New Destinations, Transnational Spaces, and How Geographically Distant Social Ties Help the Least-Skilled Ethnic Entrepreneurs

• In Event: 560 - Regular Session. Social Capital

Abstract

Ethnic entrepreneurship has long been seen as a potential means to economic and social mobility for immigrants. Whereas in the past ethnic entrepreneurship was presumed to occur through the mutual support of local co-ethnic communities, ethnic entrepreneurship can now be done through ties to co-ethnics abroad and in other immigrant gateways who can provide financing and supplies. Why would an ethnic entrepreneur choose an exchange partner far away when potential partners exist locally? Using data on a group of low-skilled Hispanic and African-American business owners, including the geographic location of their lenders and suppliers as well as the relationship they share with these lenders and suppliers, this paper shows that the least-skilled ethnic entrepreneurs are the most likely to be supported by geographically distant exchange partners. The least-skilled ethnic business owners are likely the most unattractive candidates for exchange locally, and they have the most to gain through the use of geographically distant social ties in which trust is well-developed. Although extra-local exchange partners may help sustain undercapitalized businesses, these geographically distant ties do not provide any competitive advantage in terms of profit. In conclusion, migration scholars, economic geographers, and social network analysts should take heed of the ways in which geography, social capital, and migration streams may intersect to produce unique entrepreneurship opportunities for low-skilled ethnic minorities, particularly in an era of transnational activity and migration to new immigrant destinations.

Author

• Mahesh Somashekhar, Princeton University