Social Networks, Ethnicity, and Entrepreneurship

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Social Networks, Ethnicity, and Entrepreneurship

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Title: Social Networks, Ethnicity, and Entrepreneurship
Author: Kerr, William Robert; Mandorff, Martin

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Citation: Kerr, William R., and Martin Mandorff. "Social Networks, Ethnicity, and Entrepreneurship." Harvard Business School Working Paper, No. 16-042, October 2015. (NBER Working Paper Series, No. 21597, September 2015.)
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Abstract: We study the relationship between ethnicity, occupational choice, and entrepreneurship. Immigrant groups in the United States cluster in specific business sectors. For example, Koreans are 34 times more likely than other immigrants to operate dry cleaners, and Gujarati-speaking Indians are 108 times more likely to manage motels. We develop a model of social interactions where non-work relationships facilitate the acquisition of sector-specific skills. The resulting scale economies generate occupational stratification along ethnic lines, consistent with the reoccurring phenomenon of small, socially-isolated groups achieving considerable economic success via concentrated entrepreneurship. Empirical evidence from the United States supports our model’s underlying mechanisms.
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