Prior research has found that ethnic minorities in many developed countries are associated with high levels of entrepreneurship, with recent migrants having a particularly high propensity to engage in new business activity (Levie,
2007). This effect is particularly marked in liberal economies, such as the UK, where conditions are more favourable to business start-up than other European countries and which has resulted in significant growth in the number of ethnic enterprises (Altinay and Altinay,
2008; Ram and Jones,
2008). However, whilst there are significant numbers of ethnic enterprises, the majority of these are confined to low margin and highly competitive sectors. For example, catering, clothing and retail by Indians, Pakistanis and Bangladeshis, the take-away food sector by Chinese and hairdressing and construction by African- Caribbeans (Azmat,
2010; Dana and Morris,
2007; Edwards and Ram,
2006). The confinement of ethnic enterprises to such ‘
poorly rewarded and fiercely competitive sectors’ (Ram and Jones,
2008, p.64), has led these and other authors to call for the promotion of opportunities for diversification and ‘break out’ for ethnic entrepreneurs.
Since the widespread adoption of the internet in the late 1990s, there has been considerable interest and research on online or e-businesses, and the unique opportunities and challenges that these offer (Amit and Zott,
2001). More recently, as the domain of online business has matured and broadened into distinct sub-domains, there has been a growing and distinct stream of studies that consider online home-based businesses (Gelderen et al.,
2008; Anwar and Daniel,
2014; Daniel et al., 2014). Such businesses combine the opportunities afforded by both online and home-based ventures, such as the ability to set a very low affordable loss (Sarasvathy,
2001), which may be attractive to entrepreneurs that cannot raise external financing or who have limited personal resources. However, the combination of the online medium and the home-base also exacerbate the challenges manifested in the two types of business, for example, engendering feelings of isolation and difficulties in establishing trust (Anwar and Daniel,
2014).
Research aims and questions
Previous studies have found a positive association between home computer use and entrepreneurship in ethnic groups in the US (Fairlie,
2006). This suggests that ethnic groups perceive that the online environment offers them entrepreneurial opportunities. Despite this positive association, no previous studies have explored the formation of home-based or other online businesses by ethnic entrepreneurs. The study addresses this research gap by addressing three inter-related questions that follow the accepted approach to developing qualitative exploratory studies (Weick,
2007; Smith et al.,
2013). The first question takes the necessary initial step to establish ‘what’ is occurring in the context of study: what types of online home-based businesses are being operated by ethnic entrepreneurs? The second question builds on this to explore ‘how’ the effects established by the first question came to be (Bryman,
2004; Bryman and Bell,
2007; Weick,
2007): how do the characteristics of online home-based businesses afford opportunities to ethnic entrepreneurs? The third question builds on the previous two questions to provide an explanation (a ‘why’) of the observed phenomena (the ‘what’) and its operation (the ‘how’). This explanation is most often provided by drawing on theory, in the case of this study the theory of mixed embeddedness: why online home-based entrepreneurs are both influenced by, and influence, social, economic and institutional forces? These three questions are important to provide a theoretically based understanding of the opportunities online home-based businesses offer to ethnic entrepreneurs in the UK. In addition to providing an understanding of this important group of entrepreneurs and this significant business type, this study provides a basis and comparator for future studies of other entrepreneurial groups adopting this type of business.
In the following sections we review the two bodies of literature relevant to this study: prior studies of online home-based businesses and studies of ethnic entrepreneurship that draw on the theory of mixed embeddedness. We then describe the method adopted for the empirical stages of this study. We present the findings of the study organised according to the three research questions. We follow this with a discussion of the findings and our conclusions. We highlight the relevance of our findings for practitioners and policy makers and discuss the limitations of this study and opportunities for future research.
Entrepreneurship and online home-based businesses
We draw on the widely accepted definition of entrepreneurship proposed by Shane and Venkataraman (
2000, p.218) in their seminal paper:
‘the processes of discovery, evaluation, and exploitation of opportunities; and the set of individuals who discover, evaluate, and exploit them’. Entrepreneurship is not the sole preserve of small organisations. Large organisations can also develop highly novel approaches to delivering customer value, in what is often termed intrapreneurship or corporate entrepreneurship (Halme et al.,
2012; Burns,
2012). Similarly, not all small organisations are entrepreneurial; since some may be following well tried and tested approaches (Van Wyk and Boshoff,
2004).
In the case of online businesses, those involved are deliberately seeking to leverage the flexibility of the online environment to provide novel value to their customers, often through lower cost, enhanced choice, rapid fulfilment, increased socialisation or combinations of these (e.g. Zhang et al.,
2014; Shin,
2014). The vast number of online ventures requires those entering this domain to develop novel ways to compete. Those operating their online businesses from home are additionally seeking to provide value whilst maintaining extremely low operating costs, requiring them to find creative ways to leverage and combine limited resources (Daniel et al.
2015; Di Domenico et al.,
2014). Hence, whilst we would not claim that all online home-based businesses are entrepreneurial, the flexibility offered by the online environment, the high levels of competition and the need to creatively use limited resources, result in many online businesses being highly entrepreneurial in nature, resulting in them being recognised as a source of innovation and business diversity (Gelderen et al.,
2008; Gagliardi,
2013). Our study is limited to individuals and businesses that meet Shane and Venkataraman’s (
2000) definition given above. That is, their businesses demonstrated the discovery, evaluation and exploitation of novel opportunities, such as addressing customers that were not currently served (exploitation) or developing new products or services (discovery).
Home-based and online home-based businesses: prior literature
Previous studies of home-based businesses tend to be highly descriptive and a-theoretical (e.g. Betts and Huzey,
2009; Clark and Douglas
2009–2010; Mason et al.,
2011). Studies that seek to theorise home-based businesses have tended to consider a particular aspect of such businesses, such as gender (Bryant,
2000; Walker and Webster,
2004; Nansen et al.
2010) or isolation (Smith and Markham,
1998; Smith and Calasanti,
2005; Golden et al.,
2008) and apply specific theories that focus on these singular aspects.
A theoretically grounded perspective of home-businesses can be obtained by turning to the domain of micro-businesses. Micro businesses are frequently defined as businesses with less than 10 employees (e.g. Europen Union
2016). Micro businesses are theorised as flexible, creative and able to adapt quickly to changing context and opportunities (Baines and Wheelock,
2000; Pretorius et al.,
2005). They are also theorised as ‘staying close to the customer’, which has been characterised as entrepreneurial marketing (Morrish et al.,
2010; Anwar and Daniel,
2016a). Micro businesses have also been associated with providing economic and social opportunity. In addition to allowing entrepreneurs to pursue interests (pull motivation), micro businesses formation also provides opportunities those who have had to leave paid employment (i.e. a push motivation) and the number of micro businesses such as home based businesses, is often counter cyclic with economic and paid employment growth (Clark and Drinkwater,
2000;
2010). Whilst micro businesses provide significant opportunities, they also present severe challenges. The failure rate of micro businesses is higher than for small, medium or larger businesses (Fajnzylber et al.
2006). The higher failure rate is attributed to lower resources, meaning that micro businesses are less able to withstand shocks. The high failure rate has also been attributed to limited managerial experience, with managers learning about operating their business only once they have begun (Harrison and Leitch,
2005; Keith et al.,
2016).
More recently, home-based entrepreneurs and their businesses have been theorised through entrepreneur-venture fit (Anwar and Daniel,
2016b), an approach that is derived from the more widely known person-organization fit (Van Vianen,
2000; Billsberry et al.,
2005). Person-organization fit is based on the premise of an individual joining a pre-existing organization with an established set of organizational characteristics. Entrepreneur-venture fit differs in that it describes how entrepreneurs will seek to establish ventures that either addresses their needs or draws on their abilities. Home-based businesses can provide either, or both, of these types of fit: for example meeting the need to stay in the home due to caring responsibilities or drawing on specialist abilities that can be provided effectively the home (Gelderen et al.,
2008; Anwar and Daniel,
2016b).
Ethnic entrepreneurship and mixed embeddedness prior literature
Quantitative studies have found differences across ethnic groups in the frequency or rate of self-employment and the industry sectors that are most popular with different ethnic groups. Table
1 shows the self-employment rate (defined as the percentage of people in employment who are self-employed) varies amongst males from 31.3% for Pakistanis to 10.5% for Black Africans (Clark and Drinkwater,
2010). Table
1 also shows that the rate for female participation in self-employment also varies across ethnic groups, and is lower than the rate for males in the same ethnic group. Daniel, DiDomenico, et al. (
2015) found participation in industry sectors varied by ethnic group, as shown in Table
2. Whilst their study did not differentiate businesses based at home from those based in commercial premises, they found that participation in the ICT/Professional and Financial Services sector, which includes similar types of businesses to our sample, varied from 34.6% for Caribbean and Africans to 16.3% for South Asians.
Table 1
Self-employment rate by ethnic group
Male self-employment rate | 17.3% | 10.5% | 31.3% | 26.7% |
Female self-employment rate | 7.4% | 3.8% | 8.0% | 15.9% |
Table 2
Industry sector by ethnic group
Manufacturing | 6.50% | 2.60% | 5.40% | 0.00% | 3.90% |
Construction | 21.90% | 15.60% | 5.90% | 0.00% | 16.70% |
Wholesale and Retail/Hospitality and Food | 13.80% | 14.30% | 30.80% | 48.80% | 5.10% |
Transport | 5.90% | 1.30% | 29.90% | 14.60% | 11.50% |
ICT/Professional and Financial Services | 24.70% | 33.80% | 16.30% | 19.50% | 34.60% |
Admin and Other Services | 7.60% | 10.40% | 2.30% | 2.40% | 7.80% |
Arts/Health and Education | 19.70% | 22.10% | 9.50% | 14.60% | 20.50% |
Total | 100.00% | 100.00% | 100.00% | 100.00% | 100.00% |
A number of theories have been proposed to explain the entrepreneurial orientation of ethnic groups. The most frequently used are cultural theory, disadvantage theory and mixed embeddedness (Azmat,
2010). Cultural theory posits that aspects such as social norms, beliefs and family ties influence ethnic entrepreneurs to start businesses, the type of business formed and the outcome of those businesses (Volery,
2007). As we have noted previously, whilst concentrations of certain ethnic groups in sectors, such as retail and take-away foods, is consistent with cultural theory, there is no recognition of other factors that have been shown to influence business start-up, such as relative position in the labour market or market opportunity (Levie,
2007). Disadvantage theory addresses the first of these aspects, suggesting that the high rate of ethnic start-ups is due to their relative disadvantage in the labour market, for example, due to limited language skills or non-recognition of overseas qualifications (Light and Gold,
2000; Ley,
2006).
The theory of mixed embeddedness seeks to address the narrow perspectives of these theories by situating ethnic entrepreneurs in their wider social, economic and institutional or political setting, with a consideration of how these influence ethnic business start-up and ongoing operation (Kloosterman et al.,
1999; Jones and Ram,
2007). As Kloosterman (
2010) later expands, issues and opportunities experienced by the entrepreneur are influenced by what he refers to as the opportunity structure, where ‘
the opportunity structure is itself a product of socio-economic and institutional forces’ (p.41). The dimensions of mixed embeddedness are purposefully broad, pluralist and undeterministic (Kloosterman,
2010) in order to reflect the many forces shaping the opportunities of entrepreneurs.
Whilst this makes the theory both powerful and flexible, it presents challenges when using it as a guide to data collection and analysis in empirical studies. As noted by Ram and Smallbone (
2001),
‘there is no consensus on what such features [of the mixed embeddedness framework]
should comprise’ (p.11). These authors collect and analyse data on: sector, size, location, access to finance, social networks, generational differences and institutions. Other studies collect and analyse data on: political economy, social ties, residential proximity and fitting in with workplace behaviours (Rath,
2002); enterprise support, urban regeneration and economic deregulation (Barrett et al.,
2001); sector, educational attainment, informal and formal support organisations (Price and Chacko,
2009).
Despite its broad perspective, we suggest the theory of mixed embeddedness has a number of limitations. Firstly, it posits that the social, economic and institutional setting will exert forces on ethnic entrepreneurs, suggesting that forces act in only one direction and that entrepreneurs are victims or pawns, with little individual or collective agency. To date, there is very limited discussion of the role of agency in consideration of the mixed embedded perspective (for an exception see, Trupp,
2015). We suggest that the entrepreneurs may exert agency in at least two ways. They can elect to start enterprises that do not conform to, or even challenge the constraints of the social, economic and institutional context in which they find themselves. Alternatively, they may create enterprises that are not only influenced by the environment in which they operate, but those businesses can influence that environment. As we have noted previously, and has been observed by other researchers, the broad scope of mixed embeddedness presents challenges when using this theory to guide data collection and analysis (e.g. Ram and Smallbone,
2001; Rath,
2002; Barrett et al.,
2001). Another limitation of mixed embeddedness theory and the related opportunity structure model is the focus on the start-up phase of ventures, with little guidance and insight on the how embeddedness changes over time and hence shapes and explicates aspects such as venture growth and maturity (Jones et al.,
2014). This limitation results in a cross-sectional, rather than processual, consideration of entrepreneurship (McMullen and Dimov,
2013; Kloosterman and Rath,
2001)