Diversity in Entrepreneurship: The Role of Women and Ethnic Minorities

1. Entrepreneurship and Small Firms 4th edition Chapter 3 Diversity in Entrepreneurship: The Role of Women and Ethnic Minorities David Deakins and Mark Freel Slides by Margaret Fletcher

2. Entrepreneurship and Diversity Diversity is a concept important for: • Innovation and creativity • Entrepreneurial activity • Local economic development • Economic growth Dimensions: • cultural • ethnic • gender • other dimensions follow e.g., sectoral

3. Entrepreneurship and Diversity There are similar issues in ‘minority areas of entrepreneurship’ including: • Female entrepreneurship • Ethnic minority entrepreneurship • Social entrepreneurship

4. Entrepreneurship and Diversity Issues include: • Participation rates • Motivation • Networks • Diversification • Integration into the ‘mainstream’ • Access to finance

5. Participation Rates • Female participation rates appear to be 50% those of men, e.g., self-employment rates • In practice female participation rates are nearer those of men. • Women’s participation in business often goes unrecorded.

6. Participation Rates • Ethnic minority participation rates are variable across different ethnic minority groups: • Indians • Pakistanis • Bangladeshis • Chinese • African and Caribbeans • Self-employment rates vary from 7% up to 30%: with South Asians up to 5 times those of Whites

7. Motivation • Women: role of ‘silent entrepreneurs’; male partner may be installed as a figure-head. • Role of discrimination--push factor for both ethnic minorities and women • Women may be motivated by different factors than those of men: • independence • greater flexibility of working hours • social objectives

8. Motivation • Ethnic minority groups may not have the motivations associated with ‘role-model’ entrepreneurs. • Ethnic minorities--motivations have changed across different generations: • 1st generation--negative motives • 2nd generation-positive motives • 3rd generation-do not see themselves as ethnic minorities • Role of family support/social capital

9. Networks Women: • Face difficulty entering and establishing networks • Established networks tend to be male-dominated; e.g., Chambers of Commerce, business clubs • Need networks to establish credibility • Hence policy measures may seek to form networks of self-support for women, e.g., Prowess initiative (see www.prowess.org.uk)

10. Networks • South Asian ethnic minorities --networks are well developed e.g. Asian Business Forums. • African and Caribbeans--networks are under-developed, although parts of London and Birmingham have Black Business Forums • Chinese: strong close knit community--difficult to break into community networks. • Ward and Jenkins: claim Asian communities give them a competitive advantage through access to informal capital and social capital.

11. Diversification and Sector • Ethnic minority businesses (EMBs) can be concentrated in traditional sectors (1st generation established due to low barriers to entry) • retailing • wholesaling • clothing manufacturing • Catering • Face declining demand due to increased competition. • Feature of EMBs in some localities such as the West of Scotland.

12. Diversification • Requires resources and new skills • Problems of funding • Banks may not want to fund expansion into non-traditional areas • New markets are difficult to break into for EMBs due to ‘hostility’. • Reputations/experience reinforce perceptions held by EMB owners. • Result: requires a specific coping strategy.

13. Integration into the ‘Mainstream’ • Women • May not participate in mainstream sources of advice and capital • May be in sectors not supported e.g., retailing • May be in businesses that are seen as ‘lifestyle’ • Policy measures seek to integrate and encourage start-up e.g., SBS’s Strategic Framework

14. Integration into the ‘Mainstream’ EMBs: • Ethnic enclaves limit opportunities 1. Resources: dependent on ethnic labour 2. Markets: limited in size and scope 3. Inward-looking • Lack integration into mainstream bodies; e.g. support, finance/business associations • Formal Institutions seen as white, middle-class and institutionally racist

15. Access to Finance Women • May lack financial resources of men (e.g., less likely to home owners and this limits ability to supply collateral). • Most formal and informal sources of finance are male-dominated networks e.g., business angel networks, venture capital (although in the USA, there are some networks of female business angels). • Personal resources likely to be less than those of men (on average women still earn less than men, although gap has been closing).

16. Access to Finance • EMB owners rely more heavily than other businesses on personal sources and friends or family for finance. • Formal external sources: • Banks • Venture capital • HP/leasing • Alternative grants/loans Traditionally low take-up rates of such sources, which are perceived by EMB owners as being ‘white-dominated’ and therefore problematical.

17. Banks • Centralised decision-making means that bank manager may be remote from decision-making. • Bank managers only in prominent networks • Banks have formal information requirements e.g. business plans which may not suit many women-owned businesses and EMBs since they operate informally • Thus information asymmetries are greater with women and EMBs than with white or male-owned=> greater problems.

18. Other Formal Sources • VC companies are dominated by men and white middle class. • Asian business angels--extent is not known. • Women business angel networks yet to be developed in the UK • Other sources seen as not relevant by women and EMBs • EMBs have low participation in alternative schemes such as the Small Firms’ Loan Guarantee Scheme.

19. Ethnic Minority Entrepreneurship: Additional Issues • Break-out • Traditional v emergent sectors • Plurality and diversity • Stereotyping • Local area support programme: examples: • London, Birmingham, and other cities

20. Break-out • Argued by some (e.g. Ram and Jones) that is the main issue facing ethnic minority business development • Critical issues in the process: Access to Resources and Access to Markets

21. Break-out Access to resources: • Financial capital • Human capital (education/training/experience) • Social capital (e.g., family support) Access to markets • Strategy • Networks • Skills

22. Traditional v Emergent Sectors • Traditional stereotypical view of EMBs • EMBs:- small retailer/restaurant • In practice there is much diversity, characterised by high growth businesses in emergent sectors: Example: IT: see Alternative Publishing case professional services

23. Plurality and Diversity • Diversity evidenced by high growth businesses in emergent sectors • Plurality (Modood) • Argument that to classify ethnic minorities by broad ethnic group is misleading • ethnic minorities are now characterised by cultural diversity due to mixing of cultures

24. Supporting Ethnic Minority Businesses(or Women-owned Enterprises) Traditional problem: • EMB owners (or women) do not access business support provided by the mainstream agencies; such as Business Links (and the LECs in Scotland) • Business support seen as not relevant to EMB or women owners’ needs. • Sectoral concentrations and other characteristics of EMBs or women-owned enterprises (smaller size, family businesses) require specialised and distinctive support programmes.

25. Response Response has been two fold: 1. Mainstream agencies have adopted more inclusive policies e.g., Business Links and Scottish Enterprise network now have targets to reach and support women-owned enterprises and EMBs.

26. Response 2. Establishment of small specialised agencies who have focused on the needs of women and EMB owners: • specialised agencies, however, have limited resources and limited programmes---focus on moving EMBs into the mainstream support programmmes. In addition the SBS has launched the Strategic Framework for Women’s Enterprise which attempts to co-ordinate support for women-owned enterprises.

27. Supporting Ethnic Minority Businesses • Geographically each main location has a different pattern of mainstream and specialised agency support: • Examples: • London • Birmingham • Leicester • Glasgow

28. Local area support programmes London: • a mixture of mainstream --Business Links and well established specialised agencies • local development agencies focus on social and economic development as well as business support • special co-operative development agencies e.g., Greenwich CDA • active EM business associations • strong local Chambers of Commerce often with a high proportion of members who are EMBs. • Majority of business population in some areas of London are EMBs, i.e., they are the mainstream businesses.

29. Local area support programmes Birmingham: • also a mixture of mainstream (Business Links) and well established specialised agencies • local authority intervention, especially Birmingham City Council. • network of specialised support • supported through alternative funding e.g., Arrow Fund. • strong Asian Business Forums. • some 20% of business population are EMBs.

30. Local area support programmes Leicester: • provision of support less well established • no strong specialised agencies • local authority intervention less well established • East Midlands Regional Development Agency recently established and still developing policies. • EM business associations established; e.g., Leicester Asian Business Association Result: • less co-ordinated support than London/Birmingham.

31. Local area support programmes Glasgow: • Specialised support only recently established • Ethnic Minority Business Development programme (Glasgow City Council) • Neglected area for mainstream support. • EMBs in Glasgow not catered for by mainstream agencies. • Late development, however, has permitted integration of specialised support with mainstream development agencies.

32. Local area support programmes Should enterprise support be targeted at minority groups? Argument that minority groups need special support so that their support needs can be understood. BUT: • Ensures minority groups remain outside mainstream agencies • EMBs and women-owned enterprises do not want special treatment

33. Pattern in the UK • Enterprise support for such groups is highly variable and different provision in different localities • Ethnic Minority Business Initiative at the end of the 1980s called for: • Systematic data on EMBs and their needs • Targeted support for development into mainstream • Consistent pattern of support

34. Pattern in the UK • Review of EMB support and Report by Ram and Smallbone (2001) for the Small Business Service concluded little overall progress. • For women-owned enterprises it is arguable as well that there has been little progress, although recent signs of progress: • Prowess UK national initiative • SBS’s Strategic Framework

35. Conclusions • EMBs and women-owned enterprises are characterised by diversity and plurality--high growth businesses across different sectors. • Evidence of discrimination is difficult to prove but cultural differences imply that some groups find it difficult to access finance; especially women, African and Caribbeans. South Asians have been more successful. • Diversification and break-out are still important issues for EMBs.

36. Conclusions • A major concern of policy which has been focused on promoting diversity. Important for: • entrepreneurial richness • levels of innovation and creativity • economic growth and development