Social Networks, Ethnicity, and Entrepreneurship

62 Pages Posted: 12 Jan 2017

See all articles by William Kerr

William Kerr

Harvard University - Entrepreneurial Management Unit

Martin Mandorff

Swedish Competition Authority

Multiple version iconThere are 2 versions of this paper

Date Written: November 2016

Abstract

We study the relationship between ethnicity, occupational choice, and entrepreneurship. Immigrant groups in the United States cluster in specific business sectors. For example, the concentration of Korean self-employment in dry cleaners is 34 times greater than other immigrant groups, and Gujarati-speaking Indians are similarly 108 times more concentrated in managing motels. We develop a model of social interactions where non-work relationships facilitate the acquisition of sector-specific skills. The resulting scale economies generate occupational stratification along ethnic lines, consistent with the reoccurring phenomenon of small, socially-isolated groups achieving considerable economic success via concentrated entrepreneurship. Empirical evidence from the United States supports our model’s underlying mechanisms.

Keywords: entrepreneurship, self-employed, occupation, ethnicity, immigration, networks

JEL Classification: L260, D210, D220, D850, F220, J150, L140, M130

Suggested Citation

Kerr, William R. and Mandorff, Martin, Social Networks, Ethnicity, and Entrepreneurship (November 2016). CESifo Working Paper Series No. 6211. Available at SSRN: https://ssrn.com/abstract=2897462

William R. Kerr (Contact Author)

Harvard University - Entrepreneurial Management Unit ( email )

Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States

Martin Mandorff

Swedish Competition Authority ( email )

Stockholm SE-103 85
Sweden

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