Styling Hair, Building Community: How Barbershops and Salons Spur Neighborhood Entrepreneurship

• In Event: 30255 - Social Networks and Interorganizational Relations

Abstract

Scholarship on entrepreneurship has shown that founders benefit from being in neighborhoods with robust social networks. Scholarship on neighborhoods has shown that local networks are built and maintained in “third places” such as restaurants, bars, and barbershops. In this article, we examine the implications; we ask whether neighborhood entrepreneurship benefits from a specific type of third place—personal care establishments, such as barbershops, nail salons, and hair salons. Using data on startup formation in the majority of U.S. neighborhoods between 2003 and 2016, we find that the opening of the first personal care establishment increased the number of new businesses in the neighborhood over the subsequent eight years. Results are consistent with a causal effect across multiple robustness checks. In contrast, the opening of local retail establishments that would not contribute to local networks, such as convenience and hardware stores, had a small or null effect. Further analyses suggest that the effect of personal care establishments occurs at the neighborhood level, shaping not the personal networks of the entrepreneur but the social capital of the neighborhood. All personal care establishments benefited both men and women entrepreneurs, and, as would be suggested by the literature, the effect of barbershops was larger in neighborhoods with more African Americans. Our results provide insight on how social capital shapes economic activity in neighborhoods.

Authors

• Nicholas Aaron Pang, London School of Economics

• Mario Luis Small, Columbia University

• Jorge Guzman, Columbia Business School