The entrepreneurial alternative: the self employment option for discriminated populations

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The entrepreneurial alternative the self
employment option for discriminated populations?

• Dr. Sibylle Heilbrunn
• Academic Center Ruppin
• May 2006

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Content

• Introduction
• Institutions
• Women Entrepreneurs
• Israeli Arab Entrepreneurs
• Immigrants Entrepreneurs

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Introduction 1 SMEs

• Small and medium-sized business are
  considered, according to common perception in
  developed and developing states, an important
  source for the growth of the economy and for the
  creation of stable and, from the economic point
  of view, healthy places of employment. In Israel,
  also, therefore, the Government view these
  businesses as one of the tools for achieving its
  economic targets and one of the central layers in
  the Israel economy and society. (The Israel Small
  and Medium Enterprise Authority. Htm)
•  

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Introduction 2 Entrepreneurship

• Drives change and growth
• new markets, new technologies, new industries,
  new innovations
• Creative destruction (Schumpeter)
• Stimulates enterprise and competition
• Has an important regional dimension
• Plays a key role in job creation
• Develops human capital
• Provides greater personal satisfaction

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Institutions Rational of the ISMEA

• The chief advantages of small and medium-sized
  businesses are they are innovative, flexible, and
  quick to set up at a low cost and with dispersed
  risk. They are likely to provide an appropriate
  solution to problems of employment in peripheral
  areas, as well as among particular populations,
  such as minorities, women, demobilised soldiers
  and new immigrants.

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Strategies of the ISMEA

• Training - imparting management know-how
• Finance - developing tools for financing,
  investment and revolving capital
• Adapting the business  environment in the areas
  of regulation and planning for business purposes
• Nurturing enterprise culture and business
  development

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Centres for the Promotion of Entrepreneurship
(CPEs)

• The CPEs are used as a one-stop shop - one
  central address for the businessman or the
  entrepreneur, in which he or she can receive help
  through a comprehensive range of services which
  are available and receive direction and
  information on other relevant tools operated by
  other entities for his or her benefit.

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CPEs services

• 1. Tailor made professional advice
• preliminary consultation
• preparation of a business plan
• management of marketing
• financial advice
• guidance on organisation, personnel, etc.
• .

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• 2. Training courses and workshops
• establishment and management of the business
• marketing
• exporters
• computerisation and the Internet
• electronic trading
• a course for the encouragement of womens
  enterprise
• courses for Israeli Arab population (specific
  CPEs)
• courses for new immigrants

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• 3. Referral to sources of finance
• assistance in the process of referral for
  obtaining finance from funds
• assistance in the process of referral for
  obtaining finance from banks
• assistance in the preparation of the business
  plan which are required for receiving finance

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Business training to small and medium enterprises
 

• Stage I - Location of interested businesses and
  familiarising meetings with the national
  coordinator.
• Stage II - Adaptation of the advice and the
  receipt of the consent of the businesss
  management for signing up to the project.
• Stage III - General analysis of the businesss
  activities, preparation of a general report.
• Stage IV - Implementation of the report part by
  part by linked training and directive.
• The Ministry of Industry and Trade participates
  in 75 of the cost of the advice.
•  

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Encouragement of womens enterprise

• From research which has been carried out, it
  appears that the percentage of women setting up a
  business in Israel is lower than the percentage
  of women setting up a business in other developed
  countries. Therefore
• increase their awareness of the tools at their
  disposal
• holding workshops, special seminars for
  businesswomen and entrepreneurs
• operation of business clubs for women
• conducting of research in this area and the
  convening of special courses for the
  encouragement of enterprise in women.
• cooperation with relevant entities which deal
  with the advancement of women and the status of
  women in Israel. 

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Impact of Gender on Difficulties faced by
Entrepreneurs, Heilbrunn 2004

• Womens entrepreneurship is characterize by
  structural constraints such as family
  responsibility and a lack of relevant resources
  such as social capital. Following the resource
  based perspective this study investigates whether
  women entrepreneurs face different difficulties
  from their male counterparts and are indeed
  disadvantaged as to resources such as management
  experience, business and technical skills,
  raising capital, etc. The results of the study
  show that womens ventures are smaller, service
  oriented and cheaper to finance. Compared with
  their male counterparts, women entrepreneurs
  perceive heir lack of management experience and
  business skills as a major constraint.

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Israeli-Arab Entrepreneurs

• Flexible Adaptation of Minority Entrepreneurs,
  Drori Lerner 1998.
• Israeli Arabs, who make up approximately 17
  percent of Israels total population, are highly
  segregated both culturally and in terms of place
  of residence.
• Arab entrepreneurs in Israel live in rural areas
  and relatively small communities.
• Their peripheral status is reflected in both
  geographical distribution and an economic
  inferiority.
• Arab manufacturers in Israel face various
  impediments, mainly in the form of poor
  infrastructure and limited access to the know-how
  of industrial development.
• From the perspective of segmentation theory, the
  Israeli Arab entrepreneurs are a non-assisted
  sector, characterized by limited access to
  governmental support mechanisms in comparison to
  their Jewish counterparts.
• The hypothesis is that the activity of these
  minority ethnic businesses is not confined to the
  boundaries of the enclave, but is also linked to
  both internal and external environments

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• Organizational structure and strategies
  flexible adaptation
• The flexible adaptation is expressed in reliance
  on local resources, risk-averse behavior, and
  operating in niches that can equally satisfy both
  the local and external markets.
• The main resource of the Arab industrial
  entrepreneur is the extended family. The family
  is involved in every aspect of establishing and
  maintaining the business, being the source of
  capital for starting the enterprise, providing
  both managers and workers, and backing the
  enterprise with political support.
• Although the family serves as a safety net for
  the entrepreneur, it is also a burden as the
  prime obligation is not to the business per se,
  but to the family.

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• Policy implications
• The inferior manufacturing infrastructure of the
  Arab settlements, especially of the industrial
  zones, should be developed.
• Governmental and municipal agencies should
  encourage more local Arab entrepreneurs to
  relocate to the industrial zones.
• Participation in training courses provided for
  entrepreneurs should be strongly encouraged.
• Formal financial institutions and venture capital
  funds are only rarely used by the Arab
  entrepreneurs. Thus, the few existing venture
  funds established by Arab venture capitalists
  should be supported, too.
• The Arab entrepreneurs operating in Israel have
  the potential to become a bridge between Israel
  and the economies of its Arab neighbors.
  Developing stronger entrepreneurial capabilities
  can contribute to implementing this goal.

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Immigrant Entrepreneurs

• Because new immigrants have high entrepreneurial
  potential and specific needs, the ISMEA, in
  coordination and in close cooperation with the
  Ministry of Immigrant Absorption, operates in a
  number of areas, to exploit their potential in
  this population sector and to help them in their
  entrepreneurial activities. The assistance
  offered to new immigrants, in addition to the
  provision of advice and training, includes
  courses and workshops especially for new
  immigrants.

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Problems encountered by immigrant and indigenous
entrepreneurs Similarities and differences.
Heilbrunn Kushnirovich 2006

• The phenomenon of entrepreneurship among
  immigrant groups has a growing significance in
  assessing local economic development process and
  social change.
• It is a route of economic advancement and
  mobility for immigrants.
• Immigrant entrepreneurship adds to the economic
  development potential of local communities and
  results in sustainable economic development.

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Background (2)

• The share of entrepreneurs in the Israeli labor
  force is 11.8 (by data of the Ministry of
  Industry, Trade and Labor of Israel, 2005). This
  is slightly less than the average for OECD
  (Organization of Economic Cooperation and
  Development) countries 13.1.
• The share of entrepreneurs among FSU immigrants
  is 5. Such small involvement of FSU immigrants
  in entrepreneurship may be a consequence of
  specific difficulties encountered by new
  immigrants relating to integration and
  immigration.

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The purpose of this study to investigate the
range and particularity of difficulties of
immigrant entrepreneurs and the extent to which
they cope with them.
More specifically the study issues
1. Difficulties reported by entrepreneurs during
setting up immigrant businesses.
2. Difficulties reported by entrepreneurs after
setting up immigrant businesses.
3. Specific problems encountered by the immigrant
entrepreneurs in Israel relating to immigration
and integration into the new society
4. The extent to which entrepreneurs cope with
the difficulties.
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• 1. Lack of resources
• a. Lack of knowledge language problem lack of
  knowledge about business norms lack of knowledge
  about the market of the host country lack of
  knowledge about laws.
• b. Lack of human capital
• c. Lack of social capital.
• d. Lack of financial capital.
• 2. Cultural differences between immigrants and
  natives.
• 3. Difficulties associated with the external
  economic environment.
• (Razin and Lerner)

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Empirically based mapping of difficulties
encountered by entrepreneurs
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Concluding Remarks (1)

• 1. We assumed that lack of financial and social
  capital would be not only the main but also the
  specific difficulties of immigrant entrepreneurs,
  but we found that
• a. Lack of financial capital is a main but not
  specific difficulty encountered by immigrants.
• b. In this study the lack of social capital
  constitutes neither a main nor a specific
  difficulty of immigrant entrepreneurs.

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Concluding Remarks (2)

• 2. Immigrant entrepreneurs reported less
  difficulties relating to management and marketing
  than their Israeli counterparts. This may be
  explained by co-ethnic dealing of immigrant
  businesses with customers, business partners and
  workers.
• 3. The specific difficulties of FSU immigrants in
  Israel mostly relate to cultural rather than to
  the economic or social gap between these two
  groups of entrepreneurs and such they relate to
  issues of integration into a new society.

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Is entrepreneurship an option for disadvantaged
populations? Issues to be discussed.

• These populations face glass ceilings based on
  discrimination, lack of resources, cultural
  disadvantages, etc.
• Self-employment empowerment
• Various degrees of enclave economy
• Yes, it is an option.