Academic journal article Journal of the Community Development Society

Bonding Social Capital in Entrepreneurial Developing Communities-Survival Networks or Barriers?

Academic journal article Journal of the Community Development Society

Bonding Social Capital in Entrepreneurial Developing Communities-Survival Networks or Barriers?

Article excerpt

ABSTRACT

This paper focuses on the interaction between social capital and entrepreneurship in Aboriginal communities in Canada. Using statistical and interview data from three First Nations communities in northern Ontario, I examine if and how bonding networks turn into tangible resources for business development. The paper also highlights ways in which community relationships hinder entrepreneurship and turn into barriers to economic development. The paper concludes with examples of how insight into the interaction between public policy and social networks can help understand the barriers and opportunities facing community developers in marginalized communities around the world.

Keywords: economic development, entrepreneurship, social capital

INTRODUCTION

The twentieth century was marked by a lively debate about the importance of social institutions to economic exchange. From Simmel (1971 [1908]), Weber (1969 [1920]) and Polanyi (1957) to Granovetter (1973; 1985), Putnam (1993; 1995), Portes & Landolt (1996) and Woolcock (1998), there is wide agreement that social relations can turn into both resources and liabilities for economic development, and especially for entrepreneurship. This paper focuses on one specific concept, social capital, to explore the question of whether various social relations are an asset or a liability for entrepreneurial activity.

The analysis is based on research conducted in three Aboriginal (1) communities in northern Ontario, Canada. Two centuries of radical transformations in the ways of life of Aboriginal peoples in North America have resulted in great social upheaval, documented by substantial research (e.g., Hawthorn, Cairns et al., 1966; Shkilnyk, 1985; York, 1990; Gagne, 1994; Royal Commission on Aboriginal Peoples [RCAP], 1996a; Warry, 1998; Abadian, 1999). Stimulating Aboriginal economies is key to the improvement of Native peoples' lives. The majority of policies designed to stimulate economic development in First Nation communities in Canada has been geared towards entrepreneurship, since individual economic success is assumed to strengthen the community (by generating jobs and wealth). Moreover, the community as a collective is perceived as a potential entrepreneur, providing employment for members and generating capital for social and economic programming.

Much of the research on Aboriginal business development has emphasized the challenges facing Aboriginal entrepreneurs, specifically those related to access to markets, skills, capital, and resources. This body of research is gradually shifting towards exploring soft, institutional explanatory factors, such as community structure, culture, and governance, to understand variations in Aboriginal economic development (for examples, see Cornell & Kalt, 1991; 1992). Interestingly, social capital, a concept that has gained much attention in the past decade, has rarely been discussed in relation to Native business development. The findings in this paper point towards important links between social networks and social capital and successful Native entrepreneurship.

The relationship between social capital and entrepreneurship has been more widely explored in contexts other than the Native one (for examples, see Portes & Landolt, 2000, and a discussion below). In this growing body of research, scholars highlight findings that show the ability of social networks to pull together financial and other material resources for business development on the one hand, and to apply pressures on entrepreneurs on the other. The analysis presented here highlights the importance of social networks in overcoming less explored challenges to entrepreneurship, such as access to training, access to markets, and the negotiation of community values and norms.

In the remainder of this paper I first review the literature on social capital and its links to entrepreneurship. Next, I provide a brief description of the communities and the methodology used in this project. …

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