Social Networks, Ethnicity, and Entrepreneurship

by William R. Kerr & Martin Mandorff

Overview — This research looks at why entrepreneurs from certain ethnicities cluster in particular industries, such as Vietnamese nail care salons.

Author Abstract

Immigrant groups often exhibit high levels of entrepreneurship that are concentrated in a narrow set of occupations (e.g., Vietnamese nail care salons, Punjabi Indian convenience stores). This paper develops a theory where non-work social relationships reduce the costs for members of an ethnic group for acquiring sector-specific skills for entrepreneurship in the occupations where their group concentrates. The scale economies generated by isolated and networked social interactions can result in favorable economic outcomes and self-employment conditions for these groups. This setting contrasts with classic market-based discrimination in important ways

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