Posted on behalf of Pablo Martin de Holan
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Entrepreneurship of Misery. Misery of Entrepreneurship?
I have been rich
and I have been poor.
Rich is better.
Attributed to Beatrice Kaufman (and Mae West)
http://cort.as/hGk3
THE ISSUE
In spite of considerable progress made over the past two decades, absolute poverty is omnipresent even in the wealthiest economies. Absolute poverty, also euphemistically called "bottom of the pyramid," is usually defined as "a condition characterized by severe deprivation of basic human needs, including food, safe drinking water, sanitation facilities, health, shelter, education and information. It depends not only on income but also on access to services." (United Nations 1995).
Relative poverty is difficult to measure; absolute poverty less so. It is generally accepted that absolute poverty affects between 1.5 and 1.7bn persons on the planet (out of 7), and these numbers are likely to increase as the World Bank is planning to adjust the threshold of absolute poverty to 1.90US dollars a day (currently at 1.25US/day in 2005 dollars). By that metric, between a quarter and a third of the world population is in absolute poverty or near it.
Poverty has severe consequences: its effects on human life have been well documented, and are overwhelmingly negative. Poverty reduces life expectancy, makes life less enjoyable, reduces the odds of obtaining education of any kind holding IQ constant, among other unpleasant consequences. In addition, the negative effect is stronger for children and females, and minorities however defined. Absolute poverty makes a mockery of the meritocracy upon which most liberal democracies are built, deprives citizens of their constitutional and human rights which are inalienable in most liberal democracies. Absolute poverty is morally repugnant, but an utilitarian case can be made against it: by removing talent from the economy, poverty misallocates talent and material resources, and creates suboptimal outcomes at the aggregate (GDP) level.
It is believed that sustainable development is one of the best ways to lift poor people out of poverty, and entrepreneurship plays an important role in it, both because its properties to "creatively destruct" and transform economies (positive effect), but also because the type of entrepreneurship poor people engage into (necessity rather than opportunity) creates small, uncompetitive firms that lower on average the productivity of the economy in which they participate. (negative effect).
In spite of the relevance of the topic of poverty for entrepreneurship scholars, the field has paid more attention to non-poor entrepreneurs than to poor ones, often extrapolating from studies focusing on middle-class or relatively wealthy persons. We know, however, that poor and non-poor people see the world differently, behave differently and, quite possibly, engage in Entrepreneurial activities at a different rate, so we decided to study entrepreneurial activity among very poor people. (We are aware there are exceptions to the comment about research; and we cite them when appropriate)
THE RESEARCH PROJECT
Along with a group of colleagues from three countries in two continents, we have started a project about two years ago seeking to understand entrepreneurship among poor people, with a focus on the barriers to successful entrepreneurship. With this project, we are not looking to study some poor people who actually made it through entrepreneurship, but why so many do not even try in spite of the encouragement they receive from a variety of actors. We began following an entrepreneur in a shantytown, and visited and interviewed him repeatedly. We then expanded our search to more persons in the same conditions, in different places.
We have produced some exciting work (in our opinion, of course) that will be presented at Babson Research Conference, at EGOS, and later at AOM, then coming soon to an Academic Journal near you. If you are interested in this work, and would like to collaborate or join the project or are simply curious, please contact me or talk to any of us at either conference, we will love to hear from you.
So far, we have visited and interviewed people in situation of absolute poverty in South America and Europe, which has allowed us to begin thinking about how poor people actually engage in entrepreneurship and why often they do not.
Also, if you have an unpublished manuscript that you would like to share, please do so. We are aware of most published research, but feel free to self publicize yours if not in the standard outlets or if you feel we should be aware of it.
Virtually yours,
Pablo MARTIN de HOLAN
pmdeh@pmdeh.com
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