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Ethnic entrepreneurship is, by definition, located at the intersection of one sociocultural category, ethnicity, and one socioeconomic category, the status of self-employment. Although a useful concept to examine contemporary and historical urban societies from various perspectives, ethnic entrepreneurship is by no means clear-cut. Self-employment—operating a business as a sole proprietor, a partner, or a consultant—seems fairly straightforward. However, people can be part-time self-employed, or they can run their business without being officially registered. Who has to be labeled as self-employed or entrepreneur then becomes arbitrary. Since the demise of Fordism, nonstandard forms of employment have been increasing, and more people now have a portfolio of economic activities, often including some kind of self-employment. Ethnicity is even more problematic, as it results from the interaction between complex processes of labeling of others, on the one hand, and self-identification by different social groups on the other. The outcomes of such processes, defining borders between insiders and outsiders, are contingent. Ethnic entrepreneurship, then, can be delineated only within a concrete context, and this dependence makes cross-border comparison difficult.

History

Ethnic entrepreneurship is anything but a new phenomenon. In preindustrial times, “ethnic” entrepreneurs already played a pivotal role in long-distance trade networks. As members of relatively tight-knit groups dispersed over a number of important trade cities, they were able to create far-flung networks in a world where contracts and their enforcement were rare or even absent. Notably, Armenian, Jewish, and Chinese diasporas facilitated flows of trade and finance and thus formed the backbone of the emerging “global linkages” in the Mediterranean basin, northwestern Europe, Southeast Asia, and other parts of the world. The extension of the international rule of law has eroded much of the necessity for these ethnic trade networks, but in specific trades (e.g., diamonds) they are still significant.

Ethnic entrepreneurs have also been conspicuous in another way. Mainstream entrepreneurs, tapping into the same pool of knowledge and routines, tend to share a more or less circumscribed outlook on the world. This collective view, inevitably, sheds light on some aspects but obscures or ignores others. Newcomers, Joseph Schumpeter's “new men,” may be more sensitive to new opportunities for businesses than are established entrepreneurs. By exploiting these opportunities, they may become drivers of innovation. Ethnicity but also religion and coming from elsewhere can constitute grounds for “otherness.” Ethnic entrepreneurs have at times been crucial in introducing new ways of production, new products, and new ways of marketing and distributing. More recent examples of this can notably be found in food (e.g., Turkish entrepreneurs introducing döner kebab to the German mainstream) and in music (e.g., the almost continuous stream of innovations in popular music from ragtime to rap generated by African Americans in the twentieth century), and nowadays also in software development with Chinese and Indian entrepreneurs in the forefront.

Relevancy

Notwithstanding the conceptual ambiguity surrounding it, ethnic entrepreneurship is an important and useful tool to describe and analyze contemporary economic activities. It rose to prominence after the widespread deindustrialization and economic restructuring of the 1980s, when small businesses made a comeback in advanced economic societies. On both sides of the Atlantic, migrant or “ethnic” entrepreneurs seemed especially eager to set up shop. Many of them had become unemployed when factories closed and, as jobs were scarce, opted for self-employment. “Ethnic” businesses then became a familiar element in many urban landscapes, mainly to be found in low-value-added economic activities in markets with low thresholds in terms of educational qualifications (human capital) and start-up costs (financial capital). These businesses were mainly, but not exclusively, to be found in the poorer neighborhoods of cities.

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