This article was downloaded by: [The University Of Melbourne Libraries]On: 21 March 2013, At: 06:54Publisher: RoutledgeInforma Ltd Registered in England and Wales Registered Number:1072954 Registered office: Mortimer House, 37-41 Mortimer Street,London W1T 3JH, UK

Journal of Ethnic andMigration StudiesPublication details, including instructions forauthors and subscription information:http://www.tandfonline.com/loi/cjms20

'Breaking in' and 'breakingout': A Weberian approachto entrepreneurialopportunitiesEwald EngelenVersion of record first published: 04 Aug 2010.

To cite this article: Ewald Engelen (2001): 'Breaking in' and 'breaking out': AWeberian approach to entrepreneurial opportunities, Journal of Ethnic andMigration Studies, 27:2, 203-223

To link to this article: http://dx.doi.org/10.1080/13691830020041570

PLEASE SCROLL DOWN FOR ARTICLE

Full terms and conditions of use: http://www.tandfonline.com/page/terms-and-conditions

This article may be used for research, teaching, and private studypurposes. Any substantial or systematic reproduction, redistribution,reselling, loan, sub-licensing, systematic supply, or distribution in anyform to anyone is expressly forbidden.

The publisher does not give any warranty express or implied or makeany representation that the contents will be complete or accurate orup to date. The accuracy of any instructions, formulae, and drug dosesshould be independently verified with primary sources. The publishershall not be liable for any loss, actions, claims, proceedings, demand, orcosts or damages whatsoever or howsoever caused arising directly orindirectly in connection with or arising out of the use of this material.

Journal of Ethnic and Migration Studies Vol. 27, No. 2: 203± 223 April 2001

`Breaking in’ and `breaking out’: a Weberian approach

to entrepreneurial opportunities

Ewald Engelen

Abstract Immigrant entrepreneurship has become a fashionable research topic. Moststudies betray a distinct Anglo-American bias ± ® rst in their emphasis on social capitaland ethnic networks, second in their disregard for the institutional dimension, and thirdin their implicit economic liberalism. Instead, a more neutral conceptual framework isneeded to aid comparative research. To do so this paper endorses a Weberian approachto entrepreneurial opportunities. Following Weber, I de® ne market co-ordination asvoluntary exchange and markets as a distinct product space delimited by the level ofsubstitutability of the goods in question. This de® nition makes it possible to distinguishbetween different political-economic regimes at the macro level and between differenttypes of markets at the micro level. However, `breaking in’ is only one part of the story.Recently, the attention given to innovative strategies of immigrant entrepreneurs ± or`breaking out’ ± has waxed. As it stands, this type of research is severely biased towardsspatial strategies as well as toward assimilationist premises. Hence, here too a moreneutral map is needed. Following Michael Porter’s in¯ uential analysis of competitiveprocesses, I construct a much broader list of innovative practices. Finally, I try todemonstrate the relevance of Weber’s economic sociology for the study of immigrantentrepreneurs by presenting some hypotheses on the types of markets and the sorts ofstrategies that seem to be relevant for immigrant entrepreneurs.

KEYWORDS: IMMIGRANT ENTREPRENEURSHIP; WEBERIAN APPROACH; MARKETS; ECONOMIC

SOCIOLOGY; INNOVATION

Introduction

As Hegel observed, the owl of Minerva only ¯ ies at dusk. In most advancedeconomies the number of self-employed among immigrants and ethnic minori-ties demonstrated a remarkable increase during the 1990s, even in countries likethe Netherlands and Germany which lack an entrepreneurial climate. Thisphenomenon has caught the eye of European sociologists and anthropologistsonly recently. The EU-funded research project `Working on the fringes’, of whichthis special issue is a spin-off, is a case in point.

So in this respect too Europe more and more starts to look like the US. For intraditional immigration countries self-employment has always been an import-ant avenue of economic incorporation, next to wage earnership. As a resultscholarly research on the `ethnic economy’ is dominated by American ap-proaches and assumptions. This is evident ® rst of all in the emphasis on socialcapital and ethnic networks; qualitative as well as quantitative differences in theentrepreneurial activity of different ethnic groups are predominantly explainedby `ethnic’ resources. Second, it is evident in the disregard for the institutional

ISSN 1369-183X print/ISSN 1469-9451 online/01/020203-21 Ó 2001 Taylor & Francis Ltd

DOI: 10.1080/1369183002004157 0Carfax Publishing

Dow

nloa

ded

by [

The

Uni

vers

ity O

f M

elbo

urne

Lib

rari

es]

at 0

6:54

21

Mar

ch 2

013

204 E. Engelen

dimension. Entrepreneurs do not operate in an institutional vacuum ± not evenin the US ± but are constrained and empowered by the institutional setting. Therelevance of this institutionalist’ insight is downplayed in the literature so far.Third, there is the implicit economic liberalism. Most students of migrant andethnic entrepreneurship take it for granted that entrepreneurialism is a goodthing and that it is better to have more than less.

Instead, this paper presents a more `neutral’ conceptual framework. The nextstep in the study of `ethnic economies’ must be a comparative one in whichanswers to the pressing question of how migrant and ethnic entrepreneurs areinserted in the economy are not prejudged by American experiences but dojustice both to the wide variety of economic opportunities different political-economic regimes offer and to the ingenuity of individual entrepreneurs.

Formulated thus, however, the issue is simply too large to be dealt with in onego. Therefore I propose to divide it into three.1 The ® rst sub-question addressesgeneric differences between political-economic regimes, and tries to formulateplausible hypotheses for the relation between entrepreneurial activity and theinstitutional environment at the macro level. At this level too, the mechanismsmust be sought behind the `distribution’ of migrants among the two mainavenues of economic incorporation, wage earnership and self-employment. Asthis paper addresses entrepreneurial opportunities, not economic opportunities ingeneral, this is not the place to go deeper into these mechanisms.

The second sub-question deals with markets as such. Markets are treated hereas institutions in their own right, which pose different demands in terms ofavailable resources ± human, social, ® nancial, cultural capital ± on newcomers.In this way the match or mismatch between market requirements on the onehand and collective and individual resources on the other can be analysed andthe subsequent `sorting’ of migrant and ethnic entrepreneurs among differentmarkets explained.

Naturally, entrepreneurial activity takes place in historical time. So far thetemporal and dynamic dimensions of entrepreneurial activity have not beenaddressed. To this issue the third sub-question is dedicated. To deal with it, Ipresent a more or less comprehensive map of innovative strategies, including the`break out’ to other, more rewarding established markets as well as the creationof completely `new’ markets for `new’ products. Not all strategies will be equallyrelevant to each and every entrepreneur, however. Therefore I conclude thisarticle with a (much too) brief account of the markets ± `breaking in’ ± andstrategies ± `breaking out’ ± available to ethnic and migrant entrepreneurs, giventhe assumption that they are generally short on human and ® nancial capital andthat the social capital they do possess can only partially overcome theseshortcomings.2

Political-economic regimes

Following Max Weber’s table of sociological categories, I take it that marketsimply voluntary exchange (Weber 1972: 20). This provisional de® nition excludesall types of enforced exchange ± piracy, conquest, robbery, theft ± as well asthose activities that have to do strictly with production, though it does includenon-monetary exchanges such as barter and gifts. The second market character-istic Weber distinguished is the allocation of goods according to purchasingpower. In principle, (s)he who is able and willing to make the highest bid gets

Dow

nloa

ded

by [

The

Uni

vers

ity O

f M

elbo

urne

Lib

rari

es]

at 0

6:54

21

Mar

ch 2

013

`Breaking in’ and `breaking out’ 205

the cookies. Obviously, markets differ with regard to the degree in which this isactually the case. At the limit, allocation will be completely determined bybuying power; in most cases however that will only be so in a limited andquali® ed sense. These limitations, in turn, can be of various kinds; they canrange from of® cial minimum or maximum prices to the informal restrictions andprescriptions of the `moral economy’ (Scott 1980; Thompson 1991) ± and,accordingly, can have different sources.

The similarity with Esping-Andersen’s well-known criterion of `decom-modi® cation’ for the identi® cation of the three worlds of welfare capitalism’ isstriking. According to Esping-Andersen, decommodi® cation occurs `when aservice is rendered as a matter of right, and when a person can maintain alivelihood without reliance on the market’ (1990: 22). Although focusing mainlyon the labour market, it is possible to extend the notion of decommodi® cationto other types of market as well. Thus, a decommodi® ed economy is an economyin which a smaller number of goods and services is allocated according topurchasing power than in commodi® ed ones. Concerning entrepreneurial op-portunities for newcomers, it is obvious that a commodi® ed economy providesmore entrepreneurial chances than a decommodi® ed one.3

Decommodi® cation matters not only because the number of marketable goodsand services and thus the number of markets will be higher in commodi® edeconomies, but also because it determines the type of tradeables and thus the typeof markets available. The arrangements that are to shield employees from thevagaries of markets entail costs which are either ® nanced from general taxationor from contributory premiums. In both cases, labour costs will be higher thanif protective arrangements were absent. High labour costs in turn favour someeconomic activities and punish others. In `high cost’ environments competitive-ness is secured either by entering high-grade markets (quality competition), byshifting to activities with a high capital intensity or by a combination of both(Sorge 1999).

Germany is a case in point. The German economy is af¯ icted with relativehigh unemployment primarily because labour costs are too high to makemarkets for personal services viable (Esping-Andersen 1999: 300). Besides, thepace of deindustrialisation in Germany has been much slower than elsewherebecause most ® rms are active on quality markets rather than price markets.Therefore the loss of industrial jobs has been less pronounced. As a consequencesocial-democratic parties and labour unions have been able to withstand thepressure to adopt neoliberal labour market policies and create low-rewardingmarkets for personal services (Streeck et al. 1998: 60).

To conclude, the higher the degree of decommodi® cation in an economy, thesmaller the number of markets available and the more the available markets willbe of the high grade, high-rewarding and high threshold-type. Thus, in general,chances for `breaking in’ will be highest in commodi® ed economies and lowestin decommodi® ed ones.

Markets and opportunities

There are two reasons why, in my view, a conceptual map of market opportuni-ties is indispensable. First, to explain the sorting’ of speci® c groups andindividuals in terms of the match or mismatch between structural demands andindividual or collective attributes, a comprehensive ranking’ of entrepreneurial

Dow

nloa

ded

by [

The

Uni

vers

ity O

f M

elbo

urne

Lib

rari

es]

at 0

6:54

21

Mar

ch 2

013

206 E. Engelen

slots’ is needed.4 Lacking that, explanations either turn functionalist as inneoclassical approaches or `culturalistic’ as in ethnicist explanations; people dowhat they do either because they do it more ef® ciently than others, otherwisethey would not do it, or because they are culturally `determined’ to do it. Bothtypes of explanation are reductionist, though for different reasons.

The second one has to do with issues of institutional (re)design. In neoclassicaleconomics the market is seen as a `natural site’ of social co-ordination, whichbalances supply and demand smoothly and instantaneously, and which can onlybe distorted by outside intervention, never improved. In this perspective itmakes no sense at all to speak of fair’ or `unfair’ markets. However, followingeconomic historians like Polanyi (1957), Braudel (1985), Thompson (1991) andWeber (1982) himself, the thesis that market allocation is a `natural’ or `spon-taneous’ form of social co-ordination is empirically untenable. Markets are socialand historical `constructs’, and should be seen as institutions in their own right.Identifying the relevant dimensions along which markets can be analysed thusserves the aim of highlighting the possibilities for market construction andreconstruction. Building upon Weber’s work (Weber 1972: 43± 4), I distinguishthe following dimensions: the objects of trade, the subjects of trade, the structureof the market, its level of institutionalisation , the locality of the market, its degreeof social embeddedness and, ® nally, the mode, the level as well as the object ofregulation (Swedberg 1994, 1998). I elaborate on each of these in turn.

Market objects

The ® rst dimension along which markets can be analysed is according to theobjects or goods that are traded. In which case the crucial question becomes:what is a good? As I want to include legal as well as illegal objects, services aswell as goods, material as well as immaterial goods, I need an open de® nitionsuch as: a good is anything that can be bought or sold. An inclusive de® nitionlike that allows me to distinguish between markets for material objects, or`goods’ in the strict sense (product markets, consumer markets), markets forhuman beings (slave markets, marriage markets), labour markets, markets forservices, for immaterial objects (public functions, intellectual property, patents,titles, safety), markets for social relations (goodwill), markets for prestige,money, capital, risks (insurance markets), and markets for securities (bonds,stocks). Moreover, within these broad categories further differentiations can bemade according to the degree of substitutability. Actual markets are demarcatedby a set of substitutable products. `Gaps’ in the range of substitutable productsindicate `new’ markets.

Of course, product characteristics do determine entrepreneurial opportunities.Technologically or intellectually advanced goods and services will generallydemand a higher `entrance fee’, whether or not ® nancially, than less sophisti-cated goods and services. The reason is that in the former case production tendsto be capital or knowledge intensive. Offsetting the tendency to `closure’ ofsophisticated markets is the fact that production streams with a high value-added tend to consist of two or more segments (upstream, downstream), whichare linked by specialised product markets. Nevertheless, the rule of thumb isthat producer markets are less accessible than consumer markets, if only becauseof the specialised character of the social and human capital needed to enter theformer.

Dow

nloa

ded

by [

The

Uni

vers

ity O

f M

elbo

urne

Lib

rari

es]

at 0

6:54

21

Mar

ch 2

013

`Breaking in’ and `breaking out’ 207

Concerning illegal markets too, offsetting considerations need to be taken intoaccount. In most countries the trade of drugs, ® rearms, human beings, humanorgans, sex, public of® ces and stolen goods is prohibited. Following the `blockedmobility’ thesis, according to which minorities that are excluded from themainstream economy resort to informal or even illegal activities (Barrett et al.1996; Borjas 1986), illegal markets should be fairly easy to enter, though rewardsare insecure and occupation is precarious. However, precisely because the goodstraded are illegal, inevitable transaction costs ± information, monitoring andenforcement costs in particular ± cannot be collectivised. Hence, transactionstend to be extremely costly, turning illegal markets into high threshold markets.5

Unless you are able to reduce transaction costs signi® cantly by replacingcontractual relations with familial or ethnic relations, it is very hard to set upshop in illegal markets.

Market subjects

The second dimension along which markets can be analysed concerns thesubjects of exchange: who or what is allowed to enter the market, as buyer or asseller? In most instances the answer will be: `natural’ persons. In many cases,however, the subjects active on markets are legal entities’ ± ranging fromhouseholds, families, professionals and co-operatives to incorporated ® rms,non-governmental organisations, non-pro® t organisations, semi-public and pub-lic agencies ± not `natural’ persons. This is to say that market exchange iscompatible with different `property regimes’ and different `modes of owner-ship’.6

Because property regimes differ enormously with regard to the accessibility ofthe forms of ownership they entail, not all property regimes are as hospitable tonewcomers. For example, a property regime that obliges even the smallest ® rmto incorporate poses higher thresholds for newcomers than do property regimeswith only minimal legal requirements. Here the dimension of the subjects oftrade shades over into the regulatory dimension.

Market structure

The third dimension has to do with the structure of the market. By structure’ Irefer to the number of participants on each side of the market ± the supply anddemand side ± and hence to the distribution of market power among them.According to neoclassical market theory this is all that matters. Hence, neoclas-sical theory only distinguishes between monopolistic/monopsonistic, oligopolis-tic/oligopsonistic, and fully competitive markets, referring to markets with onlyone buyer and seller, where there are a few buyers and sellers, and numerousbuyers and sellers respectively. In neoclassical economics monopolistic andoligopolistic markets are seen as deviations from fully competitive marketswhere market power is distributed equally and fairly because the number ofparticipants is postulated as in® nite.

In the real world, however, it is precisely the other way around. Most marketsare controlled by only a handful of producers (and some markets, such asdefence, by only a handful of consumers), implying that the ideal of free’market exchange in which the criterion of purchasing power rules supreme mustbe carefully distinguished from actual market exchange. The `model’ does not

Dow

nloa

ded

by [

The

Uni

vers

ity O

f M

elbo

urne

Lib

rari

es]

at 0

6:54

21

Mar

ch 2

013

208 E. Engelen

even approximate the `muddle’. In controlled markets the chance to exchangedepends equally, if not more, on one’s bargaining power as on one’s purchasingpower.7 In Weber’s terms, the `struggle over the price’ ± the actual exchange ±does not overlap with the struggle between potential competitors’ (Weber 1972:382). Or, to put it differently, entering the market does not ensure transactions.

Where huge ® rst mover gains’ can be pocketed, markets will show a tendencytowards `closure’, either because of the capital intensity of the product orbecause of other reasons:

Capital interests ¼ favour the continuous expansion of the free market, but only up to the

point at which some of them succeed, through the purchase of privileges from the politicalauthority or simply through the power of capital, in obtaining for themselves a monopoly

for the sale of their products or the acquisition of their means of production, and in thusclosing the market on their own part (Weber 1972: 384).

Obviously, the availability of such strategies to speci® c market actors has asmuch to do with their political clout as with the characteristics of the `good’ inquestion.

Institutionalisation

Markets can also be analysed along the dimension of institutionalisation. Whereexchange has a reiterative character, markets tend to be more institutionalisedthan where one-shot transactions dominate. Institutionalisation thus refers to thedegree of standardisation ± ranging from clearly-de® ned transaction proceduresto well-de® ned accountancy conventions and arbitrage rules ± rather than toregulation per se.

Nor must institutionalisation be confused with identi® able market places. Thescreen trading that is rapidly replacing ¯ oor trading in most stock exchanges, forexample, does not ® t the territorial mould but is still a highly institutionalisedform of trading. Due to Internet and other modes of electronic communication,more and more markets are becoming deterritorialised. Nevertheless, the di-minishing relevance of the physical setting in de® ning global domains cannot betaken to imply that microsocial processes in general are becoming increasinglyirrelevant’ (BruÈ ger and Knorr-Cetina 2001).

Evidently, highly institutionalised markets will show a higher degree of`closure’ than less institutionalised ones. Because institutionalisation is de® nedhere as a function of the incidence of exchange and has to do with the `hardness’or `bindingness’ of the mutual expectations of the actors involved, it follows thatthere are no markets without entry requirements. Reiterative exchanges createsocial ties that can be hard to untie for outsiders. Whether the resulting rules areformal or informal does not seem to matter much in this regard. The rigidity offormal rules is offset by their transparency, whereas the seeming ¯ exibility ofinformal ones may prove a liability because of their intransparency.8 Whicheffect predominates depends on case and context.

Market place

Usually, the concept of the market is used ± rather indiscriminately, I would say± to denote the whole range of market activity, that is: from local bazaars andsuqs to regional fairs to global capital markets, and from discrete market

Dow

nloa

ded

by [

The

Uni

vers

ity O

f M

elbo

urne

Lib

rari

es]

at 0

6:54

21

Mar

ch 2

013

`Breaking in’ and `breaking out’ 209

exchanges to national economies in general. The ensuing confusion creates adiscursive environment that is highly propitious for ideological abuses, as hasbeen noted by a number of critics of neoliberalism (cf. Boyer 1996, 1997; Engelen1995; Sayer 1995: 82± 106).

To preclude these abuses a more precise conceptualisation of the market isneeded. For some markets it is fairly obvious where they begin and end. Stockmarkets, art, antique and ¯ ower auctions are a case in point. Most markets,however, cannot be identi® ed with speci® c market places as easily as these.Above, I proposed to restrict the use of the concept to ± ® rst ± the allocation ofgoods by the principle of purchasing power, and ± second ± to delineateindividual markets by `gaps’ in the range of substitutable goods.9

If we accept this, we notice immediately that time and space are importantdeterminants of the degree of substitutability. Space can result in `gaps’ in therange of substitutable products, as can time. That is to say that for some goodslocation matters, whereas for others spatial constraints can be lifted more easily,in effect creating truly global markets for these goods. The Internet selling ofbooks and compact discs is a case in point. Most consumer markets, however,in particular most markets for primary goods, tend to be inherently local incharacter. Depending on the environment ± urban, suburban or rural ± and itspopulation density, consumer markets can generally be demarcated by theamount of time customers need to reach the supplier, ranging from a 10-minutewalk in urban settings to half an hour’s drive in suburban ones (McEvoy 2000).I propose to call this aspect of the spatiality of markets the extent of the marketto distinguish it more clearly from that other, more self-evident aspect ofspatiality, namely the place of the market.

Embeddedness

The next dimension along which markets can be analysed is that of socialembeddedness. Although currently understood to denote the social capital orsocial networks economic actors need to be economically active (Granovetter1985, 1995; Portes 1995), I intend to stay much closer to Polanyi’s original usage.Polanyi used it to criticise the classical liberal project of creating a pure orself-regulating market economy in the second half of the nineteenth century. InPolanyi’s view the rise of fascism and national-socialism, as well as the morebenign social-democracy, Keynesian macro-economics and central economicplanning, is in part a response to the failings ± brie¯ y, Beveridge’s ® ve giants’:want, disease, ignorance, squalor and idleness ± of the liberal project. Hence,morally as well as functionally, the economy must be `embedded and enmeshedin institutions’.

The inclusion of the noneconomic is vital. For religion or government may be as important

for the structure and functioning of the economy as monetary institutions or the availabilit yof tools and machines themselves that lighten the toil of labour (Polanyi 1992: 34).

With regard to discrete market exchanges, embeddedness thus refers to themotivations, orientations or attitudes of the actors in question rather than theresources ± social capital, social networks ± they possess. In contrast to neoclas-sical economics which acknowledges maximising behaviour only, the economicsociology of Polanyi and Weber explicitly recognises the complex and diversecharacter of individual motives. Just as the allocation of goods by markets is

Dow

nloa

ded

by [

The

Uni

vers

ity O

f M

elbo

urne

Lib

rari

es]

at 0

6:54

21

Mar

ch 2

013

210 E. Engelen

ruled by the criterion of purchasing power only a limine, so too is maximisingbehaviour acceptable only within broad moral and social restrictions. In otherwords, no market is socially disembedded in the sense that maximisation is thesole, unmitigated motive for action,10 while at the same time markets do differwith regard to the precise mix of motives they expect (or allow) from partici-pants. Large, `open’ markets tend to be more tolerant of maximising behaviourthan small, personalised markets. In the latter, trust and loyalty may be forth-coming, whereas the availability of `exit’ in large markets implies the threat ofopportunistic behaviour and the erosion of reciprocal trust and loyalty(Hirschman 1970).

Market regulation

The ® nal dimension is that of regulation. To prevent misunderstanding furtherdistinctions must be made here. First of all, regulation is not the same aslegislation.11 So the ® rst distinction refers to the mode of regulation, which canrange from formal to informal, from direct (legislation) to indirect (convenants),from democratic to autocratic, and can either be `hands on’ or `hands off’ .Moreover, regulation is not the same as state regulation. Regulatory tasks can beundertaken by different agents, ranging from state agencies (local, regional,national and supra-national) to voluntary associations (employer associations,labour unions), and everything in between (non-pro® t organisations, quangos).Finally, regulation does not come in one package, but is mostly broken up intodiscrete regulatory tasks ± consultation, choice, implementation, evaluation ±that are distributed among several agents.

Second, the regulatory framework of markets can be distinguished accordingto its thinness’ or thickness’. According to Streeck:

the generic difference between the two is that the ® rst kind of institutions accommodate andfacilitate rational-utilitaria n voluntarism, whereas the second generate, impose and enforce

social obligations that rational individuals would not voluntarily and contractually takeupon themselves. It is only institutions of the latter kind that make a society (Streeck 1992:

37).

The point is that there is no market without regulation. Only the ideal marketof neoclassical market theory can do without. However, markets do differ withregard to the extent to which they are regulated, as do national regulatoryregimes with regard to the level of regulation they are willing and able toprovide. At the one extreme, regulation is restricted to arbitrage, the enforce-ment of contracts and the protection of property rights, whereas at the otherextreme regulation encompasses `accumulation and exchange restrictions’, zon-ing laws, land use regulations, environmental standard setting, occupationalsafety guarantees, minimum prices, labour laws and so on.

The ® nal distinction concerns the objects of regulation. In view of the fact thatexchange is a two-tiered process, combining a `struggle for exchange’ with astruggle for the price’, any part of it can be the object of regulation, from theidenti® cation and demarcation of the trading subject, to the monopolisation andstandardisation of the means of exchange (Sylla et al. 1999), and everything inbetween. More generally, the following rules can be distinguished: seller entryrules, buyer entry rules, transaction procedure rules, transaction quality andtransaction quantity rules, and, ® nally, compensation rules. The ® rst two rules

Dow

nloa

ded

by [

The

Uni

vers

ity O

f M

elbo

urne

Lib

rari

es]

at 0

6:54

21

Mar

ch 2

013

`Breaking in’ and `breaking out’ 211

are straightforward. Together they determine who has access and on whatconditions. Rules related to the transaction procedure regulate the internalworkings of the market, for instance the offering and bidding process or thesettlement procedure. Rules concerning the quality and quantity of tradeablesrefer to the formal standards that are meant to protect buyers, to lowertransaction costs and to enhance competition through technical compatibility.Rules for compensation deal with breaches of contract, arbitrage and otherirregularities. As noted before, these rules can be institutionalised in thinner’and thicker’ ways, can be more or less strictly controlled and enforced, and canbe wielded by both public and private agencies (Burns and Flam 1987: 172± 3).

`Break out’ and innovation

So much for the comparative statics. How about the dynamics? FollowingSchumpeter (1934), innovation or `creative destruction’ is the raison d’eà tre of theentrepreneur. Nevertheless, students of ethnic and migrant entrepreneurs havestarted to recognise the importance of innovation only recently, and ± so I willargue ± up until now inadequately too. In part this is due to the marginality ofmost ethnic and migrant businesses. As they generally lack the resources toenter high grade markets, they are driven towards the lower end of theeconomy.12 As a result their entrepreneurial existence tends to be extremelyprecarious, as is re¯ ected in a high failure rate, low pro® tability, long workingdays and weeks, and a high degree of informality. Here, I intend to correct thisbias by providing a more extensive map of `break out’ strategies, including thoseof the cherished Schumpeterian entrepreneur.

Beyond ethnic niches’ and `middlemen markets’

The most in¯ uential attempt so far to map the growth strategies of migrants isthat of Waldinger et al. (1990). Waldinger et al. identi® ed four strategies, whichmust be read sequentially. `First entry markets’ are based on a high degree ofethnic concentration on the one hand and a low level of economic specialisationon the other. The development of so-called `ethnic niches’ is the second phase.These niches too are founded upon a high level of spatial and ethnic concen-tration. However, the extent of the market is much larger than in ® rst entrymarkets’ . As a result, `ethnic specialisation’ is facilitated. In the third phase these`ethnic niches’ are transformed into so-called `middlemen markets’ . This impliesa sharp break with the spatial logic of the `ethnic enclave’. Traditionally,middlemen minorities sell `ethnic goods’ to the population at large (Polanyi et al.1957). As this strategy leaves the `ethnic nature’ of the goods intact, it could wellbe called an innovative marketing and distributing strategy, aimed to tap `new’and wealthier markets that are spatially less circumscribed than the `entrymarkets’ from phase one. Finally, `economic assimilation’ entails completeconformity to the preferences of the public at large, changing in its wake thenature of the product as well as the production process. As `ethnic’ businessesincreasingly trade in their `ethnic’ clientele for the general public, they slowlylose their `ethnic’ identity and turn into mainstream ® rms (Waldinger et al. 1990:124± 7).

Two sorts of criticism can be levelled against this scheme, the ® rst oneaddressing its teleology and the second one its spatiality. `Economic assimi-

Dow

nloa

ded

by [

The

Uni

vers

ity O

f M

elbo

urne

Lib

rari

es]

at 0

6:54

21

Mar

ch 2

013

212 E. Engelen

lation’ is posited as the telos of economic incorporation. That, however, is notuncontroversial. If the explanatory aim of the mapping exercise is taken seri-ously, all strategies should be included and not only those that turn ethnicbusinesses into mainstream ones. Moreover, a strong case can be made for theproposition that homogeneous ® rms make for cut-throat competition rather thanbusiness success. Innovation is best understood as the attempt to make yourbusiness as dissimilar as possible from your competitors. The stress on `assimi-lation’ as a marker of success seems to betray an assimilationist ideology as wellas a lack of insight into the process of innovation.

Second, the main criterion Waldinger et al. use to distinguish business strate-gies is the degree of ethnic concentration. That is because in their view it is thedevelopment of `protected markets’ that creates chances for ethnic ® rms, ® rst toenter, then to specialise, and ultimately to make the jump to mainstreammarkets. To be fair, Waldinger et al. do acknowledge that their sequence is basedon spatial premises (Waldinger et al. 1990: 124). Nevertheless, spatially orientedstrategies are relevant for some entrepreneurs but not for others. Morespeci® cally, they seem to be especially suited for retailers and much less forwholesalers or manufacturers. As the sequence of Waldinger et al. was largelyderived from data from the social geographer Benjamin Ward on South-Asianself-employed in the British Midlands (Ward and Reeves 1984), it seems that itsgeographical roots are primarily to be blamed for the spatial bias (McEvoy 2000).

Jones et al. have recently tried to overcome these limitations. According tothese authors, earlier typologies failed to go much beyond the distinctionbetween `ethnic niches’ and `middlemen markets’. The premise is that marketsare always local and are either co-ethnic or not. Obviously, this point isanalogous to the one made above. To address it, Jones et al. (2000: 50) proposeto develop `a sense of geographical market hierarchy’. Thus, business strategiesshould not only be distinguished according to whether they aim at co-ethnics ornot, but also whether they aim at local markets or not. In this way a newdimension is added. While Waldinger et al. identi® ed attempts to cater to anon-co-ethnic clientele as `break out’ only, Jones et al. try to accommodate otherdimensions of innovativeness too, more speci® cally the transformation of retail-ers into wholesalers or even manufacturers. The underlying assumption is thatactivities higher up the value-added chain cater to markets that are less spatiallycircumscribed than those of retail activities. Another gain of this addendum isthe possibility of catering to non-local co-ethnic markets. Nevertheless, Jones etal. also identify adaptation to mainstream preferences as the ultimate `break out’strategy:

Unbounded on all sides, this ® nal space represents a genuinely mainstream market, the

ultimate stage in the progression, with ethnic ® rms selling to the open general market (Joneset al. 2000: 51).

Hence, Jones et al. too betray assimilationist tendencies.What is more, these amendments cover only some of the ground earlier

typologies left barren. In the scheme of Jones et al. the extent of the market is thecrucial variable. Thus, `break out’ is identical to any strategy that enablesentrepreneurs to enter markets that are either non-co-ethnic, non-local or ±preferably ± both. However, it is hard to imagine how the extent of the marketcould ® gure as an independent variable in the strategic deliberations of theentrepreneur. Getting access to higher grade, more rewarding markets is at best

Dow

nloa

ded

by [

The

Uni

vers

ity O

f M

elbo

urne

Lib

rari

es]

at 0

6:54

21

Mar

ch 2

013

`Breaking in’ and `breaking out’ 213

a side-effect of strategies that aim to change key variables in marketing, sales,distribution, manufacturing, labour, purchasing, research and development,® nance and control, the product line etc. (Porter 1980: xvii). Hence, the mostimportant problem of the typology of Jones et al. is that it takes the effects of`break out’ ± gaining access to larger and richer markets ± for the process ofbreaking out itself. As a result, the strategies in question disappear from view.

This criticism is based on how entrepreneurs perceive markets. The Americansystems theorist Harrison White has pioneered efforts to reconstruct the forma-tion of markets from the inside (White 1981a, 1981b). White de® nes markets asa group of producers that produces substitutable goods and services. Substi-tutability does not only refer to product characteristic in the ordinary sense ofthe word, but also to their spatio-temporal co-ordinates. Within this `productspace’ producers position themselves by comparing their products with those oftheir competitors on as many variables as possible. `The key fact’ , says White, isthat producers watch each other within a market’ (1981b: 518).

The material substratum of this process is constituted by chambers of tradeand commerce, fairs, Rotary and Lions’ clubs, trade journals, bulletins, manualsand other sources of industrial information. Because mainstream accountancycategories like turnover, pro® ts, price-earnings ratios and other `market signals’are too indeterminate to provide clear insights into the actual market position ofthe ® rm, more detailed information is needed. That is what social networksprovide. Hence, social networks are crucial for an adequate choice of competi-tive strategies.

The upshot of White’s theory of the market is that entrepreneurs have nounmediated access to the markets in which they operate. What we call `markets’are at best proxies for a complex con® guration of interdependent agents whocollectively determine the level of competition within an industry.

Porter’s competitive strategies

The construction of a comprehensive list of competitive strategies cannot dowithout a more comprehensive analysis of the competitive process. Businesseconomist and management guru Michael Porter has dedicated a life’s work todo just that (Caves and Porter 1977; Porter 1980, 1998). According to Porter thelevel of competitiveness in a market is neither determined solely by the numberof actual competitors, nor exclusively by the number of potential competitors,but also by the relations with suppliers and buyers as well as the availability ofsubstitutes.

Following this it is not hard to see that the analysis of Jones et al. (and ofWaldinger et al.) stresses only the effects of buyer relations on competitiveness.The precariousness of migrant and ethnic ® rms, in their view, is wholly causedby the limits of the `ethnic’ market. Because of that, `break out’ can only be ashift to a larger, more rewarding, and ultimately mainstream market. That isonly part of the story though. If ethnic and migrant entrepreneurs operatedisproportionally in low threshold markets, it is easy to appreciate that greaterweight must be placed on what Porter calls the threats of entry’. As thesethreats’ are the mirror image of `break out’, they merit a closer analysis in andof themselves.

Porter distinguishes six barriers. The ® rst has to do with economies of scale.Scale advantages occur if costs per unit decrease as the scale of production

Dow

nloa

ded

by [

The

Uni

vers

ity O

f M

elbo

urne

Lib

rari

es]

at 0

6:54

21

Mar

ch 2

013

214 E. Engelen

increases. The second one has to do with product differentiation and refers to`branding’ strategies and the consumer loyalties that this generates. The thirdbarrier ± high capital requirements ± is self-explaining. The fourth ± high switchingcosts ± refers to the problem of sunk costs’ . Whenever investment in capitalgoods or human capital is highly product-speci® c, switches to other markets willentail huge costs in terms of disinvestment and retraining, thus endangering the¯ exibility of the ® rm. The ® fth barrier concerns access to distribution channels.Incumbents will try to monopolise distribution channels, while newcomers willhave to look for alternative modes of distribution. Telecommunication is a casein point. As long as cables were the only means of data transportation, telecom-munication markets could easily be monopolised. With satellites and cell phonesthese monopolies have successfully been broken. Internet will have the sameeffect on a whole number of wholesale and retail markets. The sixth barrier,® nally, has to do with government policies. Local, regional, national and,increasingly, supra-national governing agencies possess numerous means tolimit or enhance the level of competitiveness. Obviously, market actors differwith regard to the political clout they can muster to bend and shape regulationaccording to their needs and wishes.

Combined, these barriers imply that the level of competitiveness is highest ifeconomies of scale are absent, if product differentiation is minimal, if capitalrequirements are low, if switching costs are limited and if government regu-lation is thin’. For the entrepreneur the crucial question is how to raise one ormore of these barriers to limit threats of entry and counter the downwardpressure on pro® tability. To answer this question Porter proposes to map theentry barriers into the different aspects of entrepreneurial activity. According toPorter these are product, process, marketing, sales, distribution, integration andco-operation.13

First, ® rms can raise entry barriers by carving out new market niches. Inprinciple, this can be done in one of three ways: by creating new products, byintroducing new product mixes, and by introducing `old’ products at `new’locations. The aim of these strategies is to increase the level of product differen-tiation, or in other words to diminish the level of substitutability.

Second, ® rms can opt for process strategies. In general, two variants can bedistinguished. The ® rst aims at cutting costs directly. Production costs can be cuteither through labour replacing investments (`¯ exible automatisation’) or bydowngrading tasks (`numerical ¯ exibilisation’).14 In both cases labour costs arethe primary target. Both are `neo-taylorist’ strategies because they build uponthe divisive logic of taylorist organisation principles (Engelen 2000: 67).

The second variant, on the other hand, tries primarily to enhance the qualityof the product range, and to lower costs only secondarily. To do so theorganisation is kept as simple as possible, while jobs are turned into complexand challenging tasks. As a result, workers gain greater leverage over theproduction process in toto, while the systemic inef® ciencies of taylorism areeliminated (Engelen 2000: 49± 55; Kanter 1988). Because strategies ® tting thisdescription do entail a radical break with the logic of taylorism, they are truly`post-taylorist’.

Third, ® rms can pick different marketing strategies. Marketing has to do withany attempt to differentiate products by means of `presentation’ in a broadsense. Marketing thus serves the same goal as branding, namely reducing risksand generating consumer loyalty through `emotional value’ or `affective bene® ts’

Dow

nloa

ded

by [

The

Uni

vers

ity O

f M

elbo

urne

Lib

rari

es]

at 0

6:54

21

Mar

ch 2

013

`Breaking in’ and `breaking out’ 215

(Stobart 1994). To be effective, marketing must be based on detailed data onconsumer preferences. Gathering and processing these data are complicated andexpensive. As a result larger ® rms generally have a competitive advantage oversmaller ones. However, the Internet is in the process of quickly eroding theseadvantages.

Although sales and distribution can be distinguished analytically, for mostgoods and services that proves to be very hard empirically.15 For that reason, Iwill address them together, even though it should be kept in mind thatcompetitive advantage can be gained by compressing the `gap’ between theclosing of the transaction and the actual delivery. Moreover, the transaction isnot the same as payment. Here, competitive advantage instead lies in extendingthe time-span that separates transaction and payment, as is evident from thegrowing popularity of schemes to `buy now and pay later’ .

Regarding sales and distribution, spatial strategies need to be distinguishedfrom temporal ones and from those that try to change the modality. Spatialstrategies include all attempts to relocate ® rms literally to more rewardingmarkets. The sequential model of Waldinger et al. ® ts this description, clearlydemonstrating the limits of a spatial approach. Temporal strategies refer tomodifying selling or production hours. Strategies that try to change the modalityof sales and distribution, ® nally, have to do with setting up take-away services,e-commerce, tele-sale or post-order deliveries. Obviously, changing the modalityhas spatial and/or temporal repercussions. Opting for e-commerce, for instance,implies changes in the spatial as well as the temporal dimensions of distribution.

The last two strategies have to do with the ability of ® rms to redraw theirboundaries, either juridically (integration) or functionally (co-operation). In gen-eral, integration can take two forms: horizontal and vertical integration. Horizon-tal integration diminishes competitive pressure directly by eliminatingcompetitors but also indirectly by raising entry barriers, for greater market shareusually implies economies of scale, greater bargaining powers vis-aÁ -vis buyersand suppliers, and more political clout. Vertical integration, on the other hand,refers to attempts to move up and down the value-added chain. Its advantageslie primarily in risk reduction, economies of scale and greater bargaining power.

As it leaves the juridical boundaries between ® rms as they are, co-operationby de® nition occurs between legally distinct ® rms. Co-operation too can takeplace either between competitors ± horizontally ± or within a value-added chain± vertically. Moreover, co-operation can be either defensive or offensive. Defens-ive is every form of co-operation that tries to diminish competition through priceagreements, production quotas, negotiable market shares etc. These are the`conspiracies against the consumer’ Adam Smith railed against. Offensive isevery form of co-operation that tries to sustain the informational, technologicaland organisational environment that is needed to gain competitive advantage ina qualitative sense (Cooke and Morgan 1998; Herrigel 1996: 60± 8).16

Which markets? Whose strategies?

Which `slots’ in the overall `market space’ and which competitive strategies willethnic and migrant entrepreneurs generally aim for? At present no conclusiveanswers are available because of a dearth of empirical material. Nevertheless,theoretical plausibilities can be formulated, as I try to do below. It should bekept in mind, though, that these conclusions can only have the status of

Dow

nloa

ded

by [

The

Uni

vers

ity O

f M

elbo

urne

Lib

rari

es]

at 0

6:54

21

Mar

ch 2

013

216 E. Engelen

hypotheses in the true sense of the word, that is suppositions which function asstarting-points for an investigation. To keep it manageable I stick to the ideal-type ethnic or migrant entrepreneur who is disadvantaged compared to thegeneral population in terms of relevant resources, especially ® nancial andhuman capital. I will address the ® rst part of the issue by listing the character-istics of low threshold markets, as ethnic and migrant entrepreneurs will becapable of meeting the requirements of these markets much more easily thanthose of higher grade but also more rewarding markets. I pass along each of thedimensions in turn, but this time in reverse order. With regard to the secondpart of the issue, I brie¯ y discuss which strategies might be relevant for ethnicand migrant entrepreneurs and which are not.

Low threshold markets

Low threshold markets are markets where entrance rules are either inclusive, or,if exclusive, are enforced only loosely. This is true for other types of rules aswell. Guarantees of whatever kind increase transaction costs and add to the® nancial burdens on newcomers. With regard to the other dimensions ofregulation ± the modes and objects of regulation ± it is much harder to identifyclear-cut constraints. A thin’ regulatory regime can be more restrictive fornewcomers than a thick’ one that is enforced only mildly, as is demonstrated byDutch `condoning’ practices (Engbersen and Van der Leun 2000). More researchis therefore needed before any de® nite conclusions can be drawn. A multidimen-sional model of regulation such as the one presented here does at least precludeeasy conclusions ± identifying low entry barriers with low legal thresholds forexample ± and enables a more precise mapping of the advantages and disadvan-tages of different regimes.

Second, the more markets are socially or culturally embedded, the more entrybarriers will be informal. This suggests constraints as well as chances fornewcomers. Constraints, because markets that are embedded in the culture ofthe ethnic majority tend to be exclusionary, even though legal, ® nancial andeducational requirements can be quite lax. This appears to be the main reasonbehind the remarkably low incidence of immigrants in the Dutch constructionindustry. Social embeddedness provides chances too, in the sense that marketsthat are embedded in the culture of the ethnic minority in question can provideeasy access for co-ethnics, both because co-ethnics possess the right resources tomeet informal requirements and because competition from outsiders is largelyabsent. This is of course the paradigmatic case of the `ethnic enclave’ (Portes andJensen 1989; Portes and Manning 1986).

Third, local markets ± both in terms of place and extent ± tend to be easier toenter than non-local ± regional, national, global ± ones. The extent of the marketis key here. Stock exchanges, even though local, harbour transactions whosereverberations are felt throughout the national territory and beyond. Besides, theliterature on transnationality provides nice examples of trade within transna-tional networks which is anything but local in terms of place but is in terms ofextent (Hannerz 1996; Portes et al. 1999). If not ± and more research is neededhere too ± entry barriers ought to be high instead.

Fourth, because institutionalisation does not refer to the regulatory or legalframework but to the `hardness’ or `bindingness’ of the mutual expectationsinvolved, the relation between the level of institutionalisation and accessibility is

Dow

nloa

ded

by [

The

Uni

vers

ity O

f M

elbo

urne

Lib

rari

es]

at 0

6:54

21

Mar

ch 2

013

`Breaking in’ and `breaking out’ 217

indeterminate at best. These expectations can be generated either by marketrelations or by extra-market relations. In the ® rst case, the market in questiontends to be `closed’. In the second case, chances for entry depend on whether thenewcomer shares the characteristics of the group in question. Non-institution-alised exchanges, on the other hand, hardly provide better chances for access.Because no mutual trust is built up across the `market divide’, defection isomnipresent. As a result, compensation rules must be self-enforced. This entailshuge costs that can only be shouldered collectively. So, as noted above, even inillegal markets entry depends on pre-existing membership, however informal,temporary or conditional.

Fifth, low entry barriers are synonymous with high levels of competition.Because the market is easily accessible and the number of buyers and sellerslarge, oligopolistic or monopolistic market structures are unlikely to appear. Asa result, pro® ts tend to be low, failure rates high, and the success (or even mereexistence) of the ® rm increasingly depends on informal or illegal practices. Inneoclassical theory this is the normal state of affairs. In reality, however, thereare many different causes for declining pro® ts: new competitors, changingpreferences, rising in¯ ation, declining economic growth, cheaper or better alter-natives, bad quality, bad distribution, bad marketing. This is to say that pricesignals or `markets forces’ are less transparent than neoclassical theory suggestsand that price competition is not the only form competition can take. Firms doposses a certain degree of discretionary freedom or, to put it otherwise, strategymatters.

Sixth, low threshold markets tend to be populated primarily by ® rms withsimple forms of proprietorship. Following Waldinger et al., it makes sense todistinguish between `sole proprietorship’, family partnership’, `partnership withkin or friends’ and `partnership with others’, disregarding the different juridicalforms proprietorship takes in different regimes of ownership (1990: 28± 31). Asthese forms of proprietorship require different mixes of social, ® nancial andhuman capital, ethnic and immigrant entrepreneurs will ¯ ock to forms ofproprietorship whose requirements are the easiest to ful® l, namely sole pro-prietorship’, family partnership’ and `partnerships with kin or friends’. More-over, as different forms of proprietorship are tied to different markets, to lowerthe requirements for some forms of proprietorship is one way to enhanceopportunities for migrants.

Finally, the level of the threshold is related to the complexity of the productin question. Generally, markets with low entry barriers will be located’ over-whelmingly in technologically less advanced `value-adding chains’, and withinthese chains mainly at the lower end. As markets for technologically advancedproducts pose relatively high requirements in terms of ® nancial and humancapital and as newcomers are less likely to possess these types of `capital’ insuf® cient amounts, they will be pushed into the less demanding markets, that isin labour-intensive rather than capital-intensive sectors, in retail rather thanwholesale markets, in consumer markets rather than producer markets, and insecondary or tertiary consumer markets rather than primary markets.

Viable competitive strategies

With regard to `break out’ the following rules of thumb’ can be formulated.According to the recent literature on interactive’ or integral innovation’, prod-

Dow

nloa

ded

by [

The

Uni

vers

ity O

f M

elbo

urne

Lib

rari

es]

at 0

6:54

21

Mar

ch 2

013

218 E. Engelen

uct innovation is best understood as the unintended consequence of solvingexternal problems. Formulated thus, innovation becomes a matter of organis-ation ± internally with regard to post-taylorist organisation principles, andexternally in an environment of `co-operative competition’ ± rather than spend-ing huge sums on research and development (Cooke and Morgan 1998: 41± 7;Erdquist 1997; Kanter 1988). The implications are that smart forms of organis-ation can compensate for lack of capital and that innovativeness is not theexclusive domain of rich ® rms.

Nevertheless, the other two forms of product innovation identi® ed above ±® nding new product mixes and ® nding `new’ locations for `old’ products ± stillappear to be the more relevant ones for immigrant businesses. Indeed, it couldbe argued that what makes `ethnic’ businesses into an entrepreneurial categoryin its own right is precisely the production and provision of `ethnic’ products.This is not to say that `ethnicity’ is beyond strategic manipulation, nor is it to fallinto the trap of essentialism. On the other hand, ¯ aunting economic assimilationas the goal of economic incorporation, as Waldinger et al. and Jones et al. wereseen to be doing, is to overlook the economic potentials of `ethnic’ strategies.

Regarding process innovation, it is obvious that immigrant businesses gener-ally lack the ® nancial resources to embark on cost-cutting strategies through` exible automatisation’. Numerous immigrant businesses, though, owe theirsurvival to the adoption ± whether or not intentionally ± of the neo-tayloriststrategy of `numerical ¯ exibilisation’. A number of studies shows that ¯ exibleemployment practices, low-skilled tasks and the externalisation of costs throughso-called `outsourcing strategies’ ± the hallmarks of `numerical ¯ exibilisation’ ±abound in immigrant ® rms (see Ram 1994; Reil and Korver 2001). As inmainstream ® rms the structure of production’ and the `employment relation’reinforce each other in `ethnic’ enterprises too. To transform the `employmentrelation’ into a less exploitative one, production must be restructured. Moreover,® rms organised according to taylorist principles will resort to a further informal-isation of the `employment relation’ if under competitive pressure, as this ® ts thecost-cutting logic of neo-taylorism better than the quality-enhancing logic ofpost-taylorism, even though it is self-defeating in the long run.

With regard to marketing, sales and distribution, new technologies like cellphones and the Internet can have a huge impact on the existing division oflabour between small and large ® rms. As these technologies have come withinreach of most wallets, second- and third-generation migrants in particular can beexpected to ® nd new and unexpected market niches in the short to middle run.Moreover, as the relative importance of human capital vis-aÁ -vis ® nancial capitalis likely to grow, better educational quali® cations can compensate for a remain-ing lack of ® nancial resources, thus enabling younger generations to enterlucrative markets in much greater numbers than their forerunners.

For much the same reasons, co-operative strategies are a more promisingroute to the more highly rewarding markets than integrative strategies. Not onlydo migrants generally lack the ® nancial resources required for integrativestrategies, but to reap the bene® ts of cost-sharing and economies of scalejuridical integration is simply not required. The advantages of networks of ® rmsover actual mergers are numerous. Networks combine greater ¯ exibility, adap-tiveness and lower visibility with ¯ atter organisations and fewer `hierarchyfailures’ (Hage and Alter 1997; Hollingsworth and Boyer 1997). Besides, net-working is much facilitated by new IC-technologies. Not only because they

Dow

nloa

ded

by [

The

Uni

vers

ity O

f M

elbo

urne

Lib

rari

es]

at 0

6:54

21

Mar

ch 2

013

`Breaking in’ and `breaking out’ 219

allow for the organisation and management of much more extensive networksthan previously available technologies, but also because they add to the volatil-ity of markets, thus enhancing the need for ¯ exibility and adaptiveness.

As stated above, these are mere hypotheses or rules of thumb’ which areurgently in need of empirical testing. I do hope, though, that the case for aWeberian approach to entrepreneurial opportunities in general, and to en-trepreneurial opportunities for immigrants in particular, has been convincinglymade.

Acknowledgements

Earlier versions of this paper were presented at a monthly meeting of theImmigrant self-employment, mixed embeddedness, and the multicultural city’project (Rotterdam, 2 February 2000) and at the meeting `The economic embed-dedness of immigrant enterprises’ of the thematic network `Working on theFringes’, Jerusalem, 17± 20 June 2000. The author wishes to thank all participants.However, special thanks are due to Veit Bader, Robert Kloosterman, EnzoMingione and Jan Rath. The writing of this paper has been made possible by aresearch grant from the Netherlands Organisation for Scienti® c Research(NWO/210± 11± 101).

Notes

1 This approach was developed in close co-operation with Robert Kloosterman and Jan Rath (seeKloosterman 2000; Kloosterman and Rath 2000).

2 There are of course numerous examples of immigrants who do possess suf® cient human and® nancial capital ± see for instance Saxenian (1999) on the success of Asian immigrants in Silicon

Valley. Of course, the Weberian approach adopted here can also be used to explain the`distribution’ of `high potential’ migrants among different market slots’ . However, as this paper

tries to formulate rules of thumb for the advancement of entrepreneurial opportunities in general,it is best to focus on those who lack resources, as these pose the hardest cases. Moreover, one can

trust that migrants with suf® cient resources are able to fend for themselves.3 Evidently, more chances do not necessarily imply better chances; more entrepreneurial opportuni-

ties can entail more inequality and precariousness. Ultimately it ought to be up to the individualin question to weigh the advantages and disadvantages of security versus mobility.

4 The notions of ranking’ and sorting’ are taken from Granovetter and Tilly’s (1988) paper oninequalities in the labour market.

5 For this reason state and market presuppose each other in Douglas North’s neo-institutionalperspective. Market exchange is viable only if transaction costs are low. The main purpose of the

state is to do just that, providing stable and secure contracts and property rights cheaply.Although North got the historical sequence right, his reasoning suffers from the same functional-

ist strains that can be found in neoclassical economies in general, one of the main forebears ofNorth’s neo-institutionalism (see North 1990; North and Thomas 1973).

6 This goes against the grain of the economic literature that stresses that market socialism isdoomed from the outset. That conclusion is based on the premise that there exists a `structural

af® nity’ between forms of ownership and mechanisms of social co-ordination. More precisely,private property and free market exchange belong together, as does national property and central

planning. There is no `middle way’ (see Kornai 1990). In actual fact, these structural af® nities’appear to be much less structural’ , since private property and public property, or for that matter

market exchange and central planning, turn out to be much less dichotomous than is commonlypresupposed.

7 Compare Bowles and Gintis’s notion of contested exchange’ to enrich neoclassical economicswith a notion of `market power’ (Bowles and Gintis 1990, 1993).

8 This seems to be the main explanation for the low incidence of self-employment amongimmigrants in both Israel and Italy, two countries with a remarkably high level of self-employ-

Dow

nloa

ded

by [

The

Uni

vers

ity O

f M

elbo

urne

Lib

rari

es]

at 0

6:54

21

Mar

ch 2

013

220 E. Engelen

ment among the indigenous population and a high level of informal regulatory practices at the

same time; see for Israel, Razin (1999) and for Italy, Quassoli (1999) .

9 This dual de® nition refers at the same time to `market allocation’ as a general mode of social

co-ordination next to `hierarchy’, `community’ , `voluntary associations’ and `networks’ (see

Hollingsworth and Boyer 1997; Streeck and Schmitter 1985), as to markets as concrete institutions

(see Hodgson 1988; Moss 1981). The two parts of the de® nition are not incompatible, but

represent different perspectives on economic reality. The ® rst represents a macro perspective

based on requirements of societal integration in general, whereas the second deals with the

concrete institutionalisation of these requirements. Compare Pat Devine’s proposal to distinguish

between discrete `market exchanges’ on the one hand and more general `market powers’ on the

other (1988), and Andrew Sayer’s analogous proposal to differentiate between restricted’ and

inclusive’ concepts of the market (1995: 98).

10 Even those markets that are generally seen as the paragons of capitalism ± stock markets and

option markets ± are known to be socially structured (see Abola® a 1996; Baker 1985).

11 In general, regulation or governance can take three forms: sticks’ (or legislation sec), carrots’ (or

® nancial incentives and disincentives) and `sermons’ (or persuading). In practice, the three forms

of regulation come in complex packages.

12 This is Kloosterman’s ideal-type immigrant (Kloosterman 2000: 93± 4). `High-potential’ migrants

from Asia are the exceptions who prove the rule. An interesting question, raised by Borjas (1987,

1988) and Razin (1993), is whether a commodi® ed political-economic regime attracts a higher

proportion of well-endowed migrants, whereas less well-endowed migrants rather opt for

decommodi® ed regimes. It seems to make sense to explain the choice for security over mobility

by the endowments or resources migrants possess.

13 Compare Schumpeter in the classic second chapter of his Theory of Economic Development, entitled

`Entrepreneurship and innovation’ , where he distinguished between the `introduction of a new

good’, the introduction of a new method of production’, the opening of a new market’, the

conquest of a new source of supply of raw materials’ and the carrying out of the new

organisation of any industry, like the creation of a monopoly position on the breaking-up of a

monopoly position’ to cover the issue of `new combinations’ of `materials and forces’ , as he

de® ned innovation or economic development (Schumpeter 1934).

14 Following Lane and others, I distinguish `quantitative’ or `numerical’ forms of ¯ exibilisation from

`qualitative ’ or `functional’ forms of ¯ exibilisation. `Qualitative ¯ exibilisation’ denotes micro- as

well as macro-economic strategies that centre around recombining production factors as quickly

and as cheaply as possible. This implies a high trust environment in which skills and knowledge

are seen as public goods. Innovation is the core aim of this form of ¯ exibilisation. `Quantitative

¯ exibilisation’ , on the other hand, is primarily a strategy of cost reduction. Its macro-economic

pendant follows neoclassical premises in that it tries to decrease factor costs by reducing labour

market regulation and by linking national capital markets to global capital ¯ ows (Lane 1988).

15 Personal services seem to be the only exception; for these `goods’, sales, distribution and

consumption’ overlap in time.

16 Historically governments have failed to distinguish between the two forms of co-operation. In

general with dismal consequences, among which the steady erosion of SME’s vis-aÁ -vis big

business. Because every form of co-operation between ® rms was a priori seen as a potential price

cartel, competition policies in effect precluded constructive modes of co-operation that allowed

smaller ® rms to reap economies of scale on tasks such as factoring, distribution, handling and

packaging etc. Research has shown that price cartels predominated in sectors that were character-

ised by high capital intensity, high level of standardisation, a high export-orientation and

consisted of only a handful of ® rms (Dick 1997). The second long-term consequence was the wave

of mergers and acquisitions and the trend to incorporation of the late nineteenth century that was

set in motion by the backlash against cartelisation in the US (Roe 1994; Zunz 1990). The industrial

molochs that were created then still tower over the American economic landscape. Analogous to

this distinction, Herrigel ± in his iconoclastic history of German capitalism (1996) ± points out that

large `autarchic’ producers resorted to price cartels to dampen economic turbulence, whereas

small `decentralised’ producers resorted to so-called term-® xing cartels and specialisatio n cartels

to preclude cut-throat competition. Only the former falls under the Smithian heading of `abuses

of market power’. Term-® xing cartels merely aimed to set delivery and payment standards

among a large group of small specialists, whereas specialisation cartels were meant to carve up

producer markets in several niches and to distribute these niches exclusively among its members.

Dow

nloa

ded

by [

The

Uni

vers

ity O

f M

elbo

urne

Lib

rari

es]

at 0

6:54

21

Mar

ch 2

013

`Breaking in’ and `breaking out’ 221

References

Abola® a, M. (1996) Making Markets: Opportunism and Restraint on Wall Street. Cambridge: HarvardUniversity Press.

Baker, W. (1985) `The social structure of a national securities market’, American Journal of Sociology,89(4): 775± 811.

Barrett, G.A., Jones, T.P. and McEvoy, D. (1996) `Ethnic minority business: theoretical discourse inBritian and North America’ , Urban Studies, 33(4± 5): 783± 809.

Borjas, G.J. (1986) `The self-employment experience of immigrants’ , The Journal of Human Resources,21(4): 485± 506.

Borjas, G.J. (1987) `Self-selection and the earnings of immigrants’ , American Economic Review, 77(4):531± 53.

Borjas, G.J. (1988) International Differences in the Labour Market Performance of Immigrants. Kalamazoo:W.E. Upjohn Institute.

Bowles, S. and Gintis, H. (1990) `Contested exchange: new microfoundations for the politicaleconomy of capitalism’ , Politics and Society, 18(2): 165± 222.

Bowles, S. and Gintis, H. (1993) `The revenge of homo economicus. Contested exchange and therevival of political economy’, Journal of Economic Perspectives, 7(1): 83± 102.

Boyer, R. (1996) `State and market. A new engagement for the twenty-® rst century?’ , in Boyer, R. andDrache, D. (eds) States Against Markets. The Limits of Globalization. London: Routledge, 84± 114.

Boyer, R. (1997) `The variety and unequal performance of really existing markets. Farewell to DoctorPangloss?’ , in Hollingsworth, J.R. and Boyer, R. (eds) Contemporary Capitalism. The Embeddedness of

Institutions. Cambridge: Cambridge University Press, 55± 93.Braudel, F. (1985) The Wheels of Commerce. Volume II. Civilization and Capitalism, 15th ± 18th Century.

London: Fontana Press, ® rst published 1979.BruÈ ger, U. and Knorr-Cetina, K. (2001) `Global microstructures. The interaction practices of ® nancial

markets’, American Journal of Sociology, 106: in press.Burns, T. and Flam, H. (1987) The Shaping of Social Organizations. Social Rule Systems Theory with

Applications. London: Sage.Caves, R.E. and Porter, M.E. (1977) `From entry barriers to mobility barriers. Conjectural decisions

and contrived deterrence to new competition’ , Quarterly Journal of Economics, 91(2): 241± 61.Cooke, P. and Morgan, K. (1998) The Associational Economy. Firms, Regions, and Innovation. Oxford:

Oxford University Press.Devine, P. (1988) Democracy and Economic Planning. Cambridge: Polity Press.

Dick, A. (1997) If Cartels were Legal, Would Firms Fix Prices? Washington: US Department of Justice,Antitrust Division.

Engbersen G. and Van der Leun, J. (2000) `Het Nederlandse illegalenbeleid . Gedogen tussenonvermogen en mededogen’, in Bakker, W. and Van Waarden, F. (eds) Ruimte Rond Regels. Stijlen

van regulering en beleidsuitvoering vergeleken. Amsterdam: Boom, 71± 111.Engelen, E. (1995) De Mythe van de Markt. Waarheid en leugen in de economie. Amsterdam: Het

Spinhuis.Engelen, E. (2000) Economisch Burgerschap in de Onderneming. Een oefening in concreet utopisme.

Amsterdam: ThelaThesis.Erdquist, C. (ed.) (1997) Systems of Innovation. Technologies, Institutions and Organizations. New York:

Pinter.Esping-Andersen, G. (1990) Three Worlds of Welfare Capitalism. Cambridge: Polity Press.

Esping-Andersen, G. (1999) `Politics without class? Postindustrial cleavages in Europe and America’ ,in Kitschelt, H., Lange, P., Marks, G. and Stephens, J. (eds) Continuity and Change in Contemporary

Capitalism. Cambridge: Cambridge University Press, 293± 316.Granovetter, M. (1985) `Economic action and social structure. The problem of embeddedness’,

American Journal of Sociology, 91(3): 481± 510.Granovetter, M. (1995) `The economic sociology of ® rms and entrepreneurs. A framework for

analysis’ , in Portes, A. (ed.) The Economic Sociology of Immigration. Essays on Networks, Ethnicity, andEntrepreneurship. New York: Russell Sage, 128± 65.

Granovetter, M. and Tilly, C. (1988) Inequality and labor process’, in Smelser, N. (ed.) Handbook ofSociology. Newbury Park: Sage, 175± 222.

Hage, J. and Alter, C. (1997) `A typology of interorganizational relationships and networks’, inHollingsworth, J.R. and Boyer, R. (eds) Contemporary Capitalism. The Embeddedness of Institutions.

Cambridge: Cambridge University Press, 94± 126.Hannerz, U. (1996) Transnational Connections. Culture, People, Places. London: Routledge.

Dow

nloa

ded

by [

The

Uni

vers

ity O

f M

elbo

urne

Lib

rari

es]

at 0

6:54

21

Mar

ch 2

013

222 E. Engelen

Herrigel, G. (1996) Industrial Constructions. The Sources of German Industrial Power. Cambridge:Cambridge University Press.

Hirschman, A.O. (1970) Exit, Voice, and Loyalty. Responses to Decline in Firms, Organizations, and States.Cambridge: Harvard University Press.

Hodgson, G.M. (1988) Economics and Institutions. Cambridge: Polity Press.Hollingsworth, J.R. and Boyer, R. (1997) `Coordination of economic actors and social systems of

production’ , in Hollingsworth, J.R. and Boyer, R. (eds), Contemporary Capitalism. The Embeddednessof Institutions. Cambridge: Cambridge University Press, 1± 47.

Jones, T., Barrett, G. and McEvoy, D. (2000) `Market potential as a decisive in¯ uence on theperformance of ethnic minority business’ , in Rath, J. (ed.) Immigrant Businesses. The Economic,

Political and Social Environment. Houndmills: Macmillan, 37± 53.Kanter, R.M. (1988) `When a thousand ¯ owers bloom. Structural, collective and social conditions for

innovation in organizations’ , Research in Organizational Behaviour, 10: 169± 211.Kloosterman, R. (2000) Immigrant entrepreneurship and the institutional context. A theoretical

exploration’ , in Rath, J. (ed.) Immigrant Businesses. The Economic, Political and Social Environment.Houndmills: Macmillan, 90± 106.

Kloosterman, R. and Rath, J. (2000) `Mixed embeddedness. Markets and immigrant entrepreneurs.Towards a framework for comparative research’ . Jerusalem: Paper presented at the meeting `The

economic embeddedness of immigrant enterprises’ of the thematic network `Working on theFringes’, 17± 20 June.

Kornai, J. (1990) `The af® nity between ownership forms and coordination mechanisms. The commonexperience of reform in socialist countries’ , Journal of Economic Perspectives, 4(3): 131± 47.

Lane, C. (1988) Industrial change in Europe. The pursuit of ¯ exible specializatio n in Britain andWest Germany’, Work, Employment and Society, 2(2): 141± 68.

McEvoy, D. (2000) `Ethnic minority enterprise in Britain. On the formation of ethnic niches and theprocess of breaking-out’. Amsterdam: University of Amsterdam, Paper presented at the Institute

for Migration and Ethnic Studies, 25 January.Moss, S.J. (1981) An Economic Theory of Business Strategy. An Essay in Dynamics Without Equilibrium.

Oxford: Martin Robinson.North, D.C. (1990) Institutions, Institutional Change and Economic Performance. Cambridge: Cambridge

University Press.North, D.C. and Thomas, R.P. (1973) The Rise of the Western World. A New Economic History.

Cambridge: Cambridge University Press.Polanyi, K. (1957) The Great Transformation. Boston: Beacon Press, originally published 1944.

Polanyi, K. (1992) `The economy as instituted process’, in Granovetter, M. and Swedberg, R. (eds) TheSociology of Economic Life. Boulder: Westview Press, 29± 51.

Polanyi, K., Arensberg, C. and Pearson, H. (eds) (1957) Trade and Market in the Early Empires. NewYork: The Free Press.

Porter, M.E. (1980) Competitive Strategy. Techniques for Analyzing Industries and Competitors. New York:Free Press.

Porter, M.E. (1998) On Competition. Cambridge: Harvard Business Review Press.Portes, A. (1995) `Economic sociology and the sociology of immigration’ , in Portes, A. (ed.) The

Economic Sociology of Immigration. Essays on Networks, Ethnicity, and Entrepreneurship. New York:Russell Sage, 1± 41.

Portes, A. and Jensen, L. (1989) `What’s an ethnic enclave? The case for conceptual clarity’ , AmericanSociological Review, 52(6): 768± 71.

Portes, A. and Manning, R.D. (1986) `The immigrant enclave. Theory and empirical examples’ , inNagel, J. and Olzak, S. (eds) Competitive Ethnic Relations. Orlando: Academic Press, 47± 68.

Portes, A., Guarnizo, L.E. and Landolt, P. (1999) `The study of transnationalism. Pitfalls and promisesof an emergent ® eld’, Ethnic and Racial Studies, 22(2): 217± 37.

Quassoli, F. (1999) Italian draft literature review on immigrant business and informal activities ’ .Amsterdam: Paper presented at the launching conference of a thematic network `Working on the

fringes’, 16± 17 April.Ram, M. (1994) Managing to Survive. Working Lives in Small Firms. Oxford: Blackwell.

Razin, E. (1993) Immigrant entrepreneurs in Israel, Canada, and California’ , in Light, I. and Bhachu,P. (eds) Immigration and Entrepreneurship. Culture, Capital and Ethnic Networks. Brunswick: Trans-

action Books, 97± 124.Razin, E. (1999) Immigrant entrepreneurs in Israel’s urban economies. Niche concentrations,

informal activities and public policies’ . Amsterdam: Paper presented at the launching conferenceof a thematic network `Working on the Fringes,’ 16± 17 April.

Dow

nloa

ded

by [

The

Uni

vers

ity O

f M

elbo

urne

Lib

rari

es]

at 0

6:54

21

Mar

ch 2

013

`Breaking in’ and `breaking out’ 223

Reil, F. and Korver, T. (2001) De kwaliteit van de arbeid in de Turkse loonconfectieateliers in Amsterdam.Amsterdam: Het Spinhuis.

Roe, M. (1994) Strong Managers, Weak Owners. The Political Roots of American Corporate Finance.Princeton: Princeton University Press.

Saxenian, A. (1999) Silicon Valley’s New Immigrant Entrepreneurs. San Fransisco: Public Policy Instituteof California.

Sayer, A. (1995) Radical Political Economy. A Critique. Oxford: Blackwell.Schumpeter, J. (1934) The Theory of Economic Development. Cambridge: Harvard University Press.

Scott, J.C. (1980) The Moral Economy of the Peasant. Rebellion and Subsistence in Southeast Asia. NewHaven: Yale University Press.

Sorge, A. (1999) `Mitbestimmung, arbeitsorganisation und technikanwendung’, in Streeck, W. andKluge, N. (eds) Mitbestimmung in Deutschland. Tradition und Ef® zienz. Frankfurt: Campus, 17± 134.

Stobart, P. (ed.) (1994) Brand Power. Houndmills: Macmillan.Streeck, W. (1992) `Productive constraints. On the institutional conditions of diversi® ed quality

production’, in Streeck, W. (ed.) Social Institutions and Economic Performance. Studies of IndustrialRelations in Advanced Capitalist Economies. London: Sage, 1± 40.

Streeck, W. and Schmitter, P.C. (1985) `Community, market, state ± and associations? The prospectivecontribution of interest governance to social order’, in Streeck, W. and Schmitter, P.C. (eds) Private

Interest Government. Beyond Market and State. London: Sage, 1± 29.Streeck, W., Beyer, H., Brian, K., Hassel, A., Kamp, L., Kluge, N. and Riess, B. (eds) (1998)

Mitbestimmung und neue Unternehmenskulturen. Bilanz und Perspektiven. Bericht der KommissionMitbestimmung. GuÈ tersloh: Bertelsmann Stiftung.

Swedberg, R. (1994) `Markets as social structures’ , in Smelser, N. and Swedberg, R. (eds) Handbookof Economic Sociology. Princeton/New York: Princeton University Press/Russell Sage Foundation,

255± 82.Swedberg, R. (1998) Max Weber and the Idea of Economic Sociology. Princeton: Princeton University

Press.Sylla, R. et al. (eds) (1999) The State, the Financial System and Economic Modernization. Cambridge:

Cambridge University Press.Thompson, E.P. (1991) Customs in Common. London: Merlin Press.

Waldinger, R.D., Aldrich, H. and Ward, R. and Associates (eds) (1990) Ethnic Entrepreneurs.Immigrant Business in Industrial Societies. Newbury Park: Sage.

Ward, B. and Reeves, F. (eds) (1984) Ethnic Communities in Business. Cambridge: CambridgeUniversity Press.

Weber, M. (1972) Wirtschaft und Gesellschaft. Grundriss der verstehenden Soziologie. TuÈ bingen: J.C.B.Mohr, originally published 1921.

Weber, M. (1982) General Economic History. Brunswick: Transaction Books, originally published 1923.White, H.C. (1981a) `Production markets as induced role structures’ , in Leinhardt, S. (ed.) Sociological

Methodology. San Francisco: Jossey-Bass Publishers, 1± 57.White, H.C. (1981b) `Where do markets come from?’, American Journal of Sociology, 87(3): 517± 47.

Zunz, O. (1990) Making America Corporate, 1870± 1920. Chicago: University of Chicago Press.

Author details

Ewald Engelen is a Research Fellow in the Faculty of Humanities, University of Amsterdam.

E-mail: engelen@hum.uva.nl

Dow

nloa

ded

by [

The

Uni

vers

ity O

f M

elbo

urne

Lib

rari

es]

at 0

6:54

21

Mar

ch 2

013