economy.

In contrast, for African Americans, the management competence of
owners is the single most important cause of business success or
failure. Moreover, Bates argues that African Americans who have the
education, capital, and inclination to venture into small business
enterprises find better paying opportunities and thus avoid setting up
their businesses in inner city communities.

Indeed, a major difference between these two groups is that
although Asian immigrant entrepreneurs have made progress in emerging
markets, they remain concentrated as well in traditional businesses
whereas the face of Black businesses has changed profoundly over the
last three or four decades.

For example, the erosion of discrimination has allowed African
Americans to penetrate traditionally inaccessible markets, producing a
shift from traditional personal services and mom-and-pop-type
businesses toward high-yield businesses that have resulted in Black
entrepreneurship that increasingly leads to upward mobility. A key
factor in the growth of Black businesses is the rising incidence of
highly educated entrepreneurs.

On the other hand, highly educated Asian immigrants who come to the
U.S. continue to start small-scale businesses such as restaurants,
grocery stores, and laundries that yield low profits to their owners
and often degenerate into underemployment. This fact notwithstanding,
the crowding of Asian immigrants into fields such as these, has often
been misinterpreted as evidence of success.

Bates concludes that the factors associated with success in
self-employment are much the same whether for immigrant or native-born
and across racial-ethnic groups in contemporary American society.
Contrary to popular notions, self-employment and upward mobility are
open primarily to those who are well educated, skilled, and have
significant financial resources. High rates of business failure and
self-employment exit are characteristic of those who choose
self-employment without the appropriate education, skills, and
financial resources. This pattern holds true across race, ethnicity,
and gender.

Bates notes that African Americans have actually made substantial
progress in small business enterprises, particularly over the past few
decades. Contrary to the popular myth of the glorious past of
successful minority entrepreneurship, Bates argues convincingly that in
the past, minority business owners, particularly African Americans and
Asian immigrants, struggled to keep their heads above board in marginal
business enterprises.

Although Bates is to be commended for his use of comprehensive data
sets, because he is simply testing a previously articulated theory of
entrepreneurship and doing so using quantitative methods — e.g.,
logistic regression — he necessarily leaves many unanswered questions.
How do blocked opportunities explain the extremely heavy concentration
of Asian American/Asian immigrant small businesses in inner city
African American communities? If, indeed, these businesses are labor
intensive, low-economic return, and highly risky both to the physical
and economic well-being of the entrepreneur, why do they choose these
communities as opposed to their own or other communities?

Clearly, if the reader is looking for new and innovative
explanations about minority entrepreneurship generally and African
American and Asian immigrant small-business enterprises specifically,
this is probably not the study. I suspect, however, that qualitative
sociologists will probably find much to critique and debate here.

Dr. Barbara M. Scott, Chair, Department of Sociology, Criminal
Justice, Social Work & Women’s Studies, Northeastern Illinois
University

COPYRIGHT 1998 Cox, Matthews & Associates



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