noneconomic effects of ethnic entrepreneurship: a focused look at the chinese and korean enclave...

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In this article, we aim to develop a conceptual framework from a community perspective to examine

the noneconomic effects of ethnic entrepreneurship, paying close attention to the linkage between

entrepreneurship and community building. We base our analysis on ethnographic data from our

comparative case studies of the Chinese and Korean enclave economies in Los Angeles. We argue

that it is the social embeddedness of entrepreneurship, rather than individual entrepreneurs per se,

that creates a unique social environment conducive to upward social mobility. This study suggests

that ethnic entrepreneurship plays a pivotal role in immigrant adaptation beyond observable eco-

nomic gains. Policy implications are discussed. © 2010 Wiley Periodicals, Inc.

Noneconomic Effects of Ethnic Entrepreneurship: A Focused Look at the Chinese and Korean Enclave Economies in Los Angeles

Correspondence to: Min Zhou, UCLA-Sociology Department, PO Box 951551, 264 HH, Los Angeles, CA 90095-1551, 310.825.3532 (phone), 310.206.9838 (fax), [email protected].

FEATURE ARTICLE

By

Min Zhou

Myungduk Cho

Published online in Wiley InterScience (www.interscience.wiley.com). © 2010 Wiley Periodicals, Inc. • DOI: 10.1002/tie.20316

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thunderbird International Business review Vol. 52, No. 2 March/April 2010 DOI: 10.1002/tie

mobility among individual immigrants, much understud-ied are possible noneconomic effects, or unintended consequences, on ethnic groups as a whole. In this article, we aim to develop a conceptual framework from a com-munity perspective to examine the noneconomic effects, paying close attention to the linkage between entrepre-neurship and community building. We first review the literature on the effects of ethnic entrepreneurship with a discussion on the analytic distinctions between middle-man-minority entrepreneurs and enclave entrepreneurs, and between the ethnic economy and the enclave econ-omy. We then propose a conceptual framework to ex-plain how ethnic entrepreneurship yields noneconomic effects in facilitating immigrant adaptation to their host societies. We base our analysis on ethnographic data from our comparative case studies of the Chinese and Korean enclave economies in Los Angeles. We argue that it is the social embeddedness of entrepreneurship, rather than in-dividual entrepreneurs per se, that creates a unique social environment conducive to upward social mobility.

ethnic entrepreneurship and the enclave economy: a Conceptual D iscussion

effects of ethnic entrepreneurshipWhile research findings about the effects of ethnic entre-preneurship are mixed and often hotly contested, four arguments seem to dominate the scholarship promoting entrepreneurship (Zhou, 2004). First, ethnic entrepre-neurship creates job opportunities for the self-employed as well as for ethnic workers who would otherwise be excluded by the mainstream labor market. Light (1972) showed that low rates of Chinese and Japanese unem-ployment during the Great Depression of the 1930s were due to the ethnic community’s effort in helping coethnic members to become self-employed. In the present day, research has consistently yielded similar results (Portes & Shafer, 2007; Spener & Bean, 1999; Zhou, 1992). Light, Sabagh, Bozorgmehr, and Der-Martirosian (1994) took this argument even further, contending that the numeri-cal preponderance of the self-employed contributed to overall group employment beyond the ethnic enclave and that both workers and owners in the ethnic economy would earn more than if they were unemployed.

Second, ethnic entrepreneurship yields a significant earnings advantage over other forms of employment net observable human capital and demographic charac-teristics, affecting social mobility of the family and the group as a whole. Fairlie and Meyer (1997) found that

In t roduct ion

E thnic entrepreneurship as a social phenomenon has long fascinated social scientists and stimulated considerable research. Ethnic entrepreneurs are

minority business owners or self-employed workers whose group membership is tied to a common cultural heritage or origin and is known to out-group members as having such traits (Yinger, 1985). More important, ethnic entre-preneurs are embedded in particular social structures (often marginal in the mainstream society) that regulate individual behavior, social relations, and economic trans-actions (Aldrich & Waldinger, 1990). To the layman’s eye, ethnic entrepreneurs often carry the images of petty traders, merchants, dealers, shopkeepers, and even ped-dlers and hucksters and typically conduct business in restaurants, sweatshops, laundries, greengrocers, liquor stores, nail salons, newsstands, swap meets, and taxicabs, which may or may not be located in ethnic enclaves. However, ethnic entrepreneurship in the postindustrial era has gone beyond these traditional occupations to include high-tech industries, professional services, and transnational corporations (Fairlie & Robb, 2008; Fong & Luk, 2007). Nonetheless, most ethnic entrepreneurs are from immigrant backgrounds and tend to be small business owners.

In the past three decades, globalization and restruc-turing in postindustrial economies have not reduced the significance of ethnic entrepreneurship but have instead made it more resilient and remarkable (Kloosterman, Russell, & Rath, 2004). In the United States, as in many other Western countries, ethnic entrepreneurship is well represented in the small business sector and has been per-petuated by the volatile tides of international migration. As of 2002, the number of minority-owned businesses rose to nearly four million, with gross sales receipts of $637 billion. Among them, 31% were black-owned, 41% were Hispanic-owned, and 28% were Asian-owned.1 Asian-owned firms grew at the fastest rate, increasing nearly ten times (from 105,158 in 1977 to 1,103,587) and had the largest gross sales receipts, at $327 billion, more than the gross sales receipts of all black-owned and Hispanic-owned firms combined ($89 billion for black-owned firms and $222 billion for Hispanic-owned firms).2

It is not so much the prevalence of small business in the U.S. economy as the importance of small business ownership in ethnic social mobility that has constituted one of the most studied subject matters for economic sociology and the sociology of immigration. While the research literature has consistently showed that entre-preneurship is one of the main paths to upward social

A Focused Look at the Chinese and Korean Enclave Economies in Los Angeles 85

DOI: 10.1002/tie thunderbird International Business review Vol. 52, No. 2 March/April 2010

Ethnic entrepreneurship not only fosters the entrepre-neurial spirit and sets up role models among coethnic members, but also trains prospective entrepreneurs.

gap in the literature: much understudied are the noneco-nomic effects of ethnic entrepreneurship, particularly the mechanisms through which and conditions under which these noneconomic effects are produced to affect com-munity building and immigrant adaptation. We believe that developing a conceptual framework to examine how entrepreneurship may relate to community building can help fill this gap. To do so, we must first clarify some conceptual distinctions that allow us to better understand how ethnic entrepreneurship is embedded in and con-strained by specific social contexts.

the Social embeddedness of ethnic entrepreneurshipEthnic entrepreneurs are not isolated individuals but are intrinsically constrained by particular social structures and social relations (Zhou, 2004). We illustrate this point by showing the distinction between middleman-minority entrepreneurs and enclave entrepreneurs. Middleman minorities are those ethnic entrepreneurs who trade be-tween a society’s elite and the masses. Historically, they were sojourners, interested in making a quick profit from their portable and liquefiable businesses and then rein-vesting their money elsewhere, often implying a return home (Bonacich, 1973).5 They most commonly estab-lished business niches in immigrant or minority ghettos in urban areas deserted by mainstream retail and service industries or by business owners of a society’s dominant group. Since they are not members of the communities in which they operate their businesses, they do not iden-

a high self-employment rate of an ethnic or racial group was strongly associated with a high average income for that group. Other researchers revealed that groups with higher rates of self-employment also showed higher-than-average rates of educational and occupational intergen-erational mobility and that the descendents of the self-employed enjoyed individual and family incomes higher than the national averages (Goldscheider, 1986; Portes & Bach, 1985; Portes & Zhou, 1992, 1996).3

Third, ethnic entrepreneurship buffers its impact on the mainstream labor market, relieving the sources of po-tential competition with native-born workers and enhanc-ing the economic prospects of group members as well as out-group members. Portes and Zhou (1996) found that the rise of immigrant economic enclaves did not detract from African American entrepreneurship and that the rapid growth of small firms, rather than the size of the firm, created the necessary environment for the self-sus-taining capacity of an entrepreneurial community, which in turn provided an alternative to social mobility. Spener and Bean (1999) reported a positive effect of Mexican self-employment on the earnings of their coethnic work-ers in labor markets where the size of the coethnic labor force was relatively large.4

Fourth, ethnic entrepreneurship not only fosters the entrepreneurial spirit and sets up role models among coethnic members, but also trains prospective entre-preneurs (Portes & Bach, 1985). Bailey and Waldinger (1991) found that bonds of solidarity in small ethnic firms and the presence of coethnic entrepreneurs en-couraged informal business apprenticeships, which had social effects beyond pure economic gain of the indi-vidual. They concluded that informal training systems were formed through close contacts between owners and workers in ethnic enclaves as well as in spatially dispersed ethnic economies, enabling potential entrepreneurs to eventually start out on their own.

While all of the above arguments suggest that ethnic entrepreneurship brings about positive economic out-comes for the individual as well as for the ethnic group, the fourth argument alludes to the noneconomic effects of entrepreneurship, such as nurturing an entrepreneur-ial spirit among group members, providing role modeling and informal training for aspiring entrepreneurs, serving as an alternative means to social status recognition, and reinforcing social ties locally and internationally (Bailey & Waldinger, 1991; Fong & Luk, 2007; Min, 2008; Portes & Zhou, 1992). We generally agree that ethnic entre-preneurship empowers group members with economic independence and opens up an effective alternative to immigrant social mobility. However, we see a substantial

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The enclave economy is a special case of the ethnic economy, one that is bounded by coethnicity and location.

but to the Hispanic residents who make up the majority of that neighborhood, s/he would just be one of many middleman-minority entrepreneurs.

The analytical distinction is sociologically meaningful because the economic transactions of these two types of ethnic entrepreneurs are conditioned by different social structures and social relations embedded in different eth-nic communities, which necessitate a further analytical distinction between the ethnic economy and the enclave economy. The ethnic economy is an umbrella concept that takes into consideration every enterprise that is ei-ther owned, supervised, or staffed by racial/ethnic minor-ity group members regardless of size, type, and locational clustering, as well as access to enterprises in the main-stream economy by ethnic networks (Light, 1994; Light & Gold, 2000; Light & Karageorgis, 1994). As so defined, the ethnic economy concept is a neutral designation for businesses owned by middleman-minority entrepreneurs in non-coethnic racial minority neighborhoods, busi-nesses owned by coethnic members in their own ethnic enclaves, and all other ethnic-owned or ethnic-controlled enterprises in the general economy. Such a broad con-cept, however, is relatively weak in explaining group outcomes, because variations in entrepreneurship are so large. For example, ethnic businesses concentrated in an ethnic enclave, or an ethnoburb,6 are very different from those dispersed in other mixed neighborhoods serving primarily non-coethnics, a situation more appropriately referred to as the middleman-minority entrepreneurship. Similarly, businesses that are owned and staffed by coeth-nics are very different from those that are owned by non-coethnics but staffed by supervisors and coworkers of the same ethnicity, a situation more appropriately referred to as ethnic niching, or ethnic occupational concentration (Waldinger, 1996).

The enclave economy is a special case of the ethnic economy, one that is bounded by coethnicity and loca-tion. Unlike the ethnic economy concept that includes almost every business under an ethnic umbrella, the enclave economy has several unique characteristics. First, the group involved has a sizeable entrepreneurial class. Second, economic activities are not exclusively commer-cial but include productive activities directed toward the general consumer market. Third, the business clustering entails a high level of diversity, including not just niches shunned by natives but also a wide variety of economic activities common in the general economy such as profes-sional services and production. Fourth, coethnicity epito-mizes the relationships between owners and workers and, to a lesser extent, between patrons and clients. Last, and perhaps most important, the enclave economy requires

tify with the communities and do not necessarily invest in these communities. Moreover, they are not bounded by social relations with those they serve because their businesses often perform a singular function—trade or commerce—with little symbolic or emotional attachment to their clientele and to local social structures. As a result, they are often caught in intense interracial conflicts and made scapegoats for the economic and social problems experienced by local residents. The highly publicized Korean-black conflicts demonstrate the vulnerability of middleman-minority entrepreneurs and the social risks of their economic action (Min, 1996).

Enclave entrepreneurs, in contrast, include mainly those who conduct business in their own ethnic commu-nities. In the past, they have typically operated businesses in immigrant neighborhoods where their coethnic group members dominate and were themselves intertwined in an intricate system of coethnic social relations within a self-sustaining enclave. At present times, as many ethnic enclaves evolve into multiethnic neighborhoods and new ones develop in affluent middle-class suburbs, those who run businesses in a particular location may simul-taneously play double roles—as middleman-minority entrepreneurs and as enclave entrepreneurs. For ex-ample, a Chinese immigrant who runs a fast-food takeout restaurant in a Hispanic neighborhood is a middleman-minority entrepreneur, but s/he would become an en-clave entrepreneur when returning to his or her other restaurant in Chinatown. Likewise, a Korean immigrant who runs his or her business in Los Angeles’ Koreatown may be an enclave entrepreneur to Korean coethnics,



the U.S. context, ethnic enclaves vary in the amount and complexity of organizational structures. The concept of in-stitutional completeness is particularly relevant. Breton (1964) defines institutional completeness in terms of complex neighborhood-based formal institutions that sufficiently satisfy all the needs required by members, and measure the degree of social organization in an ethnic community on a continuum. At one extreme, the ethnic community consists of essentially an informal network of interpersonal relations, such as kinship, friendship, or companionship groups and cliques, without formal organization. Toward the other extreme, the community consists of both infor-mal and formal organizations ranging from welfare and mutual aid societies to commercial, religious, educational, political, professional, and recreational organizations and ethnic media (radio or television stations and newspapers). Breton finds that the presence of a wide range of formal institutions in an ethnic community (i.e., a high degree of institutional completeness) has a powerful effect on the social adjustment of group members—but to the exclusion of out-group members.7

In the current analysis, we propose a dual-level frame-work for analysis. One is at the level of the institution—how various institutions exist and interact to generate resources—and the other at the level of the individual—how patterned interpersonal relationships are structured by institutional participation. We borrow Breton’s concept of “institutional completeness” and examine its degree by four measures: density, diversity, coethnicity, and class. The first two measures are from Breton (1964), looking specifically at the number and variety of local institutions, including local business establishments and sociocultural organizations.8 Coethnicity refers to the ethnic domi-nance of an institution’s ownership, leadership, and/or membership. We speculate that coethnicity strengthens within-group interpersonal interaction. Class measures the socioeconomic status of an institution’s membership. The out-migration of middle-class coethnics from ethnic neighborhoods has been found to exacerbate social isola-tion (Wilson, 1987). But we contend that the absence of middle-class residents in the inner-city neighborhoods does not necessarily preclude coethnic middle-class par-ticipation in local institutions in ethnic neighborhoods where the degree of institutional completeness is high.

In our view, ethnic entrepreneurship affects a high degree of institutional completeness by promoting the development of the enclave economy and ethnic social structures. Institutional completeness gives rise to a unique ethnic social context for interpersonal interac-tion and networking within the ethnic group. However, such ethnic closure does not necessarily reinforce social

a physical concentration within an ethnically identifiable neighborhood with a minimum level of institutional com-pleteness. Especially in their early stages of development, ethnic businesses have a need for proximity to a coethnic clientele that they initially serve; a need for proximity to ethnic resources, including access to credit, information, and other sources of support; and a need for ethnic labor supplies (Portes & Manning, 1986).

The enclave economy also has an integrated cul-tural component. Economic activities are governed by bounded solidarity and enforceable trust—mechanisms of support and control necessary for economic life in the community and for reinforcement of norms and values and sanctioning of socially disapproved behavior (Portes & Zhou, 1992). Relationships between coethnic owners and workers, as well as customers, generally transcend a contractual monetary bond and are based on a com-monly accepted norm of reciprocity. Tangible and intan-gible benefits associated with the ethnic enclave are often absent in the general secondary labor market, where coethnicity is atypical of owner-worker relationships and reciprocity is not an enforceable norm. Ethnic entrepre-neurs who run businesses in non-coethnic neighborhoods or those who employ non-coethnic workers can effectively evade the social control of the ethnic community while causing unintended consequences of heavier social costs such as interethnic conflicts (Min, 2008).

It should be noted that the enclave economy is not any type of ethnic economy. The adjective enclave is not just there to invoke the concept of ethnic economy, but refers to a specific phenomenon, one bounded by an identifiable ethnic community and embedded in a system of community-based coethnic institutions and coethnic social relations (Zhou, 2004). The enclave economy con-cept is thus useful for us to examine the noneconomic effects of entrepreneurship and to explain why social con-texts affecting group mobility vary by national origins or race/ethnicity and why ethnic communities vary in their capacities to protect group members from disadvantages and move them up in society.

entrepreneurship and Community Building: a Conceptual framework The central idea of the enclave economy concept is that the ethnic enclave is more than just a shelter for the disadvantaged who are forced to take on either self-employment or marginal wage work in small businesses. Rather, the ethnic enclave possesses the potential to de-velop a distinct structure of economic opportunities as well as opportunities to rebuild ethnic institutions and social relations disrupted by international migration. In

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do their respective enclave economies. While Chinatown has lost its anchoring position in the Chinese commu-nity to thriving Chinese ethnoburbs in the San Gabriel Valley, Koreatown has continued to serve as the most important and the largest center of the Korean commu-nity (Min, 1996; Zhou, forthcoming). In our compara-tive case studies, we consider the Chinese and Korean enclave economies beyond Chinatown and Koreatown, as these enclaves are interconnected with each group’s respective ethnoburbs in the metropolitan region, but we zoom in on the urban enclaves to illustrate how enclave economies relate to community building in immigrant neighborhoods.

The Chinatown neighborhood is located northeast of downtown Los Angeles. As a publicly recognized historic site, Chinatown preserves the demographic character-istics of a long-standing ethnic enclave: predominantly nonwhite (96%) and the foreign born (72%). The Chi-nese comprise a numerical majority. However, this immi-grant neighborhood is multiethnic, with 17% other Asian (mostly Vietnamese and Cambodian) and 22% Hispanic (mostly Mexican).

Koreatown is just five miles west of Chinatown and west of downtown Los Angeles. Like Chinatown, Korea-town is a typical immigrant neighborhood with a high concentration of nonwhites (94%) and the foreign born (69%). But unlike Chinatown, the neighborhood has a relatively low proportion of Korean residents. Although Koreans are one of the fastest-growing immigrant groups in Los Angeles (increasing by 238% from 1980 to 2000), they make up less than one-fifth of the neighborhood’s population. In contrast, 57% of the residents are His-panic (mostly Mexicans, Salvadorans, and Guatemalans). There is not a single national-origin group that consti-tutes a numerical majority. Rather, it is a truly multiethnic neighborhood shared by Koreans, Mexicans, Salvadorans, Guatemalans, and other Asians (mostly Filipinos, along with some Chinese and Southeast Asians).

The multiethnic makeup in Chinatown and Ko-reatown suggest that these immigrant neighborhoods constitute multiple ethnic communities.12 What makes Chinatown and Koreatown stand out as resourceful ethnic communities is the remarkable development of each ethnic group’s enclave economy. In both enclaves, the commercial corridors are filled with various types of coethnic-owned businesses in bilingual and Chinese-only or Korean-only signs. In sharp contrast, the dominance of coethnic businesses is less common in other immigrant or racial minority neighborhoods in which local businesses are mostly owned by middleman-minority entrepreneurs of diverse national origins.

isolation or block social integration as predicted by Breton, because of the strengthened ethnic social struc-tures and the active participation of suburban middle-class coethnics.

The conceptual framework we have just sketched enables us to imagine a possible link between ethnic en-trepreneurship and community building and, more spe-cifically, to examine noneconomic effects. Next, we offer a brief description of the Chinese and Korean enclave economies to set the context for our analysis.

entrepreneur ia l Development in the ethnic enclave

We maintain that there are entrepreneurs in every ethnic group, but not every group’s ethnic economy can be called an enclave economy (Zhou, 2004). The group’s higher-than-average levels of self-employment, geographic clustering of economic activities, and the diversification of ethnic businesses are some of the most salient characteristics of an enclave economy (Portes & Manning, 1986). Chinese and Korean immigrants are known for their high self-employment rates and signifi-cant geographic concentration of their businesses, which are as diverse in number and type as they are in size and scale (Light, 1972; Min, 1996, 2008; Sakong, 1990; Yoon, 1995; Zhou, 1992).

Since the 1970s, unprecedented Chinese and Korean immigration, accompanied by drastic economic marketi-zation in China and rapid economic growth in South Korea, has set off a tremendous influx of human capital and financial capital, unveiling a new stage of economic development in the Chinese and Korean immigrant communities in the United States. From 1977 to 2002, the U.S. Census reported that the number of Chinese-owned firms grew more than 11-fold (from 23,270 to 286,041) and Korean-owned firms, nearly 18-fold (from 8,504 to 157,688).9 As of 2002, there was approximately one Chinese-owned firm for every nine Chinese and one Korean-owned firm for every eight Koreans, but only one coethnic firm for every 22 Hispanics and one for every 28 blacks. Chinese- and Korean-owned businesses are also extremely diverse and vary greatly in scale. As of 2002, 31% of Chinese-owned firms and 36% of Korean-owned firms had paid employees, compared to 13% of Hispanic-owned firms and 8% of black-owned firms.10 More than one-fifth of Chinese-owned firms and about a quarter of Korean-owned firms were concentrated in the Los Ange-les metropolitan area.11

In Los Angeles, the Chinese and Korean immigrant communities have multiple geographic centers, and so



In the past two decades, the proliferation of private institutions serving children and youth is increasingly no-ticeable in the Chinese and Korean immigrant commu-nities in Los Angeles.

Driving around the commercial core of Monterey Park, one can see flashy bilingual signs of these establishments, such as “Little Harvard,” “Ivy League School,” “Little Ph.D. Early Learning Center” (a preschool), “Stanford-to-Be Prep School,” “IQ180,” and “Hope Buxiban.” The 2004 Southern California Chinese Consumer Yellow Pages listed 90 Chinese schools, 135 academic after-school tutoring establishments, 50 art schools/centers, and 90 music/dance schools mostly located in Los Angeles’s suburban Chinese community. Students enrolled in these after-school institutions are al-most exclusively Chinese from immigrant families of varied socioeconomic backgrounds. Daily programs tend to draw students who live nearby, while weekend programs tend to draw students from the local community and other locations in Greater Los Angeles. Chinatown children have easy ac-cess to these ethnic resources in their own neighborhood as well as in Chinese ethnoburbs nearby.

In comparison, the Korean system of supplementary education has established its stronghold in Koreatown from the onset because Koreatown has served as the single most important anchor for the sprawling immigrant com-munity. The levels of diversity and density of private insti-tutions serving children or youth are exceptionally high in Koreatown. In the commercial core, for example, there are a handful of Korean language schools, more than 30 hagwon; numerous college preparation institutions; 30-plus music, dance, and arts studios; and more than 20 karate and sports clubs, along with a visible number of vocational training facilities. Korean children who live in or outside of Koreatown have easy access to a wide variety of hagwon,

The restaurant/retail scene is most compelling. Fancy and pricy restaurants including smaller but trendy cafés are visibly present in both Chinatown and Korea town (with a much higher density in Koreatown). These upscale res-taurants are rarely found in other inner-city racial-minority neighborhoods. Also visible is the variety of retail estab-lishments (e.g., groceries; gift shops; jewelry stores; ethnic bookstores with homeland music, videos, periodicals, and newspapers; and other specialty stores), personal services (e.g., barbers, beauty salons, and health spas), and profes-sional services (e.g., doctor and dentist clinics, herbal doc-tor and acupuncturist clinics, herbal medicine stores, legal offices, accounting offices, financial institutions, real estate companies, travel agencies, employment referral services, and training and learning centers). Similar to restaurants, retail establishments are unique: rather than the clustering of small businesses such as mom-and-pop stores and family businesses, the ethnic retail industry consists of a wide range of businesses varying in size, type, and scale that resembles a transplanted cosmopolitan city from contemporary Asia rather than a transplanted rural village from pre-World War II Asia. Koreatown’s retail scene, in particular, is combined with a recreational entertainment industry, featuring a col-orful nightlife, a range of health spas, and a focus on golf-ing. There are also numerous trendy, stylish, and neon-lit nightclubs, karaoke bars, pool halls, and video game stores. The economic developments in the Chinese and Korean enclaves clearly target a middle-class clientele who does not live there, while serving the needs of local residents.

Moreover, a relatively recent development in the Chinese and Korean enclave economies has been in an unconventional area—education. The education en-terprise in the United States is normally considered a public good and rarely seen in ethnic entrepreneurship. However, in the past two decades, the proliferation of private institutions serving children and youth is increas-ingly noticeable in the Chinese and Korean immigrant communities in Los Angeles. These institutions include buxiban, hagwon, kumon,13 early childhood educational programs, college preparatory centers, and cram schools, as well as music, dance, and arts studios and karate, kung fu, and other sports clubs. The core curricula of these various ethnic institutions are supplementary to, rather than competing with, public school education. These private institutions combine with the local nonprofits to form an elaborate ethnic system of supplementary educa-tion (Bhattacharyya, 2003; Zhou & Kim, 2006).

The development varies between the two enclave econ-omies, however. The Chinese system of supplementary edu-cation tends to grow away from Chinatown and outwardly into the Chinese ethnoburbs in the San Gabriel Valley.

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In immigrant neighborhoods where language and cultural barriers stand in the way, coethnicity often determines the memberships in local so-cial structures and the extent to which local businesses in-terconnect with one another and local social structures.

tributes to a high level of institutional completeness in the Chinese and Korean communities. Next, we turn to examine the specific ways in which ethnic entrepreneur-ship yields noneconomic effects on community building.

Noneconomic ef fects of ethnic entrepreneurship on Communi ty Bui ld ing

Based on the dual-level framework for analysis we dis-cussed earlier, we consider community building at two levels: that of the institution—ethnic institutions for creating spaces for social interaction—and that of the in-dividual—interpersonal relationships structured through institutional participation for rebuilding social ties and social capital, facilitating information flow, and reinforc-ing community prescribed goals, values, norms, and practices. The community, therefore, should not simply be defined by an immigrant neighborhood’s characteris-tics, nor by its residents’ socioeconomic status, nor by the institutions that are located there, but by a complicated set of interrelated social relationships among various institutions and individuals bounded by ethnicity, which has significant consequences facilitating or constraining possibilities for upward social mobility. Our ethnographic studies of the Chinese and Korean enclave economies reveal the following important noneconomic effects.

Consolidating Local Social StructuresLocal businesses serve as a crucial material basis for the formation and growth of local social structures. By local social structures, we refer to all observable establishments that are located in a spatially bounded neighborhood, ranging from social service and human service organiza-tions, civic organizations, and religious organizations to ethnic organizations (family, kin, clan, or hometown as-sociations and mutual aid societies; professional associa-tions; and homeland high school or college alumni asso-ciations). In immigrant neighborhoods where language and cultural barriers stand in the way, however, coeth-nicity often determines the memberships in local social structures and the extent to which local businesses inter-connect with one another and local social structures.

Our ethnographic studies show that the dominance of Chinese-owned businesses in Chinatown, or that of Ko-rean-owned businesses in Koreatown, consolidates ethnic social structures in the locale, leading to the community’s extremely high degree of institutional completeness and the significance of ethnic identity. Chinatown’s tradi-tional social structures are composed of hometown associ-ations, family associations, mutual aid societies, merchant

after-school programs, college preparation classes, enrich-ment and recreational facilities, and vocational training offered by Korean private businesses (Zhou & Kim, 2006).

Noteworthy also is the ethnic-language media, which we consider a unique type of ethnic business (Zhou, Chen, & Cai, 2006). The Chinese- and Korean-language media are not necessarily based in Chinatown or Korea town but have a strong presence and high-volume circulation there. The Chinese- and Korean-language media are unique in that they are directly tied to the enclave economy, strictly coethnic, and mostly owned by Chinese or Korean trans-national media corporations or by coethnic entrepreneurs. The Chinese and Koreans have their own cable companies and satellite networks that offer all-day access to major net-works in China, Hong Kong, Taiwan, and Korea, as well as ethnic networks in the United States (Zhou, forthcoming; Zhou & Kim, 2006). Comparatively, the Spanish-language media is much larger in size, with pan-ethnic readership or viewership, and is more likely to be owned by larger U.S.-based corporations, to mimic mainstream media, and to be more highly commercialized and entertainment-oriented than the Chinese- or Korean-language media. Ethnic busi-ness development also perpetuates ethnic media develop-ment as demands for advertising increase.

So far we have shown that the development of the enclave economy fueled by ethnic entrepreneurship con-



enclave on a regular basis to patronize ethnic businesses and turn these businesses into social spaces in which they meet and socialize with one another to rebuild social ties. Large and upscale restaurants, for example, are often used for social activities, such as wedding banquets, community fund-raising events, and meetings run by eth-nic institutions and nonprofit organizations. Many new ethnic institutions—professional organizations, alumni associations, and political and civil rights organizations—are founded in the virtual space and not rooted in any particular locale. These ethnic institutions can utilize the social spaces offered by ethnic businesses to conduct some of their organizational activities in the ethnic en-clave (Zhou & Kim, 2003).

However, the social spaces created by local businesses are not equally accessible to all residents living in the neighborhood. Hispanic residents living in Chinatown or Koreatown are unlikely to have the same access to the tangible resources and opportunities for participation generated in the Chinese and Korean enclave econo-mies. To Hispanic residents, Chinatown or Koreatown is nothing more than the name of a place where they live, and Chinese or Korean entrepreneurs, as well as other ethnic (including Hispanic) entrepreneurs are merely middleman-minority entrepreneurs.

attracting the return of the Middle ClassIn immigrant or racial minority neighborhoods in the inner city, many viable local social structures are gone with the out-migration of the middle class to the suburbs, leaving the “truly disadvantaged” trapped in economic distress, social isolation, and ghettoization (Wilson, 1987). Neighborhood-based sociocultural institutions, churches, nonprofit service organizations, schools, and other pub-licly funded agencies are not, by themselves, up to the task for pulling the truly disadvantaged out of poverty and leading them onto a path to upward social mobility. Despite multiple risks, however, not all poor inner-city neighborhoods are predestined to ghettoization. In Chi-natown and Koreatown, there is a significant presence of nonresident middle-class coethnics.

In Chinatown and Koreatown, a significant segment of the enclave economy caters to the middle class rather than merely to local residents who live in the inner city. The combination of dense and diverse businesses creates a unique site for attracting a middle-class clientele—professionals of multiethnic backgrounds, urban yup-pies, and tourists alike—and, most important, suburban middle-class coethnics. The return of the middle class, in turn, creates new consumer demands that stimulate new entrepreneurial investments in businesses of varying types

associations, temples and churches, and Chinese schools, most of which are locally rooted in the buildings these institutions own. The continual development of Chinese-owned businesses in Chinatown reaffirms the position of these traditional ethnic institutions in the community because new ethnic business owners and new immigrants in the enclave tend to support and replenish member-ships in these institutions. The overlapping memberships in businesses, churches, and ethnic institutions tie ethnic entrepreneurs and coethnic residents closely to the eth-nic community. Koreatown witnesses similar institutional development, except that the proliferation of Protestant churches based in the enclave is more striking than that in Chinatown. Korean churches not only offer religious services but also compete with one another to attract new immigrants by providing all kinds of practical services, such as social networking, language training, and funding and assisting business development (Min, 1996).

Because multiple ethnic communities may simultane-ously exist in an immigrant neighborhood, the one with a sizeable enclave economy tends to gain the upper hand in asserting its prominence and ethnic identity in the neighborhood. When ethnic businesses are intertwined with ethnic social structures in a given neighborhood, the ethnic community’s identity becomes highly visible. For example, Koreatown owes its name to the dominance of Korean-owned businesses and ethnic social structures, not the number of Koreans living there. Korean entrepreneurs and residents would naturally identify their neighborhoods as their own communities. This is not only because they are exposed to what their own enclave economies offer them, such as the convenient access to entrepreneurial or employment opportunities and ethnic goods and services, but also because they have access to a variety of services provided by neighborhood-based social, cultural, and educational institutions and actively participate in them. In contrast, the social structures of other ethnic or racial minority communities located in the same neighborhood, such as Mexican and Central American communities, show a much lower level of institutional completeness and appear weaker despite a much larger number of Hispanic residents. To Mexicans and Central American residents, Koreatown is just a typical urban neighborhood.

Creating ethnic Social SpacesLocal businesses also create social spaces for institutions and individuals to interact. Our ethnographic studies show that, in Chinatown and Koreatown, the increase in ethnic businesses opens up ample space and oppor-tunities for coethnic interaction at the institutional and individual levels. Coethnic members converge in their

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ethnic food; shopping; and even for a facial, massage, or visit to a health spa. The frequent participation of the co-ethnic middle class increases cross-class interaction, mak-ing the enclave less socially isolated.

In sharp contrast, there are few such private institu-tions present in neighboring Hispanic neighborhoods in the downtown area. In fact, few inner-city immigrant or racial minority neighborhoods have witnessed such a high level of ethnic economic development as that in Chinatown or Koreatown. The ample ethnic resources lodged in Chinatown and Koreatown do not appear ac-cessible to Hispanic families who live there. As a result, Hispanic children share the same neighborhood but are often kept out of these local resources because of language and cultural barriers and because of the lack of human capital and group-level economic resources needed to develop a similar enclave economy and an ethnic system of supplementary education.

Social Capital formation from Patterned Social relations The Chinese and Korean enclave economies structure so-cial relations in the ethnic enclave in a number of unique ways. First, social relations in inner-city neighborhoods are patterned by coethnicity. However, Chinese and Koreans are more likely than their Hispanic counterparts to be coethnically bounded because of language and cultural barriers and the high degree of institutional completeness in their ethnic communities. From our observations in various local businesses and institutions, we notice that the most common form of interpersonal interaction is among coethnic members. Hispanic workers working in Korean-owned businesses rarely talk to their Korean coworkers at work but they interact extensively across ethnic lines among other Mexicans, Salvadorans, and Guatemalans. Korean workers, by contrast, tend to interact amongst themselves, but rarely with other Hispanics or Asians.

Second, social relations in inner-city neighborhoods are bounded by socioeconomic status. However, Chinese and Korean residents are more likely than Hispanic resi-dents to interact with suburban middle-class coethnics. Through regular participation in enclave economies, Chinese and Korean immigrants are able to reestablish social ties with coethnic living in and out of the enclave. For example, Korean workers working in Korean-owned firms have casual chats with not only coethnic workers, but also with their employers on a variety of topics other than work-related ones. In this sense, enclave economies have not merely provided tangible resources of various sorts to coethnic working-class residents, but also served as physical sites for face-to-face interaction across class

and scales as well as new further developments in local social structures.

However, the participation of middle-class non-co-ethnics and that of middle-class coethnics are different. While the former participate in the enclave economy for the sole purpose of consumption with exotic flavor, the latter do so for multiple purposes, including gaining ac-cess to ethnic-specific resources not available in the larger society. The ethnic system of supplementary education is a case in point. In many immigrant or racial minority neighborhoods, especially those in the inner city, local institutions serving families and children are mostly non-profit organizations or community-based organizations (CBOs). Many of these nonprofit CBOs depend primarily on public funds, funds from private foundations, and in-dividual or organizational donations and provide service to meet the survival needs of immigrant or socioeconomi-cally disadvantaged families and individuals. The functions and services of nonprofit CBOs are similar across urban immigrant or racial minority neighborhoods, offering English-language classes, job training, employment refer-rals, crime/gang prevention programs, family consulting, tutoring and tutor referrals, youth volunteer opportu-nities, cultural and recreational activities, and special cultural events. The CBOs in inner-city Los Angeles form the most important source of institutional support for immigrant families. However, given the overwhelmingly high demand for services, these nonprofits are often un-derfunded and understaffed, and their ability to provide quality services for those in need is severely constrained. Moreover, due to mandates from funding agencies and limited operating funds, nonprofits can only serve those identified as low-income or “at risk,” indicating that these CBOs have few participants from middle-class families. As a result, inner-city nonprofits inadvertently reinforce class segregation and social isolation.

Private after-school programs and other related edu-cational services are not visible in conventional ethnic entrepreneurship but they nonetheless open up a unique opportunity for prospective immigrant entrepreneurs, es-pecially those who are highly educated but lack proficient English-language ability. In Chinatown and Koreatown, the development of private after-school programs and a range of youth-targeted private institutions not only fills the ser-vice void in the inner city, but also gives suburban middle-class coethnics an additional reason to return because they believe that the ethnic system of supplementary education is effective in assisting their children to do well in school. When the middle-class suburbanites come to their enclave, they come for multiple purposes—sending their children to buxiban, hagwons, or kumon; going to church; eating real



Our study suggests that the vitality of the ethnic com-munity and its ability to generate tangible and in-tangible benefits depends largely on the development of the enclave economy.

quences that go well beyond the economic success of individual entrepreneurs, and that an enclave economy, rather than merely a concentration of ethnic businesses, provides a critical material base for the ethnic commu-nity to function effectively. Our analysis contributes to the literature on ethnic entrepreneurship by shifting the focal point from ultimate mobility outcomes—earnings or employment opportunities—to intermediate social processes—community building through the consolida-tion of ethnic social structures, the creation of ethnic so-cial spaces, the return of the coethnic middle class, and social capital formation. Our study suggests that the vi-tality of the ethnic community and its ability to generate tangible and intangible benefits depends largely on the development of the enclave economy. In this respect, the enclave economy concept is superior for investigat-ing specific social contexts and processes of group-level social mobility. Ethnic entrepreneurship in the contexts of the enclave economy and institutional completeness of the ethnic community offer a better explanation of why ethnicity has varied effects on outcomes of social mobility (e.g., why some ethnic groups fare better than others in education, occupation, and income). It also enables researchers to develop more nuanced and precise theoretical conceptions for understanding how ethnic resources are produced and reproduced in immi-grant neighborhoods to benefit coethnic members but exclude non-coethnic members.

The Chinese and Korean cases may be unique due to immigration selectivity premigration socioeconomic

lines and created new opportunities for social capital for-mation that circumvents inner-city social isolation.

Last but not least, a strong enclave economy entails a wider variety of organizational contexts, allowing co-ethnic members in and out of the enclave to participate simultaneously in multiple institutions. Such cross-orga-nizational and cross-class participation in the ethnic com-munity not only strengthens the interconnectedness of coethnic institutions, but also further broadens the basis for social interaction with both coethnic residents and suburbanites. Although social relations may be more sec-ondary and instrumental than primary and intimate, they create effective channels for information flow and ex-change and thus ease the negative consequences of social isolation associated with inner-city living. Take education as an example. Chinese and Korean immigrant parents, often non-English-speaking, are able to obtain detailed information about high school and college requirements, school and college rankings, scholarship and financial aid, and other education-related matters through their casual contacts with a more informed group of coethnics in churches, supermarkets, restaurants, beauty salons, and other ethnic institutions and also through the ethnic-language media. They can find tutors and after-school programs from a range of options offered by for-profit businesses advertised in ethnic-language newspapers. The ethnic media routinely announce and honor children and youths who win national or regional awards and competitive fellowships, get accepted into prestigious colleges, and score exceptionally well on SAT and other scholastic standardized tests.

In sum, an ethnic community’s high institutional completeness may lead to high coethnic closure but not social isolation. In fact, Chinese and Korean immigrants and their children benefit from opportunities offered by their respective enclave economy and institutional re-sources. However, ample tangible or intangible benefits within the easy reach of Chinese and Korean residents in Chinatown and Koreatown are not equally accessible to Hispanic residents. If we consider social relations as a form of social capital, it becomes obvious that the devel-opment of the enclave economy brings about social capi-tal resources with contents, utility, and access that differ greatly by ethnic groups. What appears to be social capital for one ethnic group may not equally benefit another sharing the same neighborhood.

Conclusion

The Chinese and Korean enclave economies demon-strate that ethnic entrepreneurship has social conse-

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coethnic members, such as offering vouchers for low-income immigrant families to tag into local resources offered by private educational institutions. However, ethnic communities lacking a concentration of coeth-nic businesses and social institutions and a significant presence of the coethnic middle class are vulnerable. Whether entrepreneurial development that can be modeled after the Chinese or Korean experience is viable for other ethnic groups remains a subject for further investigation.

acknowledgments

We thank the guest editors, Elie Chrysostome and How-ard Lin, and the anonymous reviewers for their insightful comments and helpful suggestions, but we are solely re-sponsible for any errors and problems in interpretation. This project was funded by multiple sources, including the California Policy Research Center, U.S. Department of Education, Center for Advanced Study in the Behav-ioral Sciences, UCLA Asian American Studies, and UCLA Academic Senate. Jo-Ann Yap Adefuin, Angie Chung, and Elizabeth Roach provided research assistance in conducting fieldwork and face-to-face interviews during the initial stage of the project between 1998 and 2000. Min Zhou conducted much of the follow-up fieldwork in 2002–2004.

status, the strength of an existing ethnic community, and the host society’s reception. Nevertheless, several policy-relevant lessons may be drawn. First, ethnic entrepreneurship in general creates employment op-portunities and meets various consumer demands of immigrant or ethnic group members. However, ethnic businesses in many inner-city immigrant neighbor-hoods still tend to be small and concentrated in low-end retail or manufacturing. Policymakers should pro-mote entrepreneurship but be mindful of the kinds of businesses that are diverse in type and scale, which can help increase the flow of middle-class clientele and the prospect of social interaction across class lines. Second, ethnic businesses are not intrinsically related to local social structures. Policymakers may provide incentives to entrepreneurs who start up new ventures in services more closely parallel to those provided by nonprofits, such as English-language assistance, academic tutoring, educational enrichment, and job training programs, and to help local businesses build partnerships with other social institutions located in the same locale. Third, the availability and access to local resources in inner-city immigrant neighborhoods vary by ethnicity; those generated by an identifiable enclave economy tend to be ethnically exclusive. Policymakers should find creative ways to promote interethnic coalition and help entrepreneurs open up their resources to non-

Min Zhou, PhD, is a professor of sociology and Asian American studies and the Walter and Shirley Wang En-dowed Chair in U.S.-China Relations and Communications at the University of California, Los Angeles. Her main areas of research include international migration; ethnic and racial relations; ethnic entrepreneurship, education, and the new second generation; Asia and Asian America; and urban sociology. She is the author of Chinatown: The Socioeconomic Potential of an Urban Enclave (Temple University Press, 1992), The Transformation of Chinese America (Sanlian Publishers, 2006), and Contemporary Chinese America: Immigration, Ethnicity, and Community Transformation (Temple University Press, 2009); coauthor of Growing up American: How Vietnamese Children Adapt to Life in the United States (Russell Sage Foundation Press, 1998); and coeditor of Contemporary Asian America (New York University Press, 1st ed., 2000; 2nd ed., 2007) and Asian American Youth: Culture, Identity, and Ethnicity (Routledge, 2004). For more information, visit http://www.sscnet.ucla.edu/soc/faculty/zhou/.

Myungduk Cho, PhD, is an associate professor of child and social welfare studies at Kyungwon University in Sungnam City, South Korea. Her main areas of research interest include child education, family relations, international migration, ethnic minority, Asian Americans, educational migration, and social welfare policy. Her main articles include “Shifting of Korean Students into English Education System and Its Impact on Their Families” (Journal of Kyungwon College, 2000) and “The Reason and Problems of Educational Migration to U.S. and Some Suggestions” (The Phenomenon and the Recognition, 2002: 26-2). She is co-translator of Goddesses in Everywoman (Another Culture Press, 1st ed., 1993; 2nd ed., 2001).



12. The neighborhood characteristics described here are based on the 2000 U.S. Census.

13. Buxiban (tutoring in Chinese) and hagwon (“study place” in Korean) are generally referred to as after-school academic tutoring. Kumon is a Japanese learning method and a sort of supplemental after-school pro-gram, aiming to make school-based learning easier but not to substitute for regular school learning.

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Notes

1. In the 2000 U.S. Census, the racial minority population is made up of approximately 42% black, 41% Hispanic, and 13% Asian.

2. Including firms with and without paid employees. In 1977, the num-ber of black-owned firms totaled 231,203, 17.3% with paid employees, with gross sales receipts of $8.6 billion; the number of Hispanic-owned firms was 219,255, 18.8% with paid employees, with gross sales receipts of $10.4 billion; and the number of Asian-owned firms was 110,837, 21.5% with paid employees, with gross sales receipts of $7.3 billion (U.S. Census Bureau, 1980a, 1980b, 1980c). In 2002, the number of black-owned firms totaled 1,197,567, 8% with paid employees, with gross sales receipts of $89 billion; the number of Hispanic-owned firms was 1,573,464, 13% with paid employees, with gross sales receipts of $222 billion; and the number of Asian-owned firms was 1,103,587, 29% with paid employees, with gross sales receipts of $327 billion (U.S. Census Bureau, 2006a, 2006b, 2006c).

3. The economists Borjas (1990) and Bates (1997) flatly dismissed any significant earnings benefits associated with self-employment. Portes and Zhou (1996) addressed the contradictory findings by examining how the choice of functional forms—loglinear (relative returns) versus linear (absolute dollar values)—of the earnings equa-tions produced contradictory outcomes concerning the superior or inferior earnings of the self-employed relative to wage/salaried work-ers. When the loglinear form was used, there was a negative, but sta-tistically insignificant, earnings effect of self-employment. But when the linear form was used, the effect became significantly positive. They also found that the preponderance of the self-employed was among positive outliers and thus argued that the use of the loglinear form, which was favored by most economists, sacrificed substantive knowledge about the ethnic entrepreneurship because it excluded all the outliers and evened out the earnings of the most successful entrepreneurs.

4. However, the effect was negative in labor markets where the size of the ethnic labor force was small. Spener and Bean (1999) concluded that such a discrepancy was due to the nature of niches in which the self-employed were concentrated and that, in labor markets with high coethnic density, niches in which the self-employed were engaged were likely to be more diverse and profitable.

5. But in recent years, they have been found to open up businesses in affluent urban neighborhoods and middle-class suburbs and show up in both the secondary and primary sectors of the host society’s mainstream economy (Min, 2008).

6. “Ethnoburb” is a term coined by Wei Li (1997) to refer to multiethnic middle-class suburbs.

7. With the exception for the effect of the number of ethnic publica-tions. Breton (1964) speculated that respondents from communities with no ethnic publications were most likely to make contact outside their ethnic group.

8. We use “institution” and “organization” interchangeably to refer to registered (formal) and nonregistered (informal) establishments that exist in a given neighborhood. For example, we view community cen-ters, churches, and nonprofit community-based organizations (CBOs) as local institutions the same way we do restaurants, doctors’ offices, travel agencies, banks, and tutoring centers. For-profit establishments are not merely economic institutions; they often serve as physical sites where local residents interact, socialize, and establish community (see Zhou forthcoming).

9. Black-owned firms increased by 418% and Hispanic-owned firms by 617% during the same period (U.S. Census Bureau, 1980a, 1980b, 2006a, 2006b).

10. On average, Asian-owned firms with paid employees are smaller than black and Hispanic firms (the average number of workers per firm was 7.3 for Chinese, 5.6 for Korean, 7.4 for black, and 7.7 for Hispanic). However, controlled for education and immigration status, Asian firms are more likely to be larger and knowledge-intensive businesses (U.S. Census Bureau, 2006a, 2006b, 2006c).

11. Refers to Los Angeles-Long Beach-Riverside Metropolitan area (U.S. Census Bureau, 2006c, Table 5).

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