Does Economic Culture and Social Capital Matter?: An Analysis of African-American Entrepreneurs in Cleveland, Ohio

House, Bessie, The Western Journal of Black Studies

Introduction

During the past few decades, a number of academicians and public policy analysts have focused critical attention on analyzing various factors which impact the economic outcomes of African-American entrepreneurs (Bates, 1997, 1996, 1993, 1989, 1988; Ahiarah, 1993; Ando, 1988; Brimmer, 1986; Butler, 1991; Fratoe, 1993, 1988, 1986; Green and Pryde, 1997; Walker, 1998; House and Alon, 1997; House, 2002). One of the major stimuli for these studies was the belief that Black Capitalism would act as a catalyst for economic growth and development in minority communities. It comes as no surprise, therefore, that the number of businesses that are owned and operated by African-Americans has grown enormously in recent years. What is surprising is that, as we move into the new millennium, African-Americans still do not participate in entrepreneurship to a degree that is equivalent to their overall percentage of the American population. In 1987, African-Americans owned and controlled less than 15 businesses for every 1,000 African-American people in contrast to more than 72 White-owned businesses for every 1000 whites. Blacks brought in $795 in revenues per employee, while Whites brought in $56,120 per employee (Black Enterprise, 1995). Data from the 1990 population census demonstrated that only 2.0% of African-American women who were employed were involved in entrepreneurial activities in the United States in contrast to 4.4% of employed African-American men. This is in vivid contradistinction to Korean-American men who had a self-employment rate of 27.9%, while Korean-American women had a rate of 18.9% (Fairlie, 1996). This paper examines the impact of economic culture and social capital on the business success of African-American entrepreneurs in Cleveland, Ohio.

Literature Review

Several previous studies have analyzed the important role of economic culture and social capital in enhancing economic development processes in minority communities. In Black Entrepreneurship in America, Shelley Green and Paul Pryde (1997) examined the economic characteristics of the African-American community in the United States in order to ascertain how their economic values originated and developed across time and space. In so doing, they relied on criteria that were developed earlier by Albert Shapiro regarding the establishment of a dynamic entrepreneurial culture and applied it to Black schools, voluntary associations, and family units. Green and Pryde believed that "these institutions, in which most of the daily activities of Black Americans take place, serve as principal mediators between individual Black economic decisions and the opportunity structures in American society that positively or negatively reinforce them". The criteria borrowed from Shapiro included resilience, creativity, innovation, and initiative.

Green and Pryde (1997) posit that culture can be understood as belief systems which are socially transmitted as well as behavioral patterns that exist within human communities. Thus, the term economic culture focuses on behavioral patterns and belief systems that are ultimately concerned with the production and distribution of wealth. In this paper, economic culture is defined as the beliefs and values of the entrepreneurs which impact their economic decisions and behaviors. This term encompasses a number of factors such as their entrepreneurial values and traditions, as well as their general attitudes regarding entrepreneurship. In the methodological section of this paper, these variables will be operationalized in order to help us to understand more fully where the entrepreneurial values of the Black business owners in Cleveland, Ohio, came from and what effect these values had on their overall business success. Did these values come from their family background, business mentors and role models, or from some other source?

While providing a historical overview of Black's involvement in entrepreneurial endeavors, Green and Pryde provided important demographic information on several variables such as the business owner's age and educational levels as well as their exposure to other entrepreneurs. They asked several relevant questions regarding Black economic culture such as: How can we define or describe the types of values that entrepreneurs have and where do these values come from? How do Americans overall develop their values and interest in entrepreneurship? and Are their values consistent with the American public's perception of them? While the study provided important insights on the issue of Black economic culture, several questions remain unanswered, such as how is the economic culture of the African-American community different from that of other ethnic communities and are certain aspects of African-American economic culture inimical to the economic advancement of the Black community?

Economic culture and social capital are inexorably interwoven and social capital has been defined in various ways by scholars through the years. For example, Ronald S. Burt (1997) argued that "social capital is a quality created between people, whereas human capital is a quality of individuals ... Social capital is [thus] the contextual complement to human capital. Social capital predicts that returns to intelligence, education, and seniority depend in some part on a person's location in the social structure of a market or hierarchy. While human capital refers to individual ability, social capital refers to opportunity".

Carrie Leana and Harry Van Buren III (1999) examined organizational social capital, which they defined as a resource which is illustrative of the existent social relations within individual firms. Organizational social capital is developed as a consequence of a member's ability to achieve a collective goal orientation and a shared sense of trust, which in turn denotes or creates value by enhancing collective action. Hence, for them, the term can best be understood as an asset to both the …

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Publication information: Article title: Does Economic Culture and Social Capital Matter?: An Analysis of African-American Entrepreneurs in Cleveland, Ohio. Contributors: House, Bessie - Author. Journal title: The Western Journal of Black Studies. Volume: 24. Issue: 3 Publication date: Fall 2000. Page number: 183. © 1999 The Western Journal of Black Studies. COPYRIGHT 2000 Gale Group.

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