Doing Business in Minority Markets

Black and Korean Entrepreneurs in Chicago's Ethnic Beauty Aids Industry

Robert Mark Silverman

• Publisher: Routledge
• Year: 2002
• Topic: Business
• eBook ISBN:
  9781135576530
• Subtopic: Business General
• Index: Business

This book examines black and Korean entrepreneurship in Chicago's ethnic beauty aids industry. In the case of each entrepreneurial group, business activities are heavily influenced by the economic conditions found on the South Side of Chicago. For instance, both groups provide goods and services to black consumers, both groups modify their business practices in response to the depressed incomes and disinvestment in the communities where they are located, and both groups mobilize resources based on ethnicity and social class in order to overcome the economic constraints found in the market setting where their businesses operate. This book is unique for two reasons. First, it examines the context of black and Korean entrepreneurship from an historical and sociological perspective. Through this approach, continuity and change in entrepreneurial behavior is identified. Second, it examined black and Korean Entrepreneurship within the context of a single industry, the ethnic beauty aids industry. This approach allows for a thorough analysis of networks and organizational interactions between black and Korean entrepreneurs at all levels of this industry manufacturing, distribution, and retailing. The findings in this book add to existing research on Entrepreneurship in minority communities, and offer a reformulation of theories concerning middleman minority groups, black Entrepreneurship, and economic under development.

CHAPTER 1: Introduction

THE INTERNAL COLONIAL PARADIGM

The invisible hand of the market cannot conceal color. This study contends that the economy is an extension of society’s system of racial and ethnic stratification. The central argument of this study is that the internal colonial paradigm should be used as a guiding principle in the analysis of minority business development in minority markets. Through the use of this paradigm, the institutional constraints of doing business in a minority market can be identified. Elevating the analysis of minority business development to an institutional level serves academic and practical ends. It allows for a more holistic understanding of the relationship between institutional forces and individual economic action, and it allows public officials to draw from these insights in a way that informs sound public policy. Although many issues are discussed in this study, its focus is on forwarding an argument for the internal colonial framework to public discourse. To build support for this argument, a case study is presented that focuses on the role of race and ethnicity in a specific sector of the economy, the ethnic beauty aids industry in Chicago. Through this case study, issues that affect the structure of minority businesses and their relative competitiveness will be examined. This goal of this analysis is to highlight the economic mechanisms responsible for the maintenance and reproduction of internal colonialism within the context of minority markets.

The ethnic beauty aids industry was selected as the subject of this case study because it is embedded in the context of minority markets, which entail high concentrations of minority entrepreneurs and consumers. Minority entrepreneurs enter minority markets to avoid racial barriers they perceive in the mainstream economy, and minority consumers find minority markets more accessible and responsive to their consumption needs. It should be kept in mind that minority markets are not separate and equal to those found in the mainstream economy. They exist in poor communities, where physical and economic conditions deteriorate due to a lack of investment by mainstream institutions. In addition, minority markets are not naturally occurring markets, since they form in response to racial discrimination found in mainstream society. For these reasons, this study goes beyond a simple discussion of black and Korean entrepreneurs in the ethnic beauty aids industry. It focuses on the institutional environment that these entrepreneurs are embedded in, and how they respond to it through agency.

The actions of black and Korean entrepreneurs in minority markets are shaped by racial and ethnic stratification in society. Because of this, several distinctions are made. For instance, Korean entrepreneurs fill a middleman role in minority markets, while black entrepreneurs do not. This distinction, concerning the economic role of blacks and Koreans in minority markets, is intimately linked to issues of racial and ethnic stratification in mainstream society. Discernable economic roles stem from institutional arrangements in a society, and in contemporary America the acute subordination of blacks limits the scope of minority entrepreneurship. Several distinct economic roles have emerged within the parameters of the system of racial and ethnic stratification in America. This type of segmentation in the economy is illustrated in this case study of the ethnic beauty aids industry. The characteristics of this industry present a unique opportunity to examine minority entrepreneurship and to better understand the mechanism that produce racial and ethnic inequality in contemporary America.

In order to grasp the role of racial and ethnic stratification in the economy, several theoretical constructs need to be introduced. The following theoretical overview identifies a number of concepts central to this study. Five themes will be outlined in this discussion. First, the concept of internal colonialism is developed to illustrate how minority markets are shaped by racial imperatives in mainstream society. Second, the role of middleman minorities in internal colonial settings is discussed to highlight their social control function. Third, sojourning is identified as a defining characteristic of middleman minorities, and the relevance of sojourning in contemporary minority markets is discussed. Fourth, the role of class and ethnic resources in shaping minority entrepreneurship is examined. Fifth, several distinctions are made concerning the unique characteristics of black entrepreneurship in minority markets.

THEORETICAL OVERVIEW

Internal Colonialism and Minority Markets

To obtain an understanding of how minority markets operate we must begin with a discussion of internal colonialism. This study suggests that minority markets emerge in a neo-colonial context which forms the basis of racial and ethnic stratification in American society. This argument is an extension of early writings on colonialism highlighting the effect of dominant groups on subordinate groups.¹ Arguments concerning internal colonialism borrow from Shibutani and Kwan’s discussion of colonialism and their conceptualization of “color lines.”² According to these scholars, cleavages that emerge during periods of colonization are institutionalized in a society’s system of ethnic stratification. This results in the establishment of racial and ethnic distinctions, or “color lines,” which facilitate the maintenance of colonial relations. Shibutani and Kwan discuss a number of outcomes that can emerge from colonialism. However the process by which the colonization of one society by another results in the institutionalization of colonial relations through the development of color lines is seen as a constant.

Racial and ethnic stratification function to stabilize social relations to some degree in all societies. However, in societies with a history of colonialism, where dominant and subordinate roles have been closely associated with race and ethnicity, such stratification becomes more determinant. In such societies, elaborate systems of social relations develop that are sensitive to racial and ethnic cues. For instance, Memmi enters into an extensive discussion of how social relations are shaped by colonial conditions, and the consequences that these conditions have for the interpretation of race and ethnicity.³ In a similar vein, Fanon describes the psychological ramifications that colonization has on racial and ethnic groups in terms of self-image and identity.⁴ The effects of colonialism on colonized groups are far-reaching. Members of colonized groups are socialized by dominant institutions, causing them to internalize many of the stereotypes which rationalize their subordination. When the psychological effects of colonialism are combined with the economic and political subordination that it entails, the subordination of colonized groups becomes complete. For a colonized group, the scope of agency within a colonial setting is severely limited by outside institutions, and the scope of agency beyond a colonial setting is virtually nonexistent.

These ideas are central to the concept of internal colonialism that developed in reference to America’s minority communities. European colonialism shaped social relations in America, and the contemporary system of racial and ethnic stratification developed in response to this colonial heritage. However, scholars have been hesitant to apply arguments centering on colonialism to issues of race and ethnicity in the United States. The discussion of the role of colonialism in shaping racial and ethnic stratification in American has been a controversial issue among scholars, despite the fact that the social experiences of Native Americans, Latinos, blacks and other groups have been shaped by a variant form of colonialism. A concerted effort to discuss the conditions of minority groups in America with reference to colonialism emerged briefly during the contemporary period, before it dissipated in the early 1970’s. However, a number of important adaptations of earlier colonial arguments were applied to the American context in the discussion of internal colonialism.

Some of the most important theoretical adaptations of arguments concerning colonialism were made in reference to American blacks. Together this material defines the concept of internal colonialism in the United States.⁵ In the broadest sense, these arguments focus on how blacks were forced to enter America as slaves, and how once in America they were stripped of their culture and identity while being forced to adopt mainstream values that proscribed their subordination. It is argued that these historically based conditions facilitated continued political and bureaucratic intervention in the black community, and that this intervention was affected by persistent racism and racial discrimination in the dominant society. The result of these pressures, which emanate from the mainstream society, was that blacks remained segregated in internal colonies. Blauner argued that these conditions were reflected in the nature of social relations between dominant institutions and subordinate groups in society, illustrating this with case studies focusing on police-community relations in minority neighborhoods, the institutional sources of “ghetto revolts,” and racial conflict in the university.⁶

Other scholars applied the concept of internal colonialism to the political economy of the black community, which in many respects is synonymous with the concept of minority markets employed in this study. Tabb stressed that:

The economic relations of the ghetto to white America closely parallel those between third-world nations and the industrially advanced countries. The ghetto also has a relatively low per-capita income and a high birth rate. Its residents are for the most part unskilled. Businesses lack capital and managerial know-how. Local markets are limited. The incidence of credit default is high. Little saving takes place and what is saved is usually not invested locally. Goods and services tend to be “imported” for the most part, only the simplest and most labor intensive being produced locally. The ghetto is dependent on one basic export —its unskilled labor power. Aggregate demand for this export does not increase to match the growth of the ghetto labor force, and unemployment is prevalent. As consumer goods are advertised twenty-four hours a day on radio and television, ghetto residents are constantly reminded of the availability of goods and services which they cannot afford to buy. Welfare payments and other transfers are needed to help pay for the ghetto’s requirements. Local businesses are owned in large numbers, by non residents, many of whom are white. Important jobs in the local public economy (teachers, policemen, and postmen) are held by white outsiders. The black ghetto, then, is in many ways in a position similar to that of the typical underdeveloped nation.⁷

Many of these issues were rearticulated by others during the 1970’s, and in more contemporary critiques of economic conditions in the black community.⁸ In fact, with the exception of an increasingly visible presence of non-white immigrant entrepreneurs and modest gains in public sector employment among blacks, the conditions described above persist in minority markets.

Tabb points out that the ghetto is heavily dependent on resources from outside of the black community in the form of goods, services, jobs and public aid. But, he also recognizes that, “in the absence of intergovernmental transfers, things may still be worse for the residents of these areas.”⁹ In a real sense, the issue of welfare dependence in the context of internal colonialism is parallel to that of economic dependence in the context of colonialism. This is the case since welfare payments preserve the social order. Bonacich and Light make this point when they explain how “welfare curbs the reserve army of the unemployed,” reducing the chances that wages in the mainstream economy would decline if job seekers flooded in from internal colonies.¹⁰ Welfare also reduces the chances of mass uprisings, since it brings temporary economic relief to communities that suffer from a dearth of capital. Despite the efficiency of welfare and other forms of dependence in maintaining social order in poor communities, there are areas where dominant institutions are unable to maintain social equilibrium.

The Role of Middleman Minorities in Internal Colonies

Many of the commercial functions necessary for the maintenance of internal colonialism cannot be met by mainstream institutions. Because of this, there is a need for third parties to assume an economic role in minority markets. This role is often referred to as a middleman minority role. A number of authors have discussed middleman groups and the role they fill in the economy.¹¹ However, the general characteristics associated with middleman minorities have their foundation in Weber’s analysis of “pariah people” and “pariah capitalism,” and in Simmel’s examination of “the stranger.”¹² As the terms imply, middleman minorities are perceived as outsiders who serve as go-betweens for dominant and subordinate groups in society. The middleman role is facilitated by outsider status, which initially makes middleman minorities appear impartial to the dominant-subordinate relationship that exists in society. However, the initial perception of impartiality gives middleman minorities a false sense of security, since the material benefits that they accrue from their economic role makes dominant and subordinate groups in society resent them.

Because of the existence of resentment, middleman minorities function as mediators in the economy and they fill an additional role. They buffer mainstream institutions from the criticisms of subordinated groups. Blalock and Zenner attributes this social outcome to two characteristics of middleman minorities: they tend to be concentrated in peripheral areas of the economy where they have a relatively high degree of economic influence, and they are politically detached from mainstream institutions because of their outsider status.¹³ These conditions contribute to the stigmatization of middleman minorities in both mainstream and internal colonial settings. Blalock stresses that the existence of an economic role for middleman groups grows out of social polarization, and it remains intact as long as mainstream institutions continue to benefit from existing social inequalities.¹⁴ Because of this role, Blalock identifies middleman minorities as “natural scapegoats” serving “as a buffer which can often absorb any major strains the system may undergo short of complete rebellion by the subordinate group.¹⁵

These points are central to understanding the role of middleman minorities in internal colonies. First, their economic role is an outgrowth of institutional structures in mainstream society that generate inequality. Second, their role as natural scapegoats buffers mainstream institutions from social conflict. Together, these two roles serve an important social control function, which allows economic and social conflict to transpire an alteration in the system of ethnic stratification. In addition, the middleman minority role can be conceptualized as a somewhat permanent fixture of internal colonialism, since it is generated by forces in mainstream society. The precarious situation that the economic role of middleman minorities entails virtually ensures that middleman minorities will remain alienated in society. Middleman minorities maintain an outsider status in internal colonies, they are the target of resentment in both mainstream and internal colonial settings, and they periodically become scapegoats for inequality in society. Because they are embedded in an institutional context that they find foreign, middleman minorities have a limited ability to control the environmental constraints that they face. One of their few forms of agency is expressed in their attempt to minimize their exposure to polarized groups in society through sojourning.

Sojourning and Middleman Minorities

Sojourning is characteristic of middleman minorities. Recently, this point has been disputed by scholars, particularly in the case of contemporary Korean middleman minorities.¹⁶ However, the following discussion offers clarification on this point. In order to understand why sojourning is intimately linked to the economic role of middleman minorities, it is useful to review the literature on sojourning behavior. Siu undertook the first significant analysis of sojourning behavior.¹⁷ He offers the following description of the sojourner:

The “sojourner” is treated as a deviant type of the sociological form of the “stranger,” one who clings to the cultural heritage of his own ethnic group and tends to live in isolation, hindering his assimilation to the society in which he resides, often for many years. The sojourn is conceived by the sojourner as a “job” which is to be finished in the shortest possible time.¹⁸

This definition describes an adaptive strategy where an individual enters an economic setting with the intention of accumulating capital and exiting in the shortest possible time. It also reflects the perception that a given economic setting is not con...

Table of contents

• Cover Page
• Garland Studies in Entrepreneurship
• Title Page
• Copyright Page
• Acknowledgments
• Chapter 1: Introduction
• Chapter 2: Race and the Ethnic Beauty Aids Industry
• Chapter 3: The Context of Minority Entrepreneurship on the South Side of Chicago
• Chapter 4: Sojourning and the Welfare Economy
• Chapter 5: The Effects of Competition on Ethnic Solidarity
• Chapter 6: The Interdependence of Korean Merchants and Black Employees in Minority Markets
• Chapter 7: Middleman and Black Distributors
• Chapter 8: Contemporary Black Manufacturers
• Chapter 9: Conclusion
• Appendix A: Interview Guide for Beauty Aids Merchants
• Appendix B: Beauty Aids Merchant Survey
• Appendix C: Interview Guide for Beauty Aids Distributors
• Appendix D: Beauty Aids Distributor Survey
• Appendix E: Interview Guide for Beauty Aids Manufacturer
• Appendix F: Beauty Aids Manufacturer Survey
• Bibliography