IDEAS home Printed from https://ideas.repec.org/a/kap/sbusec/v48y2017i3d10.1007_s11187-016-9796-8.html
   My bibliography  Save this article

Fractionalization, entrepreneurship, and the institutional environment for entrepreneurship

Author

Listed:
  • Sefa Awaworyi Churchill

    (Monash University)

Abstract

The vast majority of the literature on ethnicity and entrepreneurship focuses on the construct of ethnic entrepreneurship. However, very little is known about how ethnic heterogeneity affects entrepreneurship, and the institutional arrangements affecting entrepreneurship. This study attempts to fill the gap, and thus examines the effect of ethnic heterogeneity on various outcomes associated with entrepreneurship and the institutional environment for entrepreneurship. Using indices of ethnic and linguistic fractionalization, we show that ethnic heterogeneity negatively influences entrepreneurship. We argue that potential channels that can explain the negative effect of fractionalization on entrepreneurship include trust, social network, and innovation, among others. This study provides a new perspective on the existing debate that seeks to understand why the levels of entrepreneurial success vary across countries.

Suggested Citation

  • Sefa Awaworyi Churchill, 2017. "Fractionalization, entrepreneurship, and the institutional environment for entrepreneurship," Small Business Economics, Springer, vol. 48(3), pages 577-597, March.
    • Handle: RePEc:kap:sbusec:v:48:y:2017:i:3:d:10.1007_s11187-016-9796-8
    DOI: 10.1007/s11187-016-9796-8
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s11187-016-9796-8
    File Function: Abstract
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s11187-016-9796-8?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei & Vishny, Robert, 1999. "The Quality of Government," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 15(1), pages 222-279, April.
    2. Ghatak, Maitreesh & Guinnane, Timothy W., 1999. "The economics of lending with joint liability: theory and practice," Journal of Development Economics, Elsevier, vol. 60(1), pages 195-228, October.
    3. Elfring, Tom & Hulsink, Willem, 2003. "Networks in Entrepreneurship: The Case of High-Technology Firms," Small Business Economics, Springer, vol. 21(4), pages 409-422, December.
    4. repec:wvu:wpaper:10-12 is not listed on IDEAS
    5. Andrew Leigh, 2006. "Trust, Inequality and Ethnic Heterogeneity," The Economic Record, The Economic Society of Australia, vol. 82(258), pages 268-280, September.
    6. Stephan F. Gohmann & Bradley K. Hobbs & Myra McCrickard, 2008. "Economic Freedom and Service Industry Growth in the United States," Entrepreneurship Theory and Practice, , vol. 32(5), pages 855-874, September.
    7. F. M. Scherer, 1986. "Innovation and Growth: Schumpeterian Perspectives," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262691027, April.
    8. Montgomery, James D, 1991. "Social Networks and Labor-Market Outcomes: Toward an Economic Analysis," American Economic Review, American Economic Association, vol. 81(5), pages 1407-1418, December.
    9. Alberto Alesina & Eliana La Ferrara, 2000. "Participation in Heterogeneous Communities," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 115(3), pages 847-904.
    10. Marris, Peter, 1971. "African Businessmen in a Dual Economy," Journal of Industrial Economics, Wiley Blackwell, vol. 19(3), pages 231-245, July.
    11. Quamrul Ashraf & Oded Galor, 2013. "The 'Out of Africa' Hypothesis, Human Genetic Diversity, and Comparative Economic Development," American Economic Review, American Economic Association, vol. 103(1), pages 1-46, February.
    12. Alesina, Alberto & Perotti, Roberto, 1996. "Income distribution, political instability, and investment," European Economic Review, Elsevier, vol. 40(6), pages 1203-1228, June.
    13. Westlund, Hans & Bolton, Roger, 2003. "Local Social Capital and Entrepreneurship," Small Business Economics, Springer, vol. 21(2), pages 77-113, September.
    14. Saul Estrin & Tomasz Mickiewicz, 2011. "Institutions and female entrepreneurship," Small Business Economics, Springer, vol. 37(4), pages 397-415, November.
    15. Easterly, William, 2007. "Inequality does cause underdevelopment: Insights from a new instrument," Journal of Development Economics, Elsevier, vol. 84(2), pages 755-776, November.
    16. Desmet, Klaus & Ortuño-Ortín, Ignacio & Wacziarg, Romain, 2012. "The political economy of linguistic cleavages," Journal of Development Economics, Elsevier, vol. 97(2), pages 322-338.
    17. William Easterly & Ross Levine, 1997. "Africa's Growth Tragedy: Policies and Ethnic Divisions," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(4), pages 1203-1250.
    18. Taylor, Curtis R, 2000. "The Old-Boy Network and the Young-Gun Effect," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 41(4), pages 871-891, November.
    19. Quamrul Ashraf & Oded Galor, 2008. "Human Genetic Diversity and Comparative Economic Development," 2008 Meeting Papers 617, Society for Economic Dynamics.
    20. Ahlin, Christian & Lin, Jocelyn & Maio, Michael, 2011. "Where does microfinance flourish? Microfinance institution performance in macroeconomic context," Journal of Development Economics, Elsevier, vol. 95(2), pages 105-120, July.
    21. Ivar Kolstad & Arne Wiig, 2015. "Education and entrepreneurial success," Small Business Economics, Springer, vol. 44(4), pages 783-796, April.
    22. Rauch, James E. & Evans, Peter B., 2000. "Bureaucratic structure and bureaucratic performance in less developed countries," Journal of Public Economics, Elsevier, vol. 75(1), pages 49-71, January.
    23. Robert W. Fairlie, 2004. "Recent Trends in Ethnic and Racial Business Ownership," Small Business Economics, Springer, vol. 23(3), pages 203-218, October.
    24. Alberto Alesina & Ekaterina Zhuravskaya, 2011. "Segregation and the Quality of Government in a Cross Section of Countries," American Economic Review, American Economic Association, vol. 101(5), pages 1872-1911, August.
    25. Stelios Michalopoulos, 2012. "The Origins of Ethnolinguistic Diversity," American Economic Review, American Economic Association, vol. 102(4), pages 1508-1539, June.
    26. Vartuhí Tonoyan & Robert Strohmeyer & Mohsin Habib & Manfred Perlitz, 2010. "Corruption and Entrepreneurship: How Formal and Informal Institutions Shape Small Firm Behavior in Transition and Mature Market Economies," Entrepreneurship Theory and Practice, , vol. 34(5), pages 803-832, September.
    27. Stam, Wouter & Arzlanian, Souren & Elfring, Tom, 2014. "Social capital of entrepreneurs and small firm performance: A meta-analysis of contextual and methodological moderators," Journal of Business Venturing, Elsevier, vol. 29(1), pages 152-173.
    28. Bruce A. Kirchhoff & Scott L. Newbert & Iftekhar Hasan & Catherine Armington, 2007. "The Influence of University R & D Expenditures on New Business Formations and Employment Growth," Entrepreneurship Theory and Practice, , vol. 31(4), pages 543-559, July.
    29. David Ahlstrom & Garry D. Bruton, 2002. "An Institutional Perspective on the Role of Culture in Shaping Strategic Actions by Technology-Focused Entrepreneurial Firms in China," Entrepreneurship Theory and Practice, , vol. 26(4), pages 53-68, July.
    30. Pelle Ahlerup & Ola Olsson, 2012. "The roots of ethnic diversity," Journal of Economic Growth, Springer, vol. 17(2), pages 71-102, June.
    31. Himbara, David, 1994. "The failed Africanization of commerce and industry in Kenya," World Development, Elsevier, vol. 22(3), pages 469-482, March.
    32. Jacob A. Mincer, 1974. "Introduction to "Schooling, Experience, and Earnings"," NBER Chapters, in: Schooling, Experience, and Earnings, pages 1-4, National Bureau of Economic Research, Inc.
    33. Fafchamps, Marcel, 2000. "Ethnicity and credit in African manufacturing," Journal of Development Economics, Elsevier, vol. 61(1), pages 205-235, February.
    34. Arent Greve & Janet W. Salaff, 2003. "Social Networks and Entrepreneurship," Entrepreneurship Theory and Practice, , vol. 28(1), pages 1-22, January.
    35. Susanna Slotte–Kock & Nicole Coviello, 2010. "Entrepreneurship Research on Network Processes: A Review and Ways Forward," Entrepreneurship Theory and Practice, , vol. 34(1), pages 31-57, January.
    36. Alesina, Alberto & La Ferrara, Eliana, 2002. "Who trusts others?," Journal of Public Economics, Elsevier, vol. 85(2), pages 207-234, August.
    37. Acemoglu, Daron & Johnson, Simon & Robinson, James A., 2005. "Institutions as a Fundamental Cause of Long-Run Growth," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 6, pages 385-472, Elsevier.
    38. Milanov, Hana & Fernhaber, Stephanie A., 2009. "The impact of early imprinting on the evolution of new venture networks," Journal of Business Venturing, Elsevier, vol. 24(1), pages 46-61, January.
    39. Russell Sobel & Nabamita Dutta & Sanjukta Roy, 2010. "Does cultural diversity increase the rate of entrepreneurship?," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 23(3), pages 269-286, September.
    40. Anokhin, Sergey & Schulze, William S., 2009. "Entrepreneurship, innovation, and corruption," Journal of Business Venturing, Elsevier, vol. 24(5), pages 465-476, September.
    41. Cong Wang & Bodo Steiner, 2015. "Can ethnic-linguistic diversity explain cross-country differences in social capital formation?," Working Papers 6, University of Southern Denmark, Centre for Border Region Studies.
    42. Karlsson, Charlie & Acs, Zoltan J, 2002. "Introduction to Institutions, Entrepreneurship and Firm Growth: The Case of Sweden," Small Business Economics, Springer, vol. 19(2), pages 63-67, September.
    43. Eliana La Ferrara, 2002. "Self-help Groups and Income Generation in the Informal Settlements of Nairobi," Journal of African Economies, Centre for the Study of African Economies, vol. 11(1), pages 61-89, March.
    44. Eric L. Hansen, 1995. "Entrepreneurial Networks and New Organization Growth," Entrepreneurship Theory and Practice, , vol. 19(4), pages 7-19, July.
    45. Fisman, Raymond & Svensson, Jakob, 2007. "Are corruption and taxation really harmful to growth? Firm level evidence," Journal of Development Economics, Elsevier, vol. 83(1), pages 63-75, May.
    46. Jon C. Carr & Michael S. Cole & J. Kirk Ring & Daniela P. Blettner, 2011. "A Measure of Variations in Internal Social Capital among Family Firms," Entrepreneurship Theory and Practice, , vol. 35(6), pages 1207-1227, November.
    47. Eric Gedajlovic & Benson Honig & Curt B. Moore & G. Tyge Payne & Mike Wright, 2013. "Social Capital and Entrepreneurship: A Schema and Research Agenda," Entrepreneurship Theory and Practice, , vol. 37(3), pages 455-478, May.
    48. Alberto Alesina & Reza Baqir & William Easterly, 1999. "Public Goods and Ethnic Divisions," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 114(4), pages 1243-1284.
    49. Jonathan Levie, 2007. "Immigration, In-Migration, Ethnicity and Entrepreneurship in the United Kingdom," Small Business Economics, Springer, vol. 28(2), pages 143-169, March.
    50. J. Kirk Ring & Ana Maria Peredo & James J. Chrisman, 2010. "Business Networks and Economic Development in Rural Communities in the United States," Entrepreneurship Theory and Practice, , vol. 34(1), pages 171-195, January.
    51. Robinson, Peter B. & Sexton, Edwin A., 1994. "The effect of education and experience on self-employment success," Journal of Business Venturing, Elsevier, vol. 9(2), pages 141-156, March.
    52. Jacob A. Mincer, 1974. "Schooling and Earnings," NBER Chapters, in: Schooling, Experience, and Earnings, pages 41-63, National Bureau of Economic Research, Inc.
    53. Jacob A. Mincer, 1974. "Schooling, Experience, and Earnings," NBER Books, National Bureau of Economic Research, Inc, number minc74-1.
    54. Ibrahim, Gamal & Galt, Vaughan, 2011. "Explaining ethnic entrepreneurship: An evolutionary economics approach," International Business Review, Elsevier, vol. 20(6), pages 607-613.
    55. Lipparini, Andrea & Sobrero, Maurizio, 1994. "The glue and the pieces: Entrepreneurship and innovation in small-firm networks," Journal of Business Venturing, Elsevier, vol. 9(2), pages 125-140, March.
    56. Ivan Light & Léo–Paul Dana, 2013. "Boundaries of Social Capital in Entrepreneurship," Entrepreneurship Theory and Practice, , vol. 37(3), pages 603-624, May.
    57. Cooper, Arnold C. & Folta, Timothy B. & Woo, Carolyn, 1995. "Entrepreneurial information search," Journal of Business Venturing, Elsevier, vol. 10(2), pages 107-120, March.
    58. Jane N. O. Khayesi & Gerard George & John Antonakis, 2014. "Kinship in Entrepreneur Networks: Performance Effects of Resource Assembly in Africa," Entrepreneurship Theory and Practice, , vol. 38(6), pages 1323-1342, November.
    59. Cong Wang & Bodo Steiner, 2015. "Can Ethno-Linguistic Diversity Explain Cross-Country Differences in Social Capital?: A Global Perspective," The Economic Record, The Economic Society of Australia, vol. 91(294), pages 338-366, September.
    60. Jun Qian & Philip E. Strahan, 2007. "How Laws and Institutions Shape Financial Contracts: The Case of Bank Loans," Journal of Finance, American Finance Association, vol. 62(6), pages 2803-2834, December.
    61. Stiglitz, Joseph E, 1990. "Peer Monitoring and Credit Markets," The World Bank Economic Review, World Bank, vol. 4(3), pages 351-366, September.
    62. Bill McEvily & Alfred Marcus, 2005. "Embedded ties and the acquisition of competitive capabilities," Strategic Management Journal, Wiley Blackwell, vol. 26(11), pages 1033-1055, November.
    63. Michael Aguilera, 2009. "Ethnic enclaves and the earnings of self-employed Latinos," Small Business Economics, Springer, vol. 33(4), pages 413-425, December.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Awaworyi Churchill, Sefa, 2015. "Fractionalization and Entrepreneurial Activities," EconStor Preprints 123723, ZBW - Leibniz Information Centre for Economics.
    2. Sefa Awaworyi Churchill, 2017. "Microfinance and Ethnic Diversity," The Economic Record, The Economic Society of Australia, vol. 93(300), pages 112-141, March.
    3. Sefa Awaworyi Churchill, 2019. "Firm financial performance in Sub-Saharan Africa: the role of ethnic diversity," Empirical Economics, Springer, vol. 57(3), pages 957-970, September.
    4. Awaworyi Churchill, Sefa & Smyth, Russell, 2017. "Ethnic Diversity and Poverty," World Development, Elsevier, vol. 95(C), pages 285-302.
    5. Sefa Awaworyi Churchill & Janet Exornam Ocloo & Diana Siawor-Robertson, 2017. "Ethnic Diversity and Health Outcomes," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 134(3), pages 1077-1112, December.
    6. Awaworyi Churchill, Sefa & Nuhu, Ahmed Salim, 2015. "Ethnic Diversity and Educational Attainment," EconStor Conference Papers 125567, ZBW - Leibniz Information Centre for Economics.
    7. Sefa Awaworyi Churchill & Maria Rebecca Valenzuela & Wisdom Sablah, 2017. "Ethnic diversity and firm performance: Evidence from China’s materials and industrial sectors," Empirical Economics, Springer, vol. 53(4), pages 1711-1731, December.
    8. Sefa Awaworyi Churchill & Maria Rebecca Valenzuela, 2019. "Determinants of firm performance: does ethnic diversity matter?," Empirical Economics, Springer, vol. 57(6), pages 2079-2105, December.
    9. Sefa Awaworyi Churchill & Davidson Okai & Alberto Posso, 2016. "Internet Use and Ethnic Heterogeneity in a Cross-Section of Countries," Economic Papers, The Economic Society of Australia, vol. 35(1), pages 59-72, March.
    10. Joseph Flavian Gomes, 2020. "The health costs of ethnic distance: evidence from sub-Saharan Africa," Journal of Economic Growth, Springer, vol. 25(2), pages 195-226, June.
    11. Casey, Gregory P. & Owen, Ann L., 2014. "Inequality and Fractionalization," World Development, Elsevier, vol. 56(C), pages 32-50.
    12. Gerring, John & Thacker, Strom C. & Lu, Yuan & Huang, Wei, 2015. "Does Diversity Impair Human Development? A Multi-Level Test of the Diversity Debit Hypothesis," World Development, Elsevier, vol. 66(C), pages 166-188.
    13. Cemal Eren Arbatlı & Quamrul H. Ashraf & Oded Galor & Marc Klemp, 2020. "Diversity and Conflict," Econometrica, Econometric Society, vol. 88(2), pages 727-797, March.
    14. Bluhm, Richard & Thomsson, Kaj, 2020. "Holding on? Ethnic divisions, political institutions and the duration of economic declines," Journal of Development Economics, Elsevier, vol. 144(C).
    15. Alberto Alesina & Stelios Michalopoulos & Elias Papaioannou, 2016. "Ethnic Inequality," Journal of Political Economy, University of Chicago Press, vol. 124(2), pages 428-488.
    16. Desmet, Klaus & Gomes, Joseph Flavian & Ortuño-Ortín, Ignacio, 2020. "The geography of linguistic diversity and the provision of public goods," Journal of Development Economics, Elsevier, vol. 143(C).
    17. Alberto Alesina & Johann Harnoss & Hillel Rapoport, 2016. "Birthplace diversity and economic prosperity," Journal of Economic Growth, Springer, vol. 21(2), pages 101-138, June.
    18. Rodríguez-Pose, Andrés & Von Berlepsch, Viola, 2017. "Does population diversity matter for economic development in the very long-term? Historic migration, diversity and county wealt," CEPR Discussion Papers 12347, C.E.P.R. Discussion Papers.
    19. Awaworyi Churchill, Sefa & Ocloo, Janet Exornam & Siawor-Robertson, Diana, 2015. "Ethnic diversity makes me sick! An examination of ethnic diversity’s effect on health outcomes," EconStor Preprints 123721, ZBW - Leibniz Information Centre for Economics.
    20. Gershman, Boris & Rivera, Diego, 2018. "Subnational diversity in Sub-Saharan Africa: Insights from a new dataset," Journal of Development Economics, Elsevier, vol. 133(C), pages 231-263.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:sbusec:v:48:y:2017:i:3:d:10.1007_s11187-016-9796-8. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.