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The Mothers of Necessity

USC Marshall research shows benefits from so-called "necessity entrepreneurship" in emerging markets are not evenly distributed

August 13, 2018

Over the past few years, as USC Marshall marketing professor Shantanu Dutta has been studying entrepreneurship in emerging markets, he has found both good news and bad news in South Asia.

On the one hand, his new research shows higher improvements in income, consumption levels and feelings of well-being for low-income households that start businesses, relative to those that do not. People in these households, considered “necessity entrepreneurs,” often start a business for lack of other opportunities. The findings by Dutta and his team suggest that entrepreneurship is a way to overcome household consumption constraints.

Nuanced Findings

On the other hand, though entrepreneurship is fundamentally a benefit to these households, education and gender can make a difference in how well a business does. For women entrepreneurs in the lowest-income households, education level has a negative effect on their business income relative to their male counterparts.

“What we see is the effect of education on enterprise income depends both on gender and type of entrepreneurship,” Dutta said. “Women necessity entrepreneurs see lower income from their business than their male counterparts. Yet, for women entrepreneurs in high income households, the gender effect of education on business income disappears.”  

These findings reveal a nuanced insight into the benefits to women entrepreneurs in emerging markets. “While starting a business can indeed help women to improve their household well-being,” Dutta added, “women entrepreneurs in low-income households continue to face social and institutional barriers that constrain their income from entrepreneurship.”

New perspectives

In this work, Dutta, the Dave and Jeanne Tappan Chair in Marketing, provides the first systematic household level vs. individual level study of entrepreneurs in emerging markets.

Using a data set of 30,000 households gathered by IHDS (India Human Development Surveys) in 2004 and 2011, the team looked at three areas where an enterprise has the potential to benefit a household: income, levels of consumption, and subjective well-being.

Their research is further differentiated by its examination of the impact of an enterprise on necessity versus opportunity entrepreneurs, and its focus on the influence of household characteristics, such as gender, education and involvement in the enterprise.

Across the board, necessity households that started an enterprise saw improvement in both objective and subjective measures. But for educated low-income women, these improvements were not as great relative to the improvements for men in this cohort.

Dutta said this shows the need to address larger social issues for women. “Our findings call for renewed inquiry into the opportunities and constraints faced by necessity women entrepreneurs in emerging economies.”