State of the Art Review

What are the main barriers to entrepreneurship

in underrepresented groups?
Maria Wishart
Enterprise Research Centre and Warwick Business School
[email protected]

SOTA Review No 40: June 2020

Background

The case for entrepreneurship as an enabler for individuals who experience

disadvantage in accessing employment, to help them to transcend their
circumstances, or as a tool to tackle discrimination and increase social inclusion has
been made repeatedly (e.g., Alvord et al, 2004; De Clercq and Honig, 2011; Fairlie,
2005). Individuals who may experience disadvantage include migrants, ethnic
minorities, women, people who identify as having disabilities and people with low
educational attainment (Blackburn and Smallbone, 2015). However, research
indicates that these groups can also experience significant barriers to setting up and
sustaining their own businesses, and this is attributed to a range of factors including
lack of skills and experience, discrimination, difficulty accessing finance and poor
human and social capital (Halabisky, 2015; Fairlie, 2005). Human capital is defined as
an individual’s personal skills knowledge and experience, and social capital as the
resources that an individual is able to access through their personal networks
(Halabisky, 2015). This review considers research that explores the evidence on the
main barriers that are encountered by aspirant entrepreneurs from disadvantaged
groups attempting to establish and run their own businesses. Some barriers to
entrepreneurship appear to be experienced in common by all or most groups, but
others are specific to certain types of individuals (OECD/EU, 2017).

Evidence
Research in this area has tended to focus primarily on exploring and elucidating the
experiences of particular groups, such as migrants, or ethnic minority individuals,
rather than on the barriers to entrepreneurship themselves. Some papers have
extended their focus to tackle obstacles to entrepreneurship in a range of
underrepresented groups. Analysis of this body of research allows us to discern a
range of barriers, and a key emerging theme relates to the way in which different
groups appear to experience some common and some unique barriers. Four common
barriers to entrepreneurship can be identified – inability to access finance, lack of
human capital, lack of social capital and discrimination. These have been shown to be
experienced in different ways by different groups, as outlined in table 1 below.
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 Table 1: Barriers to entrepreneurship common to underrepresented groups
Barrier Authors Focus Key findings
Inability to access Drori and Lerner, Migrant Language barriers and
finance (2002) entrepreneurs limited knowledge of
financing
Bruder et al (2011); Migrant and ethnic Poor integration into
Senik and Verdier, minority society, leading to
(2011) entrepreneurs unawareness of available
sources of finance
Manolova et al (2012). Female Women experience
entrepreneurs and discrimination not in
finance accessing finance per se,
but in accessing finance
on favourable terms
Kitching (2014) Disabled Disabled entrepreneurs
entrepreneurs struggle to gain access to
start-up capital, often due
to discrimination
Irwin & Scott (2010) Impact of personal Link between low
characteristics, education and inability to
including education, access finance, amplified
on access to finance in ethnic entrepreneurs
in entrepreneurs
Lack of human Beckinsale et al (2010) Ethnic minority Low adoption of ICT skills
capital entrepreneurs
Huarng et al (2012) Female Lack of management
entrepreneurs education and managerial
skills impede female
entrepreneurship
Somerville and Migrant Traditionally over
Sumption (2009) entrepreneurs represented in low-skill
low-profit sectors
Drakopoulou Dodd Disabled Poor educational
(2015) entrepreneurs attainment can be linked
to disabilities
Fairlie (2007) Entrepreneurs with Negative correlation
low educational between education and
attainment business failure in
entrepreneurs
Lack of social capital Katila and Wahlbeck Ethnic minority Reciprocal obligations can
(2011); Ensign and entrepreneurs drive recruitment from
Robinson (2011) diaspora rather than wider
community, restricting
networks
Uddin and Jamil (2015) Disabled Disabled people often lack
entrepreneurs social networks which can
facilitate start-ups
Mendy and Hack-Polay Migrant Over reliance on business
(2018) entrepreneurs practices from home
countries
Martin et al (2015) Female Difficulty gaining
entrepreneurs acceptance in male
dominated sectors &
associated networks
Discrimination/bias Ram and Jones Ethnic Negative stereotyping,
(2008); Neville et al minority/migrant discriminatory practices
(2017) entrepreneurs
Shinnar et al (2017) Women Socially prescribed gender
entrepreneurs roles mean women are
less supported in
entrepreneurship
Cooney (2008); Pavey Disabled Disabled people not seen
(2006) entrepreneurs by themselves and others
as potential entrepreneurs

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Extant research also highlights barriers which are unique to specific groups, and which
can be characterised as derived from their particular characteristics or circumstances
or both, as outlined in table 2 (below).

Table 2: Barriers to entrepreneurship experienced by specific

underrepresented groups
Barrier Authors Focus Key findings
Lack of knowledge of OECD/EU (2017) Migrant Unaware of available
culture & institutions entrepreneurs support and resources for
of host country entrepreneurs
Benefits trap Kitching (2014); Disabled Prospect of losing benefits
Boylan and Burchardt entrepreneurs plus unawareness of in-
(2002) work tax support
discourages disabled
entrepreneurs
Family circumstances Manolova et al (2012); Female Entrepreneurial
Thompson et al (2009) entrepreneurs aspirations can vary by a
woman’s life stage, as can
risk aversion. Women
more likely to need to
combine family
responsibilities and work
Embeddedness in Deakins et al (2007) Ethnic minority Can restrict business
community and family entrepreneurs ambitions to niche sectors
networks and hamper efforts to
access broader market
sectors
Low educational Fairlie (2005) Entrepreneurs with Link to lack of knowledge
attainment few formal of opportunities, inability
qualifications to access finance and low
sector-specific human
capital

Although studies to date have identified and explored a range of barriers to

entrepreneurship in a number of underrepresented groups, highlighting the distinction
between barriers that are common to all groups and those which are unique to specific
groups demonstrates that the picture is complex. This complexity is something that
has been largely ignored in research to date, and it merits further focus, not least
because focusing on common issues can potentially impact on a broader group of
aspirant entrepreneurs.

Summary and evidence gaps

Research on the theme of barriers to entrepreneurship in underrepresented groups
has tended either to address all underrepresented groups together, or to identify and
examine one source of disadvantage for a specific group. As well as potentially over-
simplifying the issue, this means that researchers have not yet fully engaged with the
idea that underrepresented groups may experience multiple sources of disadvantage
– so-called double or even triple disadvantage (Azmat, 2013). Examining the sources
and effects of multiple disadvantage is a potential area for future research which could
help elucidate the challenges facing underrepresented groups.

Barriers can be related to a group’s characteristics or their circumstances, or both.

Exploring the interplay between the different barriers that underrepresented groups
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face is another possible focus for future research. This requires a more nuanced
approach to the design of research in this area.

It is also likely that although different groups may experience ostensibly the same
barrier, for example, difficulty in accessing finance, they may experience it in different
ways and for different reasons. Thus, policies and interventions designed to address
a particular barrier may not be appropriate or effective for all groups. Research carried
out by the ERC (2020) highlights variation in the way that different kinds of
entrepreneurs are engaged by existing support services and networks, and indicates
that delivery of interventions requires tailoring to local and sectoral circumstances.
Research which seeks to examine potential interventions from the perspective of
specific groups of entrepreneurs, for example studies that adopt an engaged
scholarship approach (Ram et al, 2012), may thus also be timely and appropriate.

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About the author

Maria Wishart is Research Fellow - Business Resilience at

Enterprise Research Centre and Warwick Business School.
Following her undergraduate degree and a seventeen-year
career in industry, Maria returned to academia, completing
an MSc in Research Methods, an MA in Philosophy and a
PhD in Identity and Ethics. She can be contacted at
[email protected]

Other SOTA Reviews are available on the ERC web site www.enterpriseresearch.ac.uk. The views expressed in
this review represent those of the authors and are not necessarily those of the ERC or its funders.