ERJ is an an international journal committed to publishing the very best scholarly research. It encourages a scholarly exchange between experts from all fields which demonstrate the vital role that entrepreneurship plays in determining the quality of lives, societies, and economies. The scope of the journal is unique in that it seeks to disseminate both theoretical and empirical evidence research that will facilitate the development of entrepreneurship as a field of study today, and in the future. A scholarly forum for new ideas that have the impact on broadening the traditional business model, the journal recognizes experts and their contributions from all fields including economics, business, psychology, sociology, anthropology, political science, engineering, physical and life sciences.
The paper was co-written with Piers Thompson of UWIC and Caleb Kwong of Essex University.
As it is always difficult to get a paper into an American-based journal. I am doubly pleased at this positive news because ERJ is a new publication that aims to be the leader in its field over the next few years - one of the editors is Chandra Mishra, who transformed the Journal of Small Business Management between 2001 and 2010, and both Howard Aldrich and William Baumol are on the advisory board.
More importantly, the study examines Wales as its case study to determine the potential of entrepreneurial activity for rejuvenating deprived communities.
Utilising data from the Global Entrepreneurship Monitor (GEM) in conjunction with the Welsh Index of Multiple Deprivation (WIMD), the paper examines the relationship between early stage entrepreneurial activity, entrepreneurial attitudes and attributes, with the different domains of deprivation.
Whilst it found some evidence that those living in the most deprived communities were less likely to be involved in early stage entrepreneurship, most of this could be accounted for by the individual characteristics of those living in these areas.
Interestingly, the lack of existing businesses or public services appears to play little role in dissuading prospective entrepreneurs and it would appear from this that there is no need to establish a critical mass of businesses to encourage new business starts within the deprived areas of Wales, as the attraction of low competition appears to play a role in encouraging new business.
Controlling for the endogeneity of the choice of location does not alter the results relating to early stage entrepreneurship, but after separating the ‘choice’ of living in a deprived area and the presence of entrepreneurial attributes, it is found that entrepreneurial social capital and the perceived presence of start-up skills are negatively associated with a number of domains of deprivation as might be expected. The results relating to the perception of good opportunities is mixed with some positive and some negative influences, although this potentially relates to the fact that whilst demand will be suppressed as in a prosperity pull style effect, the absence of competition also provides opportunities.
The paper finds that areas do have an effect, but so do individual characteristics, and since it is these selfsame characteristics that result in many choosing to live in the deprived areas, as well as creating the low social capital, bridging ties, and adverse peer effects, the three components are intrinsically interwoven.
This means that policies to help under-represented groups within these communities may be more appropriate than general business advice and support to overcome help firms grow in weaker economic conditions, but pinning hopes on this alone rejuvenating the area is perhaps asking too much given the role that in and out migration play. Bearing in mind that migration may result in little long term benefit for a deprived area, this does not mean individuals may not benefit.
Therefore, the question is whether enterprise is the most cost effective method of helping this minority of beneficiaries, especially if aspiring entrepreneurs are held back by their environment? A lack of role models, due to a large extent by a lack of tradition of entrepreneurship, is a considerable problem. One method of overcoming this would be through the provision of forums for interaction between entrepreneurs and the public.
The negative area effect on the perception of opportunities would also be tackled by instigating such fora with individuals being made aware of the possibilities open to them rather than being dissuaded by the lack of economic activity present in the area. Training programmes to provide general enterprise skills would be beneficial to not only help develop entrepreneurs but ensure that a greater number of the population are provided with the broad range of entrepreneurial skills suitable for working in small firms.
It is unclear from this study the extent to which specific finance provision is required for deprived areas, as those with lower household incomes have a lower propensity to start businesses although no further significant influence is found for income deprivation. This would imply that policies to help those out of work or on low incomes to start businesses will be adequate although raising entrepreneurship artificially in this manner could impact on the quality of entrepreneurial activity in an area.
The paper will be published in 2012.