Drivers of fragility in the ventures of poverty entrepreneurs

• Published in: Small business economics Vol. 61; no. 1; pp. 305 - 323
• Main Authors: Morris, Michael H., Soleimanof, Sohrab, Tucker, Reginald
• Format: Journal Article
• Language: English
• Published: New York Springer US 01.06.2023; Springer Nature B.V
• Subjects: Alertness; Business and Management; Community-based programs; Entrepreneurs; Entrepreneurship; Industrial Organization; Management; Microeconomics; Poverty; Scarcity; Ventures; L26; Liability of poorness; Venture fragility; Poverty alleviation; Entrepreneurial alertness; L25
• ISSN: 0921-898X; 1573-0913; 1573-0913
• DOI: 10.1007/s11187-022-00687-6

This study examines whether and how the experience of poverty shapes the entrepreneurial journey. The research builds upon disadvantage theory to explore how liabilities resulting from the poverty experience can serve as obstacles to the creation of sustainable enterprises. An analysis of data from a sample of 202 entrepreneurs in poverty contexts in the USA demonstrates how liability of poorness (LOP) factors leads to the emergence of more fragile ventures. The findings further indicate that entrepreneurial alertness can moderate the effect of LOP on venture fragility. The study offers theoretical and practical suggestions for further understanding and fostering entrepreneurship as a viable solution to poverty. Plain English Summary How poverty conditions affect a person’s ability to start a successful business. Creating a successful business can be difficult for anyone, but especially for those who come from poverty circumstances. This study demonstrates how ventures created by poverty entrepreneurs tend to be more fragile or subject to serious decline or failure when the inevitable threat or unexpected setback occurs. Two key aspects of poverty, experienced scarcity and significant nonbusiness distractions, combine to lead entrepreneurs to create more fragile businesses. However, when a low-income individual demonstrates more entrepreneurial alertness, a variable associated with venture success, the negative effect of poverty-related variables is reduced. The findings suggest that, for entrepreneurship to be a viable pathway out of poverty, public policies and community-based programs should focus on reducing the fragility of these ventures and enhancing the opportunity recognition skills of these entrepreneurs.