HISPANIC-AMERICAN ENTREPRENEURS

USASBE 2008 Proceedings - Page 0969

HISPANIC-AMERICAN ENTREPRENEURS: RESEARCH OPPORTUNITIES AND CHALLENGES Stephanie E. Newell Management Department College of Business Eastern Michigan University Ypsilanti, Mi 48197 734-487-3240 [email protected] Kunal Banerji Eastern Michigan University Ramdas Chandra Nova Southeastern University Sanjib Chowdhury Eastern Michigan University Ruth Clarke Nova Southeastern University Megan Endres Eastern Michigan University Dianna Stone University of Texas – San Antonio Fraya Wagner-Marsh Eastern Michigan University


ACADEMIC ABSTRACT Over the past few years both the popular press and business press have been filled with stories about the growth of the Hispanic-American population and the impact of that population growth on American business. U.S. Census data estimates project that Hispanic-American households in the U.S will number approximately 13.5 million by 2010 and represent more than $670 billion in spending power. This symposium discusses a series of research programs focusing on Hispanic-Americans entrepreneurs, and is designed to engage the audience in a discussion of current research and developing ideas for future research and practice. EXECUTIVE SUMMARY Both mainstream news outlets and academic researchers are expressing an interest in Hispanic entrepreneurs today despite a surprising lack of knowledge about the fastest growing segment of the U.S. population (Fairlie and Woodruff, 2005; Robles, 2004). The growth in population is coupled with a growth in Hispanic entrepreneurs to be the largest class of minority-owned businesses in the U.S. (Birch, 2000; Robles, 2004). The data from the 2002 U.S. Census Survey of Business Owners states that Hispanics owned 1.6 million non-farm businesses in 2002 generating approximately $222 billion in revenues and employing approximately 1.5 million people. As of 2002 these businesses accounted for approximately 6.4% of all U.S. non-farm businesses. (U.S. Census Data, 2002). This symposium discusses a series of research programs focusing on Hispanic-Americans entrepreneurs, and is designed to engage the audience in a discussion of the state of current research and to develop ideas for future research. Wagner-Marsh begins by discussing the growing presence of Hispanic Americans in the U.S. economy and the influence this population group may exert on management and business. Chowdhury and Endres discuss the current state of Hispanic-American entrepreneurship research with recommendations for future areas of research. Clarke and Chandra discuss the results of an ongoing study of the creation of social capital by Hispanic entrepreneurs through the use of bi-national chambers of commerce, local US Chambers of Commerce and other specific Hispanic business groupings. Stone and Newell focus on the impact of cultural values on the entrepreneurial behavior of Hispanic Americans. Finally, Banerji discusses the importance of “ethnic enclaves” for developing entrepreneurial activity with specific case examples from the Cuban business community in South Florida. All of the presentations address the opportunities and challenges we face as we begin to research the influence of Hispanic entrepreneurs on entrepreneurial activity in the U.S. INTRODUCTION Both mainstream news outlets and academic researchers are expressing an interest in Hispanic entrepreneurs today despite a surprising lack of knowledge about the fastest growing segment of the U.S. population (Fairlie and Woodruff, 2005; Robles, 2004). In fact, Hispanics make up approximately half of the U.S. population growth since 2000 (U.S. Census Bureau). U.S. Census data estimates project that Hispanic-American households in the U.S will number approximately 13.5 million by 2010 and represent more than $670 billion in spending power (U.S. Census). Further, a recent report by the Conference Board shows these households to be


younger on average than other U. S. households with approximately 38% of Hispanic-American households headed by someone under 35 as opposed to the national average of 23% of American households headed by someone under 35. The growth in population is coupled with a growth in Hispanic entrepreneurs to be the largest class of minority-owned businesses in the U.S. (Birch, 2000; Robles, 2004). The data from the 2002 U.S. Census Survey of Business Owners states that Hispanics owned 1.6 million non-farm businesses in 2002 generating approximately $222 billion in revenues and employing approximately 1.5 million people. As of 2002 these businesses accounted for approximately 6.4% of all U.S. non-farm businesses. (U.S. Census Data, 2002). The expected increases in the Hispanic population over the next 25 to 50 years indicate that we can expect continued growth in the number of Hispanic owned businesses in the U.S. Academic researchers have been slow to recognize the impact of the growth of the Hispanic population on business in the U.S. Peterson, Olson and others have begun to research the phenomenon of Hispanic -American entrepreneurs, and the development and impact of ethnic enclaves on entrepreneurial activity. These research programs provide an excellent base on which to build. However, these researchers point out that more work is needed as the HispanicAmerican population is expected to grow to 25% of the U.S population by 2050. This symposium discusses a series of research programs focusing on Hispanic-Americans entrepreneurs, and is designed to engage the audience in a discussion of the state of current research and to develop ideas for future research. Wagner-Marsh will begin by discussing the growing presence of Hispanic Americans in the U.S. economy and the influence this population group may exert on management and business. EXPLORING THE STATE OF HISPANIC ENTREPRENEURSHIP RESEARCH Chowdhury and Endres will discuss the current state of Hispanic-American entrepreneurship research with recommendations for future areas of research. Their survey of the entrepreneurship literature reveals a significant dearth of research on the Hispanic entrepreneur and the socio-economic environment he or she faces (Birch, 2000). As stated by Fairlie and Woodruff (2005), research in this area of entrepreneurship is understudied despite its potential economic opportunity. In response to this need, they summarize the findings of research to date, and provide future research suggestions, focusing on the entrepreneur’s characteristics and the socio-economic environment. Summary of Past Research on Hispanic Entrepreneurship Some scholars suggest the reason for low self-employment compared to the population growth for Hispanic is that a significant proportion of Hispanics are immigrants with insufficient financial and human capital (Fairlie and Meyer, 1996). This research is extended to an examination of the assimilation of Latino migrants to the United States and their offspring (Trejo, 1997, 2003, Blau and Kahn 2004, and Cobb-Clark and Hildebrand 2004). Hout and Rosen (2000) suggest that parental entrepreneurship may explain a significant proportion of the gap in self-employment between minority Latinos and Whites (Hout and Rosen, 2000).


Other researchers examine the unique characteristics of Hispanic entrepreneur. Eastlick and Shim (1998) suggest some unique characteristics of Hispanic business owners, particularly female, Hispanic entrepreneurs. This stream of research suggests that Hispanic entrepreneurs are unique due their unique cultural values, norms that are too strong to be assimilated into the prevailing culture (Brush and Hisrich, 1986; Triana, Welsch, and Young 1984; Eastick and Shim, 1998). Focusing on Cuban-American entrepreneurs, Peterson and Meckler (2001) proposed three different level of uniqueness: Cuban entrepreneurs have unique patter of carrier; unique pattern of entrepreneurship for specific age group and the uniqueness of the entrepreneur’s personal history. Researchers also focus on a related topic of “ethnic enclave theory” (Borjas, 1986; Peterson, and Roquebert, 1993; Peterson, 1995). These studies explored the sociology of enclave development to understand the concentration of self-employment in certain SMSAs for Cuban-Americans and Mexican-Americans. These studies suggest that self-employment among different Latino groups (Mexican, Cubans, “other Latinos”) is increasing in relation to the percentage of Latinos in particular Standard Metropolitan Statistical Areas. This increase is more for immigrants than for Latino population that is born in the U. S. There are a few other related studies that have examined the difference in self-employment rates and earnings among different groups of Latino populations. For instance, Flota and Mora (2001) found a higher self-employment rate for Mexican American men near the U.S./Mexico border. Fairlie (2004) shows that self-employed Latinos have gained faster earning growth when compared with Latino wage earners. Consequently, Trejo (2003) show that the generation of the Latino population in the U.S. has a positive impact on their earnings. Finally, another stream of research explores the relationship between self-employment among Latino Americans and different socio-economic problems. According to Olson, Zuiker, and Montalto (2000), self-employment for Latino-Americans provides several benefits over working for others including financial benefits. However, these benefits vary based on employment sectors. Fairlie (2004) suggests that self-employment in Latino-Americans may reduce poverty and discrimination. Future Research Suggestions Triana et al. (1984) suggested that more research was needed to understand how Hispanic entrepreneurs use information. Hispanic entrepreneurs appeared to use information differently than other ethnic entrepreneur groups, such as their preference for professional sources of information over other sources. However, the reasons why information seeking differs and its effects are not established in this research. Vincent (1996) also researched decision making policies of Mexican-American entrepreneurs and stated that more research is needed in the area of success versus failure measures due to the inconsistent decision making styles of MexicanAmerican entrepreneurs. Peterson (1995) stated that the “particularly high” levels of some individual factors in immigrants predispose one to entrepreneurship (e.g., risk propensity, age) and suggest that future


research is needed to understand these patterns. Hout and Rosen (2000) suggested, however, that researchers should look beyond variables such as risk propensity and opportunity to explain racial differences in entrepreneurship. The authors stated that it was important to determine why racial differences exist in self-employment despite a “rich set of variables” that have been studied. Perhaps in response to research concerns such as those of Hout and Rosen (2000), Peterson and Meckler (2001) applied the complexity and chaos theories to immigrant entrepreneurship research and specifically to Hispanic entrepreneurs. The authors proposed that future researchers should consider multivariate methods and relative effects of situational and personal variables. The lack of concrete findings in research thus far may be due to the large error variance in these studies and the tendency to focus on direct effects in predictive models. Finally, Eastlick and Shim (1998) identified gender as a possible differentiating factor among Hispanic entrepreneurs. The authors suggested that more comprehensive studies of female Hispanic entrepreneurs are needed, specifically longitudinal measures of the business’ characteristics. Peterson and Roquebert (1993) also called for more research on Hispanic enclaves of entrepreneurship, especially in South Florida. The authors suggested that more knowledge is needed regarding how these entrepreneurs gain access to suppliers, customers and markets, and how they gain access to capital. Tienda and Raijman (2004) suggested that research is needed to study Mexican immigrants’ use of strong ethnic networks in entrepreneurial actions. According to the authors, policy research is also needed in how these businesses get timely product/service information and financial support. Vincent (1996) stated that different Hispanic subpopulations and different times in the business cycle will increase generalizability in this area of research. Tienda and Raijman (2004) echoed the need for ethnic entrepreneurship research at different points in the business life cycle due to the tendency of Mexican-owned businesses to be “more economically precarious.” Yuengert (1995) echoed the call for more research on entrepreneurship in immigrant enclaves, particularly Cuban and Mexican enclaves. Yuengert noted that these enclaves correlate with lower earnings for their residents versus outside the enclaves and the reasons for this are unclear. In 1995, Peterson again focused on immigrant entrepreneurs and stressed the need for research to understand their business practices and effects on international trade. Creation of Social Capital As the above discussion clearly shows some research interest exists in the field of Hispanic entrepreneurship. However, given the large number of Hispanic-owned businesses and the rate of growth of Hispanic community in the U.S., the current level of research is insignificant. In addition, much of the existing research provides only survey statistics on Hispanic community and Hispanic-owned businesses.


Scientific research to develop and test theories in relation to Hispanic entrepreneurship is extremely limited. Moreover, the few scholars that embarked on scientific research on this topic have focused only on businesses ownership. Consequently, there is a complete lack of research on true Hispanic entrepreneurship, where innovation, creativity, and fast growth are essential elements. In line with this call for further research on Hispanic entrepreneurship, Clarke and Chandra will discuss the results of an ongoing study of the creation of social capital by Hispanic entrepreneurs through the use of bi-national chambers of commerce, local US Chambers of Commerce and other specific Hispanic business groupings. They will report their preliminary findings on the influence of national origin and consequent benefit obtained by membership of these groups, linking this to the theoretical discussion on social capital. Data collection uses a survey instrument that covers six different dimensions of social capital: groups/networks, trust, collective action, information/communication, social cohesion and political empowerment. Their results highlight the benefit to entrepreneurs originating from countries outside the U.S. of becoming part of a national origin group that can facilitate their business development. Impact of Cultural Values Stone and Newell’s research focuses on the impact of cultural values on the entrepreneurial behavior of Hispanic Americans. There is research that has assessed the degree to which personality and cultural values influence entrepreneurial behavior (e.g., Brice, 2006, Brockhaus, 1982; Morris & Schindehutte, 2005). Results of this research have revealed that entrepreneurs share several core personality traits (e.g., Brice, 2006). Additionally, research has shown that Anglo-American values (eg: individualism, competitive achievement) influence entrepreneurial activity (Morris & Schindehutte, 2005). It is important to note however that Hispanic cultural values are often quite different than Anglo-American values. For instance, Hispanic Americans, on average, place more emphasis on collectivism, high power distance, familism, spontaneity, and a present time orientation than Anglo-Americans (Marin & Marin, 1991). Given this difference in cultural values, Stone and Newell discuss an ongoing project designed to assess the extent to which Hispanics (a) share the same core values of other entrepreneurs regardless of their cultural origin or (b) whether there are cross-cultural differences in the reasons Hispanics engage in entrepreneurial behavior. Preliminary results of this project will be presented. Cuban-American Entrepreneurs We recognize that the Cuban-American entrepreneurial enclave in South Florida has some unique advantages that may not be available to other “ethnic enclaves”. However, we believe that a discussion of research findings on this group is useful in both illustrating some of the challenges inherent in undertaking research on “ethnic enclaves”, as well as engendering discussion of the differences among the national and ethnic groups commonly termed Hispanic. Banerji discusses the importance of “ethnic enclaves” for developing entrepreneurial activity with specific case examples from the Cuban business community in South Florida. The success of the Cuban American community in South Florida raises the question as to what are the causes


for this success. In their pioneering study Peterson and Roquebert (1993) identified six key external reasons that have played a major role in this success story. They are – • Accessibility of suppliers, customers and new markets • Ethnic economic control of an ethnically saturated internal labor market, • Capital availability and side investments • Land availability • Social networks and living conditions • Governmental support In addition to these factors many of these successful entrepreneurs had the vision and the desire to quickly adapt to the new environment and lead an entrepreneurial life-style (Peterson and Roquebert (1993). It needs to be emphasized that though a favorable external environment played a key role in the success Cuban-American entrepreneurs, they also had certain personality and group characteristics that helped to be successful in an entrepreneurial role. In a subsequent study Peterson (1995) identified some of these key traits • • • • • • • • • • •

Aspirational levels and motivational role models Need for achievement through b business ownership Risk taking propensity as a personality variable Displacement and Situationaly rooted risk taking Lack of real alternatives Family mentors Education and business experience English language skills and middlemen minority roles Learning and skill development in the US Financial resources for venture start-up Accessing available resources

The success of the Cuban-American is not the outcome of a few factors – but more of an interaction of these factors. “The true miracle of Cuban American success is that so many favorable factors came together at the same time” (Peterson, 1995). Miami and South Florida have a multitude of successful Cuban-American Entrepreneurs and Banerji will be discussing case studies of several successful entrepreneurial ventures by Cuban-Americans. So What? It is clear that the number of Hispanic entrepreneurs in the U. S continues to grow. The increase in entrepreneurial activity among Hispanics is important because it affects economic opportunities for these individuals and our society as a whole. This session focuses on the need for additional research to better understand the entrepreneurial activity of this important population. To date much of the research has focused on business ownership and the collection of survey statistics on the Hispanic community and Hispanic owned businesses. Consequently, there is a lack of research on true Hispanic entrepreneurship, where innovation, creativity, and fast growth are essential elements. All of the presentations discussed above address the opportunities and challenges we face as we begin to research the influence this growing segment


of the U.S. population has on entrepreneurial activity in the U.S. Throughout the session we encourage the audience to engage with us in discussing and thinking about research opportunities brought about by this changing demographic. We hope that this discussion will energize many researchers like us to focus their attention on such a fertile research topic as Hispanic entrepreneurship. REFERENCES Arboleya, C. J. 1985. Miami's Cuban community, 25 years later. Miami, FL: Barnett Bank. Barger, T.S. 2006. Hispanics in the Workplace: Building Meaningful Diversity. The Conference Board, March 2006. Bates, Timothy. 1995. Self-Employment Entry across Groups, Journal of Business Venturing, 10: 143-156. Birch, D. 2000. Small Business Research Summary: Analysis of Hispanic-Owned Companies, U.S. Small Business Administration Office of Advocacy, 199. Accessed April 4, 2007 at http://www.sba.gov/advo/research/rs199.pdf Boswell, T. D., & Curtis, J. R. 1984. The Cuban-American experience: Culture, images and perspectives. Totowa, NJ: Roman & Allanheld. Brush, C. and Hisrich, R. D. 1986. Characteristics of the Minority Entrepreneur. Journal of Small Business Management, 24. Card, D.1990. The impact of the Mariel boatlift on the Miami labor market. Industrial and Labor Relations Review, 43, 245-257. Eastlick M. A. and Shim, S. 1998. Characteristics of Hispanic Female Business Owners: An Exploratory Study. Journal of Small Business Management, Vol. 36. Fairlie, R. W. 2004. Does business ownership provide a source of upward mobility for Blacks and Hispanics? Public Policy and the Economics of Entrepreneurship. eds Holtz-Eakin, Douglas; Rosen, Harvey S. 2004. p. 153-179. Fairlie, Robert W. and Christopher Woodruff. 2005. Mexican-American Entrepreneurship, Paper presented at the 10th Annual Meeting of the Society of Labor Economists, San Francisco Flota, Chrystell, and Marie T. Mora. 2001. The Earnings of Self-Employed Mexican Americans along the U.S.-Mexico Border, The Annals of Regional Science 35, 483-499. Franco, L. 2005 Hispanic Market in 2005 The. The Conference Board, January 2005. Marin, G., & Marin, B. (1991). Research with Hispanic populations. Newbury Park, CA: Sage.


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