Working Paper: NBER ID: w13065
Authors: Kaivan Munshi
Abstract: Entrepreneurship has been traditionally concentrated in the hands of a few small communities in most developing economies. As these economies restructure, it is evident that these communities will be unable to satisfy the increased demand for new entrepreneurs. The analysis in this paper suggests that new business networks will compensate for the weak family background of first-generation entrepreneurs under some circumstances, supporting occupational mobility even in industries with significant barriers to entry. Using new firm-level data on the Indian diamond industry, the empirical analysis documents the important role played by an underlying community network in the expansion from agriculture to international business in one historically disadvantaged community over the course of a single generation.
Keywords: Entrepreneurship; Community Networks; Economic Development; India; Diamond Industry
JEL Codes: L14; L22; L23; L26; O12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Community networks (D85) | Firm success (L21) |
| Community networks (D85) | Business connections, credit, and insurance (L14) |
| Kathiawari network (D85) | Firm performance (L25) |
| Strengthening of kathiawari network (D85) | Support for first-generation entrepreneurs (M13) |
| Increasing number of entrepreneurs from farming backgrounds (M13) | Growth of kathiawari network (D85) |
| Weak family backgrounds (J12) | Need for community networks (D85) |