Pulled In or Pushed Out? The Effect of Learning on Minority Entrepreneurship

• In Event: Inequality, State, and Local Policy

Abstract

Entrepreneurial ecosystems have drawn increasing attention from economic development practitioners, scholars, and policymakers obligated to develop and sustain healthy local economies. Ecosystems can be broadly understood as geographically bounded communities of stakeholders (individuals and organizations) engaged in the formation, development, and growth of new businesses. They are context-specific and vary from place to place. A good starting point of understanding the importance of a supportive entrepreneurial ecosystem is provided by Gnyawali and Fogel (1994, p.50): “Unless entrepreneurs are well equipped with technical and business skills (coming from support organizations within a locality, region, or state, and from peers, nonprofits, or governmental agencies), they may not be able to overcome various problems they encounter at different stages of their business development”. To date, the extant literature has concerned essential components of entrepreneurial ecosystems; however, how entrepreneurial ecosystems can increase entrepreneurial opportunities and resources accessible to minority groups needs more exploration. Moreover, policy makers and practitioners also confront keen ambiguity in whether and how governmental intervention can relatively balance such inequalities. The question of what governments can do to encourage economic competitiveness alongwith mitigating social divides goes to the heart of theoretical and empirical explorations.
In this study, we would like to explore whether learning about innovative ideas and practices in social inclusion and diversity enables the development of a more diverse entrepreneurial ecosystem. Capturing social learning by intercity visits, we hypothesize that intercity visits touching on racial and social diversity issues raise awareness of challenges and sufferings minority entrepreneurs confront; learning about others’ innovative ideas and practices also allows cities to obtain a better understanding of what support is most needed by minority entrepreneurs, how to limit barriers and creating more attractive opportunities to pull minorities into small business ownership, and how to deliver support in a culturally sensitive way. And accordingly, those cities tend to have a more diverse entrepreneurial ecosystem, resulting in more minority-owned firms.
To examine the hypothesis, a difference-in-differences (DID) model will be estimated to test this hypothesis. We will sort the cities with diversity agenda during intercity visits between 2009 to 2016 into multiple treatment groups based on the time of intercity visit occurrences, and those without diversity agenda during intercity visits into multiple control groups. We will match the treatment groups with the control groups by the time of intercity visits occurrences to construct 8 datasets. We will then compare the diversity of entrepreneurial ecosystems (operationalized as the number of minority-own firms) before and after the occurrence of intercity visits between cities with and without discussion over diversity and inclusion. A spatial econometric model considering spillover effects geographically will also be adopted for result comparison.
This research contributes to the entrepreneurship policy literature in three ways. First, it will emphasize the role of social interactions and networks in entrepreneurial ecosystems, which remains understudied. Second, it will enhance our understanding of how to use intercity visits to develop diverse entrepreneurial ecosystems which may level the playing field between minority groups and decrease poverty. Third, it will expand our knowledge about the causal relationship between organizational learning and entrepreneurial outcomes.

Authors

• Ivy Liu, University of Mississippi

• Hongtao Yi, Florida State University