From Farming to International Business: The Social Auspices of Entrepreneurship in a Growing Economy
Entrepreneurship has been traditionally concentrated in the hands of a few small communities in most developing economies. As these economies restructure, it is evident that these communities will be unable to satisfy the increased demand for new entrepreneurs. The analysis in this paper suggests that new business networks will compensate for the weak family background of first-generation entrepreneurs under some circumstances, supporting occupational mobility even in industries with significant barriers to entry. Using new firm-level data on the Indian diamond industry, the empirical analysis documents the important role played by an underlying community network in the expansion from agriculture to international business in one historically disadvantaged community over the course of a single generation.
This project could not have been completed without the enormous effort put in by the survey team leader Sam Taraporevala, department of sociology, St. Xavier's College, Mumbai. He was assisted in the implementation of the survey by a team of interviewers ably supervised by Noor Aboobakar and Delnaz Chinwalla. Among the many individuals in the diamond industry that I wish to thank are Mark Boston, Nehalchand Dhadda, Arun Doshi, Mahesh Gandani, Ghanshyam Dholakia, Kamlesh Jhaveri, Jal Mahimwalla, Bakul Mehta, Rashmin Mehta, Russell Mehta, Vinod Mehta, Arvind Parikh, Bharat Parikh, Milan Parikh, Rashna Press, Ramnik Shah and, especially, Suhrud Jhaveri and Rajul Jhaveri. The Gem and Jewelry Export Promotion Council (GJEPC) graciously gave me access to their database of diamond export firms. I am grateful to Andrew Foster and Ashley Lester for helpful discussions that clarified my thinking on the theoretical framework and to Ashish Khosla for writing the computer programs that translated the GJEPC data into a format that was suitable for analysis. Abhijit Banerjee, Asim Khwaja, Nancy Luke, Mark Rosenzweig and seminar participants at Beijing University, NBER, UBC, USC, and Yale provided helpful comments on the paper. Karim Ladha and Jonathan Stricks provided excellent research assistance. Research support from the National Science Foundation through grants SES-0431827 and SES-0617847 is gratefully acknowledged. I am responsible for any errors that may remain. The views expressed herein are those of the author(s) and do not necessarily reflect the views of the National Bureau of Economic Research.