Small Firm Financial Contracting and Immigrant Entrepreneurship

Abstract

The production methods, financial requirements, and supply and demand characteristics of the contract clothing manufacturing sector are studied in order to determine why market exchange relationships within the sector are often untypical (in spite of low entry barriers and set-up costs).The characteristics of the market for the final product necessitate interfirm pooling of resources and cooperation, so firms enjoying strong networks of relationships are likely to achieve competitive advantage.Because the formation of these networks is facilitated when the owner-managers involved share social ties such as ethnic identity and value systems, the contract clothing manufacturing sector has become particularly attractive to immigrant entrepreneurs.The social ties at the heart of interfirm networks create a viable and less costly alternative to formal governance systems based on contracts.Any state initiatives designed to force informally governed immigrant businesses to comply with formal regulatory demands are likely to bring about the collapse of many businesses, which may have a negative impact on the country's economic welfare.(SAA)

Keywords: Immigrant entrepreneurs, Opinion paper/position paper/essay, Public policies, Contracts & agreements, Clothing industry, Manufacturing industries, Cooperation, Competitive advantages, Interfirm alliances, Social networks