Rags to Riches?
Research Paper Title:
“Rags to riches? Entrepreneurs' social classes, resourceful time allocation, and venture performance”
Authors:
Joanna Mingxuan Li
Fan Yang
Background:
Despite the popular belief that entrepreneurship can be a powerful tool to combat social inequality, evidence has shown that entrepreneurs originating from lower social class groups tend to underperform compared to those from higher social class groups. While existing research has primarily focused on differential access to resources as the key factor driving the perpetuation of inequality, this study adds to the literature by highlighting the underexplored mechanism of the psychological effects of occupational class. The researchers theorize that while being resourceful with a particular type of resource “time” is an important resourcefulness technique that helps entrepreneurs from lower occupational classes thrive, the cognitive schemas stamped on them by their social class backgrounds may undermine their ability to be resourceful.
Highlights:
The authors theorize that being resourceful with a particular type of resource—time—is an important resourcefulness technique.
The authors argue that entrepreneurs from lower social classes can use time resourcefully to overcome initial resource deficiency.
Meanwhile, entrepreneurs’ resourcefulness is also affected by the cognitive schemas their social classes stamped on them
The authors analyze a national sample of Chinese private entrepreneurs from 2006 to 2010.
The authors find that resourcefully allocating time enables entrepreneurs from lower social classes to achieve superior performance.
However, they are less likely to use time resourcefully in reality.
Methodology:
Sample Description: Private entrepreneurs in China, between 2006 and 2010
Sample Size: 8663
Analytical Approach: Regression Analysis
Hypothesis:
1. a) The relationship between time invested in learning activities (i.e., learning time) and venture performance is moderated by entrepreneurs’ occupation-based social classes such that the relationship is more positive for entrepreneurs from lower classes than for those from higher classes.
b) The relationship between time invested in networking activities (i.e., networking time) and venture performance is moderated by entrepreneurs’ occupation-based social classes such that the relationship is more positive for entrepreneurs from lower classes than for those from higher classes.
c) The relationship between time invested in management activities (i.e., management time) and venture performance is moderated by entrepreneurs’ occupation-based social classes such that the relationship is more positive for entrepreneurs from higher classes than for those from lower classes.
2. Lower-class entrepreneurs, compared to higher-class entrepreneurs, are less likely to be resourceful in using time (i.e., allocating time across learning, networking, and management activities based on their urgency and importance).
Results:
The study found that return on learning time is higher for farmer- or worker-entrepreneurs than for cadre- or manager-entrepreneurs.
The study also revealed the differential rewards of networking time across entrepreneurs from different social classes. The return (in annual sales) of one additional hour of networking time per day for farmer- and worker-entrepreneurs (as the lower-class group) is much higher than that for cadre- and manager-entrepreneurs (as the higher-class group).
Further, the return (in annual sales) of one additional hour of management time per day for farmer- and worker-entrepreneurs (as the lower-class group) is significantly lower than that for cadre- and manager-entrepreneurs (as the higher-class group).
Overall, compared to cadre- and manager-entrepreneurs, farmer-entrepreneurs benefit more from investing time in learning and networking activities than in management activities.
Although farmer-entrepreneurs stand to benefit most from investing more time in learning and networking activities (versus management activities), they instead invest a significant amount of time in management activities in practice, suggesting that their lack of human and social capital may be further aggravated by their mismanagement of time.
Conclusion:
The theory and findings enrich our understanding of social classes in entrepreneurship by revealing the dual mechanisms of resource endowments and cognitive schema underlying the observed perpetuation of class inequality in entrepreneurship. The research also helps advance the literature on entrepreneurial resourcefulness by demonstrating the importance of being resourceful with a fundamental resource time in mitigating resource constraints. Practically, this study suggests that empowering marginalized individuals and reducing inequality may require policymakers and relevant organizations to go beyond simply providing tangible support and devote more efforts to removing hidden constraints that entrepreneurs face.