Ethnic Businesses In Multiethnic Cities

Ethnic Businesses in Multiethnic Cities


Eric Fong, Emily Anderson, Wenhong Chen, and Chiu Luk

University of Toronto

July 2007





Overview

An examination of ethnic business locations in multiethnic cities Multiethnic: Patterns of ethnic business location in

neighborhoods with various racial and ethnic compositions Multi-industry: Patterns of ethnic business location for certain

major industries

Argument: Ethnic business location is determined by optimization of:

1. Neighborhood business environment,2. Unique locational demand of each industry, and3. Spatial consequences of ethnic embedded structures of ethnic

businesses.


Overview

1. Literature Review

2. Discussion of Neighborhood Types and Industrial Sectors

3. Presentation of Hypotheses

4. Data and Methods

5. Results and Discussion


Literature Review Sociological Theory

The Chicago School: Ethnic business locations reflect the size of the ethnic population (Burgess, 1925)

Concept of Social Capital: Ethnic communities linked structurally, embedded ethnic relations (Portes and Sensenbrenner, 1993)


Theoretical Background Geographical Theory

Neo-classical “optimization” approach to business location (Weber, 1909; Lösch, 1949)

Structural linkages in ethnic and economic relations are facilitated and reinforced by spatial proximity (Dicken and Lloyd, 1990)

Dense patterns linkages create agglomeration economies whose benefits to all involved vastly outweigh their costs (Scott, 1998)


Four Neighborhood Types

1. Ethnic Enclave Neighborhood

2. Ethnic Clustered Neighborhood

3. Minority Neighborhood

4. Non-Minority, Non-Ethnic Neighborhood


The Ethnic Enclave Neighborhood Central to the ethnic community both socially and

economically High ethnic concentration

Many new immigrants Home to many ethnic businesses (Zhou 1992, Kwong

1979). Sustained by a sizeable local ethnic population


The Ethnic Clustered Neighborhood Lower ethnic proportion than enclave, but still has

an ethnic character Provide goods and services demanded by both the

ethnic and non-ethnic communities residing there (Logan et al, 2002)

Usually located adjacent to ethnic enclaves and spread over large area


The Minority Neighborhood Substantial number of other ethnic or minority group

residents – commonly found in multiethnic cities Not always located next to each other Frequently dominated by their own businesses, but

often contain a number of establishments operated by other ethnic groups


The Non-Ethnic, Non-Minority Neighborhood No substantial proportion of ethnic members or

minorities, often referred to as “majority” Industrially diverse yet proportionally few ethnic

businesses


Four Unique Local Business Environments:

1. The ethnic enclave neighborhood: Many ethnic businesses Low industrial diversity among ethnic businesses Larger proportion of recent ethnic immigrants

2. The ethnic clustered neighborhood: A large number of clustered ethnic businesses Many recent ethnic immigrants (but fewer than in the enclave)

3. The minority neighborhood: A smaller number of ethnic businesses A small proportion of ethnic businesses in adjacent

neighborhoods4. The non-ethnic/minority neighborhood:

A small number of ethnic businesses High levels of industrial diversity


Four Major Industrial Sectors:

1. Manufacturing

2. Retail

3. Food Retail

4. Finance, Insurance, and Real Estate


Ethnic Manufacturing Sector Industrial Characteristics

Small ethnic firms, often in subcontracting roles Labor intensive, unpleasant working environments, high

turnover Labor pool includes members of other ethnic groups

Unique spatial characteristics Need to locate near source of labor supply Avoid ethnic agglomeration with other co-ethnic businesses Seek ethnic agglomeration with other manufacturing

businesses Locate close to suppliers and transportation infrastructure


Ethnic Retail Sector Industrial Characteristics

Not food retailers; instead, are apparel stores, general wares, dollar stores, gas stations (Zhou)

Need to attract a wide variety of customers to reach profit Offer diverse products and services to their customers

Unique spatial characteristics Seek locations where there are other businesses to

maximize flow of shoppers Frequently serve co-ethnic members, so choose locations

convenient to them in ethnic enclave or clustered neighborhoods


Ethnic Food Retail Sector Industrial Characteristics

Often small in scale, deeply embedded in ethnic networks for recruiting workers and obtaining market information (Song, 1995)

Most customers are co-ethnic Unique Spatial Characteristics

Prefer locations with highest number of co-ethnic members, but may be discouraged by the high rents of ethnic enclaves

Smaller retailers mitigate high rents by locating in ethnic clustered neighborhoods, which still lets them access many co-ethnic customers.

Take advantage of scale economies by agglomerating with other food retailers

Low industrial diversity


Ethnic Financial, Insurance, and Real Estate Sector

Finance, Insurance, and Real Estate Sector Provide loans, mortgages, insurance coverage to

ethnic entrepreneurs and homebuyers Strong “interweaving” relationships that facilitate

information sharing, trust Unique Spatial Characteristics

Clustering to maintain essential business linkages Prefer locations in ethnic enclaves: main venue

for selling products and services to the widest range of co-ethnic customers


Hypotheses: Locational Preferences of Ethnic Industrial Sectors

1. Manufacturing Industry Fewer ethnic businesses Lower industrial diversity Fewer co-ethnic workers

2. Retail Industry Higher industrial diversity Larger ethnic populations

3. Food Retail Industry High co-ethnic population Fewer nearby ethnic businesses Lower overall industrial diversity

4. Finance, Insurance, and Real Estate Industries Larger co-ethnic populations Lower industrial diversity among all ethnic businesses Lower proportions of recent immigrants


Summary Hypothesis Matrix

MANUFACTURING RETAIL FOOD

RETAIL

FINANCE, INSURANCE,

REAL ESTATE

ETHNIC ENCLAVE

X X

ETHNIC CLUSTERED

X

VISIBLE MINORITY

NON-ETHNIC, NON-VISIBLE

MINORITYX

INDUSTRIAL SECTORS

NE

IGH

BO

UR

HO

OD

TY

PE

S


Data Business Directories: 2000 City of Toronto, 2001 York Region 2001 Census Tract Data included 85% Chinese in Toronto census metropolitan area Chinese businesses:

business name: sounds like a translation from Chinese (e.g. Wah Fung) uses a typically Chinese expression (e.g. Golden Happiness) comes from a well-known landmark in Hong Kong, mainland China, or

Taiwan contact name:

President, owner


Results: Table 1Table 1: Distribution of Chinese Businesses by Neighborhood Type and Industrial Sector

a) Chinese Businesses by Neighborhood TypesN %

Chinese Enclave Neighborhoods 1140 31.76Chinese Clustered Neighborhoods 482 13.43Visible Minority Neighborhoods 101 2.81Non-Chinese/Non-Visible Minority Neighborhoods 1866 51.99

b) Ethnic Businesses by Industrial SectorsN %

Manufacturing 433 12.06Retail (Except Food Related) 1995 55.59Food Retail 999 27.84Finance, Insurance, and Real Estate 162 4.51


Results: Table 2Table 2: Probit Regression Analysis of Industrial Sectors on Neighborhood Types

Manufacturing Sector -0.302 ** -0.066Retail Sector (except Food Related) 0.374 ** -0.06Food Related Retail -0.185 ** 0.141 **Finance, Insurance, and Real Estate 0.147 * -0.185Busienss Size: Small -1.606 ** 0.049 ** -1.564 ** -0.197 ** -0.195 ** -0.203 ** -0.195 **Business Size: Medium 0.030 -1.576 ** 0.020 0.008 0.291 ** 0.284 ** 0.283 ** 0.292 **Intercept -0.302 ** -0.594 -0.321 ** -0.372 ** -1.190 ** -1.162 ** -1.124 ** -1.190 **Log-Likelihood -2070.496 -2074.699 -2101.226 -2106.743 -1398.247 -1397.929 -1395.634 -1397.610N 3589 3589

Manufacturing Sector -0.05 0.558 **Retail Sector (except Food Related) -0.051 -0.286 **Food Related Retail 0.070 0.070Finance, Insurance, and Real Estate 0.064 -0.045Business Size: Small 0.438 ** 0.441 ** 0.436 ** 0.441 ** 0.972 ** 0.948 ** 0.940 ** 0.943 **Business Size: Medium 0.159 * 0.152 * 0.154 * 0.156 * -0.228 ** -0.236 ** -0.212 ** -0.208 **Intercept -2.041 ** -2.017 ** -2.066 ** -2.049 -0.043 0.188 ** 0.002 0.021Log-Likelihood -450.72 -450.613 -450.508 -450.736 -2345.036 -2358.14 -2378.979 -2379.954N 3589 3589Note: p* < 0.1; P** < 0.05

Chinese Enclave Neighborhoods Chinese Clustered Neighborhoods

Visible Minority Neighborhods Non-Chinese/Non-Visible Minority Neighborhoods


Controlling for the business size: Chinese manufacturing firms:

↓Chinese enclave neighborhoods ↑non-Chinese/non-visible minority neighborhoods

Chinese retails other than food retails: ↑ Chinese enclave neighborhoods ↓ non-Chinese/non-visible minority neighborhoods

Chinese food retails: ↓ Chinese enclave neighborhoods ↑ Chinese clustered neighborhoods

Chinese FIRE businesses ↑ Chinese enclave neighborhoods.


Results: Table 3

Table 3:Probit Regression Results of Business Environment of Different Neighborhood TypesChinese Enclave

Neighborhoodsp

Chinese Clustered

Neighborhoodsp

Visible Minority Neighborhoods

pNon-Chinese/Non-

Visible Minority Neighborhoods

p

Number of Chinese Businesses 0.010 * -0.002 -0.026 -0.010 **Number of Chinese Businesses in Adjacent Tracts 0..001 0.002 ** -0.006 ** -0.001 *Industrial Diversity of Chinese Businesses -0.851 -0.139 -0.213 -0.108Industrial Diversity of All Businesses -5.096 ** -1.766 * 1.233 1.583 **% Chinese Immigrants Arrived 1992 or After 1.887 ** 0.959 ** 0.684 -1.292 **Intercept -1.481 ** -1.341 ** -1.350 ** 1.116 **Log Likelihood -86.683 -154.2 -110.71 -239.96N 471 471 471 471Note: p* < 0.1; P** < 0.05


Results: Table 4

Table 4: Probit Regression Results of Industrial Locational Demands

ManufacturingRetail (Except Food

Related)Food Related

RetailFinance, Insurance,

and Real EstateNumber of Chinese Businesses -0.050 ** 0.093 ** -0.090 ** -0.003 Number of Chinese Businesses in Adjacent Tracts -0.071 ** 0.009 0.022 * 0.011Industrial Diversity of Chinese Businesses -2.517 ** 1.200 ** 0.027 -2.872 **Industrial Diversity of All Businesses 0.387 0.391 -0.595 * -0.276% Chinese Immigrants Arrived 1992 or After 0.139 0.195 -0.183 -0.505 *Business Size Medium -1.274 ** 5.833 0.898 ** -0.266 Small -1.820 ** 6.589 0.600 -0.730 **Intercept 1.154 ** -6.897 -1.007 ** -0.185Log Likelihood -925.101 -2034.000 -1881.910 -541.310N 3185 3185 3185 3185Note: p* < 0.1; P** < 0.05


Conclusion The results of our analysis have shown the

existence of different locational patterns by ethnic businesses involved in different industrial sectors.

Locations of ethnic businesses reflect the match among locational demands of a particular industry, spatial consequences of ethnic embedded structures, and a particular business environment of the neighborhood. Our data in general confirm our central assertion.