Ethnic Entrepreneurship and Forms of Capital

TABLE OF CONTENTS

SUMMARY

INTRODUCTION

THEORETICAL FRAMEWORK
Entrepreneurship
Ethnic Entrepreneurship
Forms of Capital
Human and Cultural Capital
Social Capital

METHODOLOGY

EXPLORING ROMANIAN ENTREPRENEURSHIP IN PADUA
1. The Italian landscape
2. Italy-Romania: migrations and agreements
2.1 Italians to Romania
2.2 Romanians to Italy
2.2.1 Why Italy? Why Padua?.
3. Opening a business in Padua
3.1 Why becoming entrepreneurs?
3.2 How to open an enterprise.
3.3 How to access the financial resources
4. The access to the market
4.1 Discrimination
5. Further reasons for their success

DISCUSSION OF THE FINDINGS

CONCLUSION

BIBLIOGRAPHY

LIST OF WEBSITES

APPENDIX

Ethnic Entrepreneurship and Forms of Capital: an Investigation of the Reasons for the Entrepreneurial Success of Romanian Immigrants in North-Eastern Italy

Summary

The phenomenon of ethnic entrepreneurship does not seem to flourish in Italy when compared with other European countries. An exception is provided by the Romanian group. Specifically, this community seems to be extremely successful on the entrepreneurial level, not only because of the large number of firms they established in the territory, but also because of their rapid and extensive growth in recent years. This phenomenon is interesting and puzzling when considering the discriminatory attitudes of the Italian public opinion towards Romanians and the contradictory Italian immigration policies.

This thesis intends to disentangle the reasons for the entrepreneurial success of Romanians in Italy, taking into consideration the specific location of Padua. In doing so, this study contributes to the debate on ethnic entrepreneurship, by developing the understanding of the multiplicity of factors behind this phenomenon.

Given the scope, a qualitative approach was adopted. Specifically, the core of this thesis is a community-based fieldwork carried out in Padua. Five Romanian entrepreneurs in the territory were carefully sampled and interviewed. Subsequently, their answers have been interpreted, analysed and discussed.

The results suggest that several factors contribute to the entrepreneurial careers of Romanians in Padua. First, the economic landscape seems to be beneficial thanks to abundant market opportunities and to the large presence of SMEs. Second, the characteristics of the Romanian community in Italy are important for their success. Specifically, they seem to be rich in human, cultural and social capital, which hence represent crucial fostering factors for their entrepreneurial achievements. Third, the accession of Romania into the EU in 2007 resulted to be highly related with this phenomenon, as it triggered the proliferation of Romanian firms in the territory. Lastly, the presence of firms from North-Eastern Italy in Romania and the local supportive institutions established in Padua marginally contribute to this phenomenon.

Altogether, this research conforms to previous studies on ethnic entrepreneurship. Specifically, in line with the mixed-embeddedness approach elaborated by Kloosterman and Rath, this thesis suggests that a throughout analysis of this phenomenon needs to take into consideration not only the ethnic group, but also the socio-economic and legal environment of the host country with its institutions. Notably, a broader European perspective is here added, encompassing the changing of status of Romanian citizens in 2007 as a result of the latest EU enlargement.

INTRODUCTION

In the Italian context, the phenomenon called ethnic entrepreneurship does not seem to flourish when compared with other European countries.^[1] Significant exceptions to this tendency are represented by the Moroccan, the Chinese and the Romanian groups.^[2] The latter community is extremely noteworthy from an entrepreneurial perspective not only because of the high number of firms owned by Romanian citizens (nearly fifty thousand Romanian enterprises were registered in Italy in 2010)^[3] but also because their presence rapidly increased in recent years with a 204.1% growth from 2004 to 2009.^[4] Thus, it can be evinced that members of this group display a remarkable degree of success in their entrepreneurial careers.

In this thesis, the research question is: among other foreign communities, why are Romanians one of the most successful entrepreneurial groups in Italy?

This study seeks to investigate the reasons behind this puzzling phenomenon, taking into consideration the location of Padua, a city in the North-Eastern region of Veneto. In order to exhaustively examine this particular issue, it will be fundamental to address several consequential sub-questions: why do Romanians migrate particularly to Padua? Why and how do they set up their businesses? What are the difficulties and the advantages that Romanian entrepreneurs have in this specific context?

Initial hypothetical answers may be advanced by taking inspiration from the vast body of literature on ethnic entrepreneurship. For instance, it could be expected that a crucial role for the development of their firms is played by their peculiarities as a group, id est by their social, human and cultural capital. Moreover, the socio-cultural landscape of the host country or its legal and political situation may contribute to the entrepreneurial achievements of Romanians in this setting. In addition, a beneficial economic landscape of the territory, as well as positive bilateral relations between Italy and Romania may represent further fostering elements for their entrepreneurial careers. Lastly, decisions taken at the European level, such as the Romanian accession into the EU, might affect this phenomenon. Thus, this thesis seeks to understand whether and how each of these factors contributes to the entrepreneurial achievement of Romanians in the specific location of Padua and to detect how this group overcomes the difficulties of establishing and managing their businesses. For instance, obstacles to their careers might be represented by the bureaucratic process that leads to the foundation of the enterprises, or by a problematic access to the market.

This study intends to contribute to the overall debate on ethnic entrepreneurship. Precisely, this thesis aims to develop the understanding of the multiplicity of determinants behind the entrepreneurial achievement of specific immigrant groups. Considering that this research focuses on a typical instance of positive intra-European and intra-EU migration, an innovative aspect will be provided by the embracement of a broader European perspective, examining the effects of its policies and decisions for this phenomenon. In addition, while there is a vast body of literature on ethnic entrepreneurship and on Romanians in Italy, their entrepreneurial success in this context has never been studied before.

The choice of the case study has been deeply pondered. Romanians were selected as new citizens of the European Union,^[5] and as one of the most active populations in terms of migratory flows. Furthermore, they are one of the most negatively stereotyped groups in different national contexts,^[6] hence aspects of positive and beneficial integration are interesting and puzzling to analyze.

Subsequently, Italy was chosen as the preferred destination country for Romanians. In the Italian context, the importance of this population cannot be underestimated. From the occupational perspective, this group of immigrants represents a substantial portion of the total work force, and their contribution as tax payers is extremely relevant, with almost 3 billion Euros in 2009.^[7]

Additionally, their tendency to start a business in Italy is even more interesting and puzzling given the domestic contradictory immigration policies and the discriminatory attitudes of its public opinion towards the Romanian population. As a matter of fact, in her analysis of the most widely-read Italian newspaper La Repubblica, Uccellini outlines that criminal episodes involving this specific migrant group receive a disproportionate amount of attention when compared to the ones involving Italians, hence suggesting a clear connection between Romanians and criminality.^[8] She also notes that the entrance of Romania into the EU did not lead to an expected decrease of these types of media discrimination. On the contrary, despite their legal “insider” status, Romanians in Italy are still perceived as de facto“outsiders”, or, alternatively, as “dangerous criminal insiders” which should be kept “outside” because of their violent nature.^[9] Albarello and Rubini posit that this over-representation in the Italian media may be one of the factors which lead to social prejudices against the Romanian community. According to them, in Italy Romanians are often confused with Roma, creating a sort of stigmatized overlap between the two populations in the Italian collective imagination and depicting both groups as dishonest and criminals.^[10] Furthermore, the domestic environment is certainly not beneficial for ethnic entrepreneurs in general, as there are legal barriers aiming to prevent the self-employment of immigrants.^[11]

The selection of Padua as the specific location for this study is the result of a conspicuous concentration of Romanian enterprises in the North-Eastern Italian region of Veneto. Notably, Padua is only the 15th city in Italy in terms of non-EU entrepreneurs, with 6,275 firms, preceded by three other cities of Veneto, precisely Vicenza (13th), Verona (10th) and Treviso (7th).^[12] In contrast, it presents an extraordinary high number of Romanian entrepreneurs, being the 6th city in the whole peninsula and the 2nd in the Veneto region for the number of Romanian enterprises in its territory.^[13] These data suggest that Padua is not exceptionally attractive for foreign entrepreneurs in general, but particularly to Romanians. Thus, this city represents an extremely interesting location for this study.

Summing up, the following pages will aim to disentangle the different reasons behind the puzzling phenomenon of Romanian entrepreneurial success in the particular location of Padua. For this purpose, a combination of theoretical underpinnings, secondary data and empirical findings will be fundamental. Specifically, five Romanian entrepreneurs in Padua will be interviewed, and their answers will be contextualized and theoretically interpreted. In the following pages, the case selection will be explained, and the methodological approach of the whole study will be revealed. In the central part of the thesis, the empirical findings will be reported, discussed and combined with second-hand data and with background information relevant for the answer to the research questions. Lastly, in a conclusive section, the results will be integrated into the broader debate on ethnic entrepreneurship, in order to understand whether this study reconciles or diverges with previous researches. However, in order to clarify the terms used throughout this thesis and to understand the following discussion, it is now important to provide a theoretical framework on ethnic entrepreneurship and on the different forms of capital.

THEORETICAL FRAMEWORK

Entrepreneurship

In order for this study to be understood completely, it is first necessary to present and to clarify one of the most important terms mentioned throughout this work: entrepreneur. According to the conventional definition, an entrepreneur is described as “Someone who organizes a business venture and assumes the risk for it”.^[14] Notwithstanding the concreteness of the latter explanation, Carland et al. sustain that discussions about this term can be traced back until ca. 1700, when the Irish banker and economist Richard Cantillon defined the entrepreneur as a rational decision maker who provided management for the firm assuming its risks.^[15] In more recent times, several authors focused on the specific characteristics of this category, providing a clear-cut distinction between the term entrepreneur and manager. In particular, according to Mill, a distinguishing key factor is the risk bearing, assuming that as a typical feature only of the former group.^[16] Differently, Schumpeter believed that the most central attitude of the entrepreneurs is innovation.^[17]

Nonetheless, this work does not need to analyze in depth the definition of this term. On the contrary, in this thesis an entrepreneur will be recognized simply as an individual who is the owner and manages a business venture, dealing with its related risks.

Moreover, even though notable differences might exist amongst businesses with different sizes, this research will refer solely to Small and Medium Enterprises (SMEs). Thus, this concept needs to be clarified. In 2003, the European Commission agreed on a common definition for SME, establishing a maximum limit of 250 employers and with either an annual turnover not exceeding 50 million euro or an annual balance sheet total not over 43 million euro.^[18] A further distinction was made within this category, between micro, small and medium enterprises:

- the firms which employ less than 10 people and with no more than 2 million euro annual turnover or balance sheet are considered micro-sized;
- small enterprises have from 10 to 50 employers and less than 10 million euro annual turnover or balance sheet;
- The enterprises with between 50 and 250 employers and either a 10 to 50 million euro annual turnover or a 10 to 43 million euro annual balance sheet are medium-sized.^[19]

On a general level, Blanchflower and Oswald posit that, from the perspective of the employee, being an entrepreneur seems to be an appealing working status.^[20] Furthermore, Bessant and Tidd question the deeper reasons for such individuals to create new businesses, outlining mainly three different motives: firstly, one of the most common reasons, especially amongst self-employers, is certainly the aim for independence and to gain a living based around the entrepreneur's individual environment and values. Secondly, another frequent motivation is related to the willingness to become wealthy and powerful through both business creation and growth. Lastly, the aspiration and the desire to change something in their own business sector seem to be important factors fostering the foundation of a certain number of enterprises. In particular, the so-called innovative entrepreneurs often include social and technologic entrepreneurs.^[21]

Kloosterman and Rath observe that ethnic entrepreneurs are not likely to be pushed by innovation,^[22] while their aims for independence and for an economic growth are certainly key factors. Focusing on this specific study, the next section will clarify the meaning of the term, its main characteristics and the reasons for becoming an ethnic entrepreneur.

Ethnic entrepreneurship

Borrowing the definition given by Aldrich and Waldinger, ethnic (or immigrant) entrepreneurs are intended here as a category of entrepreneurs who share common national background, origins, culture and migratory experience.^[23] Accordingly, this thesis considers as ethnic exclusively the first generation immigrant entrepreneurs who migrated from their countries of origin either by themselves or with their own families, leaving aside foreign of second or third generation migrants.

Apart from their different ethnic backgrounds, immigrant entrepreneurs present some peculiarities compared to indigenous entrepreneurs, especially when considering the preferred business sectors. On the one hand, the former are generally more willing to work long hours and in some hard-work businesses, such as constructions, hence replacing the domestic population who may shift towards lighter and more profitable sectors.^[24] On the other hand, ethnic entrepreneurs might offer characteristic goods and services which are not likely to be provided by indigenous entrepreneurs.^[25] Typical examples are Asian restaurants or Thai massage centres because, in those cases, ethnic entrepreneurs may have the required know-how, or they might be part of specific networks that have the possibility to supply products which can only be imported from their countries of origin. In addition, factors such as the physical appearance of the workers in those sectors are considerably important, giving a sense of authenticity to the whole business.^[26]

Extremely interesting issues are also the reasons behind the decision for immigrants to become self-employed, which is an extensively debated topic on the vast body of literature on ethnic entrepreneurship. The majority of these studies are the result of North-American authors who elaborated two dominant theoretical models. The first one focuses on the entrepreneurs themselves and on their ethnicity. Specifically, this approach strongly emphasises the characteristics of the ethnic entrepreneurs, in other words their social, human and cultural capital. For instance, the economist Borjas maintained that human capital is a crucial factor in explaining the entrepreneurial success of certain immigrants.^[27] On the contrary, other authors reject this atomistic view, and focus on the social networks which interconnect those groups and more in general on their social capital.^[28] This extensive body of literature lacks to take into consideration the broader context in which ethnic entrepreneurship flourishes, hence it is not sufficient when studying ethnic entrepreneurship in specific settings or when comparing this phenomenon in different national or local environments.^[29]

The second model infers that the relation between ethnicity and the politico-economic factors is crucial for a better understanding of ethnic entrepreneurship. For instance, authors following this approach underline the centrality of business vacancies for immigrants, of government policies towards foreign minorities and of the presence in the host country of economic sectors normally preferred by migrant groups.^[30] An interesting but slightly different theory has been elaborated, among others, by Jones and McEvoy, who stated that immigrants are pushed towards self-employment because of a blocked-mobility, referring to a lack of job opportunities in the host country due to racist practices.^[31] This second mainstream does not yet seem appropriate for the study of ethnic entrepreneurship, and it has been vastly criticized for diverse reasons, such as for the assumption that ethnic entrepreneurs act differently by default than domestic entrepreneurs.^[32]

Enriching both previous models, a more recent and primarily European approach seeks to embody the role of institutions for the entrepreneurial achievement of certain immigrant groups. In this sense, Kloosterman and Rath elaborated the concept of mixed embeddedness, which not only encompasses the characteristics of the different ethnic communities and the wider societal context of the host countries, but also the institutions which facilitate the process of opening and managing a business for aspirant ethnic entrepreneurs.^[33] The latter seems to be the most complete approach in this field of study, combining different perspectives in an inclusive manner and allowing the analysis of the success of ethnic entrepreneurs in different national or local contexts. This research will thus adopt the mixed-embeddedness approach by taking into consideration the socio-economic environment of Padua, and more generally the North-Eastern Italian one, the impact of the local, regional and national institutions and policies on the issue and the different forms of capital of the Romanian group. Furthermore, a broader European dimension will better contextualize this phenomenon. Precisely, it will be questioned whether certain policies or decisions taken at a European level might affect the presence and the success of Romanian entrepreneurs in the local context of Padua.

Forms of Capital

In the previous pages it was stated that human, social and cultural forms of capital are of a crucial importance for the formation and the success of ethnic enterprises. Hence, it is necessary to clarify the different meanings of these terms and, when possible, to contextualize them with the specific case of Romanians in Padua. At this stage, those are only illustrative assumptions, which will be verified or dismantled in the empirical part of the thesis.

Human and Cultural Capital

According to Becker, human capital refers to the knowledge possessed by an individual or a group which increases their cognitive capability for an economic output.^[34] It is possible to distinguish between two types of knowledge: tacit or explicit. Explicit knowledge refers to the abilities acquired through education, and it is rather easily measurable. Typical instances are the formal education and the skills acquired through it. On the contrary, tacit knowledge is generally gained through experience, thus it is more difficult to detect. The latter form of human capital refers to previous work experiences, to practices learnt in different job environments or to training courses which are not part of a formal education.^[35] Hence, human capital is the outcome of the education, but at the same time it includes the know-how acquired through job experiences. In the case of the group of immigrant entrepreneurs, not only is human capital represented by the education and the skills of the singular individuals, but also by the community's knowledge of the economic environment, of the legal permits or of the know-how, or working practices, of the host country.

The application of the concept of human capital to the field of ethnic entrepreneurship has been pioneered by Chiswick, who maintained that the longer the immigrants' length of residence in the United States, the higher their earnings seem to be, due to the increase of their human capital accumulated throughout the years.^[36] In subsequent researches, the link between education and entrepreneurship was widely explored, as well as the importance of previous labour experience in the entrepreneurial activity.^[37] Therefore, as outlined also by Cruickshank in his analysis of migrant businesses in New Zealand,^[38] human capital is of a crucial importance for the immigrants in order to establish their enterprises and to access to determined resources. For instance, applying this concept to the specific case of this thesis, the entrepreneurial success of Romanians may be hypothetically justified by the fact that several of them operate into a business sector they already knew before their migration, or by the experiences accumulated during their residence in Italy, hence facilitating their entrepreneurial achievements.

Another crucial form of capital involved in the phenomenon of ethnic entrepreneurship is the concept of cultural capital. As defined by the French sociologist Pierre Bourdieu, it includes the education, the values and the knowledge of cultural forms that an individual or a group possesses and that can promote social mobility.^[39]

He identifies three states of cultural capital: the institutional state, which encompasses the institutional recognition of the cultural capital of the individuals, mostly through education certificates or academic credentials; the objectified state, which refers to the possession of cultural goods, acquired through economic capital for either symbolic or economic reasons; the embodied state of cultural capital, which is a “long lasting disposition of the mind and the body”^[40] and it is shared among groups (i.e. their language skills, behavioural patterns or cultural practices). According to Bourdieu, the embodied cultural capital cannot be transmitted instantaneously, but, on the contrary, it can be acquired over time, becoming part of an individual or a group's knowledge or state of mind.^[41] Analyzing these definitions, some aspects of cultural capital, mostly in its institutional state, present some similarities with the concept of human capital, especially in its explicit type. Nonetheless, a clear-cut distinction between the two forms is represented by the objectified and the embodied states of cultural capital, which embrace perspectives not considered by human capital. In this study, the latter is probably the most relevant state of cultural capital in relation with the phenomenon of ethnic entrepreneurship, as it can be a feature of a whole ethnic group.

As a matter of fact, De Bruin argues that migrant communities typically share the embodied state of cultural capital thanks to their common ethnic and migratory background. She also observes that, under certain circumstances, their shared cultural capital may provide the basis for opportunity, thus leading to positive outcomes. However, at the same time, being outside of the dominant culture of the host society often represents a disadvantage for them.^[42]

Nevertheless, a group's cultural capital is not necessarily far off from the one of the host society. For instance, Cucuruzan and Vasilache affirm that Spain has become an attractive destination country for Romanians because of the cultural similarities between those two populations.^[43] More precisely, it is assumed that the cultural capital of Romanians presents some similarities with the one dominant in Spain, thus having a positive impact on their integration and fostering the migration patterns between the two countries. Following this assumption, it may be expected that the cultural capital of Romanians enhances their integration in the North-Eastern Italian society, thus facilitating their entrepreneurial success. In this case, crucial factors fostering this phenomenon might be their skills in the Italian language, or a behavioural pattern similar to the one of the host society.

A weakness in the theories of human and cultural capital is that they both consider the attitudes of the communities or of the individuals merely as independent and balanced knowledge tools. Nonetheless, social relations may affect the impact of those capitals on the careers of the entrepreneurs, because individuals may over-estimate or under-utilize their skills depending on the social environment they are living in.^[44] Therefore, it is crucial to explore the ethnic communities also from a social perspective, as it might influence their entrepreneurial success.

Social Capital

The concept of social capital is widely used in sociological theory and, in recent years, it received interest in many different contexts, from economics to child education, because, as argued by Portes, it seems to be applicable for explaining all the issues related with society.^[45] In particular, Putnam suggests that social capital may be even more important than other forms of capital for political stability and economic progress,^[46] thus it is crucial also for the main issue of this research.

Its first theoretical elaboration can be attributed to Bourdieu, who defined it as “the aggregate of actual or potential resources which are linked to possession of a durable network of more or less institutionalized relationships of mutual acquaintance or recognition”.^[47] Similarly, in a later definition, Portes described social capital as the capacity of individuals to gain access to resources through their membership in networks or broader social structures.^[48] In these definitions, a focus was made on the importance of the networks and of the resources that can be acquired through them. Furthermore, Putnam posits that social networks undergird spontaneous cooperation within the community and spread transitive trust among their members,^[49] enabling various forms of mutual aid and solidarity. From a market perspective, typical positive outcomes resulting from social capital may be price discounts, access to particular goods, rotating credit associations, employment tips or the connections with specific suppliers or institutions. According to Putnam, social capital is important for the economic achievement of individuals also because it might mitigate the negative effects of an adverse socioeconomic environment, such as a socially excluding community.^[50] He suggests, in other words, that there are well-understood links between the social networks of individuals and their economic success.^[51] Hence, it is easy to understand that a significant stock of social capital bolsters the entrepreneurial vocation of the group that possesses it, allowing a crucial system of communication amongst the different business sectors.

[...]

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^[1] Quassoli 2002.

^[2] CGIA: Ethnic entrepreneurship spreads in Italy. [04-07-2011]

^[3] Camera di Commercio Padova 2011: 117.

^[4] CGIA: Ethnic entrepreneurship spreads in Italy. [04-07-2011]

^[5] Together with Bulgaria, Romania accessed the EU on the 1st January 2007.

^[6] Albarello and Rubini (in press); Tonry 1997: 12.

^[7] Cucuruzan 2010: 76.

^[8] Uccellini 2010.

^[9] Ibid.: 16.

^[10] Albarello and Rubini (in press).

^[11] Quassoli 2002.

^[12] Camera di Commercio di Padova 2011: 22.

^[13] Ibid.: 9.

^[14] Webster Online Dictionary. [30-06-2011]

^[15] Carland et al. 1984: 355.

^[16] Mill 1848.

^[17] Schumpeter 1934.

^[18] The new SME definition: User guide and model declaration. [30-06-2011]

^[19] Ibid. [30-06-2011]

^[20] Blanchflower and Oswald 1998: 27.

^[21] Bessant and Tidd 2009: 256.

^[22] Kloosterman and Rath 2003: 12.

^[23] Aldrich and Waldinger 1990: 112.

^[24] Kloosterman and Rath 2003: 3.

^[25] Ibid.: 2.

^[26] Kloosterman and Rath 2003: 2-3.

^[27] Borjas 1990.

^[28] e.g. Putnam 2000; Portes 2000; Light and Gold 2000.

^[29] Kloosterman and Rath 2003: 5.

^[30] e.g. Sassen 2001.

^[31] Jones and McEvoy 1992; Aldrich and Waldinger 1990: 116.

^[32] Kloosterman and Rath 2003: 6.

^[33] Ibid.: 8-9.

^[34] Becker 1975.

^[35] Davidsson and Honig 2003: 302-303.

^[36] Chiswick 1978.

^[37] e.g. Honig 1996.

^[38] Cruickshank 2010.

^[39] Bourdieu 1986.

^[40] Ibid.: 242.

^[41] Ibid.: 243-245.

^[42] De Bruin 1998.

^[43] Cucuruzan and Vasilache 2009: 72.

^[44] Davidsson and Honig 2003: 305.

^[45] Portes 2000: 1.

^[46] Putnam 1993: 183.

^[47] Bourdieu 1986: 248.

^[48] Portes 1998: 6.

^[49] Putnam 1993: 169.

^[50] Putnam 2000: 307-318.

^[51] Ibid.: 325.