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Indigenous Entrepreneurship: An Analysis of Capital Constraints

By Craig W. Furneaux and Kerry A. Brown


Encouraging entrepreneurship amongst Indigenous people, and fostering the development of small businesses, has been advocated as the most promising avenue for economic development amongst Indigenous communities (Fuller et al., 2003). Unfortunately, the number of Indigenous people engaged in small businesses in Australia is quite low when compared both to the national average and also with Indigenous participation rates in Canada and the United States of America (Hindle, 2002). While rationales for low Indigenous participation rates in small businesses have been advanced for other Pacific nations (Cheshire, 2001a, 2001b; Croulet and Sio, 1986; van der Grijp 2003; Curry 2005), a cogent explanation of analysis of low participation rates by Indigenous entrepreneurs in Australia remains to be articulated. One explanation for low Indigenous participation rates in small business is due to a lack of access to capital (de Bruin & Mataira 2003). \ud \ud Bourdieu (1986) suggested that there are a number of different types of capital. Firkin (2003) advances this reasoning by arguing the following forms of capital are relevant to entrepreneurs: financial, human, social, physical, organisational and technological. If an entrepreneur lacks of access these forms of capital, this is likely to have negative outcomes for the entrepreneurial venture (de Bruin and Dupuis 2003; Firkin 2003). The literature suggests that Indigenous entrepreneurs lack access to most of these forms of capital. For example, many Indigenous communities lack access to physical, labour, and information marketplaces (Miller 1985; Pearson, 2000); financial institutions and financial capital (Daly 1994); and have low levels of financial literacy and management skills (de Bruin and Matira 2003). Indigenous entrepreneurs do, however, have access to rich sources of social capital through their extended kinship networks. But this form of capital proffers a mixed blessing for Indigenous entrepreneurs. \ud \ud Dense social networks can provide rich sources of financial, intellectual and social capital (Naphiet & Goshal 19984). However if a network is over-embedded it can paradoxically limit access to resources (Uzzi 1997). For Indigenous entrepreneurs, social networks can even result in a drain on resources, as an Indigenous person in business is expected to share their wealth with their kin - even if this wealth is floor stock that needs to be sold in order to create operating surplus (Foley 2003). This is what has been referred to as the 'traders dilemma' in Pacific Island nations (van der Grijp 2003), as the entrepreneur needs to make a profit to succeed in business, but is also expected to distribute wealth among kinship networks. These calls for support and favours from extended networks of relations can often overwhelm new enterprises (Granovetter 1992:7). \ud \ud Sharing resources within Indigenous communities is more than an economic investment - it is also a social investment (Schwab, 1995). In Schwab's (1995) extended analysis the social networks of indigenous people, sharing acts as a primitive form of socialism through redistribution of wealth through the community, and reinforces the relationship of giver and receiver through the act of giving. To refuse a request from a relative in need is to reject the relationship itself (Schwab 1995). As Granovetter (1992: 4) argues, the ''(1) the pursuit of economic goals is normally accompanied by that of such non-economic ones as sociability, approval, status and power; (2) economic action (like all action) is socially situated and cannot be explained by individual motives alone; it is embedded in ongoing networks of personal relations rather than carried out by atomised actors''. Thus the rich social networks of Indigenous entrepreneurs, while a resource, are paradoxically a drain on financial resources, due to their embedded nature. \ud \ud A number of examples of attempts by government to address the capital constraints facing Indigenous communities are identified, specifically programs which seek to enhance financial literacy, micro savings and loans, business incubators and enterprise partnerships

Topics: 150300 BUSINESS AND MANAGEMENT, Indigenous, Entrepreneurship, Capital Constraints
Publisher: Swinburne University of Technology
Year: 2007
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