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5. Expanding the Interaction Theory of Entrepreneurship
- Russell Sage Foundation
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5 Expanding the Interaction Theory of Entrepreneurship IvAN LIGHT AND CAROLYN ROSENSTEIN MAXWEBER declared that economic sociology must start from the desire for utilities and the provision to furnish them.1 Adhering to this tradition, textbooks have long claimed that both supply and demand require attention in a complete explanation of entrepreneurship .2 Smelser writes that "like all markets, the market for entrepreneurial services has a demand and a supply side," underscoring the fact that both sides require attention.3 Yet, despite the theoretical centrality of these terms, definitions of demand and supply are few.4 Berg and DiMaggio discuss demand, but neither defines it.5 Neither Stinchcombe nor Martinelli and Smelser index either demand or supply , though theirs are leading texts in the sociology of economic life.6 Only Parsons and Smelser offer analytical definitions.? They define supply as "the production of utility or economic value." Entrepreneurs are useful because of the goods and services they produce or cause to be produced.8 Therefore, the supply side of entrepreneurship includes demographic features of feeder populations that affect their willingness and ability to produce. These features include their mean age, their sex ratio, and their number. But entrepreneurial capability also depends upon sociocultural resources such as socially oriented action patterns, embedded transactions, social networks, and social capital (Portes, this volume). The more abundant these productive resources, the greater the entrepreneurship of a group. Parsons and Smelser define demand as "the disposition to pay" 166 Expanding the Interaction Theory of Entrepreneurship 167 for goods and services "in a process of market exchange."9 Following Friedman, the demand curve traces how many entrepreneurs the market will support at various price levels. But demand neither exists prior to and independent of supply nor does it beget supply. 10 First, the meeting of groups creates new demands, as when Germans learn to appreciate Turkish cuisine because Turks work in German cities. Second, consumer demand does not guarantee any supplier response, nor does it guarantee that the entrepreneurial response will exhaust the demand. No matter how strong the demand for gambling halls, serious Baptists will not run them, nor will Quakers manufacture poison gas and nuclear weapons, lucrative though they certainly are. Market Opportunities The economist's term "demand" corresponds to "market opportunity ," a virtual synonym common in sociology. We somewhat prefer the term demand to market opportunity in this context. Opportunity has a valid and autonomous meaning in status attainment studies where it stands for a vacant prestige niche. ll Weber meant by market opportunity the privilege of trading where the right is not routinely available to all.12 However, in the context of entrepreneurship research, "market opportunity" is synonymous with demand.13 Waldinger , Aldrich, and Ward stress the importance of "opportunity structures" and then define "opportunity structures" as "market conditions." 14 In the last analysis, market conditions offer "opportunity " because of money rewards. If money returns are abundant, opportunity is abundant; if returns are nil, opportunity is nil. Limitless opportunities to perform unpaid services do not create an opportunity structure for housewives. In practice, therefore, market opportunity and opportunity structure boil down to buyers. Sometimes opportunity is defined ostensively. Ostensive definitions list the conditions under which a phenomenon appears. Waldinger , Aldrich, and Ward have offered an ostensive definition of "the types of economic environments" that offer entrepreneurial opportunity : co-ethnic consumer products, underserved or abandoned markets, markets with low returns to economies of scale, markets with unstable or uncertain demand, and markets for exotic goods.1s In the same spirit, Waldinger earlier declares demand for small firms a product of "markets whose small size, heterogeneity, or susceptibility to flux and instability limit the potential for mass distribution and mass production." 16 Ostensive definitions suffer from two limitations. First, since they [54.198.108.174] Project MUSE (2024-03-29 11:04 GMT) 168 The Economic Sociology of Immigration explain from precursors, they do not isolate causality. Knowing that tooth decay occurs after eating chocolate, candy, doughnuts, and pop tarts, one still does not know that sugar causes tooth decay. Additionally, ostensive definitions are subject to reappraisal whenever someone discovers new categories. Waldinger's early list resembles but is shorter than Waldinger, Aldrich, and Ward's list, so the expansion of the list has already begun.I7 Others have also compiled different but equally good listS.I8 If these lists are added together , the number of precursors becomes embarrassingly large with no guarantee that additional categories will not shortly appear. Research Design Although demand...