Entrepreneurship in the Indian Diaspora

Role

Name

Affiliation

Prof Sujata Patel

Department of Sociology,

National Coordinator Subject Coordinator

University of Hyderabad Paper Coordinator

Prof. Kamala Ganesh

Formerly Dept. of Sociology, University of Mumbai

Content Writer

Rakesh Ranjan

Research Scholar, Centre for the Study of Social Systems, Jawaharlal Nehru University

Content Reviewer

Prof. Kamala Ganesh

Formerly Dept. of Sociology, University of Mumbai

Language Editor

Prof. Kamala Ganesh

Formerly Dept. of Sociology, University of Mumbai

Technical Conversion

Module Structure Description of the Module Items

Description of the Module

Subject Name

Sociology

Paper Name

Sociology of the Indian Diaspora

Module Name/Title

Entrepreneurship in the Indian Diaspora

Module Id Pre Requisites Familiarity with concepts of Diaspora and Entrepreneurship . Objectives

Objectives of the module are to answer the following questions: ·

How to define Diaspora Entrepreneurship?

·

What are the major classifications of Diaspora Entrepreneurship?

·

How are Diaspora Entrepreneurs different from other entrepreneurs?

·

What is the investment environment that Government of

1

India offers for its Diasporas?

Key words

·

Which are the major legislative institutions established by the Indian government to promote Diaspora Entrepreneurship?

·

What is the linkage between Return Migrants and Diaspora Entrepreneurship.

Diaspora Entrepreneurship, Ethnic Markets, Diaspora Engagement, Diaspora and Homeland Development, Cultural Embeddedness

Entrepreneurship in the Indian Diaspora Section V Module 4

QUADRANT I 1. INTRODUCTION Ethnic and social networks can be seen as one of the important instruments of nations in the promotion of international trade. Familiarity that is available through ethnic and social networks helps to overcome weaknesses in the information and contracting environment (Curtin 1984). Robin Cohen (1997: 84) in his book ‘Global Diasporas: An Introduction’ definesthe trade diaspora as an important type of diaspora with examples of Chinese traders in European colonies of South-East Asia and the Lebanese in the Caribbean and East Africa. Cohen introduced the idea of diaspora as a continuous state of formation and reformation (Cohen, 1997:15). A more recent study by Baghdiantz-McCabe et al. (2005) explores the role of ‘diaspora entrepreneurial networks’- merchant families and their extended regional networks with others of the same ethnic origin- focussing particularly on Armenians, Jews, Greeks and Indians. This process of formation of diaspora business networks, popularly known as trade diaspora continued in its mercantile style till the early twentieth century, but their diasporic role was not considered seriously by any nation state. Over the last three decades,diaspora entrepreneurship has gained visibility. Globalization has enhanced the practical, economic and affective role of diasporas, showing them to be an adaptive form of social organization. In recent years due to the impact of globalization there is a growing evidence of diaspora entrepreneurship in India. With the extension of transnational networks, diaspora affiliation towards the homecountry started becoming more close, especially with the regulatory changes in Indian government’s foreign investment policies. Post 1990, liberalization created an environment for diaspora entrepreneurship especially in the service sector such as Information Technology, Education, Infrastructure and Healthcare. Recent research suggests that expatriate communities (both those living abroad and those who have returned) are playing an important role in increasing bilateral trade between their country of origin and the country in which they are based.

2

2. DEFINING DIASPORA BUSINESS AND ENTREPRENEURSHIP Diaspora entrepreneurship refers to the development of businesses by immigrants who are in a position to take advantage of diaspora policies and organizations established by countries that are promoting entrepreneurship in their diasporas. This kind of economic development relies mostly on organizational ties between migrants and the governments, institutions, and agencies that are promoting it (Website, Migration Policy Institute, 2012. Available HTTP ). Diaspora entrepreneurs can serve as a channel for organizational ties between their home countries and destination countries. Newland and Tanka (2010) in their work on Diaspora Entrepreneurship analysed previous work by Knight (1921), Schumpeter (1934), and Joseph Schumpeter (1974) and tried to differentiate between two forms of Diaspora Entrepreneurship:namely Necessity Entrepreneurship and Opportunity Entrepreneurship. 2.1 Necessity Entrepreneurship A ‘necessity entrepreneur’ is one whostarts a business for survival, is self-employed by default, and concentrateson petty trade and personal services. He/she does not create many jobs and in many cases barely makes enough to feed the family. Necessity entrepreneurship is largely operated by return migrants. A greater number of necessity entrepreneurs may not correlate with higher levels of economic growth. In fact, an abundance of necessity entrepreneurs may suggest the exact opposite — that individuals are setting up their own businesses or working for themselves because they cannot find opportunities in the labour market. Unskilled immigrants or returnees who establish their own businesses, mainly out of necessity, have different networking opportunities and approaches to starting businesses than high-skilled immigrants with business experience abroad — in Silicon Valley or the city of London, for example. Those running businesses that require little education and low start-up costs usually work in sectors that are oversaturated with competitors and have very small profit margins, thus making social capital extremely important for survival, for example in sectors like schools, small hospitals, goods and service based small enterprises etc While selfemployment can create value for entrepreneurs and any employees they might have, research shows that necessity entrepreneurship has no effect on economic development (Newland and Tanaka, 2010:4). At best, it reduces overt unemployment and enables people to support themselves. 2.2Opportunity Entrepreneurship An ‘opportunity entrepreneur’is one who is filling a gap in the economy and introducing new forms of production. He/she contributes substantially to economic growth and often creates jobs outside the family. Opportunity entrepreneurs are much more likely to have a positive impact on economic development. They are skilled individuals who specialize in highdemand and rapidly growing sectors of the knowledge-based economy. Some of the successful examples are Apollo Hospital, LMV Prasad Hospital, Chaitanya Gurukul Trust etc. These enterprises can create huge economic opportunities and profits for businesses and their countries. Even those with little education but strong business acumen may perceive and take advantage of market openings. The role of diasporas in developing knowledge-based sectors in China, India, Ireland, and Israel is now well known (Newland and Tanaka2010:4). They have provided venture capital and connections to trade networks, facilitated technology 3

and knowledge transfers, and pioneered development of robust special economic zones in their countries of origin. 3. CLASSIFICATION OF TRANSNATIONAL MIGRANT ENTERPRISES Patrica Landolt, Lilian Autler and Sonia Baires (1999) distinguish four types of transnational migrant enterprises: circuit firms, cultural enterprises, ethnic enterprises and return migrant enterprises. 3.1.Circuit Firms Circuit enterprises are the archetypical transnational business ventures because they sustain the flow of tangible and intangible resources between a country of origin and its migrant settlements. Migrants sustain regular contact with relatives who shuttle back and forth and carry letters, cash, and precious packages. From these small and informal beginnings,a complex, multi-million dollar service industry has developed. Currently, circuit enterprises include informal and formal courier agencies that deliver money, products, and people using a variety of methods to households and businesses in home and host countries. On of the most prominent examples is the ‘NRI courier’ working from Cochin in Kerala. This courier service has started a new concept of “Emotion Delivery” under which a family can send and receive various ethnic or other products from homeland or hostland. 3.2.Cultural Enterprises Cultural Enterprises can be seen as transnational enterprises playing a tacit role as stewards and promoters of national identity among migrants. Cultural enterprises or cultural markets are often based in the hostland and help migrant communities in daily contact with homeland. Cultural enterprises include both ventures that produce or distribute homeland based mass media such as newspapers,radio and TV programming, and businesses that produce or distribute homeland based beverages and foods. Mauritius, Malaysia, Singapore, USA are some of the effective examples of cultural markets driven by transnational enterprises. Most of these entrepreneurial activities are happening through cultural networks in the home country, where reliability issues tend to be solved through cultural relationship (Khanna and Nanda, 2003:14).Some of these cultural enterprises include ‘Radio Fiji’, ‘Radio Natal’ ; Tamil Dailies like‘Tamil Murasu’, TV channelslike ‘Vasantham’ and many others (Report of the High Level Committee on Indian Diaspora 2003: 462).

3.3.Ethnic Enterprises Ethnic enterprises include a range of small business ventures located in immigrant neighbourhoods which sell exclusively homeland based products, and which cater to a broadly ethnic following. It includes small grocery or convenience stores, restaurants and bakeries, retail commerce, beauty shops, auto mechanics, and crafts people such as carpenters and plumbers, as well as informal street vendors. Given the large concentration of Indians worldwide, the ethnic enterprise sector is vibrant and diverse. It also has more transnational links. While many ethnic enterprises depend on a steady supply of regulated and unregulated imports from homeland, businesses maintain transnational supply networks.

4

Ethnic Shops in London

Source: City Listings, UK , Available listings.co.uk/company/shreeji_sweets_1068660.html

at

HTTP