3 THEORETICAL FRAMEWORKS

Transcription

1 3 THEORETICAL FRAMEWORKS Previous theoretical and empirical work provides the analytical frameworks that guide this research project. In the last four decades many theories have been developed to explain the phenomenon of ethnic enterprise. Current theories concerning ethnic business may be grouped into three main categories: 1) the cultural approach; 2) the structural approach; and 3) the situational approach. This section reviews the literature related to each of the three approaches and briefly discusses the adequacies or inadequacies of each theory for Korean small business. As indicated in the introduction, underemployment and mobility orientation may be important for understanding Korean immigrants concentration in small business because most recent Korean immigrants of middle-class, white-collar background cannot find occupations commensurate with their education and ability. Thus, the theory of status inconsistency and the mobility theory of entrepreneurship are also reviewed, neither of which fits any of the three main categories classified above. THE CULTURAL APPROACH The cultural approach explains the patterns of middleman minorities in general and ethnic enterprise in particular on the basis of the group s cultural traits. Depending upon which aspects of culture are emphasized, the cultural approach has two contrasting models: the modern capitalism thesis and the pariah capitalism thesis (Bonacich, 1980; Light, 1980, 1984b; Zenner and Jarvenpa, 1980).

2 The Modern Capitalism Thesis Theoretical Frameworks 29 The modern capitalism thesis relates ethnic enterprise to what Max Weber (1952) called the Protestant ethic. In this view, a particular minority group becomes successful in small business because of its value system and/or behavorial patterns characterized by hard work, frugality and rational economic activity. The literature dealing with ethnic enterprise cites Werner Sombart s The Jew and Modern Capitalism (1951) as responsible for the modern capitalism thesis (Bonacich, 1980:213; Zenner, 1977:4, 1980:415). Sombart (1951) claimed that Jews influenced the outward form of capitalism by quickening international trade and endowed economic life its modern spirit through their religion. For him, profit-seeking, money-lending, advertising, free trade and individual competition were the main characteristics of modern capitalism. He argued that Jews, particularly through their religion, did much to shape this capitalist system. Following Sombart, many others (See, Aris, 1970:93-122; Conroy and Miyakawa, 1972; Hill, 1977; Hsu, ; Kennedy, 1962; Kitano, 1974,1976:131-2; Kitano and Sue, 1973; Kosmin, 1979; Stone, 1974; Strodtbeck, 1957) have emphasized work ethic, frugal attitudes, and future orientation on the part of Jewish, Chinese, and other trading minorities to explain a high level of social mobility and/or business success achieved by these minority groups. The modern capitalism thesis that emphasizes hardworking and frugal attitudes seems to be useful in understanding Korean immigrants overrepresentation and success in small business, especially because Korean immigrants were recruited from the urban, middleclass, Protestant strata of the Korean population. Korean immigrants are similar to middle-class Americans in their social characteristics and thus they seem to accept the American middle-class value system characterized by hard work, frugality and future orientation. Korean immigrants hard work and frugal attitudes seem to be important for Korean small business for the following two reasons. First, Korean immigrants frugality and hard work may help them to amass capital for business and thus facilitate the establishment of Korean small business (See, Bonacich, Light and Wong, 1976:443, 1977:55; Kim and Wong, 1977:240; Light, 1980). Second, Korean immigrants hard work may be an important factor for their success in labor-intensive small businesses. The literature dealing with Korean small business emphasizes long hours of hard work by Korean immigrants both before and after the start of business (See, Bonacich, Light and Wong, 1976:443,1977:55; lllsoo Kim, 1981:lOl-146; Light, 1980:55). Thus, the extent to which Korean immigrants value system and behavioral

3 30 Ethnic Business Enterprise patterns characterized by hard work, frugality and future orientation contribute to their establishment of and success in small business will be determined in this book. The Pariah Capitalism Thesis Exponents of the pariah capitalism thesis argue that the business pattern associated with Jews and Asian groups represented a premodern form of commerce, not modern capitalism. Historically, middleman minorities depended upon family/kin ties and ethnic networks for their commercial enterprises, rather than the rational impersonal market approach of modern capitalism. Weber (1 968: ), who saw the hiring of impersonal contracted labor and bureaucratic organization as the crux of modern industrial capitalism, argued that Jews historically represented pre-modern commercial capitalism because their enterprises depended upon ethnic and family ties, not on impersonal contracts. In the Weberian tradition, sociologists paid more attention to pre-modern aspects of ethnic business characterized by family ties and ingroup solidarity than to the values and behavior of minority business owners (See, Bonacich, 1975a; Bonacich and Modell, 1980; Goldwscheider and Kobrin, 1980; Kitano, 1976; Miyamoto, 1939,1972; Light, 1972,1980,1984b; Lovell-Troy, 1980; Sengstock, 1974, 1983; Waldinger, 1984a, 1984b; Wilson and Martin, 1982). Light (1 972) claims that Chinese and Japanese Americans in California during the pre-war period utilized rotating credit associations consisting of relatives and friends as a means of amassing capital for business establishment. He argues that the maintenance of this old cultural tradition by these Asian groups partly explains their overrepresentation in small business in comparison with blacks. Waldinger (1 984a, 1984b) has also documented that informal work relations in ethnic firms help co-ethnic workers to acquire business training and information. Chinese and Japanese immigrants has been successful in labor-intensive small businesses partly because cheap and loyal family and ethnic labor provided them with competitive advantages over native white and black business owners (Bonacich, 1973; Bonacich and Modell, 1980; Light, 1972; Loewen, 1971 ; Wong, 1979). Another way minority members take advantage of ingroup solidarity for business operation is to maintain a tight vertical integration of ethnic sub-economy from producers or importers through retailers to customers, the practice associated with Japanese and Cuban immigrants (See, Bonacich and Modell, 1980; Boyd, 1971; Modell, 1977; Wilson and Martin, 1982). Researchers refer to the advantages related to group ties as ethnic resources.

4 Theoretical Frameworks 31 Korean immigrants seem to depend upon collective resources as well as their values and other class resources. Bonacich, Light and Wong (1 976, 1977; Light, 1980, 1984b) suggest that Koreans in the United States form a highly organized community and that communal resources are important for the development of Korean small business. Kin ties and ethnic networks may facilitate the establishment of Korean small business by giving such advantages as business information, business training and private loans. It has also been indicated that family and ethnic labor is valuable to Koreans business operations because it is cheap and loyal (Bonacich, 1979a, 1979b; lllsoo Kim, 1981 :194-5). Thus, ethnic resources will be examined not only as one major facilitating factor for the establishment of Korean small business, but also as one of the main factors that make Korean immigrants successf u I in sma I I business. THE STRUCTURAL APPROACH Structural theories emphasize the social and occupational structure of the host society as more important than the characteristics of a minority group for understanding its concentration in small business and other related middleman occupations. The following three theories or interpretations have been provided to explain ethnic business in the United States: 7) the status gap thesis; 2) Bonacich s split labor market interpretation; and 3) the theory of ecological succession. The Status Gap Thesis One structural factor emphasized by Rinder (1 959) and others (Blalock, 1967:79-84; Loewen, 1971; Shibutani and Kwan, 1965:1971) as encouraging immigrant ethnic business is the status gap between the ruling and the subordinate groups. Rinder (1 959) argues that trading minorities such as Jews, Chinese and Armenians have historically existed in societies characterized by the status gap. Since there are no intermediate groups in such societies to bridge the status and economic gap, the ruling group needs to use an alien group to distribute goods and services to the masses. Loewen (1971) explains, based on the white-black status gap, the concentration of the Chinese in the Mississippi Delta in the black-oriented grocery business. In his view, few whites wanted to operate grocery businesses in the black community because status differences between whites and blacks in the Delta area were so great that operating a black-oriented grocery stigmatized the white businessman. This social structure provided Chinese irnmigrants with an opportunity in the grocery business in the black

5 32 Ethnic Business Enterprise community. In addition, Sengstock (1 974), Shibtani and Kwan ( ), and Wong (1977) also emphasize the status gap between whites and blacks in the United States to explain the concentration of Iraqis, Jews and Chinese in small businesses in black ghettos. The status gap thesis is useful in understanding middleman minorities in pre-industrial societies where there were no middle-ranking classes. However, it may be of little use in understanding current middleman minorities in contemporary America where social classes are diversified. Although a status gap still exists between blacks and whites, it probably is not as pronounced as it was in the Mississippi Delta before 1970 as described by Loewen. Korean immigrants seem to have more opportunities for business in black ghettos. Niches for small businesses found in ghetto areas, however, seem to be created largely by contemporary urban patterns rather than by the black-white status gap. Bonacich s Split Labor Market Interpretation In a series of articles, Bonacich, 1979a, 1979b, 1980; Bonacich, Light and Wong, 1976,1977,1980) has tried to answer the question of why Koreans concentrate in small business when the economy is becoming increasingly concentrated, and opportunities for small business are declining. In the earlier article she co-authored with Light and Wong ( 1976), Bonacich suggested several possible structural forces which encourage Koreans to enter small business. One of the possibilities she suggested is that the marketing strategies of large corporations leave gaps in the economy which Korean immigrants can efficiently fill. This view is consistent with the dual labor market theory which sees the economy as divided into core and peripheral industries (Gordon, 1972). Another possibility suggested is that American monopoly capitalism uses Korean immigrantsas a middleman minority to cheaply distribute corporate products to the masses. This view fits Bonacich s split labor market theory (1 972, 1975b, 1976, 1979a). In her later articles (1 979a, 1979b), Bonacich elaborates her split labor market interpretation of Korean small business. In her view, Korean small business is not business per se, but a form of utilization of cheap immigrant labor by American capitalism (1 979a:47).According to her, Korean small business is used by the interests of U.S. big capital in two ways. The first usage is the case in which Korean small business is directly linked to large capitalists, as in the examples of Korean-run franchised stores and subcontracting in the garment industries. In this case Korean business not only provides major corporations with cheap immigrant labor, but also helps them to avoid

6 Theoretical Frameworks 33 the problems of labor management and control. The second usage is less obvious but, according to Bonacich, also real (1 979a:49): Independent service shops such as corner groceries may have no direct tie-in to big U.S. corporations. Yet capitalism can benefit from their presence in that they help to distribute corporate products cheaply. Bonacich s structural approach provides valuable insights into the role of Korean small business in the United States. However, her thesis has both empirical and logical problems. Her argument for the connection between large corporations and Korean business is partly based on her observation of a large number of Korean-run subcontracting industries in Los Angeles. However, as indicated in the introductory chapter, her interpretation may not be useful in understanding Korean small business in communities like Atlanta where there is no single Korean-run subcontracting industry. She suggests that even shops that are not directly linked to large corporations, such as independent grocery stores or retail shops, serve the interests of big U.S. capital. It is, however, difficult to show that U.S. capitalists encourage Korean immigrants to enter small business, although it may be granted that U.S. corporate capital benefits from or even takes advantage of Korean small business as a source of cheap labor. Accordingly, Bonacich s thesis is of little use in answering the question of why Korean immigrants concentrate in small business. Ecological Explanation The main structural forces which make possible a large-scale entrance of Koreans into small business seem to be recently developed U.S. urban patterns characterized by racial segregation, the concentration of blacks and other racial minorities in the inner city, and the movement of the white middle class to suburban areas. Most Korean immigrants are settled in large metropolitan areas such as Los Angeles, New York and Chicago, and most Korean businesses are located in inner cities or black areas. For example, lllsoo Kim (1981) indicates that Korean run businesses in New York cater largely to racial minority members such as blacks, Puerto Ricans and Mexicans. Bonacich, Light and Wong (1 976) also indicate that Koreans engaged in trade and liquor businesses in Los Angeles serve mainly black and Mexican customers. This author s preliminary research also suggests that more Korean businesses in Atlanta are located in the inner city or black areas than in white areas. Korean immigrants who start businesses in the inner city or black areas seem to have one major advantage - they may be able

7 34 Ethnic Business Enterprise to establish businesses in these areas without facing serious competitions with native born white American merchants. Neither native whites nor large corporations seem to be willing to establish businesses in the inner city or black areas because of high crime rates and low profit margins (Bonacich, Light, and Wong, 1976:447; Aldrich and Reiss, 1976). Aldrich s research on ecological succession (Aldrich, 1975, 1980; Aldrich and Reiss, 1976) further sheds light on how business opportunities might be opened up for Korean immigrants in inner city, ghetto areas. According to him, as inner city areas become populated predominantly by black residents, white business owners sell out and other whites fail to buy into these areas. This process has opened up new business opportunities for black and other minority members. Aldrich (1 975) suggests, however, that blacks and Puerto Ricans are slow in taking over white-owned businesses or establishing new businesses because of their lack of capital requirements and business experience. Aldrich (1 980) shows that in Wandsworth, England, Asian immigrants with better organizing capacities than blacks benefit more from this residential succession. Korean immigrants may be successful in their business ventures in the inner city and black areas because of the business vacuum created by this process. Thus, this book will examine US. urban segregation patterns as a factor that encourages Korean immigrants to enter small business and make them successful in it. THE SITUATIONAL APPROACH The situational approach emphasizes factors related to the immigrant situation of certain minority groups as mainly responsible for their occupational adjustment in trade and service-related small businesses. There are three theses under the situationat approach which have been applied to ethnic business in the United States: 1 ) the discrimination thesis; 2) the disadvantage thesis; and 3) the sojourning thesis. The Discrimination Thesis The discrimination thesis may be classified under the category of the structural approach. However, it is better classified under the category of the situational approach because it focuses on reactions by immigrant groups to the host discrimination rather than on the host discrimination itself. There are different forms of minority response to host discrimination, and this explanation is based on a withdrawal response. In this view, some alien minority groups like the Chinese

8 Theoretical Frameworks 35 and Japanese in the United States, maintained strong ethnic solidarity as a means of avoiding or overcoming hostility and rejection from the outside world. Minority groups concentrate in a limited range of middle-rank entrepreneurial roles to avoid competition in the labor market with the majority population. No one has presented the discrimination thesis as a theory of ethnic enterprise. Instead, a number of sociologists (See, Blalock, 1967:79-84; Bonacich, 1973; Daniels, 1966; Kurokawa, 1970: ) have emphasized ethnic solidarity, hard work, and the concentration in service and retail businesses on the part of Japanese, Chinese and Jews as survival mechanisms. The discrimination thesis seems to be useful in understanding the case of the Korean group. Results in research using Bogardus Social Distance Scale show that the Korean group ranks near the bottom (Bogardus, 1968). This indicates a high level of prejudice against Koreans. Discrimination against Koreans is currently discernible, particularly in employment (Hurh and Kim, 1980). While prejudice and discrimination certainly are not the only determinants of why Korean immigrants turn to small business, they may be major factors for the concentration of Korean immigrants in small business for two reasons. First, discrimination by employers may be why many Korean white-collar and professional immigrants cannot hold those occupations for which they were trained. Second, and more importantly, the general prejudice directed against Koreans on the part of native American workers may pose a real problem for many Korean workers and thus push them to enter small business. Therefore, this book will determine the extent to which host discrimination pushes Korean immigrants to enter small business. The Disadvantage Thesis Studies of small business owners (See, Bechofer, et al., 1974; Cohen, 1969; Hagan, 1968; Kilby, 1971; Marris and Somerset, 1971; Mayer, 1975; Newcomer, 1961 ) indicate that entrepreneurs are recruited from those who are handicapped in the labor market in terms of language, education and other characteristics. That is, they are recruited from those who cannot achieve social mobility through formal channels. Immigrants have greater disadvantages in the labor market than natives, and a higher proportion of foreign born Americans than natives have been self-employed since the nineteenth century (Andreasen, 1971; Light, 1972; Newcomer, 1961; Thernstrom, 1966). Light (1 979) suggests that disadvantages in the labor market push all minority members to turn to self-employment but that those minority members with cultural advantages successfully enter small business. He argues

9 36 Ethnic Business Enterprise that those minority members without cultural resources for small business very often find self-employment in peddling, illegal enterprises, and predatory crimes. The disadvantage thesis seems to be more important than any other theoretical perspective in understanding Korean immigrants tendency toward self-employment. As Asian immigrants, Koreans have serious handicaps in employment with regard to their language barrier, unfamiliarity with American customs and racial discrimination (Bonacich, Light and Wong, 1976:446; Kim, 1981 :85). Of course, discrimination is part of labor market disadvantages and thus the discrimination and the disadvantage theses can be treated together. However, language difficulty seems to be a more serious problem than racial discrimination for the occupational adjustment of Korean immigrants of white-collar and professional background and therefore the two theories are treated separately. Thus, we hypothesize that Korean immigrants perceptions of their disadvantages in the American job market is one of the major factors that lead them to turn to small business. The Sojourning Thesis Bonacich (1973) argues that middleman groups originate as sojourners, or temporary residents in a society, who plan to return eventually to their home countries. The economic effects of sojourning include a tendency toward thrift to hasten a return home, and a concentration in certain occupations which do not tie him to the territory for long periods (1 973:584). The sojourner chooses occupations which are easily liquidated or transportable, such as commerce and trade. The non-economic effects of sojourning, Bonacich says, include a high degree of internal solidarity, and the maintenance of distinctive cultural traits (1 973:83). Since sojourners plan to return to their home country, they have little reason to seek cultural and social assimilation. One major criticism of Bonacich s sojourning theory is that some ethnic groups such as Jews in the United States show high propensity for small business even though they have settled permanently in the host society (Hill, 1977:7-8; Light, 1979:34; Zenner, 1977:8-11, 1978:lO). This implies that sojourning is not a necessary condition for the development of ethnic business. This general criticism is relevant to the case of the Korean group. Earlier Korean immigrants came as sojourners, but recent Korean immigrants have come here as permanent settlers (Choy, 1979:217). Findings from previous studies strongly suggest that most recent Korean immigrants do not consider

10 Theoretical Frameworks 37 themselves sojourners. According to one survey (Bok-Lim Kim, 1975:1), only 5.4 percent of Korean male and 1.6 percent of female respondents indicated that they wish to return to Korea. Hurh (1 977:44) also suggests that the immigration of Koreans to the United States has led to a change in their reference groups from Korea to this country. Therefore, sojourning is believed not to be an important factor for Korean immigrants decisions to enter small business. STRATIFICATION AND MOBILITY THEORIES The theory of status inconsistency seems to be also useful in understanding Korean immigrants occupational adjustment in small business. Status inconsistency refers to the situation in which two of the major status dimensions (race, education, occupation and income, cf., Lenski, 1954) are unbalanced. We can consider race (or ethnicity) and education as investment, and income and occupation as reward. Status inconsistency occurs when high race or education is combined with low income or occupation (underreward), or when low race or education is combined with high occupation or income (overreward). Sociologists have suggested many behavioral symptoms as effects of status inconsistency. Most relevant for our purposes is that status inconsistency is said to lead to mobility striving (Benoit-Smulyan, 1944; Fenchel, et al., 1951 ; Galtung, 1966; Hartman, 1974; Landecker, 1960). Underrewarded status inconsistent strive to achieve social mobility to create status equilibrium. Traditional middleman minority members were usually farmers or unskilled workers and few of them were professionals in their society of origin (Turner and Bonacich, 1980), thus their immigration did not involve the problem of status inconsistency. However, most recent Korean immigrants are characterized by high pre-immigrant educational and occupational levels (Hurh, Kim and Kim, 1979; lllsoo Kim, 1981), and thus status inconsistency may be a major factor which pushes Korean immigrants to enter small business. Most Korean immigrants of white-collar background find their initial employment in low-paying, menial jobs (Hurh and Kim, 1984; Kim and Wong, 1977). Korean immigrants acutely recognize their problem of underemployment. For example, about one half of Korean respondents in one case study indicated that their income or occupation is not commensurate with their education (Hurh, Kim and Kim, 1979:46-7). Thus, many Korean immigrants are both objectively and subjectively status inconsistents. We might interpret a very high rate of entry of Koreans into small business as an attempt to achieve mobility for status equilibrium.

11 38 Ethnic Business Enterprise While the theory of status inconsistency indirectly gives insights into understanding Koreans overrepresentation in small business, there is a theoretical view which focuses specifically on the relationship between social mobility and entrepreneurship (See, Griffen and Griffen, 1978; Hagen, 1968; Kessner, 1977; Marris and Somerset, 1971; Peterson and Elifson, 1967). In this theoretical view, particular individuals or groups enter small business as a means of achieving social mobility when the possibility of upward mobility in non-entrepreneurial roles is limited and the possibility of upward mobility by means of business is available. In their study of African entrepreneurship, Marris and Somerset (1971) emphasize the importance of the inability of African businessmen to find rewards in established, non-entrepreneurial occupations as follows:... the entrepreneurs are recruited from the frustrated and talented who, because they have been excluded from occupations of highest prestige, are determined to show that in business they can go on better. Korean immigrants are highly educated but excluded from prestigious occupations in this country because of their language and other adjustment problems. Small business becomes the only means by which to achieve economic and social mobility. Thus, status inconsistency and mobility orientation as a factor for Korean immigrants occupational adjustment in small business will be considered.