It Takes a Village: Exploring the Social Fabric Supporting Entrepreneurship in Emerging Market Communities

Abstract

My dissertation initiates scholarship analyzing income-inequality and entrepreneurship at a community level, a market mechanism not tested in prior research on communities and organizations. In addition, my dissertation initiates scholarship analyzing deviance and entrepreneurship at a community level, an institutional mechanism not tested in prior research on communities and organizations, as well as an institutional mechanism not developed within wider scholarship on institutions and entrepreneurship. The aforementioned analyses constitute chapters three and four of my dissertation respectively. Scholarship has traditionally argued that increased income equality reduces overall levels of entrepreneurship because economic elites will have less excess capital to re-invest into new businesses, there will be less incentive to practice entrepreneurship, and fewer people will be pushed into necessity-driven entrepreneurship. I test an alternative theory, based on social capital theory, arguing that a more even distribution of income engenders social capital, which in turn increases both the level and quality of entrepreneurial activity in communities. I test hypotheses using data from Mexico that tracks the entrepreneurial activity in every municipality in the country for the years 2000–2011. Longitudinal and within-country analysis remedy the methodological weakness of prior empirical work in this area. I find support for hypotheses grounded in a social capital perspective on income equality and entrepreneurship. Research at the nexus of institutional theory and entrepreneurship has not considered whether, and how, deviance from institutions impacts entrepreneurship. I argue that deviance will foster greater entrepreneurial activity in communities where it is not valued (or where traditional employment models are more valued). As deviance increases, a deviant subculture develops which yields higher social value for entrepreneurship as a career path in two ways. First, deviant subcultures value behaviors commonly associated with an entrepreneurial orientation: Risk-taking, experimentation, and independent thinking. Second, deviant subculture directly places higher value on entrepreneurship as a career path because it is viewed as disrupting the economic status quo of the dominant system. Thus, increasing aggregate levels of deviance should lead to increases in entrepreneurial activity. I test this argument using longitudinal data on all 2448 municipalities in Mexico. The results confirm my hypotheses.