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JSBE
Le Conseil canadien des petites et moyennes entreprises et de l’entrepreneuriat/Canadian

JOURNAL OF SMALL BUSINESS & ENTREPRENEURSHIP


Council for Small Business & Entrepreneurship

Le Conseil canadien des petites et moyennes entreprises et de l’entrepreneuriat (CCPME) est une
organisation nationale mutuelle qui se propose de promouvoir le développement des petites et
moyennes entreprises et de l’entrepreneuriat par la recherche, l’éducation et la formation, le
réseautage, et la dissémination de l’information savante et décisionnelle.

L’organisation a été fondée en 1979 en tant que filiale du Conseil international des petites et
moyennes entreprises. Son nom a été changé en CCPME/CCSBE en 1991. Parmi ses membres on JOURNAL OF SMALL BUSINESS & ENTREPRENEURSHIP
trouve des universitaires, des éducateurs, des représentants d’organisations de soutien aux petites
entreprises, des chercheurs, des fonctionnaires, des étudiants de l’entrepreneuriat, et des stratèges.
VOL. 22 NO. 1
Pour information complémentaire sur le CCPME/CCSBE, veuillez consulter le secrétariat à
l’adresse suivante:

CCSBE Secretariat
The Journal of the Canadian Council for Small Business and
c/o Acadia Centre for Small Business & Entrepreneurship Entrepreneurship/Conseil canadien de la PME et de l’entrepreneuriat
Acadia University
PO Box 142 Special Issue:
Wolfville, Nova Scotia B4P 2R6 Exploring Entrepreneurship Beyond the Boundaries
Tel: 902-585-1776
Fax: 902-585-1057
Couriel: ccsbe.secretariat@acadiau.ca INSIDE
Site Web: http://www.ccsbe.org/
The Ethics of Exploring Entrepreneurship Beyond
Le Conseil international des petites et moyennes entreprises the Boundaries
Gerard McElwee iii

Le CIPME sert de groupe d’encadrement, avec pour rôle l’intégration des activités de divers profes- The Hidden Enterprise of Bootlegging Cigarettes Out of
sionnels et organisations en étroit rapport avec les petites et moyennes entreprises. Le Conseil crée et
distribue l’information nouvelle concernant la gestion de ces entreprises et le développement de Greece: Two Schemes of Illegal Entrepreneurship
l’entrepreneuriat, et le travail de ses membres fournit au milieu des petites entreprises des idées Georgios A. Antonopoulos and Jay Mitra 1
VOL. 22

provenant du gouvernement, de l’éducation et du commerce. Story-branding by Empire Entrepreneurs: Nike, Child


Labour, and Pakistan’s Soccer Ball Industry
Le CIPME stimule la recherche dans de nouveaux domaines par l’intermédiaire de conférences,
d’échanges éducatifs, d’activités de conseil, et de réseautage mondial. Comme le Conseil soutient le David M. Boje and Farzad R. Khan 9
travail d’autres organisations plutôt qu’il ne le reproduit, son but est d’étendre le réseau d’échange Growers and Facilitators: Probing the Role of
NO. 1

d’information en encourageant le développement de filiales nationales et associées. Entrepreneurs in the Development of the Cannabis
À l’origine fondé aux États-Unis en 1956, le CIPME compte à présent plus de 2000 membres dans
Cultivation Industry
plus de 60 pays. Ses filiales couvrent la planète. Pour renseignements complémentaires sur le CIPME Martin Bouchard and Claude B. Dion 25
et ses filiales, veuillez contacter le secrétariat à l’adresse suivante: Value-adding and Value-extracting Entrepreneurship at
the Margins
ICSB Secretariat
School of Business and Public Management Kirk Firth and Gerard McElwee 39
George Washington University, 2115 G. Street, NW Suite 403 Beyond Legitimate Entrepreneurship: The Prevalence
Washington, DC 20052, USA of Off-the-Books Entrepreneurs in Ukraine
Tel: 1-202-994-0704 Fax: 1-202-994-4930
Couriel: icsb@gwu.edu
Colin C. Williams 55
Site Web: http://www.icsb.org/ Extracting Value from Their Environment: Some Observations
on Pimping and Prostitution as Entrepreneurship
Robert Smith and Maria L. Christou 69

Published by the Faculty of Business Administration, University of Regina


Publié par la faculté d’administration de l’Université de Régina
frontpages-22-1.qxp 9/12/2008 3:07 PM Page i

The Journal of Small Business and Entrepreneurship is covered by the following abstracting and
indexing services: Journal of Economic Literature (on-line and CD), EconLit, Cabells Directory,
ProQuest, and CBCA Business. The articles can also be found on EBSCO Publishing bibliographic
and research databases.
frontpages-22-1.qxp 9/12/2008 3:07 PM Page ii
Introduction.qxp 9/12/2008 3:08 PM Page iii

The Ethics of Exploring Entrepreneurship Beyond


the Boundaries
Gerard McElwee, University of Lincoln, Lincoln, United Kingdom
Much of the mainstream academic literature in the entrepreneurship literature does not
explore those areas of enterprising activity which lie outside of the “conventional”—those
topic areas of “business life cycle,” “entrepreneurial motivation,” “networking,” and so
forth. There are however, some interesting exceptions as the authors in this special issue
demonstrate as they explore the “other,” the “non-conventional” and entrepreneurial
Outsiders. Significantly, other academic discipline areas, notably within the social sci-
ences: Sociology, Criminology and Economics have a history of engaging with marginal
entrepreneurs or what Smith (2007) has named entrepreneurship at the margins. However,
these marginal entrepreneurs have not been studied as entrepreneurs and of course herein
lays an interesting paradox. If we study marginal entrepreneurs as entrepreneurs we give
them legitimacy. Writing about such actors does not necessarily create legitimacy to their
acts or consequences of their acts. What it does is develop nuanced understandings of
alternative forms of entrepreneurship. Indeed Mark Casson as long ago as 1982 wrote of
criminality, war and revolution as alternative entrepreneurships.
Legitimacy, as we will see, is a culturally assigned activity. Thus what is legitimate for
some is not for others.
Frith and McElwee in this issue suggest that it is not for them to comment on what is
ethical or moral and nor is it their task to make value judgements about the entrepreneur
for as Weber says
No ethics in the world can dodge the fact that in numerous instances the
attainment of “good” ends is bound to the fact that one must be willing
to pay the prices of using morally dubious means or at least dangerous
ones—and facing the possibility or even the probability of evil ramifi-
cations. From no ethics in the world can it be concluded when and to
what extent the ethically good purpose “justifies” the ethically danger-
ous means and ramifications. (Gerth et al., 1958: 121)
Thus we let the reader decide if the marginalized social actors featured in this special edi-
tion are entrepreneurs or not.
Clearly, all entrepreneurs have competing ideals and as Giddens, following Weber
suggests, there is no such thing as universal ethics or of course a monopoly on truth.
The consequences of an entrepreneur’s actions may or may not concern the entrepre-
neur herself. Indeed in some of the examples described in this issue the actions of the
entrepreneur and the consequences of her actions are very different to the original or stat-
ed intentions of the entrepreneur, McElwee (2008). This is what Weber (1968) calls the
“paradox of consequences” and elsewhere, Swedberg and Agevall (2005) the “double
ethic” whereby some communities have an “in group” morality for their own members
and an “out group” ethic for members of other communities.

Journal of Small Business and Entrepreneurship 22, no. 1 (2009): pp. iii–iv iii
Introduction.qxp 9/12/2008 3:08 PM Page iv

iv MCELWEE

The papers in the issue, to a greater or lesser extent, deal with a group of relatively
ambiguous concepts such as morality, value judgements and legitimacy. A problem with
the concept of legitimacy is that it assumes that there is evidence to support the view that
there is a common value system or widespread legitimacy. As we will see in this collec-
tion there are a good number of forces which combine, either formally or informally to
facilitate the development of a modern economy and society.
I would like to thank all of the contributors and anonymous reviewers for their work
in compiling this special issue and to Bob Anderson for the opportunity and support. It is
not an easy task to broker such “Special Editions” and therefore Bob Anderson’s enlight-
ened encouragement has proven to be more than welcome.
I hope the reader enjoys reading this issue as much as I have enjoyed compiling it.
Further Reading
Casson, M.C. 1982. The Entrepreneur: An Economic Theory. Oxford: Robertson.
Gerth, H.H. and C. Wright Mills. 1958. From Max Weber: Essays in Sociology. Oxford: Oxford University
Press.
Giddens, A. 1982. Capitalism and Modern Social Theory: An Analysis of the Writings of Marx, Durkheim and
Max Weber. Cambridge: Cambridge University Press.
McElwee, G. 2008. “In Search of Montsalvatch: Making Sense of Interviewing,” Tamara Journal 7, no. 2:
134–48.
Smith, R. 2007. “Editorial,” International Journal of Entrepreneurship and Innovation 8, no. 4: 245–50.
Swedberg, R. and O. Agevall. 2005. The Max Weber Dictionary: Key Words and Central Concepts. Stanford:
Stanford University Press.
Weber, M. 1968. Economy and Society: An Outline of Interpretive Sociology. New York: n.p.

Gerard McElwee
University of Lincoln, UK
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The Hidden Enterprise of Bootlegging Cigarettes


Out of Greece: Two Schemes of Illegal
Entrepreneurship
Georgios A. Antonopoulos, University of Teesside, Middlesbrough,
United Kingdom
Jay Mitra, University of Essex, Southend, United Kingdom
ABSTRACT. Cigarette smuggling in all its forms prevents the Greek state from collecting large amounts of
taxes. The phenomenon has been largely neglected by the academic community and this is even more the case
when it comes to bootlegging. This article is a presentation of the available evidence on two schemes of boot-
legging cigarettes out of Greece. It explores the different entrepreneurial inputs of cigarette bootleggers, and the
practices that resemble “normal” entrepreneurial activities, through two case studies. These inputs and practices
shed some light on the environment in which unproductive economic activity takes place, offering researchers
and policy makers insights into their manifestation.
RÉSUMÉ. La contrebande de cigarettes sous toutes ses formes prive le gouvernement grec de vastes revenus.
Ce phénomène n'a pas été d'un grand intérêt pour la communauté universitaire, et c'est encore davantage le cas
quand il s'agit de vente illicite. Cet article présente les données disponibles concernant deux schémas de contre-
bande de cigarettes à partir de la Grèce ; il explore en deux études de cas les différents intrants entrepreneuriaux
des contrebandiers, ainsi que les pratiques qui ressemblent à des activités entrepreneuriales “normales”. Ces
intrants et pratiques jettent de la lumière sur le milieu dans lequel une activité économique non productive prend
place, offrant ainsi aux chercheurs et aux stratèges un aperçu de leur manifestation.

Introduction
Cigarette smuggling is a form of smuggling that deprives the Greek state OF large
amounts of taxes. According to data obtained from the Hellenic Coast Guard (2005), the
evaded taxes from cigarettes seized by the Hellenic Coast Guard from 1998 to 2004
amounts to 107,948,634.42 € (US$ 139,377,991.87/ £ 73,504,975.728) (Hellenic Coast
Guard, 2005). Greece is a very interesting case study when it comes to cigarette smug-
gling for a variety of reasons, apart of course from the fact that research on the topic in
the country is in an embryonic state. This is due to Greece having a large smoking popu-
lation, a significant black market economy and low “tax consciousness,” neighbouring
countries with large informal economies such as Albania, FYROM and Bulgaria (see
Stanchev, 2005), and high (cigarette) smuggling rates (Tobacco Journal International,
2000).
For Joossens (1999) and von Lampe (2005), bootlegging is one of the ways of smug-
gling cigarettes, and refers to instances when an amount of cigarettes that exceeds customs
regulations is bought. According to Joossens (1999), bootlegging usually involves thou-
sands of cigarettes, the cigarettes are duty paid, the investment is relatively small, and
bootlegging is organised by individuals and gangs and it is caused by price differentials
among neighbouring countries. In addition, as Joossens et al. (1992) suggest, bootlegging
accounts for a relatively small share of the total cigarette-smuggling business. Numerous

Journal of Small Business and Entrepreneurship 22, no. 1 (2009): pp. 1–8 1
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2 ANTONOPOULOS AND MITRA

bootlegging schemes have been identified in Europe such as at the German-Polish and
German-Czech borders, across the English Channel (von Lampe, 2005), at the Austrian-
Hungarian borders and at the Greek-Bulgarian borders (Joossens, 1999).
Cigarette smuggling in general is not a widely researched phenomenon and this is even
more the case when it comes to bootlegging. According to von Lampe (2005) “there are no
systematic analyses available on the modus operandi and structure of bootlegging, neither
for Germany, nor for the UK, nor for any other EU member state” (von Lampe, 2005: 14).
In addition, although there have been some efforts to estimate the effect of crime in gener-
al on entrepreneurship (see, for example, Ortega Alvarez, 2002), bootlegging has not been
viewed through the prism of entrepreneurship theory. This article is a presentation of the
available evidence on two schemes of bootlegging cigarettes out of Greece; therefore,
Greece in this article is treated a source country for contraband cigarettes.
In common with many other activities in the “hidden economy,” cigarette bootlegging
represents illegal entrepreneurship, which is concerned with what Baumol (2002) refers
to as the domain of the rent-seeking entrepreneurs. These entrepreneurs seek and gain
entrepreneurial “rent” from the same system of enterprise that legal, entrepreneurs do.
Their ability to identify opportunities, make novel combinations of different resources,
use information asymmetry to derive economic outcomes, and network with “weak” and
“strong” ties, is similar to their mainstream counterparts. The critical difference is perhaps
in the outcomes of their operations and the conscious attempt to work outside the legal
framework or the “citizen consensus” afforded to all in society. Wealth creation is possi-
ble with both groups of entrepreneurs but the “citizenship consensus” offers potential
opportunities for all whereas the “hidden economy” activities are best served when those
outside it are its natural “victims.” Moreover, despite its potentially innovative function it
is questionable whether the acquisition of monopoly profits contributes to the economy.
In fact, as Baumol (2002) argues, it can constitute an effective impediment to economic
production or productivity. Each act of rent-seeking can reinforce the unproductive func-
tion as firms engaged in such practice redirect their activities down a negative spiral for
the sake of self-defence. Investigating and studying the entrepreneurial behaviour of
hidden-economy entrepreneurs is, therefore, particularly important in order to distinguish
between forms of social acceptance and legitimacy on the one hand, and of economic and
social exploitation on the other. Putting rent-seeking activities such as bootlegging under
the microscope helps us to understand that entrepreneurship is not synonymous with pro-
ductivity and growth (Schumpeter, 1911). What matters, therefore, is the appropriate con-
sideration of specific entrepreneurial inputs and practices which lead entrepreneurs to
operate at either opposite ends of the entrepreneurial spectrum (that is between the hero-
ic acts of entrepreneurial genius at one end and criminal monopolization of profits) or
realising the innovative space that lies somewhere in between (see Figure 1 below). In the
18th century, Adam Smith argued that competition helps to resolve the problem of
extremes, and Schumpeter (1911) stated that entrepreneurship can embrace these
extremes anyway. Implicit in both their arguments is the need for legitimization of the
“hidden economy” system of entrepreneurship that underscores much of the thinking that
guides policy development today (Williams, 2006).
This article explores the different entrepreneurial inputs of cigarette bootleggers and
the practices that resemble “normal” entrepreneurial activities, through two case studies.
These inputs and practices shed some light on the environment in which unproductive
economic activity takes place, offering researchers and policymakers insights into their
manifestation.
Antonopoulos-Mitra.qxp 9/12/2008 3:11 PM Page 3

HIDDEN ENTERPRISE OF BOOTLEGGING CIGARETTES OUT OF GREECE 3

Heroic Legitimate Rent-seeking


Entrepreneur Entrepreneur Entrepreneur
ship ship ship

Legitimisation
Process

Figure 1. The Entrepreneurship Spectrum


Methodology
This article is the product of interviews with “actors” of the cigarette bootlegging busi-
ness. Specifically:
• An interview with an individual who as a student in the former Yugoslavia in the
1980s and early 1990s was smuggling cigarettes out of Greece into former Yugoslavia
(Bootlegging scheme one). This interview was conducted in the city of Patras in
Greece in September 2006.
• Interviews that were conducted in a town in the northeast of England in May 2006
with two runners transporting cigarettes from Greece into the UK (Bootlegging
scheme two). Here we adopt the term “runner” from von Lampe (2005) and will later
explain what it means. In all interviews the participants were asked to provide infor-
mation about the social organization of the particular bootlegging schemes.
Bootlegging Scheme One
The first bootlegging scheme involves a Greek student at the University of Belgrade, who
was smuggling cigarettes bought from the duty-free shop on the Greek-Yugoslavian bor-
der from 1986 to 1991. He used to buy DM (Deutsch Mark) 1,000 in merchandise (hard
packs of Marlboro and Camel), and he was transporting them in his and his friends’ lug-
gage on the bus. He used to sell the cigarettes in cafés and bars in Belgrade, where the
elite of what was then Yugoslavia used to hang about. Despite the fact that cigarettes in
Yugoslavia were much cheaper than in Greece, bootlegging was possible because: a) there
was no hard pack for Marlboro in Yugoslavia and the possession of such a pack was a sign
of prestige and status, and b) the quality of the Yugoslavian tobacco was much poorer than
the Greek tobacco. The student used to transport cigarettes in January, after Easter and in
September when he was returning from Greece after the holidays. From every load of DM
1,000 he used to have a profit of DM 2,000. In order to circumvent the strict Customs
search on the Greek-Yugoslav border, the bootlegger had established a contact with a cus-
toms officer, who did not, however, receive any money in order to “turn a blind eye,” and
was, as the interviewee suggested “my customs officer” (emphasis by the interviewee).
This story highlights the lifestyle circumstances that allow for an indulgence in oppor-
tunity gratification at the individual level. The reliance of the student on weak ties with
the customs officer, and the capitalisation of opportunities based on both greed and social
enhancement, is typical of small-scale entrepreneurship that satisfies a limited market
place. Small quantities of goods are exchanged in a market which could ill afford status
or quality. There being no market for legitimate business activity, bootlegging offers
restricted opportunity for economic gain.
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4 ANTONOPOULOS AND MITRA

Bootlegging Scheme Two


The second bootlegging scheme involves the manager of a café that is a meeting place for
students in a northern English town, who gives money to a number of students who fre-
quent his café for bringing him specific brands of cigarettes (that are consumed in
Britain), especially at periods when students return home (Christmas, Easter and sum-
mer). Each student “imports” 16 cartons (3,200 cigarettes) to Britain, and receives about
£30 (US$ 55/ 44€) as an “importation fee.” The cigarettes are brought into Britain by air
and occasionally through the Channel Tunnel, and distributed to customers in a chain of
bars and clubs in the town. There are basically two different sets of “actors” in bootleg-
ging scheme two:
• The Pusher, who has “recruited” the runners, and who has the responsibility of intro-
ducing the contraband cigarettes into the market through a network of acquaintances
and customers. The pusher has, therefore, a “managerial” position in the whole busi-
ness. He could be characterised as a “line manager” for the other actors of the business.
• Runners: the runners are individuals who transport smaller quantities of EU duty-paid
cigarettes for cigarette-smuggling networks (House of Commons, 2005, cited in von
Lampe, 2005: 15). They usually transport cigarettes in their cars and/or luggage. In our
case they are the two individuals interviewed (see Figure 2).
Runners one, two and three conduct regular business with the pusher, whereas runners
four and five conduct business only occasionally. The reason why this is the case is not
known. All runners are personally linked to each other, either as couples (runners one amd
two, and four and five), housemates (two and three) or friends. Runners two and three
were recruited (as runners) through being employed in the legitimate business managed
by the pusher, whereas runners one, four and five, who were regular customers of the law-
ful business, started bootlegging cigarettes for the pusher after runners two and three
introduced them to the pusher. Runner two was the first to be recruited for the bootleg-
ging scheme and the person having the closest relationship with the pusher since runner

Figure 2. Bootlegging scheme two (note that the typographical error was embedded in the original copy of the
figure and could not be corrected).
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HIDDEN ENTERPRISE OF BOOTLEGGING CIGARETTES OUT OF GREECE 5

three stopped working for the legitimate business (but not the illegal business) a few
months later. Essentially, the pusher exhibits some of his entrepreneurial qualities by
investing in runner two only, and thus having indirect access to the rest of the runners
(one, three, four and five) (see Morselli, 2003). The second bootlegging scheme is more
complex than the first presented in this article, because it involves a larger number of
individuals/“actors.” Contraband cigarettes in this bootlegging scheme are introduced to
a network of customers (known to the pusher) in the café and a bar chain in the town. The
selling of cigarettes is conducted in special areas within the café, the bars or the clubs.
Bootlegging scheme two represents a “higher order” of entrepreneurship characterised by
a stronger organisation enabling opportunity identification and realisation, stated and
explicit networks of operation, the use of both “strong” and “weak” ties, complexity of
activities, cross-investment opportunities, and defined customer groups across dispersed
borders.
Discussion—Conclusion—Recommendations
Initially, it should be mentioned that the data obtained and presented in this article refer
to two successful schemes since the bootlegger in the first case was never apprehended,
nor has the second scheme been intercepted so far. We therefore consider this article to be
important because it is based on typical bootleggers, the successful illegal entrepreneurs,
and not on “captive populations” (Gigengack and van Gelder, 2000: 11). Further to that
there are a number of issues, interesting both in terms of criminological and entrepre-
neurship research, that need to be discussed. Firstly, in relation to “structures” involved in
cigarette smuggling, the Greek media very often attribute any form of smuggling, includ-
ing cigarette smuggling, and/or “organised” criminal activities to Mafias and Cartels. This
is not surprising since these are terms which are highly sensational, attractive and benefi-
cial (to the public, the police and the politicians) (von Lample, 2001). The implication of
this representation, however, is huge. The public are fed up with the idea that cigarette
smuggling (among other illegal markets) is conducted by hierarchical, rigid and powerful
organizations, which is of course false. In a similar vein, governmental organizations and
agencies have been suggesting that “because of the high profit potential, organized crime
has become heavily involved in bootlegging” (Advisory Commission on
Intergovernmental Relations, 1977: 1). As it is shown in this article, cigarette smuggling
in the form of bootlegging can be quite (dis)organized and this is why Joossens et al.
(2000) characterize it as a “low-tech type of cigarette smuggling.” The cases presented in
this article support the enterprise paradigm, putting emphasis on a process of exchange
between the bootlegger and the customers, and on “how participants are organizing their
crime-trade and adapt to and survive in illegal markets” (von Lampe, 2002: 193).
According to this paradigm, what we loosely term “organised crime” and illegal markets
are a jigsaw of flexible “entities” that establish themselves when opportunities for profit
appear (see Block and Chambliss, 1981; Hobbs, 1988; van Duyne, 1993, 1997; Zaitch,
2002). These entities are adaptive to the new social, political, and—most importantly—
economic environments, and see themselves as “service providers” (Ruggiero, 1997: 27).
Second, “criminogenic asymmetries” (Passas, 1999) such as the huge price disparities
that exist between Greece and neighbouring countries are not always the reason for the
bootlegging of cigarettes. Indeed, in our general research on cigarette smuggling we came
across Greeks travelling to Bulgaria, and specifically Petritsi and Sandanski, to buy ciga-
rettes among other commodities (see, for instance, Terzenidis, 2004). The reason for this
is the huge price disparities that exist between Greece and Bulgaria. In particular, in 2002
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6 ANTONOPOULOS AND MITRA

a pack of Marlboro was sold 45% cheaper in Bulgaria than in Greece (Mackay and
Eriksen, 2002: 102–09). We have also come across a beach bar owner in a Greek island
bringing cigars from Cuba and selling them to interested customers at a much higher
price, and airplane crew smuggling quantities of cigarettes from countries of the Arab
peninsula in order to sell them to ground staff of the airline they were employed by. Price
differences are indeed an important factor of bootlegging but surely there are other factors
too: prestige for the smoker of bootlegged cigarettes or the bad quality of the tobacco used
by the local manufacturers, as was shown in bootlegging scheme one. We did not come
across any bootlegging into Greece from Turkey, Romania, Serbia, FYROM in the Greek
media, and we have collected absolutely no anecdotal accounts of such a case despite the
huge differences in cigarette prices, which are in some cases (for example Romania and
Serbia) even bigger than the difference between Greece and Bulgaria (see Mackay and
Eriksen, 2002: 102–09). There is something more than simply price differential that
favours the smuggling of cigarettes from the context in which cigarettes are sold cheaper
to the one in which cigarettes are more expensive. The assertion made by the Advisory
Commission on Intergovernmental Relations (1977: 3) and indeed other state-related
organisations, as well as the tobacco industry (see Joossens and Raw, 1995) that “cigarette
bootlegging will continue unabated and will increase if tax differentials increase further,”
is too simplistic.
Third, bootlegging of cigarettes does not only occur among neighbouring countries or
countries that are relatively close geographically. As was shown in bootlegging scheme
two, bootlegging can also occur among countries that are geographically distant
(Greece–United Kingdom). The presence of a bootlegging scheme operating with such
geographic scope in our opinion strengthens the position of the network and/or “crimi-
nally exploitable ties” (von Lampe, 2003a) in the study of “organised crime” and illegal
trades.
Fourth, corruption is not an essential feature of bootlegging out of Greece since the
transportation of quantities that exceed those suggested by regulations are not always
known to law enforcement and other relevant state agencies. In addition, the quantities are
relatively small, and the circle of distribution is small and closed, which reduces the pos-
sibility of public authorities getting to know of this activity.
Fifth, similar to the research on cigarette smuggling in Germany conducted by von
Lampe (2003b), and which has greatly inspired the current article, the “actors” of the
bootlegging schemes presented were not involved in other criminal activities or illegal
markets.
Sixth, legal businesses, the cafés and bars in Belgrade in bootlegging scheme one and
the café, bars and clubs in the northern English town in bootlegging scheme two, play an
important and functional role in the social organizations of the bootlegging business in
four ways:
• by simply acting as an outlet in which contraband cigarettes are sold (bootlegging
schemes one and two);
• by acting as a venue in which legal entrepreneur-customer relationships are trans-
formed into illegal entrepreneur-customer relationships (bootlegging scheme two);
• by acting as a venue in which legal business relationships between the employers and
the employees are transformed in illegal business relationships (bootlegging scheme
two) (see von Lampe and Johansen, 2004);
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HIDDEN ENTERPRISE OF BOOTLEGGING CIGARETTES OUT OF GREECE 7

• by acting as a venue facilitating the illegal entrepreneurial relationship between the


bootlegger and his customers (bootlegging scheme one).
Based on this study we recommend further research on the reasons conducive to the
bootlegging of cigarettes other than the price disparities among different contexts. In addi-
tion, explanations are needed as to why bootlegging occurs among specific jurisdictions
and not others. Finally, we recommend further research on the social organization of boot-
legging schemes in Greece and out of Greece as well as further investigation into the per-
sonal and social characteristics of the participants in bootlegging schemes.
Central to the proposed research and/or policy agenda is the need to identify norms
and patterns of criminal entrepreneurship that both resemble and are differentiated from
their legal counterparts. As this article shows, not all forms of bootlegging follow prac-
tices which have stereotypical associations such as “mafia control” or price differentials.
In their “commonness” can be found much of the explanation for their possible legit-
imization and the prospect for a productive turnaround. Furthermore, the processes of
individual effort, opportunity identification, networking, and the use of weak and strong
ties, we find possible resolutions to the problem of operating at the extreme or outside the
line of the “citizenship consensus.” For the researcher the social-psychological and eco-
nomic explanations of deviation from the “norm” are crucial for the dispassionate study
of entrepreneurship in all its forms. For the policymaker, understanding the normative
processes of the hidden economy, their link with the environment and institutions that
underpin mainstream economic activity, and the potential of particular manifestation in
specific environments, offers real prospects for their legitimization and return to produc-
tive economic endeavour.
Contact Information
For further information on this article contact:

Georgios Antonopoulos,School of Social Sciences & Law, University of Teesside, Middlesbrough,


TS1 3BA, United Kingdom

Tel.: +44 (0)1642 342392 (office)


E-mail: G.Antonopoulos@tees.ac.uk

or

Jay Mitra, School of Entrepreneurship and Business, University of Essex, Southend Campus, 10
Elmer Approach, Southend-on-Sea, Essex SS1 1LW, United Kingdom

Tel.: +44 (0)1702 328390 (office)


E-mail: jmitra@essex.ac.uk

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and the United States,” Forum on Crime and Society 1, no. 2: 99–116.
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Passas (eds.), Upperworld and Underworld in Cross-Border Crime. Nijmegen: Wolf Legal Publishers.
——. 2003a. “Criminally Exploitable Ties: A Network Approach to Organised Crime.” Pp. 9–22 in E. Viano, J.
Magallenes and L. Bridel (eds.), Transnational Organised Crime: Myth, Power and Profit. Durham, NC:
Carolina Academic Press.
——. 2003b. “Organising the Nicotine Racket: Patterns of Cooperation in the Cigarette Black Market in
Germany.” Pp. 41–66 in P.C. van Duyne, K. von Lampe and J.L. Newell (eds.), Criminal Finances and
Organising Crime in Europe. Nijmegen: Wolf Legal Publishers.
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Programme (n.p.).
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Loyal Behaviour in Criminal Relations.” Pp. 102–13 in S. Nevala and K. Aromaa (eds.), Organised Crime,
Trafficking, Drugs: Selected Papers Presented at the Annual Conference of the European Society of
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Boje-Khan.qxp 9/12/2008 3:11 PM Page 9

Story-Branding by Empire Entrepreneurs: Nike,


Child Labour, and Pakistan’s Soccer Ball Industry
David M. Boje, College of Business, New Mexico State University, Las
Cruces, New Mexico
Farzad R. Khan, Suleman Dawood School of Business, Lahore
University of Management Sciences, Lahore, Pakistan
ABSTRACT. Our study identifies and calls for an answerability-ethic of storytelling where entrepreneurs are
held responsible and accountable for the harmful ways in which they story the Third World. We study a
Corporate Social Responsibility (CSR) initiative involving Nike in the Third World. Our study draws upon inter-
views and textual study of the Sialkot Child Labour Elimination Project that was signed in Atlanta, Georgia in
February 1997. We find that Nike’s CSR stories not only brand products but they also brand Third World labour.
Our study’s main contribution is to show that entrepreneurs’ branding through storytelling their “benign” CSR
initiatives in the Third World, an activity we term “story-branding,” has an imperial face requiring the use of
power to turn workers voiceless (make them into subalterns).
RÉSUMÉ. Notre étude identifie et préconise une éthique de responsabilité en matière de contes, dans laquelle
les entrepreneurs deviennent responsables de la façon nocive dont ils peignent le Tiers-Monde. Elle porte sur
une initiative de responsabilité sociale d’entreprise (RSE) concernant Nike dans le Tiers-Monde. Cet article est
basé sur des entrevues et sur une étude textuelle du Projet Sialkot pour l’élimination de la main-d’oeuvre
enfantine, signé à Atlanta (Georgia) en février 1997. Nous constatons que chez Nike les contes de RSE imposent
la marque non seulement sur les produits, mais encore sur la main-d’oeuvre du Tiers-Monde. Notre contribution
principale est de montrer que les entrepreneurs qui par l’entremise de leurs contes mettent leur marque sur leurs
initiatives “bienveillantes” de RSE au Tiers-Monde—une activité que nous appelons “marquage par contes”—
présentent un visage impérialiste, et doivent donc user de force pour faire taire les travailleurs et les subordonner
à leur pouvoir.

Introduction
Storytelling is a primary way entrepreneurs maintain the currency of their reputation.
While marketing and corporate reputation literatures recognize that Corporate Social
Responsibility (CSR) is a vital component of a company’s brand strategy (Chun, 2005),
the role of story is not being addressed by them. Entrepreneurs strengthen their brands
through telling stories about their CSR initiatives. Such CSR stories improve the image of
entrepreneurs with consumers, help them gain legitimacy for their labour practices, and
assist them in attracting other resources required for their continued success (Lounsbury
and Glynn, 2001; Zott and Huy, 2007). However, this literature on entrepreneurship and
branding is limited in that it ignores the effects of entrepreneurs and their legitimating
story work on the poor and powerless in the Third World where many entrepreneurs base
their supply chains and where they situate their CSR initiatives.
We address this limitation by connecting entrepreneurship and branding literature to
postcolonialism, a field that looks at the effects of colonization on societies and cultures,
particularly in the Third World (Westwood, 2006). We bring the great postcolonial theo-
rist Edward Said’s (1978, 1993, 1994) concern about the plight of the Third World to the
centre of entrepreneurship studies and direct it to what is most marginalized in branding

Journal of Small Business and Entrepreneurship 22, no. 1 (2009): pp. 9–24 9
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10 BOJE AND KHAN

and entrepreneurship studies: Third World worker voices. Creating space for these voices
leads us to a more critical reading of the literature on entrepreneurs and branding. Through
this reading, we articulate a new term called ‘story-branding’ that helps surface the impe-
rial face of the branding process.
Story-branding, our paper’s main contribution, is defined as entrepreneurs strengthen-
ing their brands by putting into play a characterization of events relating to a CSR initia-
tive in the Third World that ends up branding one set of actors (entrepreneurs and their
organizations) as heroes who rescue other characters. The focus of this form of story
telling is on the entrepreneur as hero in an adventurous story saga. Just as with imperial-
ism and its heroic “civilizing” mission (Ahmad, 2000; Blaut, 1993), the consequences of
that adventure for people in the Third World are simply left out of the narrative. In terms
of the study we present, Nike, the heroic entrepreneur, rescues Third World families from
child labour in Pakistan’s soccer ball industry. The remedy Nike, other global brands, and
various agencies, implemented to remove child labour did not include the voices of the
children, or their parents, who, in our study, had an entirely different characterization of
their work experience. Neither in Nike’s story-branding was any mention made of the
harmful effects that ensued from its heroic rescue mission. What our analysis of the impe-
rial face of branding suggests is a disturbing dark side to this entrepreneurial activity
which is overlooked in previous studies that otherwise treat the phenomenon as heroic or
romantic adventure storytelling.
Through our study of story-branding regarding a CSR initiative in the Third World, we
find that the literature on entrepreneurship and branding fails to notice that in CSR story-
telling done to brand products, Third World labour is being branded as well. In the classi-
cal definition of branding, it is being burned, like prisoners or cattle, with identifying
marks (e.g., grateful for CSR when opposite is the case) that are injurious to it and which
facilitate its exploitation. Branding has thus an imperial face of imposing identifying
marks to permit injury and disgrace for the people in the Third World who make the prod-
ucts of First World entrepreneurs.
A related contribution is to identify an additional ethical dimension in entrepreneur-
ship revealed by story-branding: the ethical inquiry into corporate ‘answerability’ for the
stories of Third World workers being branded in story characterizations. Entrepreneurs
need to be held answerable for the consequences of the highly compelling stories they tell,
if indeed, as we argue, such branding-stories do contribute to late capitalism’s ongoing
imperial project that otherwise is crushing to a worker’s dignity in the Third World.
Our article is organized as follows. First, we explore postcolonialism and its concern
with the inhabitants of the Third World made voiceless. Second, we briefly lay out our
methods for our case study of the CSR initiative “The Sialkot Child Labour Elimination
Project” involving Nike and other global soccer ball brands. We then present our case
study where we do our best to open spaces for subaltern voices, women soccer ball stitch-
ers, regarding this initiative. After this, we reflect upon Nike’s imperial face and discuss
how these subalternized voices problematize our understandings on branding through
CSR initiatives situated in the Third World. This leads to ethics, and we argue that there
needs to be storytelling answerability. Entrepreneurs need to be held answerable for the
stories they tell, for they brand not just products but also people. We conclude with our
paper’s contributions and future research directions opened up by our inquiry that treats
entrepreneurship’s branding activities through postcolonial sensitivities.
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NIKE, CHILD LABOUR, AND PAKISTAN’S SOCCER BALL INDUSTRY 11

Postcolonialism and the Subaltern


Postcolonialism has advanced many insightful concepts to make sense of Europe’s post-
1492 engagement with (some would say onslaught against) the Third World. One such
concept that has generated much theoretical mileage is the term “Subaltern.”
The word subaltern, though coined by Gramsci, was popularized by a group of Indian
historians in the 1980s (Prasad, 2003). This group came to be known as the “Subaltern
Studies Collective’ with Ranajit Guha being perhaps its most notable member
(Chakrabarty, 2002). Subalterns meant all those weak and marginalized elements (i.e., the
poor masses) ignored in the mainstream narrative of history that focuses on elites and their
motives and actions to explain historical events. The collective sought to rewrite Indian
history from the perspective of these groups, to write a people’s history of India. The
research that ensued contested several claims of mainstream Indian history. In contrast to
the then prevailing view of Indians being united in a common cause against the British,
the Subaltern Studies research pointed out that there were severe class-based conflicts
between the leadership elements of Indian nationalism and their grassroots who often had
a different vision of India than their leaders (e.g., one that preserves their local, rural cul-
ture as opposed to a high-modern industrialized vision of India held by such Indian
nationalist leaders as Nehru [Chakrabarty, 2002; Roy, 1999]; for a concise history on the
Subaltern Studies collective, see Chakrabarty, 2002 and Ludden, 2001a; for an outstand-
ing example of subaltern research looking at workplace and organizational dynamics, see
Chakrabarty, 1983).
In the 1990s the term subaltern came to take on a more specific meaning as it came to
be appropriated by postcolonial studies (Prasad, 2003). From being used as a term to refer
to the subordinated masses in general, it began to be used to depict specifically those
classes or individuals within them who are spoken about but never heard (Ludden, 2001a,
2001b; Prasad, 2003) in contrast to other subordinated groups (e.g., tribals in India) that
do not even make it to the realm of public discussion (Roy, 1999).
Sensitivity to subalterns should alert us to their possibilities in other domains charac-
terized by massive imbalances of power. CSR initiatives in the Third World could well be
such domains where the multi-billion-dollar global transnational corporation is engaged
with penniless workers. They become subalterns or peripheral centres of the CSR initia-
tive: they are central to the initiative but in terms of having their voice heard and their
interests fairly represented and realized, they become ignored.
This seems to have happened in our study of a CSR initiative undertaken by Nike and
other brands to eradicate child labour from soccer ball production. Before we present our
study, we would like to make a brief note on methods.
Methods
The majority of the world’s soccer balls have, for decades, been produced in Sialkot,
Pakistan, with leading international brands (e.g. Nike and Adidas) sourcing almost exclu-
sively from Sialkot (Khan, Munir and Wilmott, 2007). Estimates of the number of stitch-
ers employed in Sialkot’s soccer ball manufacturing cluster varied from a low of just over
30,000 (International Monitoring Association for Child Labour [IMAC] 2003) to a high of
65,000 (Awan, 1996: 5). The great majority of children helped their parents at home, who
were in turn paid for the number of soccer balls rather than hours worked—an ILO esti-
mate placing the number of children at approximately 15,000 (Husselbee, 2001: 133; ILO
1999). Most of these balls were stitched in homes (mostly in the 1,600 odd villages sur-
rounding Sialkot). Balls reached these homes through an elaborate chain of subcontractors.
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12 BOJE AND KHAN

In this study, we chose a qualitative storytelling inquiry research design. This was in
keeping with standard research practice of storytelling studies (Boje, 1991, 1995, 2001;
Czarniawska, 2004; Gabriel, 2000). The focus of the study was to ascertain the stories of
the most subjugated segment of Pakistani society, involved in the soccer ball industry:
women soccer ball stitchers.
Main sources of data were interviews and documents. Between November 2000 and
October 2003, the second author (hereafter SA) made three extended field trips to Sialkot,
Pakistan. Interviews were conducted with Pakistani soccer ball factory owners, staff of
NGOs working on the project to eliminate child labour, male and female soccer ball stitch-
ers as well as children affected by the project. Each interview was semi-structured and
lasted on average about 80 minutes. The longest was about three hours. A total of 110
respondents participated in the interviews, with 50 of them being women stitchers. At the
close of each interview, stitchers were asked questions about exercising agency (voice)
and any constraints experienced in doing so. NGO personnel were asked about the visible
absence of stitchers’ voices in the design and implementation of the project.
Apart from interviews, several other sources of information were used, including
newspaper stories, internal organizational documents (emails, faxes, memos, letters, proj-
ect evaluation reports, meeting minutes), US Department of Labor (DOL) hearings, legal
archives, public fact-finding reports, internet documents, and surveys published by the
child labour project organizations. In total, this comprised 10,000 text pages. It was sup-
plemented by video documentaries about Sialkot child labour issues, and a quantitative
database of an NGO with basic demographic information on 2,000 stitching families.
The aim of our data analysis was to contrast the perspectives of Nike, other global soc-
cer brands, and their trade associations with the accounts told by members of stitching fam-
ilies. The intertextuality of documents and interviews allowed for corroboration of threads
(or themes) across storied accounts among multiple sources. This was done in an iterative
fashion, comparing what stitchers were saying against the other accounts. Next we exam-
ine the basic findings of the study as they relate to branding and entrepreneurship.
Nike’s CSR and Sialkot Child Labour
Nike is a recognized entrepreneurial organization, and Phil Knight, the founder, is known
as an entrepreneur who changed the sports apparel industry. As the mass media brought
child labour in soccer ball making to the attention of the world, the heroic entrepreneur
story was in jeopardy. Nike’s branding of itself as heroic adventurer needed a facelift.
Nike, and its apologists, therefore branded its CSR initiative as a form of Third World
mother and child emancipation. This served to return the romantically heroic entrepre-
neurial face to Nike and Phil Knight. We will review, briefly, how the controversy
emerged, and then trace the responses of various parties involved.
The Child Labour Crisis
On April 6, 1995, CBS aired at prime time a short documentary on the soccer ball indus-
try in Sialkot, “Children at work” (CBS transcripts, 1995). The CBS story forcefully
brought to the fore the unsettling irony of poor children at work so rich American kids
could play. The CBS story was picked up by the other mass media both in the US and
abroad. The result was an international media firestorm, doling out a blitz of moral penal-
ties to the global soccer ball industry for being found in bed with child labour.
Our next point is controversial. We believe that, from the villagers’ point of view, (and
studies conducted within Pakistan), the stories being framed about widespread child
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NIKE, CHILD LABOUR, AND PAKISTAN’S SOCCER BALL INDUSTRY 13

labour exploitation were grossly exaggerated. Specifically, in 1995, the Human Rights
Commission of Pakistan published a comprehensive report challenging the veracity of
allegations being made about the soccer ball industry. Such reports agreed that wages
were exploitative, but refuted the main charges leveled by the media: the prevalence of
bonded child labour, workplace beatings of children, children working predominately in
unsafe workshops for long hours, and differential wages for children and adults. Children
were actually working part-time, earning the same rates as adults, in the comfort of their
homes with their families who were all jointly stitching the soccer balls.1
The problem, from a narrative perspective, is that once a story (even one with inaccu-
rate or exaggerated claims) is treated as gospel, it is very difficult to reverse the effect of
a media firestorm. The media did not consult the village workers, letting them voice their
side of the story, nor did the media wait for more rigorous and systematic study before
demanding change. Momentum builds legitimacy to just go with the more popularized
version of the story (without counterstory consideration). A snowball effect ensued. For
example, on June 28, 1996, with official endorsement of the US Department of Labor and
prominent politicians (e.g., Joseph P. Kennedy II), a campaign was launched to bring an
immediate end to child labour in Sialkot’s soccer ball industry. The campaign came to be
known as the “Foul Ball Campaign” coordinated by the International Labor Rights Fund
(ILRF) (a Washington-based labour advocacy group) in cooperation with a network of
labour, consumer, religious, sports, and child advocacy groups (US Department of Labor,
2003).
Nike Responds?
Nike’s initial response to the crisis is difficult to trace given contradictory statements
issued by it on this matter, at various points in time. For example, from a written deposi-
tion to the US Department of Labor hearings held on June 28, 1996, Nike seems to have
begun sourcing production of soccer balls in Sialkot in 1995 (US Department of Labor,
1996). The deposition states that after they began soccer ball production in Sialkot (i.e.,
perhaps in the Fall of 1995), Nike “implemented more steps to protect worker rights than
companies that have operated in the country for decades” (cited in ibid.). The deposition
goes on to state that at Nike’s insistence its supplier (Saga Sports) began to ensure child-
free production by establishing stitching centres that could be easily monitored, unlike
homes in disparate villages, to ensure that no children were involved in the production.
The story given by Phil Knight, the founder of Nike, gives a different version. Knight,
speaking to the National Press Club on April 12, 1998, said:
In 1994 Jack Beecraft of our Singapore office flew into Sialkot,
Pakistan to check out the first ever Nike soccer ball order. What he
found was conditions that were not acceptable. What he found was the
conditions that did not meet Nike’s code of conduct, and were not con-
trollable, because essentially for 50 years the Pakistan soccer ball indus-
try had been made up of a process in which the ball uppers were sent
out into a cottage industry into—with very little controls on who the
upper were sewn by, and they in fact, were sewn by children, old
_________________________
1. The validity of the Human Rights Commission of Pakistan’s report was corroborated by evidence on Sialkot’s
soccer industry published prior to the crisis (e.g., Weiss, 1991) as well as later by numerous studies and sur-
veys done by other independent organizations such as international NGOs (e.g., Save the Children and ILO),
international trade unions and their Pakistani affiliates (e.g., International Confederation of Free Trade Unions
and All Pakistan Federation of Labour) and local organizations (e.g., Raasta Development Consultants).
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14 BOJE AND KHAN

people, blind people, under all kinds of bad conditions. Basically seeing
this he said that is not acceptable under the way we do business, and he
and Mr. Sufi got together in Beverton, Oregon three months later to
hack out a different way of making soccer balls in Pakistan. (Cited in
Federal Document Clearing House, 1998)
Phil Knight’s version would tend to indicate that the response began as early as 1994.
However, on another occasion, at roughly the same time he gave the above speech, Phil
Knight seems to have shown little concern over work-age issues. In the documentary film
The Big One, the following conversation occurred between Michael Moore, the film-
maker, and Phil Knight:
Moore: “Twelve-year-olds working in factories? That’s okay with
you?”
Knight: “They’re not 12-year-olds. The minimum age is 14.”
Moore: “How about 14, then? Doesn’t that bother you?”
Knight: “No.” (Cited in Miller, 1998)
Traces of the attitude displayed in the above interview can be found as far back as
1996 in Nike, suggesting that Knight was not making a once-off statement but articulat-
ing a long-held attitude in Nike. For example, when confronted in 1996 with evidence that
children were involved in the making of Nike soccer balls, Nike spokeswoman, Donna
Gibbs, defended the company, saying, “it’s an ages old practice [and] the process of
change is going to take time. Too often, well-intentioned human rights groups can cause
dramatic negative effects if they scare companies into stopping production and the kids
are thrown out on the street” (cited in Schanberg, 1996: 42). In that same interview, she
had acknowledged that her company had not implemented, till that point, its stated goal
of child labour free soccer ball production. Given that Nike did not contest this account of
their corporate behaviour by Schanberg, this seems to suggest that such views were indeed
articulated and the quotes were not taken out of context. Also, in other places Gibbs
expressed Nike’s gradual approach to the child labour issue by stating that the problem is
a large one—in her words, “Child labour is really an epidemic in Pakistan” (Denby,
1997)—which by implication would mean that a substantial expense of time would be
needed to address it, reflecting a position that was already expressed explicitly in
Schanberg’s interview.
We tend to get three different stories from these Nike sources, suggesting that if we
were to find additional accounts of Nike’s own response to the child labour crisis, we
would perhaps also find more different stories of Nike’s response to this crisis. Based on
the texts, at hand, dating Nike’s response seems to result in a range of anywhere from
1994, predating the media crisis, to around fall 1995, a few months after its outbreak.
Also, as can be seen, accounts differ on the urgency felt by Nike in tackling this matter,
with Phil Knight’s and Department of Labor versions indicating that when the company
became aware, it changed course immediately, while the Gibbs version indicates that the
course reversal was a gradual one.
All the accounts do agree, however, on one count. None of them contain any evidence
to suggest that Nike provided any material assistance to its supplier, Saga Sports, as the
latter went through the costly process of building child-free stitching centres with health
dispensaries and other such worker facilities.
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NIKE, CHILD LABOUR, AND PAKISTAN’S SOCCER BALL INDUSTRY 15

The Sialkot Child Labour Project


Nike moved through its industry associations (e.g., World Federation of Sporting Goods
Industry [WFSGI]) to stave off consumer pressure by enacting an industry-wide solution
to the child labour problem. On February 14, 1997 at the SuperShow (one of the two annu-
al international trade fairs of the sporting goods industry) in Atlanta, Georgia, the global
soccer ball industry unveiled at a press conference its “final solution” to the child labour
crisis that had been plaguing it for almost two years. The industry announced “The Atlanta
Agreement,” which stated that a project, the Sialkot Child Labour Elimination Project,
would be jointly established by the Sialkot Chamber of Commerce and Industry (SCCI),
the United Nations Children’s Fund (UNICEF), and the International Labour Organization
(ILO) to phase out children from Pakistan’s soccer ball industry in the next 18 months.
The US Department of Labor would be its main donor.
At that press conference, Nike’s industry association representatives claimed the high
moral ground, stating that this CSR initiative reflected industry’s own unswerving com-
mitment to ethical business practices. Stephen Rubin, WFSGI President, in his speech,
made the following remarks:
The soccer community has asked for reassurance that child labour has
no place in producing the soccer balls used in neighbourhood sandlots
or national stadiums. This new partnership is an unprecedented
response to that concern. For the first time ever—in any industry, in any
part of the world—local manufacturers, global brands and internation-
ally respected children’s organizations have agreed to work together to
address child labour in a responsible manner. (Cited in PR Newswire,
1997)
The Sialkot Child Labour Elimination Project announced at that press conference began
to be implemented in October 1997 (ILO, 1997). Child labour was to be phased out by
shifting the stitching of balls, the activity in which children were involved, to monitor-able
stitching centres (ibid.). The stitching centres are factories or workshops that, unlike vil-
lage homes, could be more readily accessed by ILO monitors in order to verify that no
children were involved in stitching soccer balls. The project also incorporated a social
protection program. Its purpose was to take care of the displaced child stitchers and their
affected families by creating alternative income opportunities, largely through micro-
credit schemes and vocational training (e.g., tailoring) (Crawford, 2001). Education of
children was to be provided either by enrolling them in government schools or setting up
one- to three-room education centres where they would be educated up to Grade 5 on a
few-hours-a-day basis (Save the Children, 2000; ILO-IPEC, 1999; Bunyad Literacy
Community Council, 1998).
Two years later, Nike and the soccer ball industry announced mission accomplished
when US President Bill Clinton gave it the following ringing endorsement:
Let me cite just one example of the success being achieved, the work
being done to eliminate child labor from the soccer ball industry in
Pakistan. Two years ago, thousands of children under the age of 14
worked for 50 companies stitching soccer balls full-time. The industry,
the ILO and UNICEF joined together to remove children from the pro-
duction of soccer balls and give them a chance to go to school, and to
monitor the results.
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16 BOJE AND KHAN

Today, the work has been taken up by women in 80 poor villages in


Pakistan, giving them new employment and their families new stabili-
ties. Meanwhile, the children have started to go to school, so that they
[when] come of age, they will be able to do better jobs raising the stan-
dard of living of their families, their villages and their nation. I thank all
who were involved in this endeavour and ask others to follow their lead.
(Clinton, 1999)
Clinton’s speech sums up the CSR storytelling spun by Nike and its industry associa-
tions. Child labour was identified by the media and industry took action to remove it.
Others should “follow their lead.”
In sum, Nike Corporation (and the Atlanta Program organizations) came off as caring
and responsible entrepreneurs providing schooling to Third World children and jobs for
their mothers. Nike’s CSR initiative was to spin the controversy, branding themselves as
mother and child emancipators. This rescued the romanticized and heroic entrepreneurial
face of Nike’s branding from the media firestorm. Next, we reanalyze the sides of the
story presented, from a postcolonial perspective. We turn next to our analysis of the imple-
mentation of the Sialkot Child Labour Elimination Project.
Telling the Postcolonial Side of Nike Story-branding
In Nike’s CSR story-branding, the focus was on doing something beneficial for the moth-
ers, fathers, and children stitching soccer balls in their homes. A postcolonial question
needs to be asked: what became of them? We contend the families are the subalterns of
the storytelling. President Clinton mentions them in passing, but no voice is given them
in his or the other accounts reviewed thus far.
Reviewers and readers may be wondering about our intent here. We are not arguing
that child labour is a good thing, nor are we making the case that the Pakistan soccer ball
industry must do away with stitching centres and go back to the old way of production,
village families stitching soccer balls in the privacy of their homes. Rather, we are mak-
ing the case that corporations, agencies, and anti-child labour activists and exposé jour-
nalists did not adequately investigate or provide a forum for villager families to tell their
side of the story.
Therefore, we next attempt to reclaim the voices of the families by talking to them,
and to NGO personnel who were on the ground doing the work of the Atlanta Program.
What we learn from their reflexivity is that the story-branding and the Atlanta Program
had destructive consequences for the stitching families.
The authors’ move is to claim an “answerability ethic” (Bakhtin, 1990, 1991). There
is a question of being answerable for the story told, for how it brands (characterizes)
workers, leaves them voiceless in program design, and fails to examine how corporate
(and apologist) storytelling has dire consequences for the voiceless workers. Corporations
and their apologists, as well as the media, are in a powerful position, being able to tell and
disseminate highly compelling stories that bring with them demands for action (interven-
tions into lives of the Other, i.e., the poor and powerless in the Third World).
The project turned out to be largely a top-down affair. Most of NGO personnel inter-
viewed were of the opinion that there was effectively no participation of the local stitch-
ing communities in the project. To illustrate this point, an NGO worker stated:
Not consult them in design, just in implementation… Guess involve-
ment highly restricted to just your choice whether you want to go to the
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NIKE, CHILD LABOUR, AND PAKISTAN’S SOCCER BALL INDUSTRY 17

doctor or you would like the doctor to come to you. That is the extent
of their participation. Some [NGOs] do not even ask them these ques-
tions but just give them directives.
Internal minutes of Project coordination committee (PCC) meetings referred to stitch-
ers as “targets,” things to be acted upon, never as persons who should be directly partici-
pating in the PCC deliberations, which were, after all, what everyone says they were con-
cerned about. In the internal records reviewed, when stakeholders were mentioned, the
“stitchers” were conspicuously absent from all their lists. An internal project communica-
tion strategy draft, for example, lists the following stakeholders to whom information
about the project should be constantly communicated: “Firstly the media, both national
and international, who in turn, serve the public. Secondly, the various interested NGOs,
such as human rights groups, employers’ organizations, trade unions, etcetera”
(Husselbee, 1997).
Not only in internal documents were stitchers absent, but also often in public docu-
ments. For example, in Save the Children’s public report, stitchers were noticeably absent
from a listing of relevant project stakeholders: “The findings have been shared with all the
stakeholders including international brands, trade unions, the media, human rights groups,
NGOs, and government agencies” (2000: 13). Given that stitchers, in the mental frame-
works of the policymakers, were either inanimate “targets” or simply absent referents, the
conclusion of Save the Children’s project evaluation report concerning stitcher participa-
tion need not unduly surprise us: “In Sialkot, a number of stakeholders did not play strong
roles within the partnership. These are: the community (including working children and
their families), Trade Unions and Government” (Crawford, 2001: 12–13).
There is a major answerability issue here: stitchers had been kept largely clueless
about all that was taking place in their name. When the second author would ask them to
describe the project, the stitchers answered with blank stares. Their alienation from the
project sometimes took on surreal proportions. For example, parents and children sitting
in a project-established Non-Formal Education Centre (NFE) (1–3 room affairs where
children were imparted basic education up to Grade 5 on a part-time basis) did not know
that the centre was established as part of the child labour project, much to the embarrass-
ment of the NGO field worker that had helped to establish the NFE and had impressed
upon the second author prior to arrival at the NFE how much work his NGO had done in
imparting to stitcher families information about the project. Similarly, the stitchers
belonging to a microcredit community organization could not for the life of them provide
any information about the project, especially its origin and scope.
While the project was imposed from above, it did produce the results that Western con-
sumer sentiment had bayed for. The project had by 2003 been successful in phasing out
children from 95% of all soccer ball production (IMAC, 2003). It had effectively made
the industry child labour-free and in that process won international acclaim (Clinton,
1999). But the victory ball came at the expense of the stitching families, particularly
women.
Project Consequences on the Stitchers
To assess the impact of the project on women stitchers, it is important to first depict their
socio-economic condition, which is intricately tied to their profession: soccer ball stitch-
ing. This profession is at the lowest rung of the soccer ball production supply chain lad-
der in terms of wages. Even if two parents were stitching soccer balls, satisfying basic
needs is an ever elusive prospect. As a Save the Children report, based on a survey of 100
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18 BOJE AND KHAN

villages, stated, “Both adults and children pointed out that most adults were working as
hard as they could but still could not make ends meet” (1997: 2).
Women stitchers thus live an impoverished existence even though the balls they stitch
generate riches for their Sialkot manufacturers and their international brands. To this eco-
nomic plight is added the burden of the sheer disdain with which stitching work is looked
upon by village culture. Surveys from various reports attest to this fact. For example, a
Punjab Rural Support Programme report states as one of its findings that “stitching is con-
sidered an inferior source of income” (Punjab Rural Support Programme, 2002: 5). But
again, how is this cryptic statement digested in the existence of those who endure it? The
women stitchers that were interviewed felt visibly ashamed at being soccer ball stitchers.
This was apparent in groups that contained more affluent women who in the group setting
would boast that no members of their family stitched soccer balls.
The lot of women stitchers, and stitching families in general, is quite impressively cap-
tured in the following words of a widow of a leading Sialkot soccer ball baron, who after
conducting a door-to-door survey of 403 stitchers comprising one-third of her stitching
workforce, the majority of whom were women (56.4%), said in a speech to her family
firm’s international buyer:
The stitching families frequently took advance payment from the con-
tractor as they received no social security cover, no provident fund, no
pension fund provision, no bonus payment, no profit sharing… The
income from football stitching was simply too little to cater for any
medical emergency. With great difficulty could they maintain all their
children in school and pay for books and uniforms. Almost all had
debts. I was informed that help with educational expenditure and med-
ical care was the most pressing need, followed by others such as: repair
work to their homes damaged during the rainy season, dowry for the
girls when they get married, toilets, a pump, fans, electricity meter.
(Khawaja, 2002: 2)
The world of women stitchers is, thus, one of necessity and desperation. Not surpris-
ingly, the burning issue for women stitchers is a living-wage. Surveys conducted on stitch-
ers, both men and women, from 1997 onwards attest to this statement. Important work-
place issues, such as living-wage, were kept off the agenda. The only focus was to get
children out of the industry.
As a remedy, a trickle-down approach was deployed using microcredit, school enrol-
ment drives and informal education centres. The problem, however, is that such solutions
ended up missing the vast majority of the women stitchers and their families (Crawford,
2001). Moreover, it seems that none of these social protection programs could be made
sustainable; the education centres have begun to be wound up, so their impact, while ben-
eficial for the few families who came into their safety nets, are transient at best for the rest
of the women stitching population. With the income generation and education programs
having largely missed the bulk of stitching families that were affected by the project, the
lot of the women stitchers seems not to have improved in any substantive way by all the
project work carried out in their name to benefit them. Most importantly, the project, by
establishing monitorable stitching centres, in which the International Labour Organization
(ILO) could check to see whether children were stitching, actually worsened their plight.
One has to ask if the Atlanta Project is answerable for the current situation. The new
monitorable centre regime exposed women stitchers to verbal abuse. Working at home
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NIKE, CHILD LABOUR, AND PAKISTAN’S SOCCER BALL INDUSTRY 19

gave them privacy and provided them with the convenience of not exposing themselves
as soccer ball stitchers, thereby avoiding the slurs and the derogatory comments of their
fellow villagers. Now having to commute to work, it was difficult for them to hide that
they belonged to the lowly soccer ball-stitcher class. One woman stitcher, nostalgic about
home-based stitching, sighed, “Before you could earn with respect at home.” Respect is
important for women and the visible daily commute to centres opened up their self-respect
to scathing verbal assaults by villagers, particularly men. One woman stitcher, despite her
precarious economic situation, left working in centres because she could no longer toler-
ate such abuse. She recollects her centre stitching experience as follows:
If we go to factories, people say nasty things about us. [They say]
Putting red lipstick, going out, what do you have in mind. [We] do it
[stitching] out of necessity. Common feeling [in villages] is that if one
cannot do anything [one is useless] then stitch. No respect in village.
Home-based stitching thus saved women from verbal abuse. At times, it also provid-
ed them protection from physical and sexual abuse. One former Save the Children officer,
a Sialkot village resident himself, points out that sexual harassment, including rape, was
as an important factor that made women overwhelmingly refuse work at centres, even at
the pain of severe economic deprivation:
[A] big stitching centre of [organization name concealed] that provided
pick and drop facilities. We told women why not go there. But women
were being exploited there, sexually. [The centre] had all male staff.
Had middle woman would act as middle person. [She would] get girls
to agree and then [the girls] taken to head office. This information went
back to villages. Women not want to work. They reacted by stopping to
come.
The women stitchers who made the hard migration to stitching centres, whether in
their own villages or in remote locations, form at best maybe 20% of the pre-project
women stitching workforce. The remainder refused to make such a migration out of a
variety of predispositions, the three most prominent being self-respect, obligations at the
home, or due to permission not being given by their men folk to commute to work.
Regardless, their stance has come at a vicious material cost to them. A woman stitcher at
her home angrily said:
Wages are poor. We have children. Work hard to earn bread. We get
money on times [from subcontractor] sometimes. Ten years [I have
been] stitching. If I protest, there are 1000 people willing to stitch.
[Subcontractor will] say fine. You do not want to work, [I will] give it
to others.
Another woman stitcher described the drastic drop in orders coming to the village in the
following way: “Before we used to get 2 balls, now get 1 ball. If before we get 1 ball, now
make half.”
Though wage rates initially increased for male stitchers at centres, they were not
enough to compensate for the loss of income suffered by women and children now unable
to stitch. Overall, household incomes fell in absolute terms. All this happened while the
project received international accolades for its humanitarian concerns and the US presi-
dential seal of approval. The women stitchers would have truly wondered if they indeed
were the ones being described by Bill Clinton in his ringing endorsement. This is brand-
ing’s imperial face.
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20 BOJE AND KHAN

Discussion
Our case study shows that while Nike and other global concerns branded themselves
through their story-branding as socially responsible actors, they were simultaneously
branding Third World workers (i.e., soccer ball stitchers, particularly women) in a man-
ner that was distorting their reality and denigrating their concerns (e.g., of a living-wage)
as superfluous and irrelevant, not even fit for mentioning. This is what we call the impe-
rial face of branding. Like branding cattle, the poor soccer ball stitching families were
branded with identification markers hurtful and injurious to them, but serviceable to their
“masters.” They were branded as recipients of a “civilizing mission” with women going
to work and children going to school. They were branded as being rescued from the
scourge of child labour. This branding was required so that Nike could parade its brand as
a responsible corporate citizen celebrating freedom for women and children. That the
brand was the proverbial emperor not wearing any clothes has gone without commentary
during the past decade, for the voices that could shatter this ongoing illusion had been
placed at the margins and subalternalized.
This seemingly imperial face of branding requires subalternization (women-stitcher
voicelessness) to perpetuate the image-management strategy. It requires a high imbalance
of resources between the limited voices of workers and the well-funded voices of corpo-
rate entrepreneurs. The stitchers also lack access to legal/political, cultural and economic
resources; and, to our knowledge, no attempt was made by NGOs, for example, to atten-
uate this situation. The “foreigners” could fly into Sialkot but representatives of the stitch-
ers could not readily travel to the ILO offices in Geneva to convey their concerns and
grievances. Communications regarding the design and implementation of the project were
conducted in English and little or no effort was made to inform the stitchers of the inter-
national controversy and the nature of the response being prepared. Lacking any kind of
capital, symbolic or material, the largely illiterate stitchers were handicapped in gaining
access to, let alone becoming involved in, agenda-setting processes and negotiations over
their fate.
Readers may be interested in recent developments in Sialkot’s soccer industry. On
November 20, 2006, Nike announced it ended production with Saga Sports, its Pakistani
soccer ball supplier.2 Two child workers were found to be making soccer balls: “Nike dis-
covered widespread unauthorized outsourcing of its products from Saga facilities, result-
ing in the production of Nike soccer balls inside homes in the Sialkot area” (ibid.). On
May 24, 2007, Nike announced it had resumed production in Pakistan.3 The new subcon-
tractor factory, Silver Star Group, made an agreement to not use any part-time workers (or
home-based producers) in its soccer ball manufacture. We point out that, once again, the
village families (workers) did not have a voice in working out the arrangements.
There is another more invisible form of power at work. The post-1492 encounter of
Europe with the Third World, over half a millennium into its running, has established cer-
tain scripts and certain ways of relating to the Third World that are taken for granted in
the dominant Western culture as normal (Blaut, 1993). One such script is that it is normal
_________________________
2. See Nike Press release dated November 20, 2006:
http://www.nike.com/nikebiz/news/pressrelease.jhtml?year=2006&month=11&letter= [Retrieved on August
9, 2007].
3. Nike Press Release dated May 24, 2007:
http://www.nike.com/nikebiz/news/pressrelease.jhtml?year=2007&month=05&letter=h [Retrieved on
August 9, 2007].
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NIKE, CHILD LABOUR, AND PAKISTAN’S SOCCER BALL INDUSTRY 21

for Third World matters to be decided in Western centres (Said, 1978, 1993). The Ottoman
Empire was severed in meetings in Paris. The Sialkot village family economy was ripped
apart in decisions taken in Geneva, Zurich, London, Atlanta, and Munich, to name a few
of the cities where the blueprint of the project was articulated. The agreement that ushered
in the project was called the “Atlanta Agreement,” not the “Sialkot Agreement,” even
though the agreement was primarily about Sialkot’s poor soccer ball stitchers. Imagine
how odd it would look if an equally intrusive project that would disrupt something so pri-
vate as the household division of labour in a major North American or European city was
called the “Sialkot Agreement,” where all the key decisions were made by individuals nei-
ther from Europe nor North America. That the Atlanta Agreement does not sound odd to
us only testifies to the hold the culture of imperialism has over our common sense. As long
as that imperial common sense holds, so too will subalternization of Third World voices.
Decisions will continue to be made as a matter of routine and normalcy, far away from the
reach of “natives.” The imperial face of branding will continue to be enacted without hav-
ing to worry about overcoming insurgent voices from below. They simply will not make
it to the gate.
This link of imperialism and entrepreneurship has, to our knowledge, not been made
or explored in any explicit fashion in the literature that discusses entrepreneurship and
branding. Our analysis leads us to propose that branding CSR stories that subalternize
Third World voices are crucially dependent on imperial motifs. Without the imperial his-
tory that socialized us into a Eurocentric perspective with Old and New Europe (North
America) as the key decision-making centre for the rest of the world (Blaut, 1993), we
find it difficult to imagine that the “Atlanta Agreement” pronouncing on Sialkot could
have been conceived with so little awkwardness and so little participation from the peo-
ple of Sialkot. Without the cultural residue of imperialism, it would appear as nonsensical
as our hypothetical Sialkot Agreement.
While we suffer distress on account of the CSR subalternizing stories told by Nike and
others propping themselves on the culture of empire, we are horrified when we contem-
plate that doing so helps reproduce and circulate the culture of empire. To the extent that
Nike’s stories embody imperial attitudes (e.g., treating as unremarkable the absence of
“natives” from decision-making arenas which are kept far from the Third World), they
contribute towards what we call, slightly paraphrasing Hannah Arendt, “the banality of
empire.” Such attitudes find a new lease being circulated and presented not just by gov-
ernment discourse but by the powerful image machineries of Nike and other global
brands. The constant repetition and ubiquitous presence of these stories churned out by
corporate image machines make imperial attitudes found in them so commonplace and
banal that they are taken for granted. In this fashion, we feel that the Third World brand-
ing in CSR stories may well be contributing to making the Third World vulnerable to
Western aggression by normalizing and making self-evident the “right” of the West to
intervene and speak for the Third World—a right that is rarely questioned in respectable
circles of policy and debate. If Atlanta can decide on Sialkot, can not Washington decide
on Iraq? The question is not “if” we can intervene but “when.”
Moreover, such storytelling is flawed when the voices of the workers are ignored. We
propose a more productive direction for concerns of ethics regarding Nike and its prac-
tices (production and branding). Our study identifies an additional dimension in entrepre-
neurship revealed through story-branding: the ethical inquiry into corporate answerabili-
ty for the stories of Third World workers being branded. Entrepreneurs need to be held
Boje-Khan.qxp 9/12/2008 3:11 PM Page 22

22 BOJE AND KHAN

answerable for the highly compelling stories they tell, if indeed as we argue, such
branding-stories do contribute to the imperial project through branding the people in the
Third World to make them voiceless and permit their exploitation. Our study prompts that
key moment of reflexivity: “I am the only one who can act, and if I don’t act, no one will
act. I am therefore complicit with what will happen next to the Other.” In short, when Nike
and the members of the Atlanta Program are the ones who can act, and if they don’t act,
to ascertain the voice of the villagers in their own view of work, then those organizations
are complicit in what has happened to the Other. We therefore charge that the Atlanta
Agreement changed the labour practices, but not in ways that have benefited village
labour. The Atlanta Agreement is therefore accountable, and responsible, for the conse-
quences of its manner of storying-for-the-Other while the Other remained voiceless, and
there needs to a redress.
Conclusion
Our paper brings into conversation two hitherto unconnected literatures: postcolonialism
and branding in entrepreneurship studies. We examined from a postcolonial subaltern per-
spective a particular case of a CSR initiative in the Third World undertaken by Nike as
part of its branding efforts. Doing so, we feel we have made the following contributions.
First, we have expanded the margins of our knowledge on entrepreneurship and brand-
ing by making it more inclusive. We have opened it to the stories of Third World voices,
in ways that will make the literature more emancipatory than the current situation. We
hope this research effort will reduce the parochialism found in entrepreneurship studies
that has largely ignored the Third World, especially the poor situated there.
Incorporating Third World voices has given us some new insights into entrepreneur-
ship and branding. Story-branding helps us realize that entrepreneurship studies seem to
be situated in a branding tunnel fixated on branding products and entrepreneurs, forget-
ting the world outside the tunnel. The CSR initiatives, undertaken as part of a branding
strategy by corporate entrepreneurial concerns, do not just help brand products, they end
up branding a whole lot more (e.g., Third World workers). Examining story-branding
reveals another face to branding activity other than the face of freedom (i.e., positive asso-
ciations of helping Third World workers) commonly given to it. We begin to see a darker
and more menacing aspect to entrepreneurial branding, forged through stories about
benign and constructive CSR initiatives in the Third World, when we refract them through
the stories of voiceless Third World workers (the subalterns). From the subalterns, we see
that CSR stories brand Third World labour, give them identifying marks that distort their
realities and deceive Western consumer sentiment by branding Third World workers as
happy and thankful for CSR’s civilizing mission. Sweatshops thus appear as workshops
and the entrepreneur is seen as a liberator and not a jailer of Third World labour. A hege-
monic order is created and the exploitation of the Third World continues. We bring to sur-
face this imperial face of corporate entrepreneurial branding hitherto neglected and under-
theorized in the literature.
Reflecting on branding’s imperial face leads to other contributions in the paper. We see
that this imperial face is dependent on subalternizing Third World workers whose voices
can contest its representations. This subalternization requires power not just material
(asymmetrical distribution of resources) but also cultural. And the cultural power it seems
to draw upon is the culture of imperialism. The culture provides the scripts by which it is
normal to ignore the “natives” and to make decisions about them in the West. We feel that
this connection and the relationship between imperialism’s attitudes and branding in terms
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NIKE, CHILD LABOUR, AND PAKISTAN’S SOCCER BALL INDUSTRY 23

of how each depends upon and reproduces the other has not been articulated in an explic-
it fashion.
This connection is an exciting one for it leads to another contribution of our paper
which is to identify an additional dimension in entrepreneurship story-branding: the ethi-
cal inquiry into corporate answerability for the stories of Third World workers being
branded. To the extent that entrepreneurs brand the Other (Third World workers) in their
for-the-Other stories in a manner that the Other remains voiceless while her realities are
distorted, her priorities are ignored, and her dignity is injured, these entrepreneurs are
accountable and responsible for these consequences produced by their storying. And there
needs to be a redress.
In terms of future directions, the crucial question for story-telling answerability is: how
can voiceless workers gain voice? How can the subaltern speak? The real heroines are the
working women in the apparel, footwear, and sports equipment factories. Can No Sweat
and Blackspot provide real alternatives to branding where Third World workers have nar-
rative control and are not passive commodities fabricated for enhancing brand equity? Can
the imperial face of branding be replaced by a new one based on solidarity and compas-
sion? These are the questions to explore to bring about a new face to entrepreneurship and
branding. A face that does not hide the horrors of a young woman worker in the Third
World, but reveals a face in which all of us can see our most decent impulses.
Acknowledgements
Canadian International Development Agency (CIDA) and the Social Sciences and Humanities
Research Council of Canada (SSHRC) funded research for this study. We gratefully acknowledge
the helpful comments of this journal’s editors and reviewers.

Contact Information
For further information on this article, contact:

David M. Boje, Endowed Bank of America Professor, College of Business, New Mexico State
University-Grants, Grants, New Mexico, USA.

Tel.: 505-532-1693/Fax: 505-646-1372


E-mail: dboje@nmsu.edu
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Bouchard-Dion.qxp 9/12/2008 3:13 PM Page 25

Growers and Facilitators: Probing the Role of


Entrepreneurs in the Development of the Cannabis
Cultivation Industry
Martin Bouchard, School of Criminology, Simon Fraser University,
British Columbia
Claude B. Dion, University of Montreal, Montreal, Quebec
ABSTRACT. Hydroponics is one the fastest rising sectors in the horticultural industry. It is, however, a con-
tested one. The problem with the industry is that the products sold by hydroponics entrepreneurs are not only
being used to grow tomatoes or cucumbers, but also potentially illegal produce, such as cannabis. In this paper,
we explore the extent to which cannabis and hydroponics entrepreneurs have a symbiotic relationship. We first
take a comparative look at the size and the development of the cannabis cultivation and the hydroponic retail
industries over a 30-year period (1977–2006). Findings show that both industries followed a similar growth
curve which started in the early 1990s, and slowed down in early 2000. A second set of findings shows that the
mutual relationship between both industries does not necessarily translate into deviant management practices for
the hydroponics entrepreneurs.
RÉSUMÉ. La culture hydroponique est l’un des secteurs les plus dynamiques de l’industrie horticole, mais c’est
aussi un secteur contesté. Le problème est que les produits vendus par les entrepreneurs hydroponiques sont
utilisés pour cultiver non seulement des tomates et des concombres, mais aussi des substances qui peuvent
s’avérer illégales, telles que le cannabis. Cet article examine dans quelle mesure les entrepreneurs en cannabis
et en culture hydroponique opèrent en symbiose. Nous jetons d’abord un regard comparatif sur l’ampleur et le
développement des industries de la culture du cannabis et des marchés hydroponiques de détail sur une période
de trente ans (1977–2006). Les résultats montrent que dans les deux cas une courbe de croissance similaire a
commencé au début des années 1990, pour diminuer en même temps au début des années 2000. Un second
ensemble de résultats révèle que la relation mutuelle des deux industries ne se traduit pas nécessairement en
procédures de gestion déviantes pour ce qui est des entrepreneurs hydroponiques.

Introduction
Hydroponics is one the fastest rising sectors in the horticultural industry. It is, however,
a contested one. The main controversy does not revolve around the entrepreneurs involved
or the nature of the products they sell. It is, after all, a widespread mode of agriculture
used by farmers to grow flowers and vegetables, as well as a perfectly legitimate hobby
for a significant proportion of home gardeners. The problem with hydroponics entrepre-
neurs is that the products they sell are not only being used to grow tomatoes or cucum-
bers, but also potentially illegal produce, such as cannabis.
Cannabis is a plant and, in many ways, the techniques required for its cultivation are
similar to those used for growing other plants or vegetables. Hydroponics is an intensive
form of agriculture that brings essential nutrients directly into contact with the growing
plant in a water solution (Roberto, 2005). Hydroponics has many advantages over soil-
based techniques, including higher yields per plant, the potential for top-quality produce
and the possibility of growing year-round in a controlled environment. Cannabis growers
in industrialized countries recognized these advantages, and adopted hydroponics in

Journal of Small Business and Entrepreneurship 22, no. 1 (2009): pp. 25–38 25
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26 BOUCHARD AND DION

increasing numbers in recent years. Recent research in the province of Quebec, Canada,
showed that close to 30% (or about 15,000) of cannabis growers used hydroponics and
that, as a group, they accounted for more than 50% of cannabis production in the province
(which represents more than 150 metric tons per year; see Bouchard, 2007a).
Cannabis growers are clients of hydroponics shops, but the importance of their busi-
ness for these stores is unknown. The nature of the link between cannabis entrepreneurs
and hydroponics entrepreneurs is also subject to debate. For law enforcement representa-
tives, the cannabis and the hydroponics industries are one and the same (Review Panel,
2002). Alternatively, hydroponics industry representatives insist on the legitimacy of their
businesses, making special efforts to distinguish themselves from the cannabis industry
(Hassall and Associates, 2001; National Competition Policy Review, 2002; Paul, 2003).
But even legitimate hydroponics industry representatives acknowledge that certain store
owners maintain ties to the cannabis industry: “Hydroponics retailers are shop fronts to
the (cannabis) industry, and they need to change their language and some of their business
practices if they want to attract genuine home gardeners” (Paul, 2003).
The matter is complicated because both the cannabis and the hydroponics entrepre-
neurs benefit from one another. An argument can be made that the swift and widespread
development of the cannabis cultivation industry would have been difficult, if not impos-
sible, without the presence of hydroponics shops. These shops act as legal facilitators for
cannabis entrepreneurs, providing them with an easy access to the necessary equipment
and supplies, but also with advice on how to use them. The term “facilitator” is used in
the criminological literature to describe a participant (legitimate or not) who provides spe-
cific operational services to entrepreneurs of the irregular economy (Morselli and
Giguere, 2006). The difference with the current study is that hydroponics entrepreneurs
and their employees are not necessarily knowingly assisting cannabis growers. As for
legitimate hydroponics entrepreneurs, the cannabis clientele represent a business oppor-
tunity to be (legitimately) exploited. It is therefore in the economic interest of both types
of enterprises that the other is alive, and well.
The Current Study
The extent to which cannabis and hydroponics entrepreneurs have a symbiotic relation-
ship (Aldrich, 1990) can be tested empirically. How important is the cannabis industry to
hydroponics entrepreneurs? In this paper, we explore the issue in two different ways. First,
we take a comparative look at the development of the cannabis cultivation and the hydro-
ponics retail industries. The setting is a mature cannabis industry situated in the province
of Quebec, Canada. The data gathered for the purpose of this study allow us to follow the
number of hydroponics retailers from 1969 to 2006. In order to differentiate between more
general garden centres and true “facilitators,” we limit our examination to specialist stores
whose major activity is the sale of hydroponics equipment and supplies (National
Competition Policy Legislation Review, 2002). Illegality renders data on the size of the
cannabis industry much more difficult to obtain. Official crime data for cannabis cultiva-
tion offenses are used as a proxy for the development of that particular industry.
If the link between cannabis growers and facilitators is as close as it appears to be, it
is possible that a proportion of hydroponics entrepreneurs are involved, or were involved,
in illegal activities. Such entrepreneurs could use hydroponics shops to legally sell their
expertise and exploit their contacts in the cannabis industry, thereby profiting from their
unique position to reach an important clientele. For example, cases of hydroponics shop
employees involved in cannabis cultivation ventures have been recently publicized in
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ROLE OF ENTREPRENEURS IN THE CANNABIS CULTIVATION INDUSTRY 27

Canada (Mitchell, 2002; Le Quotidien, 2002). The case in Quebec involved a store
employee who was involved in a classic “buy and bust” case, typical of low level polic-
ing of illegal drug markets. He supplied cannabis cuttings (baby plants) and equipment for
$ 10,000 CAN to an undercover police agent (Le Quotidien, 2002).
Determining the extent to which some hydroponics entrepreneurs are also illegitimate
entrepreneurs is a delicate, complicated issue, and it is not part of our objectives. Instead,
we are interested in exploring whether hydroponics entrepreneurs’ natural connection
with an illegal industry has an impact on the way they manage their business. Important
ethnographic studies such as Adler’s (1993) and Bourgois’s (1995) showed that talented
illegal entrepreneurs do not necessarily make successful legitimate businessmen. In short,
they tend to struggle with the formal requirements of legal enterprises. The current study
is interested in whether hydroponics entrepreneurs are generally good managers of their
business. Though it is limited, available information suggests that many may not be. For
example, a recent decrease in the number of specialist hydroponics stores in Australia
(from 400 to 200 in less than five years) has been attributed by representatives of the
hydroponics industry to bad retail management practices and a change in cannabis-relat-
ed legislation (Paul, 2003).
Our dataset allows us to explore the issue from two angles. We will first be concerned
with the failure rates of hydroponics shops, an indication of entrepreneurs’ capacity to sus-
tain their business. Second, we will examine hydroponics entrepreneurs’ compliance with
a formal requirement of legal businesses in Quebec—producing an annual declaration of
activity to the government. Findings on both issues will be compared with similar infor-
mation obtained from flower shop retailers, a comparable industry that is not as directly
linked to an illegal market.
Methodology
Official Crime Data
Official crime data is gathered from every police agency in Canada by the Canadian Centre
for Justice Statistics and published annually by Statistics Canada (2007). In this study, we
used the number of cannabis cultivation cases officially recorded by police agencies in the
province of Quebec, Canada for 1977–2005 (earliest and most recent years available). A
“case” is defined as the number of times police agencies discovered a cannabis cultivation
site for a given year. Therefore, such data do not represent an official count of the number
of persons arrested for cannabis cultivation. More than one offender may be arrested per
cultivation case, and some cases involve no arrests at all. Past research has shown that 95%
of hydroponics cannabis cultivation cases lead to at least one arrest (mean = 1.3 offenders
per case), but only 14% of outdoor cultivation cases (Bouchard, 2007b).
Official crime data is useful to uncover longer trends, but a major limitation is that it
does not distinguish between cultivation cases involving hydroponics, and cases in which
cannabis entrepreneurs used other techniques. Another limitation of official crime data for
the purpose of the present study is that it may or may not reflect actual trends in terms of
the number of individuals, entrepreneurs or employees active in cannabis cultivation.
Research has shown, however, that such data is a very good proxy for analyzing drug
crime trends in most cases (Warner and Coomer, 2003), but it should be triangulated with
alternative indicators, when possible. Here, we use capture-recapture estimates of the
number of active hydroponics cannabis growers for 1998–2002, as well as data on the
number of hydroponics shops as alternative indicators upon which we can evaluate offi-
cial crime data.
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28 BOUCHARD AND DION

Hydroponics Shop Data


The data on the number and general characteristics of specialized hydroponics shops were
taken from Quebec’s Enterprise Register database now available online on the Registraire
des enterprises du Québec’s (REQ) website (available from: http://www.req.gouv.qc.ca/
default_eng.htm). The REQ is a government organization that maintains a public register
to record identification data on enterprises operating in Quebec. Every profit-based busi-
ness in Quebec is legally obligated to register with the REQ, with the exception of indi-
viduals operating a sole proprietorship business and using a business name that includes
their first and last names. The REQ database replaced the former Central enterprise data-
base (FCE), after the law governing registration (Act Respecting the Legal Publicity of
Sole Proprietorships, Partnerships and Legal Persons [RSQ c. P-45]) was modified and
came into effect January 1, 1994. The complementary FCE database is still available and
has also been used to create the time series of hydroponics shops in Quebec.
Our sample contains information on 160 enterprises that were active between July
1969 and June 30, 2006. A keyword search was needed to retrieve all enterprises that
declared one of their main activities was the specialized sale of hydroponics equipment
and supplies. The word “hydroponics” yielded 62 valid entries in the REQ database.
Stores with no mention of “hydroponics” (of its French version “hydroponique”) in their
business name or in their declared domain of activity were missing from this search.
Another 77 new enterprises were found on the Yellow Pages website (http://www.yellow-
pages.ca/) under the category of “hydroponics equipment and supplies.” We retrieved
their information from the register by using their name. Finally, 21 other enterprises were
found on the complementary FCE database using the keyword “hydroponics.” Overall, it
is possible that the sample underestimates the number of hydroponics stores by a small
margin, but there is no reason to believe that it qualitatively modifies any of our findings.
Stores that would not be included in the sample include: a) Stores that were active as
hydroponics shops but that did not declare as such, and b) stores that were not active in
2006 or in Montreal. We manually checked all annual yellow page books for Montreal
between 1970 and 2006 and discovered very few enterprises that were not already includ-
ed in the sample.
Business Characteristics
Only a few business characteristics are publicly available in the REQ database: business
location, start and end date of activity, number of employees, legal form (incorporated
company/sole proprietor/partnerships), and the presence of a notice of default in the
record. The last three variables are missing for most of the enterprises retrieved from the
FCE database (N = 21).
The descriptive data indicates that the industry is widely represented in every region
in Quebec, and not particularly concentrated in Montreal. The city represents more than
25% of the Quebec population and 21.9% of hydroponics shops were located in Montreal.
Most of the shops are very small: 29% of owners declared having no employee, 59% had
between 1 and 5 employees, and 12% had six or more. At least 10 out of 17 of these larg-
er enterprises (6+ employees) appeared to be general garden centres, rather than special-
ist shops. They were preserved in the analysis because they officially presented their
enterprises as hydroponics equipment suppliers. Finally, more than 70% of enterprises
were owned by an incorporated company, as opposed to being identified to a sole propri-
etor (24%) or a partnership (6%).
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ROLE OF ENTREPRENEURS IN THE CANNABIS CULTIVATION INDUSTRY 29

Compliance Rate
Enterprises registered with the REQ must update their registration information every year
by producing an annual declaration of activity. An enterprise that fails to produce the dec-
laration is liable for a fine ranging from $200 to $2,000, which may double in the event
of a repeat offence. Failure to produce an annual declaration generates a “notice of
default” in an enterprise’s record. A compliance rate for the industry was calculated by
recording the instances in which an enterprise received a notice of default and then com-
plied by producing a late declaration. Enterprises that received a notice of default because
they were already inactive were thus excluded from the analysis.
Survival Time
The survival time of each individual shop could be calculated by using the start and end
date specified in the REQ database. A start and end date (if any) was systematically
recorded for each enterprise, but not necessarily under the same heading. In a typical first
registration for a company or a partnership, entrepreneurs will start by registering a date
for the start of the company, and then a few days or weeks later, a business name. In the
cases where entrepreneurs already have a registered company, they will update their
record with a new name and a new start date (for that name). As for sole proprietors, they
typically register a start date for their business name, and not for a company. The business
name more realistically identified the point of entry and thus we preferred it when it was
found in the file (N = 121). The date for the start of the company was chosen for files not
updated with a different business name (N = 39).
A total of 67 enterprises exited the industry during the period under study. Very few of
them notify the REQ and update their status once they become inactive. When the REQ
does not receive an enterprise’s annual declaration of activity for two consecutive years,
the enterprise is struck off ex-officio and an end date is recorded. Using this date would
overestimate the survival of individual enterprises. In these cases, we used the date for
which the enterprise received their last notice of default as the closing date. Rather than a
precise count of the number of days an enterprise was opened for business, the survival
time of individual enterprises should be considered as a slight overestimation of the actu-
al figure. The survival time was used to calculate failure rates that could be compared to
our flower shop sample.
The Flower Shop Sample
One of the objectives of the current study is to compare compliance and survival time of
hydroponics shops with a comparable industry: flower shop retailers. Because the number
of flower shops is too large (more than 1200 in Quebec, Réseau de Développement de
l’Industrie Florale [RIDF] 2006), we retrieved from the REQ database only the flower
shops which had the key words “flower + boutique” in their business name. One advantage
of the sampling procedure is that it led to an acceptable sample size (N = 127) which cov-
ered a time period similar (1972–2006) to the one found in the hydroponics shop industry.
The hydroponics and flower shop samples differ slightly on the general business char-
acteristics available in the REQ files. The proportion of sole proprietors is larger (46 %
vs. 24%) and the proportion of incorporated companies smaller (39% vs. 70%) in the
florist sample. Not unexpectedly, this leads to a higher proportion of flower shops with no
employees (41% vs. 29%), and a smaller proportion of larger 6+ enterprises (3% vs. 12%).
A comparable proportion of hydroponics (22%) and flower shops (19%) were located in
Montreal.
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30 BOUCHARD AND DION

Results
Figure 1 compares the evolution in the number of hydroponics shops and in the number
of cannabis cultivation offences recorded by police agencies between 1977 and 2005 in
Quebec, Canada. Starting with the cannabis curve, it suggests that a major change
occurred in the cannabis cultivation industry in recent years. The change also took place
in a very short period of time. Police data prior to 1990 included very few cultivation
offences (about 100 recorded offences per year). Subsequent to 1990, recorded offences
increased almost without interruption to close to 3000 in less than 15 years—the most
rapid growth occurring between 1993 and 1997. As would be expected from the symbiot-
ic relationship hypothesis, the curve for hydroponics shops is very similar. Between 1993
and 2003, both the number of cannabis cultivation offences and the number of hydropon-
ics shops have been increasing at a very fast pace. Both curves also show signs of stabi-
lizing in recent years.
Figure 1, however, shows that the hydroponics industry existed for quite a while before
cannabis growers took notice and adopted the technique in large numbers. As early as 1986,
more than 20 hydroponics shops were dispersed around the province. Meanwhile, the num-
ber of cannabis cultivation cases had reached its lowest point in the series. The initial rise
in the number of hydroponics shops from 1977 to 1988 was followed by a decline from
1989 to 1993, before the industry took off in 1994. Interestingly, the revival of the hydro-
ponics industry seems to correspond to the emergence of hydroponics in the cannabis
industry. Bouchard (2007b) showed that hydroponics appeared in arrest data in significant
proportions only in the mid-1990s. In fact, as late as 1997, only a little over 100 arrests for
hydroponics cannabis cultivation cases were made by police agencies in Quebec.

100 3500

90
3000
Number of cannabis cultivation cases
Number of hydroponics shops

80
2500
70

60 2000

50
1500
40

30 1000

20
500
10

0 0
2006
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005

Hydroponics shops Cannabis cultivation cases

Figure 1. The number of cannabis cultivation offences and the number of hydroponics shops in Quebec, Canada,
1977–2005.
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ROLE OF ENTREPRENEURS IN THE CANNABIS CULTIVATION INDUSTRY 31

18
16
Nb of hydroponics businesses

14
12
10
8
6
4
2
0
‘69 ‘71 ‘73 ‘75 ‘77 ‘79 ‘81 ‘83 ‘85 ‘87 ‘89 ‘91 ‘93 ‘95 ‘97 ‘99 ‘01 ‘03 ‘05
Entries Exits

Figure 2. The number of entries and exits in the hydroponics shops industry, Quebec, 1969–2006.

The recent expansion in both the legitimate and illegitimate industries deserves a more
detailed examination. Between 1993 and 2003, the number of hydroponics shops rose
from 15 to 90, at a pace of close to seven new shops annually. A similar trend was exposed
in a recent report from South Australia, which indicated that the number of hydroponics
shops went from 10 in 1992, to more than 90 in 2000 (Review Panel, 2002). The signifi-
cance of the growth is further illustrated when we examine entry and exit patterns (Figure
2). From 1997 to 2003, a total of 93 shops entered the industry. Apparently, this wave of
entries was supported by a high volume of customers: only 31 businesses exited during
the same period. We are not aware of any sudden enthusiasm by home gardeners for grow-
ing vegetables hydroponically that would justify the entry of 62 new shops in seven years.
In fact, trends do not appear to match, as far as commercial hydroponics production of
vegetables and flowers is concerned. Carrier (1999) reported that the Quebec industry
peaked between 1988 and 1991, and that it was in a consolidation phase at the end of
1990s.
The most plausible hypothesis for these additional shops was that the majority of their
clients were cannabis growers. The evolution in the number of hydroponics shops and
Bouchard’s (2007b) estimates of the number of hydroponics growers in Quebec between
1998 and 2002 were combined into Figure 3 in order to further illustrate this possibility.
Estimates were only available for five years, but were sufficient enough to provide some
observations. The five-year period appeared to be one of transition in the hydroponics
cannabis industry, illustrating the end of a rapid growth period and the transition to a sta-
bilization phase. Bouchard’s (2007b) study was inconclusive as to whether the important
jump from 8,100 to 13,900 growers between 1998 and 1999 should be treated as realistic
or as a measurement artefact. Examining the evolution in the number of hydroponics
shops made this jump more plausible: it occurred in the middle of the steepest increase in
the number of hydroponics shops in Quebec (1997–2000).
Figure 3 also adds to the interpretation of the stabilization phase apparent in both
industries in recent years. For three consecutive years, from 2004 to the first half of 2006,
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32 BOUCHARD AND DION

Number of hydroponics cannabis growers


100 18000
90
Number of hydroponics shops

16000
80 14000
70
12000
60
10000
50
8000
40
6000
30
20 4000

10 2000

0 0
‘69 ‘71 ‘73 ‘75 ‘77 ‘79 ‘81 ‘83 ‘85 ‘87 ‘89 ‘91 ‘93 ‘95 ‘97 ‘99 ‘01 ‘03 ‘05
Number of hydroponics shops Number of hydroponics cannabis growers

Figure 3. The number of hydroponics shops (1969–2006) and estimated number of hydroponic cannabis grow-
ers (1998–2002, from Bouchard, 2007b) in Quebec.
the number of hydroponics shops was stable in Quebec. In the last three years, 22 firms
entered and 19 exited the industry (Figure 2). The stabilization phase also paralleled a
similar trend observed in the hydroponics cannabis industry in 2001–2002 when the pop-
ulation of growers stopped increasing and stabilized at 15,000 growers.
If we extrapolate (using Figure 1), and predict that the population of cannabis grow-
ers remained stable thereafter,1 we could expect the competition to intensify in the hydro-
ponics industry, leading to more exits. The increasing exit to entry ratios found between
2003 and 2006 were consistent with these expectations (Figure 2). More than a quarter of
all exits in the history of the industry occurred in 2003 and 2004 only. In 2004, for the first
time in twelve years, there were more shops exiting (11) than entering (8) the industry.
The intensification of competition is particularly noticeable in large city like Montreal,
where more than 37% of the city’s industry exits occurred in 2003 and 2004.
Failure Rates
The 1990s were a good time to start a hydroponics shop. Based on the number of cannabis
growers in Quebec, the demand for hydroponics was increasing rapidly, especially in the
second half of the decade. If cannabis cultivation followed a classic diffusion curve, the
steepest increase in growers should have occurred between 1996 and 1999. Using the
symbiotic relationship hypothesis, we would expect the failure rates of hydroponics shops
to be at their lowest during that time period.
To find out if the failure rates of hydroponics shops differed along the curve, we divid-
ed the 1994–2003 period in three, distinguishing between shops that were part of the first
wave of entries (1994–96), those that were in the rapid growth period (1997–2000), and
those that entered in the last growth wave when the number of cannabis growers
apparently stabilized (2001–03). The other two periods correspond to the beginnings of

_________________________
1. An indication of the intensification of competition in the cannabis cultivation industry is a decreasing whole-
sale price trend reported by various police reports (GRC, 2002) and confirmed by local growers interviewed
by the first author for a different study.
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ROLE OF ENTREPRENEURS IN THE CANNABIS CULTIVATION INDUSTRY 33

60

50

40
% failure

30

20

10

0
1 2 3 4 5 6

Years in business
1969-1979 1980-1993 1994-1996 1997-2000 2001-2003

Figure 4. Failure rates of hydroponics shops in five time periods, Quebec, 1969–2003.

the industry (1969–79), and its first growth cycle (1980–93). For each period, we calcu-
lated the failure rates of hydroponics shops after one to six years in activity. Findings are
shown in Figure 4.
Overall, the failure rates resembled what is usually observed in industries with similar
growth patterns (Utterback, 1994). The hydroponics shops that first entered the industry
showed the most durability. Only one out of the eight enterprises that entered before the
1980s lasted less than five years, and four of them were still in operation in 2006. The most
important finding, based on Figure 4, was that shops entering the industry in the middle of
its fast expansion phase (1997–2000) were more durable than others. These stores could
expect double the lifetime of shops that entered in the periods immediately preceding or
following the fast expansion phase. Many of the shops that entered the industry in the first
growth wave (1994–96) could not sustain themselves until the hydroponics cannabis indus-
try gained its momentum, in 1996–97. Shops that entered the industry in the latter period
(2001–03) were vulnerable as a result of an increasingly competitive industry.
Are these failure rates particularly high, or low? We compared hydroponics shops’
general failure rates to those found in a sample of florists (N = 127). As Figure 5 shows,
early exit rates for both industries were almost undistinguishable. About 22% of hydro-
ponics and 27% of flower shops did not survive two years. However, after that point, the
curves divide in two. Close to 37% of flower shops had failed before getting to three years
of business activity, whereas the proportion remained at 25% for hydroponics shops. More
than 50% of flower shops left the market before reaching five years. This proportion was
only reached after 10 years in the hydroponics shop industry.
Our flower shop sample could not be used to compare general trends in the industry.
However, we knew from a recent report that flower and hydroponics shops were not
evolving in the same market context: the number of flower shops decreased in the last 15
years, from 1,400 in 1991 to 1,200 in 2005 (RIDF, 2006). During the same period, the
number of hydroponics shops increased from 16 to 91 (Figure 1). The different market
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34 BOUCHARD AND DION

70

60

50
Failure rate (%)

40

30

20

10

0
1 2 3 4 5 6 10
Years in business
Flower shops Hydroponics shops

Figure 5. General failure rates of hydroponics shops and a sample of flower shops in Quebec, 1969–2003.

context could thus explain the durability of hydroponics shops, or the slightly larger size,
on average, of hydroponics shops compared to florists. However, the important result for
this paper was that failure rates did not appear to be abnormally low. The median survival
time of four years found for hydroponics shops (or less than 2.5 years for shops that
already exited the industry) was much higher than it was, for example, for “commercial
prostitution” establishments in Montreal in the 1980s (massage studios, escort services,
strip clubs, etc.), which lasted an average of 6 to 18 months (Leguerrier, 1989).
Complying with the Rules
Managing a legal enterprise involves responsibilities and formal rules that strictly illegal
entrepreneurs may not be accustomed to. One of these formal rules is the registration and
annual production of a declaration of activity to the Registre des Entreprises du Quebec
(REQ). When businesses fail to produce a declaration, they are cited with a notice of
default by the REQ. Failure to produce a declaration two years in a row leads to an auto-
matic revocation of their rights to operate their business.
We examined the extent to which owners of hydroponics shops were complying with
this formal rule. We identified enterprises that received a notice of default and that subse-
quently produced a late annual declaration of activity (excluded were the enterprises
receiving a notice of default because there were already inactive). Only enterprises that
started in 2003 or earlier were used in the analysis (N = 119). Findings indicated that
32.8% of hydroponics shops had a notice of default in their record. In order to determine
if this was a good or bad score, we examined the compliance rate in our sample of flower
shops. Results showed that flower shops were just as likely to be reminded of their obli-
gations: 28.4% of florists in our sample failed to produce their annual declaration within
the prescribed deadline. The difference in compliance rates between flower and hydro-
ponics shops was too small to be interpreted as differential management practices, and
could be explained by the higher failure rate found in the flower shop sample (Figure 4).
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ROLE OF ENTREPRENEURS IN THE CANNABIS CULTIVATION INDUSTRY 35

Finally, we examined whether non-compliant enterprises were different from other


enterprises. Our data was limited to a comparison of three variables: business size based
on number of employees (0, 1-5, 6+), location (Montreal/others), and legal form (incor-
porated company/sole proprietor/partnership). We found that no variable significantly pre-
dicted storeowners’ non compliance with their obligations. A logistic regression analysis
(not shown) also confirmed this finding.2 To summarize, non compliance did not appear
to be a particular trait that could be attributed to a broadly defined type of enterprise, or
to an industry.
Discussion and Conclusions
The hydroponics industry is a fast-growing sector of the horticultural industry. For exam-
ple, the current paper shows that the number of specialized stores selling hydroponics-
related products increased sevenfold in a matter of ten years (1993–2003) in Quebec,
reaching 93 stores in 2006. What has caused the industry to develop so rapidly is, how-
ever, subject to controversy. The most plausible hypothesis, the one explored in this paper,
is that much of this growth could be attributed to the development of the cannabis culti-
vation industry. This paper aims to answer the following research question: how impor-
tant is the business of cannabis clients for legitimate hydroponics shops?
Analyzing links between illegal and legal enterprises is a delicate issue, reserved for
police rather than empirical investigations. In this paper, we take advantage of two macro-
level data series to compare the evolution of the cannabis and hydroponics industries.
First, we find that cannabis and hydroponics data agree on the general trend: as police
services discovered an increasing number of cultivation sites in the 1990s, a similar trend
was developing in the hydroponics shop industry. Analyzing hydroponics shops’ data
helps us specify the timing of adoption of hydroponics in the cannabis cultivation indus-
try. The findings indicate that the number of hydroponics shops increased very rapidly in
the latter part of 1990s, a finding that is consistent with previous research on the size of
the hydroponics cannabis industry in Quebec. Second, we shed light on how potentially
important is the business of the cannabis growers for hydroponics entrepreneurs. The
greatest increase in the number of hydroponics cannabis growers was followed by the
most rapid wave of entries in the facilitator industry (1997–2000). In addition, shops that
entered in that particular period proved to be more durable than shops that entered in the
period immediately before, or immediately after. Finally, increased industry competition
and stabilization in the number of hydroponics shops in 2004 occurred soon after the num-
ber of cannabis growers stabilized in 2001–02.
This link between the cannabis and facilitator industries does not translate into partic-
ularly “deviant” management practices on the part of legal entrepreneurs. First, survival
rates of hydroponics shops compare favourably to those we find in the flower shop indus-
try or to rates that we would expect from industries closely connected to illegal activities
(Leguerrier, 1989). Second, compliance rates in producing an annual declaration of activ-
ity are similar in both industries. Overall, we find no evidence of irregular business prac-
tices in the hydroponics industry with the data available for the purpose of this study.

_________________________
2. Findings for flower and hydroponics shops go in opposite directions, further reinforcing the random charac-
ter of non compliance behaviour in this sample. Non compliance is more likely for small, Montreal-based, and
sole proprietor hydroponics shops. Conversely, flower shops’ non compliance is more likely for incorporated
companies. Size or location do not appear to be important factors. Again, none of these differences were found
to be statistically significant.
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36 BOUCHARD AND DION

The close connection between the hydroponics and cannabis industries does not mean
that hydroponics entrepreneurs are guilty of anything other than, perhaps, turning a blind
eye to the illegal activities of their clients. Willingly or not, however, hydroponics entre-
preneurs acted as important facilitators to the development and establishment of an illegal
industry. Industrialized countries could not be the setting for the development of a large-
scale illegal drug production industry unless local cannabis entrepreneurs were able to
obtain easy access to: 1) The equipment and supplies necessary to grow cannabis in indoor
settings, which reduces their vulnerability to detection (Bouchard, 2007b); 2) Advice on
how to use the equipment, and how to solve problems when they arise—for example,
bugs, fungus, odour control (Weisheit, 1992). Hydroponics shops could, and have, pro-
vided both to cannabis growers in Quebec.
Entrepreneurship is about seeking and exploiting new business opportunities, and the
1990s were a good time to start a hydroponics shop in Quebec. Future research should try
to disentangle the role of legitimate home gardeners in the growth of the hydroponics
retail industry. Data on the size and activity level of associations of hydroponics home
gardeners should be collected, and compared to the development of the industry.
Surveying hydroponics entrepreneurs, their background, and their reasons for entering the
industry would also be a good place to start investigating important questions, such as
what the hydroponics industry would look like without the cannabis clientele.
Acknowledgements
The authors wish to thank Therese Brown, Maïa Leduc, Daniel Morency, and Dr. Rob Smith for
their helpful comments and their assistance at various stages of this research.

Contact Information
Martin Bouchard, School of Criminology, Simon Fraser University, 8888 University Drive,
Burnaby, BC, Canada V5A 1S6

Phone: 778-782-8135/Fax: 778-782-4140


mbouchard@sfu.ca
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——. 2007b. “A Capture-Recapture Model to Estimate the Size of Criminal Populations and the Risks of
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Le Quotidien. 2002. “Sagamie Hydroponique” (March 29): 14.


Leguerrier, Y. 1989. “Les Entreprises de Prostitution Commerciales: Les Commerces Ephémères des Marches
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l’Industrie Florale 1, no. 5: 1–2. Available from : http://www.fihoq.qc.ca/infolettre-rdij-jan-2006.pdf
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Roberto, K. 2005. How-To Hydroponics, 4th ed. Farmingdale, NY: Futuregarden.
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Value-adding and Value-extracting


Entrepreneurship at the Margins
Kirk Frith, University of Lincoln, Lincoln, United Kingdom
Gerard McElwee, University of Lincoln, Lincoln, United Kingdom
ABSTRACT. Empirical data is reported from two case studies on the methods used to establish and grow the
businesses of two entrepreneurs operating in very different environments: one legitimate, the other illegitimate.
Both utilize strong social skills to legitimize their behaviours but neither can be considered as mainstream or
conventional entrepreneurial actors. The findings suggest that, despite the very different outcomes associated
with their actions, both entrepreneurs exhibit similar enterprising skills and managerial capabilities as found in
entrepreneurs engaged in non-marginal activities.
RÉSUMÉ. On rapporte ici des données empiriques, provenant de deux études de cas, sur les méthodes utilisées
pour mettre en place et exploiter deux entreprises opérant en milieux fort différents—l’un légitime et l’autre non.
Les deux entrepreneurs se servent de solides aptitudes sociales pour légitimer leurs comportements, mais ni l’un
ni l’autre ne peuvent être tenus pour des acteurs entrepreneuriaux conventionnels ou de type majoritaire. Nos
conclusions démontrent qu’en dépit des résultats très différents découlant de leurs actions, ces deux entrepre-
neurs possèdent des capacités d’initiative et des compétences de gestion similaires à celles des entrepreneurs
engagés dans des activités non marginales.

Introduction
Entrepreneurship is widely regarded as a driver of economic development and growth
(Harper, 2003). Williams (2008) argues there appears to be a clear distinction between
“necessity-driven” entrepreneurs pushed into entrepreneurship because other options for
work are absent or unsatisfactory, and “opportunity-driven” entrepreneurs who engage in
entrepreneurship out of choice. In this paper, however, we utilize a different bifurcation
of entrepreneurs operating at the margins: “value-adding” and “value-extracting” entre-
preneurs. To do this, empirical evidence will be presented from interviews with two
entrepreneurs.
This paper will first define what is meant by entrepreneurship at the margins. It will
then comment on the bifurcation of entrepreneurs at the margin as “value-adding” or
“value-extracting” and the extent to which the activity of these entrepreneurs can become
accepted and/or tolerated by external actors particularly if an ethical code is adopted and
followed. This will be illustrated and explored by two case studies; one of a “social entre-
preneur,” and one of a drug dealer. Both entrepreneurs, as will be seen, exhibit character-
istics, for example, strategic awareness, opportunity spotting and networking, usually
associated with more traditional notions of entrepreneurship. The final section will bring
together some conclusions about the relevance and insights that can be drawn by deliber-
ately dichotomizing “value-adding” and “value-extracting” entrepreneurship as a mecha-
nism for understanding the challenges and constraints faced by entrepreneurs who oper-
ate at the margins.
The first task is to define what is meant by “entrepreneurship at the margins,” “value-
adding,” and “value-extracting.” Clearly, entrepreneurship at the margins can be located

Journal of Small Business and Entrepreneurship 22, no. 1 (2009): pp. 39–54 39
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40 FRITH AND MCELWEE

within what Williams (2006) refers to as the informal economy but, and as will be seen,
this is not necessarily a specific characteristic.
Entrepreneurship at the Margins
The promotion of enterprise and entrepreneurship has tended to focus on business start-
up in the formal sector and, as a consequence, has paid little attention to the nature and
types of entrepreneurship that occur at the margins. Research into entrepreneurship at the
margins has sought to explore why certain groups and individuals, despite not fitting the
conventional description of the entrepreneur, have managed to engage in enterprise and
entrepreneurship. As an academic discipline, entrepreneurship has always been concerned
with understanding how entrepreneurs work at and beyond the boundaries of what is
known and, occasionally, of what is accepted in the pursuit of profits. However, the major-
ity of research exploring entrepreneurship at the margins has tended to focus on the mar-
ginalized entrepreneur rather than on entrepreneurship at the margins per se. Cases of
entrepreneurship involving minority entrepreneurs (Galloway, 2007), illegal enterprises
(Rehn and Taalas, 2004; Smith, 2007; Williams, 2008), drug dealers (Frith and McElwee,
2008a, 2008b) and other such marginal activities (Storr and Butkevich, 2007) have been
the most common instantiations of this type of research to date. The individuals involved
in these enterprises have been commonly portrayed as deviant and often as social outcasts
who operate at the margins of society. This type of research has, by and large, document-
ed cases of entrepreneurship that mainstream, and hence more widely accepted, entrepre-
neurship research has tended to ignore.
The activities pursued in this type of research have generally been small in scale and
to have had relatively little impact upon the wider community in which they have been
situated. Frith and McElwee (2008b) argue, however, that these actors have both an eco-
nomic and a social function, both of which offer critical but in themselves insufficient
insights into entrepreneurship at the margins. Nevertheless, as Galloway (2007: 271) sug-
gests, research exploring entrepreneurship at the margins has helped to challenge “current
stereotype-based knowledge” and draw attention to the heterogeneity or diversity of entre-
preneurial activities and individuals which, according to Schindutte et al. (2005: 27–28),
has furthered the “development of … theory regarding the larger population.”
In much of the recent literature on entrepreneurs’ motives, there has been a tendency
to differentiate between necessity- and opportunity-driven entrepreneurs (Harding et al.,
2006; Maritz, 2004; Minniti et al., 2006; Perunovic, 2005). This paper argues, however,
that squeezing entrepreneurs into one side or the other of this either/or dichotomy over-
simplifies entrepreneurs’ motives and obfuscates how they change over time. This neces-
sity/opportunity dualism is not only too simplistic to explain entrepreneurs’ motives
since both necessity and opportunity factors are commonly involved, but there is often a
temporal fluidity in their motives, usually from necessity-oriented to opportunity-orient-
ed factors. The lived practice is therefore more integrative and dynamic than captured by
this static either/or dualism. Furthermore, concentrating exclusively on the motives that
underlie entrepreneurial action necessarily avoids discussion of the social consequences
of their activities. As such, we turn to another important, though frequently overlooked
dualism within the entrepreneurship literature, that of value-adding and value-extracting
entrepreneurship.
“Value-adding” and “Value-extracting” Entrepreneurship
For Kirzner, a substantial proportion of entrepreneurial activity does not occur at the
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ENTREPRENEURSHIP AT THE MARGINS 41

margins, does not enrich or expand the totality of human knowledge but, nevertheless,
helps to improve market efficiency and overall economic welfare (Kirzner, 1973).
Entrepreneurs who are engaged in activities of arbitrage, for example, are considered as
value-adding entrepreneurs as they work to ensure that resources are put to their most pro-
ductive or profitable use. Value-adding entrepreneurship can therefore be defined as those
types of entrepreneurial activities which are legitimate but which do little to change or
affect the margins within which they operate. Value-extracting entrepreneurship can be
defined as those types of entrepreneurial activities that occur within existing margins but
which impoverish or damage the community within which they occur. Illegal enterprises,
including drug-dealing and fencing (selling “hot” or stolen goods), for example, are per-
haps the most common forms of this type of activity and tend to follow or mimic very
closely legitimate forms of entrepreneurship. Indeed, removing or ignoring the moral or
ethical issues associated with such activities renders them almost imperceptible from tra-
ditional forms of entrepreneurship.
Smith (2007: 245) argues that entrepreneurship at the margins should move away from
mainstream or typical cases of entrepreneurship and instead focus on cases of entrepre-
neurship that are at the “edge of the known and accepted” as there are “many areas of
entrepreneurship that exist at the boundaries of our knowledge and that are worthy of fur-
ther study.” Although this definition focuses attention upon entrepreneurship at the mar-
gins as opposed to entrepreneurship on the margins, it makes it clear that there is an aspect
of entrepreneurship (level of acceptance) that is very important to the growth and survival
of such endeavors. As argued above, there are entrepreneurs working within the margins
of what is known and accepted; however, there are also entrepreneurs whose activities
help to influence and shape the margins themselves. As such, we take the view that
research should be concerned with all types of entrepreneurial activities at the margins
which themselves are in the process of being challenged, reconsidered, redefined, and, in
certain circumstances, redrawn altogether. This paper explores, with specific reference,
the processes and mechanisms used to achieve and leverage degrees of acceptance.
Entrepreneurship at the margins poses ethical and moral issues for both the entrepre-
neurs themselves and the actors with whom they interact. For some commentators, entre-
preneurship and ethics appear as conflicting forces. Wempe (2005), for example, argues
that, until very recently, entrepreneurship and ethics were regarded as naturally opposed:
There is the view that ethics (together with the law) limits entrepre-
neurship. Ethics (and laws) formulates standards that give entrepre-
neurship some space. Ethics and entrepreneurship are seen as two
entirely separate areas. Entrepreneurship is viewed as amoral, or per-
haps even as immoral. Entrepreneurs need to exploit opportunities and
consider all options. This should occur within the boundaries set by the
law, and complemented by ethics. (Wempe, 2005: 215)
Atherton (2004) argues that as a result of this dynamic, the majority of entrepreneur-
ship research has deliberately overlooked or simply not considered the ethical dimension.
A reason for this, according to Wempe, is that entrepreneurship has traditionally been
understood as an economic pursuit in which self-interest or the interests of small groups
of individuals predominate—especially in situations where the future of a business is at
stake and the investment and future well-being of the owner is in jeopardy (Schramm,
2006). As a consequence, entrepreneurship and ethics have tended to be kept as separate
academic disciplines (Hannafey, 2003). Given that entrepreneurship involves exploiting
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42 FRITH AND MCELWEE

better or superior information than is possessed by trading counterparts (Kirzner, 1973),


ethical considerations appear particularly intractable. As a consequence, the entrepreneur
has been most commonly presented as a lone individual, a maverick hero whose skills and
expertise in opportunity-spotting are singularly concerned with profit maximisation
(Nodoushani, and Nodoushani, 2000).
However, depictions of the entrepreneur as a dispassionate and efficient calculator of
economic costs and benefits neglects that fact that entrepreneurs are socially active indi-
viduals whose actions and behaviours alter, both positively and negatively, the environ-
ment within which they and others both work and live. Furthermore, such characterisa-
tions do not resonate with real-world accounts and experiences in which entrepreneurs are
often seen to be at the forefront of social change. To illustrate this dynamic, two very dif-
ferent case studies are presented in order to explore in more detail the challenges facing
entrepreneurial individuals who are prepared to initiate ventures that are on or transgress
the boundaries of what is known and/or accepted.
The first case study used in this paper charts the developmental history of a social
enterprise based in the East Midlands of the UK, while the second case study charts the
developmental history of a drug-dealing circle also based in the East Midlands of the UK.
This theoretical approach is in keeping with the suggestion of Etzioni (1987: 175), who
argued that the activities of entrepreneurs help to change obsolescent and ossified socie-
tal patterns:
entrepreneurship is studied here as the force that promotes societal real-
ity testing. Societal patterns (institutions, organizations, rules, etc.) tend
to ossify, lagging ever more behind constantly changing environments.
Entrepreneurs, by promoting new patterns, help bring society and its
component units in touch with reality … the focus here is on the con-
tribution of entrepreneurship to the society at large and the economy
embedded within it.
The two cases presented seek to explore in more detail the assertion made by Etzioni and
to explore the notion of societal reality testing in greater depth.
Methodology
The entrepreneurs in both of these cases were interviewed over a number of months in
2006 by one of the authors using what has been termed the “phenomenological interview”
as initially proposed by Thompson et al. (1989) and discussed by Cope, where: “the aim
of the interview is to gain a first person description of some specified domain of experi-
ence” (2003: 15).
Unstructured interviews were used to allow the respondents a choice in what account
they gave, thereby avoiding imposing too much form on the nature of the response. Using
relatively unstructured techniques allowed the interviewees to feel free to describe their
experiences in some detail without putting them either under any pressure to respond in a
particular way, as much as is practicable, or indeed to push them in any particular direc-
tion. Interviewing and visiting both interviewees on a number of occasions over a period
of several months also helped to develop a strong rapport between the interviewer and
interviewee which, in turn, improved the interview responses both in terms of openness
and honesty.
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ENTREPRENEURSHIP AT THE MARGINS 43

Case Study: Hill Holt Wood


History
Hill Holt Wood, a 34-acre ancient woodland in Lincolnshire, was purchased by Karen and
Nigel Lowthrop in 1995. The purchase capital of £30,000 was raised through the sale of
the Lowthrops’ fencing company which they had owned and managed for the previous 10
years. Hill Holt Wood was in very poor condition when Karen and Nigel first took own-
ership; invasive rhododendron had taken hold of large tracts of land, the drainage system
had been severely damaged leaving much of the surface area of the woodland waterlogged
and inaccessible, and the vast majority of the quality timber had been removed and sold.
However, Karen and Nigel felt that they had the knowledge and the motivation required
to restore Hill Holt Wood to its original or natural condition.
In 1996, Karen and Nigel sold their house and used the proceeds to purchase a 30-foot
American Winnebago. Within weeks, Karen and Nigel had moved into the Winnebago
and onto the woodland so as to save the morning/evening commute time to and from the
wood as well as to demonstrate to their neighbours and the local community their com-
mitment to the development of the site. Nigel felt strongly that the interest and support of
the local community would prove essential if the project was going to succeed:
When we first arrived there was a lot of suspicion with regards to what
we were doing and why we were doing it. I think people thought that
we were radical environmentalists and that the wood was going to be
filled with “tree-huggers” and other such types. We had to work really
hard to demonstrate to our neighbours that we were genuinely interest-
ed in making a difference so we decided to try and include them in
every step of the project.
In the first instance, involvement with the community took the form of simple meas-
ures such as attending local events, meeting and speaking with their neighbours and invit-
ing as many people to come and visit them in the woodland as possible. This, Karen and
Nigel felt, helped to break down some of the suspicions that they had picked up on when
they first arrived, before they had time to take root.
Two years after the purchase of Hill Holt Wood, Karen and Nigel established the Hill
Holt Wood Management Committee as a permanent link between themselves and the local
community. The committee was designed to act in an advisory role and included repre-
sentatives from a number of local organizations as well as a number of influential locals.
There were many reasons given for establishing the committee, the most significant being
the need to increase the input from the local community, improve the overall transparen-
cy of the project, and create a greater sense of shared ownership:
I use those words [transparency, openness, trust, inclusiveness] in
reports that I write, and use them to explain how we developed the trust
of the local community and how to get community support and that’s
why I’m always telling people everything about the business and
involving as many people as possible, you know, I’m sticking to my
principles, I’m saying that we are open and transparent and we will tell
people how much the site is worth, how much we earn, how much the
business turns over, everything!
However, despite the very obvious success enjoyed by Karen and Nigel and all those
involved in and associated with Hill Holt Wood, the key challenge, convincing external
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44 FRITH AND MCELWEE

stakeholders and organizations of the benefits of Hill Holt Wood’s approach to woodland
management, was still very difficult:
the farmers’ union still don’t see it and they still don’t understand it and
they still don’t listen to it, they still dismiss it as a one-off, you know,
they don’t see how it could impact on other sites. They always say that
you might do one per county, that’s always been the argument, now, if
I can get a mirror project set up two miles to the east of us and another
one two miles to the west of us, one of which is bigger than Hill Holt,
and, erm, if, if they work to the level that I think they can work, then in
three years’ time the total jobs employed on those three sites could be
80, possibly 90, with a turnover of £3,500,000, maybe £4,000,000 …
now if we can do that, then they can’t argue with it, they can’t argue that
there is an approach that they can’t apply to an awful lot of farmland, to
a lot of sites around the country.
In an attempt to convince outsiders of the merits of Hill Holt Wood, Nigel worked
extensively and almost exclusively on promoting to others the work that was being under-
taken at Hill Holt Wood. One dimension to this promotion was giving talks and presenta-
tions across the UK. However, the biggest challenge was encouraging people to come and
see the woodland for themselves:
To start with it was like pulling teeth, we were just dismissed and
nobody wanted to talk to us let alone to come and visit the site … it’s
very difficult as a small project to get recognized, to get seen, apart from
the fact that you’ve got no track record and the who the hell are you
kind of attitudes, but there’s also the fact that if you’ve got government
departments that fund projects that they can hold them up as successes
and what they don’t want is some independent who’s actually doing bet-
ter than their funded project.
The next important step in the development of Hill Holt Wood was to make the proj-
ect economically sustainable and to demonstrate the viability of their strategy. Through
his contacts in the local area, Nigel discovered that there was an opportunity to provide
on-site courses for local young offenders who had been excluded from mainstream edu-
cation. In exchange for working with these young people and teaching them basic life
skills such as teamwork and responsibility, Hill Holt Wood would receive appropriate
remuneration per student per day. Nigel realized that he could use these young people to
help him to achieve his vision for Hill Holt Wood and so he tailored the learning courses
around improving, managing and maintaining the learning environment (i.e. the wood
itself). The first group of learners arrived at Hill Holt Wood in 1998. The new direction
taken by Hill Holt Wood as a result of pursuing this opportunity opened a number of new
avenues and brought the project to the attention of a wider range of individuals and groups
that previously would not have been interested in the project:
We’ve had visitors coming to the site from any number of different
agencies including DEFRA [The UK government Department of
Environment, Food and Rural Affairs], the DTI, [The UK government
Department of Trade and Industry], the Office of the Deputy Prime
Minister, the Forestry Commission; we’ve even had visitors from the
royal family. That’s what’s so great about what we’re doing, it appeals
to so many different organizations on so many different levels. The
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ENTREPRENEURSHIP AT THE MARGINS 45

more stakeholders we’ve got interested in Hill Holt Wood the easier
we’ve found it to do the thing—the difficulty was in getting them here
in the first place!
In 2001, Karen and Nigel were granted planning permission for the building of an eco-
house in their woodland. The planning permission for the eco-house was granted by the
District Council in part recognition of the business-generated income that was beginning
to come from forestry and business-related activities ancillary to forestry. However, Karen
and Nigel feel that the planning permission would not have been given without the hard
work and support of the local community. In keeping with this belief, Karen and Nigel
elected to increase the community membership from the initial four-parish network estab-
lished in 1997 to an 11-parish network by 2002, covering a total population in excess of
10,000.
In late 2002, and at the insistence of Karen and Nigel, the Volunteer Board of Directors
(VBD) took full control of Hill Holt Wood (buying Karen and Nigel out of the business
for a fee well below the true market value but allowing them to proportion off a part of
the woodland for their new house). The VBD asked Karen and Nigel to continue in their
roles as manager and director, respectively. Selling Hill Holt Wood to the community was,
according to Nigel, a key factor in ensuring the long-term sustainability of the project:
People thought we were barmy when Karen and I gave up the business
and gave it to the community but we’ve actually done better out of it
personally than if we’d stayed running it. It’s interesting that the exec-
utive committee actually argued with me in favour of my salary going
up! The move into becoming a social enterprise was driven by consid-
erations of sustainability; it helps to make the business more sustain-
able, it helps to make the community link more stable. The real differ-
ence is how the business is becoming less dependent on me; it won’t be
long now until it is totally independent. I think it could survive without
me… If Karen and I both left, it would, it would be too difficult at the
moment but, I guess, in another year or so I think it would be fine, it
might even do better!
Throughout this time, the numbers of learners arriving at Hill Holt Wood grew steadi-
ly as did the numbers of staff employed as rangers or as administrative assistants. In addi-
tion Hill Holt Wood was awarded a number of local, regional and national awards in
recognition of their achievements both for enterprise and entrepreneurship as well as for
their contribution in developing new approaches to helping young offenders find new
meaning in their lives and careers.
With regards to the future, Karen and Nigel both feel that they have developed a busi-
ness that can be used as a template for other similar projects across the country:
It’s now taking that and saying that it can happen all over the country.
It will be difficult to set up more projects like this along the same sort
of lines; the element of community control, the element of environ-
mental lead and the different approach to the countryside, it’s difficult
to win people over in the short term but we’ve proven that if you per-
sist, it can be done.
However, despite the success of the project to date, the desire to convince an ever
increasing audience of the merits of their approach appears not to have diminished:
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46 FRITH AND MCELWEE

Table 1. Key Achievements


Timeline Key Achievements People Employed
1995 Hill Holt Wood Purchased by Karen and Nigel Lowthrop
Management committee established
1997 Friends of Hill Holt Wood formed Employs 3 staff
Education, Environment and Financial committees established
First learners arrived (New Deal)
1998 Employs 3 staff
Runners up Lincolnshire Environmental Award
1999 First straw-bale building erected Employs 3 staff
2001 Planning permission granted for eco-house Employs 3 staff
“Solutions 4” learners arrive
2002 Social enterprise formed Employs 6 staff
Investor in People standard awarded (IIP)
2003 “Employment-2-Enterprise” contract awarded Employs 8 staff
Royal visit
2004 Employs 17 staff
IIP retained
Adult learning inspectorate passed (Grade 2)
Winner Enterprising Solutions Award
2005 Employs 18 staff
Winner Entrepreneur of the Year Award
Winner Lincolnshire Environmental Award (group award)

It’s the underlying idea, I’m trying to win people over to the idea, to the
underlying concept of sustainable development, and to the benefits that
can be gained by linking the urban with the rural. It’s great to be
involved in a whole string of meetings now about that and talking at
conferences and being sought out for conferences and so on.
Discussion
As can be seen from the case study of Hill Holt Wood, the challenges facing new and
innovative businesses are often acute. Even in cases where the social benefits appear quite
obvious to outsiders familiar with the project, there tends to be strong resistance when old
patterns and routines and established ways of working are challenged and shown to be
outmoded. Karen and Nigel attempted to overcome these challenges by taking an inclu-
sive approach, by involving as many people as possible in their project. However, includ-
ing local stakeholders in the project involved more than simply allowing them to walk
around the woodland; it required full and ongoing communication between both parties.
This approach allowed Karen and Nigel to develop strong relationships with the key
stakeholders in the area and to gain the trust that was so critical in terms of developing
and expanding the site. Once the trust of the local community had been gained, it was
essential for the long-term sustainability of the business to get other, and possibly more
powerful, stakeholders involved in the business. However, the challenges of involving
more distant stakeholders were far greater for a number of reasons. Firstly, the greater the
distance away from the site these stakeholders were, the more difficult it was to convince
them to visit the site. Secondly, the less proximate these stakeholders were, the less like
stakeholders they felt and so the less interest they had in the project. Nevertheless, as far
as Karen and Nigel were concerned, these individuals and organizations were stakehold-
ers and were perhaps the biggest obstacle in the way of securing the future of Hill Holt
Wood. As such, Karen and Nigel expended a great deal of effort in trying to contact these
stakeholders and in trying to communicate to them the benefits of adopting their approach
to woodland management.
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ENTREPRENEURSHIP AT THE MARGINS 47

Gradually, over time and on the crest of the “green wave,” more and more individuals
from across the UK began to visit and become involved in the Hill Holt Wood project, cul-
minating in a visit from HRH the Earl of Wessex. The visits of such key individuals made
a significant difference in terms of Hill Holt Wood’s ability to open the doors to other
stakeholders, to get them interested and to encourage them to contribute to the project.
The issues discussed here are not unique; indeed, in many ways it is the archetypal
story of the entrepreneur emerging victorious against all odds. Such stories which depict
hard-working and devoted individuals in pursuit of their dreams of and for a better world
are pervasive. The promotion of entrepreneurship has been based largely on this type of
story with the inference that individuals who are successful in their private endeavors will
improve not only their own economic well-being but also that of others. Entrepreneurship,
from this perspective, is understood and [re]presented as both a private and a public good.
However, the prevailing assumption that underpins such stories has come under increas-
ing scrutiny in recent years; “there are a variety of roles among which the entrepreneur’s
efforts can be [allocated], and some of those roles do not follow the constructive and inno-
vative script that is conventionally attributed to that person” (Baumol, 1990: 894).
Case Study: Jim Smith
History
Jim Smith studied for a business management degree at university from 2002to 2005.
Prior to beginning his studies, Jim Smith worked five years for a large company as a low-
level department supervisor. However, a lack of on-the-job recognition and a feeling that
the rewards he was given were not commensurate with the efforts that he was making,
meant that he made a decision to go on to further education. Jim Smith knew, however,
that he would not be in receipt of any financial assistance whilst he was studying and that,
as a result, he would be obliged to support himself throughout his studies. As such, Jim
Smith arrived at university anxious to find a suitable means for making enough money to
cover his expenses.
By nature a gregarious and inquiring individual, Jim Smith made a number of new
friends and acquaintances within his first few weeks at university. It was at a campus party
that he noticed a number of students sitting around smoking marijuana. After a long and
informative conversation, Jim Smith discovered that the marijuana had been brought to
university by one of the students but that the quantity brought was almost exhausted. In
addition, the students had remarked that they had no way of obtaining any further supply
until they went home for the Christmas break (still three months away). Recognizing a
very obvious level of demand and being made aware of supply shortages, Jim Smith
quickly made the decision to travel home and find a marijuana supplier that he could trust
and who would be prepared to make the long journey to university to deliver the product:
The way I see it there’s only two ways to make money at university,
well, there’s actually three; you can go and work for a retail shop or at
a bar and earn four pounds fifty an hour, you can promote nights at local
pubs and clubs which is what a lot of students do or you can sell drugs.
It was an easy choice for me to make given my previous experience of
the retail trade.
Furthermore, Jim Smith expressed the opinion that if he hadn’t chosen to become a
drug dealer then someone else would have taken his place and fulfilled that function:
If people take drugs, they take drugs—that’s the bottom line. If people
are smoking marijuana before they come to university, then you can
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48 FRITH AND MCELWEE

pretty much guarantee that sooner or later they will find a new supplier.
It just so happens that I noticed the opportunity before they got to meet
the incumbent suppliers and so managed to take advantage of the
situation.
It was not a difficult decision for Jim Smith to make, especially given his view that
this situation presented a very real opportunity for him to make the money he needed to
pay his way through his studies:
I think it was about November, October/November, when I started sell-
ing in large quantities. When I arrived at university, there were only two
guys that you could go to for that sort of thing serving the whole student
population. I mean, if you look at it, when I started there, there was
maybe eight or nine thousand students, erm, and, I mean, only two peo-
ple serving that market. I mean, you think, that’s not very competitive,
you know, it sounded more like a monopoly, really! I think that most
people stay well clear from supplying drugs, you know, they’re happy
enough to consume the products, they’re just not prepared to take the
associated risks of supplying them.
Although word of mouth was the main driver in the growth and development of the
business, Jim Smith also worked hard in actively promoting his products; Jim Smith con-
tinually asked the most popular students at the university, members of the students’ union
as well as the university’s leading promoters (of night-club events), to help expand his
business by referring as many customers to him as possible. In addition, Jim Smith used
his position as a first-year living in university-supplied accommodation to network with
his fellow students and to build his customer base as a result:
I was in a great position to exploit the fact that the first-years didn’t
know the area, didn’t know where to go to get their gear and didn’t real-
ly know anyone outside the first year. This meant that almost immedi-
ately I had a firm grip on my customer base. The main problem I had
was expanding beyond that set of students, especially getting access to
the first-years that didn’t live on campus. I used the friendships that I
had developed both in class and outside to spread the word that I was
the man who could help and, before I knew it, my phone started to ring
all hours of the day and night.
Of course, the marketing of illicit products presents a number of very significant chal-
lenges. Firstly, traditional marketing channels are not available, and secondly, and perhaps
more worrying for the seller, as the business profile grows, so do the chances of being dis-
covered by the authorities. However, when Jim Smith was asked whether he was con-
cerned about being discovered, he replied that he was not. Indeed, during the course of the
interview, it became very obvious that, although he was aware of the legal ramifications
of being a drug dealer, he felt that what he was doing was not socially unacceptable and
that, as a result, the chances of anyone “blowing the whistle” on him were fairly remote:
I stayed away from all of the harder drugs, although I was occasionally
asked if I could get hold of them. I think that people really don’t mind
if someone’s selling marijuana and making a few quid on the side. On
the other hand, I think people really look down on you if you’re selling
things like crack or ecstasy and try and stop you from doing it. I wasn’t
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ENTREPRENEURSHIP AT THE MARGINS 49

really doing anyone any harm and I think people knew that and so didn’t
have a problem with me.
As word spread amongst his fellow students, Jim Smith’s customer base grew rapidly
and he soon found himself incapable of meeting demand (in terms of the time it took for
him to visit all of his customers). As a result, Jim Smith made the decision to set up a num-
ber of smaller dealers and to begin working as a distributor. Again, this decision resulted in
a number of distinct challenges and potential threats to the business and to Jim Smith him-
self. To counter these new dangers, Jim Smith decided that the best way to conduct matters
was to bring all of his dealers together and to try and run the business as a kind of family
business. To this end, Jim Smith encouraged his dealers to communicate with one another
on a regular basis to discuss any issues/problems that they were having with their clients
or with selling their products. In addition, Jim Smith organized bi-weekly meetings where
all the dealers would get together over dinner and a few pints of beer. The work spent on
developing these relationships was minimal in comparison to the benefits that it brought:
I asked my guys to share their products with each other so that if some-
one was finding it difficult to sell their gear, the others could take over
and shift it for them. This meant that I could make more orders of larg-
er quantities on a more regular basis which was good for all of us. In
addition, it was important that my guys didn’t try and take their cus-
tomers from each other, you know, everyone was serving their own lit-
tle niche, selling to their friends and so on, and so everyone had really
good relationships with their clients which meant that there was a lot
more trust embedded in the process than there might have been if every-
one was just out for themselves.
Building up strong networks of social trust also involved being very open with every-
one and not trying to hide anything. The need to be open was particularly pressing when
Jim Smith moved into shared accommodation for his second year of studies. All of Jim
Smith’s flatmates were aware of the fact that he was selling marijuana (though none of
them were involved in the business directly), and all of his flatmates had to accept the con-
stant stream of visitors coming to the house at all hours. To limit any sense of annoyance
that may have arisen, Jim Smith paid all the communal bills, including utilities and tele-
phone and internet charges, as well as organizing frequent and all-expenses-paid nights
out (courtesy of Jim Smith’s promoter friends). In return for these payments, Jim Smith’s
flatmates were happy to tolerate the various goings-on associated with living with a drug
dealer as well as, on occasion, passing some marijuana on to the other dealers if Jim Smith
was unavailable:
I know I was asking a lot of my flatmates to be using their home as the
base for a drug dealing operation. I could have gone and lived on my
own, but I didn’t want to lose that sense of being at university. I made
sure they knew what it would entail before moving in and I reassured
them that although I would be holding small quantities, I had arrange-
ments for storing the large deliveries when they arrived so that there
was no danger for my flatmates in case of a break-in or a bust.
By the time Jim Smith’s studies were nearing completion, his activities as a drug
dealer had become known by almost the entire student population. Although Jim Smith
felt that this wasn’t a problem in terms of his security (and very probably good for
business), the constant demands placed on him as a result were overwhelming:
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50 FRITH AND MCELWEE

I had to be on my best behaviour at all times, you know, I had to go out


and show my face at all the big evening events, but I had to be careful
not to get too drunk in case I did anything silly and upset anybody. It
was really difficult trying to keep everyone on my good side to prevent
any negativity occurring, you know, it felt like being on a first date all
the time. Although all these people were my customers, I felt exposed
all the time and so, in some senses, I felt like I was their customer inas-
much as they held so much power over me. It got to be really hard on
me and so as I was nearing the end of my time at uni I began to think
about packing it all in and concentrating solely on my work.
At approximately the same time as Jim Smith was contemplating cessation of trading,
there was a break-in at his house. Although no one could be sure of the motives for the
break-in, Jim Smith, in conversation with his flatmates, decided to stop all his activities
and to make sure that everyone else knew as well:
I have to be honest, it was really scary and I think it really upset my flat-
mates a lot. There was no way they would have let me continue dealing
from the house even if I wanted to—which I didn’t. Although the break-
in could have been just bad luck, the fact that it occurred really brought
home to me and my flatmates the dangers that I was exposing us all to.
I think I was naïve in a lot of ways, you know, I thought I could get in,
make some money and get out, but maybe the break-in was a warning
against such complacency. I stopped selling immediately and told my
dealers that if they wanted to carry on, which I advised against, then
they would have to find their own source of supply. As it turned out, lots
of people quickly learnt of the break-in and all were supportive of my
decision to get out of the business. The thing that struck me the most
was that whilst I was selling the drugs I had no problem with doing it,
but as soon as I stopped it really made me think about the dangers I had
placed myself and others in.
Discussion
The details of the second case study suggest that the broad promotion of enterprise and
entrepreneurship may not always lead to outcomes that are consonant with the assumption
of economic and social development. Baumol (1990) argues that conceptualizations of
entrepreneurship as a purely economic pursuit are too narrow. Indeed, Baumol (1990:
897–98) argues that such depictions are misleading as they do not consider the wider out-
comes that often accompany entrepreneurial activities; “if entrepreneurs are defined, sim-
ply, to be persons who are ingenious and creative in finding ways that add value to their
own wealth, power, and prestige, then it is to be expected that not all of them will be over-
ly concerned with whether an activity that achieves these goals adds much or little to the
social product.” Indeed, according to Schramm (2006: 279), although economic incen-
tives may be at the heart of many entrepreneurial endeavors, it is important not to ignore
the social outcomes that often arise; for many entrepreneurs “the temptation to set aside
ethical standards is always present because the gains are so large for the individual who
decides to work outside the rules.”
This case study suggests, however, that understanding entrepreneurship as an individ-
ual activity does not correspond to real-world accounts of entrepreneurship where there is
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ENTREPRENEURSHIP AT THE MARGINS 51

frequently a cited need, certainly if the business is to grow, to involve more and more peo-
ple in a business. As such, the “temptation to set aside ethical considerations” applies not
only to the entrepreneurs themselves, but also to all those individuals who are involved in
the enterprise in some way or fashion. Referring back to Etzioni’s (1987) notion of soci-
etal reality testing, this case study suggests that entrepreneurs who are able to generate
sufficient social capital are able to involve people in activities that they would normally
have left well alone.
The two case studies are almost polar extremes of what can be achieved at the mar-
gins of entrepreneurship. Hill Holt Wood reads very much like a pioneer story where the
vision of one family, over many years, began to influence national policy on woodland
management and conservation. The case study is concerned with both the margins of what
was known and of what was acceptable, but through hard work and perseverance, the
unknown became the known and the unacceptable became the accepted. In effect, the
margins were redefined in favor of Hill Holt Wood and in favor of the innovations intro-
duced therein. The consequences of this newly acquired endorsement were such that new
but similar projects immediately began to spring up across the UK with the full and imme-
diate support of both local and national organizations.
The second case study, on the other hand, demonstrates that entrepreneurs can take
advantage of the uncertainty that exists at the margins to further their own levels of per-
sonal gain. Furthermore, in doing so, the behaviours and ethical considerations of associ-
ated and proximate individuals can be compromised. In such instances, the margins, cer-
tainly at a local level, are redrawn again but this time at a cost to society rather than at a
gain. Given such activities, it is somewhat disconcerting that the acknowledgement that
entrepreneurship is, in some cases, as extractive as it is additional is remarkably absent
from the majority of entrepreneurship texts despite some well-founded and astute obser-
vations; it is often assumed that an economy of private enterprise has an automatic bias
towards [improvement], but this is not so… It has a bias only towards profit” (Hobsbawm,
1969: 40).
Although a great deal of entrepreneurship research does not explore the ethical conse-
quences of entrepreneurial activities, it is clear that many entrepreneurial initiatives do
much to influence and shape the behaviours and ethics of the communities within which
they occur. The first case study demonstrated, both locally and nationally, that there was
a need to increase awareness of the importance of ancient woodlands. The second case
study demonstrated that people are prepared to turn a blind eye to the activities of their
friends if those activities do not cause them any discomfort or harm. Both case studies
suggest that there is still a lot of research that needs to be done to further our understand-
ing of how entrepreneurs shape the social expectations or ethical frameworks within
which they operate (Bucar et al., 2003). The skills and capabilities used by the entrepre-
neurs in the case studies were extremely similar: to further their business pursuits, both
parties needed their businesses to be sanctioned by the communities within which they
were embedded and both parties had to work very hard to include all the people around
them who might assist in the development and expansion of their businesses.
Entrepreneurship is not, as we have seen, limited to the economic domain and has far-
reaching consequences, although these consequences are often largely hidden and not rec-
ognized by the entrepreneurs themselves. In an environment in which an ever-increasing
emphasis has been placed on the importance of entrepreneurship, especially within further
and higher education institutions, there appears to be a greater need to raise awareness of
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52 FRITH AND MCELWEE

the non-economic impacts and outcomes of entrepreneurial activities and to encourage


greater levels of responsibility and accountability. Whether this should be the responsibil-
ity of educators or whether the responsibility rests across society and social structures
more broadly is not clear. However, what has become increasingly obvious in recent years
is that the unfettered pursuit of wealth and success in the guise of entrepreneurship can
have disastrous consequences on the communities in which they are situated. On the other
hand, as suggested by Etzioni (1987), entrepreneurs can do much to break down ossified
societal practices and to usher in new and improved business practices which enrich both
the entrepreneurs and the communities within which they are based.
Conclusions
The central discussion on which this paper has been based—that is, the similarities in
approach to entrepreneurship in two very different contexts—has important policy impli-
cations. Until now, there has been an assumption that entrepreneurs are engaged primari-
ly in value-adding activities and that value-extracting forms of entrepreneurship can be
eradicated from the economic landscape by increasing the level of punishments and
chance of detection (Renooy et al., 2004). This paper reveals, however, that if govern-
ments adopt such an approach, they may well with one hand deter precisely the types of
entrepreneurship and enterprise that, with the other hand through their enterprise culture
policies, they are seeking to nurture. Recognizing the integrative and dynamic nature of
entrepreneurial behaviours is, therefore, more than simply a matter of academic interest.
A fuller and more nuanced understanding of value-extracting entrepreneurs’ motives and
behaviours is crucial so that appropriate public policy decisions can be taken towards this
hidden enterprise culture, such as initiatives to enable these entrepreneurs to legitimise
their business ventures rather than solely measures to eradicate these enterprises. If this
paper therefore stimulates further studies that evaluate whether there is the same co-pres-
ence of opportunity factors and dynamism in entrepreneurs’ motives elsewhere, as well as
encouraginggreater reflection on what should be done about the prevalence of value-
extracting entrepreneurs, then the paper will have fulfilled its objectives.
Contact Information
For further information on this article contact:

Gerard McElwee, Reader in Rural Enterprise, University of Lincoln, Lincoln, LN6 7RT, United
Kingdom.

Tel: 00 44 (0) 1522 88 6423


E-mail: gmcelwee@lincoln.ac.uk
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williams.qxp 9/12/2008 3:14 PM Page 55

Beyond Legitimate Entrepreneurship:


The Prevalence of Off-the-Books Entrepreneurs
in Ukraine
Colin C. Williams, University of Sheffield, United Kingdom
ABSTRACT. Although entrepreneurs are commonly represented as risk-takers, there has been little evaluation
of the extent to which they might weigh up the costs of being caught and the level of punishments, and engage
in off-the-books work practices. Reporting a survey conducted in Ukraine during late 2005 and early 2006 of
331 entrepreneurs (defined as individuals starting-up an enterprise in the past three years), however, just 10%
are found to operate on a wholly legitimate basis, while 39% have a license to trade and/or have registered their
business but conduct a portion of their trade off-the-books and 51% operate wholly unregistered enterprises con-
ducting all of their trade in the informal economy. The outcome is a call to move beyond the cleansed ideal-type
representation of entrepreneurs as legitimate and wholesome super heroes that pervades the literature and
towards a fuller understanding of the lived practice of entrepreneurship in the contemporary world.
RÉSUMÉ. Malgré que les entrepreneurs soient fréquemment décrits comme étant des preneurs de risques, il y
a néanmoins peu d’études évaluant dans quelle mesure ils peuvent soupeser les coûts économiques de se faire
prendre ainsi que la gravité des sanctions qu’il leur serait imposées et exercer leurs activités commerciales au
noir. Un sondage mené en Ukraine de la fin 2005 au début 2006 auprès de 331 entrepreneurs ayant démarré une
entreprise au cours des trois dernières années indique que seulement 10 % d’entre eux exploitent leur entreprise
en toute légalité. Par contre, 39 % ont un permis d’exploitation et/ou une entreprise immatriculée, mais exercent
une partie de leurs activités commerciales au noir, tandis que 51 % exploitent des entreprises non immatriculées
et sans permis et exercent la totalité de leurs activités commerciales au noir. Ces résultats amènent à conclure,
en premier lieu, de la nécessité de redéfinir cette représentation des entrepreneurs les décrivant comme étant de
véritables superhéros à l’image saine; une représentation idéaliste de ceux-ci qui fait omission de tout trait
indésirable et qui est répandue dans la littérature. En deuxième lieu, il faut faire en sorte d’avoir une meilleure
compréhension de l’entrepreneuriat tel qu’exercé dans le monde d’aujourd’hui.

Introduction
Despite the recurring depiction of entrepreneurs as risk-taking super-heroes, the literature
on entrepreneurship has seldom questioned whether this means that they always play the
game by the rulebook. Notably absent from nearly all literature on entrepreneurship, that
is, is the notion that these risk-takers might weigh up the costs of being caught and the
level of punishments and then decide to do some or all of their business on an off-the-
books basis. In this paper, therefore, the aim is to evaluate the degree to which entrepre-
neurs operate in the off-the-books economy in order to question the validity of the ideal-
type representations of entrepreneurs as legitimate super-heroes that permeates the entre-
preneurship literature.
In the first section of this paper, therefore, the ways in which entrepreneurship has
been conventionally depicted in the literature will be reviewed so as to display how the
wholesome, clean and pure narratives of entrepreneurship that dominate the literature
have written out off-the-books entrepreneurs from their portrayals followed in the sec-
ond section by a review of what is known about the relationship between entrepreneur-
ship and off-the-books endeavor. The third section then reports one of the first surveys
to evaluate the degree to which entrepreneurs start-up their businesses trading on an off-

Journal of Small Business and Entrepreneurship 22, no. 1 (2009): pp. 55–68 55
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56 WILLIAMS

the-books basis conducted in Ukraine during 2005–06. Finding that the vast majority of
entrepreneurs start-up on an off-the-books basis, the concluding section calls for a move
beyond the currently dominant super-hero representation of entrepreneurs and towards a
fuller understanding of the lived realities of entrepreneurship.
Before commencing, however, it is necessary to define what is here meant by off-the-
books work or what has been variously called “informal employment,” the “underground
economy,” “shadow work” and “hidden sector” to name but a few of the nouns and adjec-
tives employed. Despite the array of terms, a strong consensus exists amongst both aca-
demics and policy-makers regarding how to define such work. The off-the-books econo-
my is widely accepted as referring to the paid production and sale of goods and services
that are unregistered by, or hidden from the state for tax and/or benefit purposes but which
are legal in all other respects (European Commission, 1998; Feige, 1999; Grabiner, 2000;
ILO, 2002a; Marcelli, Pastor and Joassart, 1999; OECD, 2000a, b, 2002; Portes, 1994;
Thomas, 1992; Williams and Windebank, 1998). As such, only paid work that is illegal
because of its non-declaration to the state for tax and/or social security purposes is includ-
ed in the off-the-books economy. Paid work in which the good and/or service itself is ille-
gal (such as drug trafficking) is excluded, as is unpaid work. This economic sphere, like
all others, nevertheless, possesses blurred edges. Some include work where gifts are
given. Moreover, illegal services in some nations are legal in others, such as prostitution,
meaning that what is included in the off-the-books economy can differ significantly across
nations. Here, however, and reflecting the consensus, only paid transactions are included,
and solely exchanges of legal goods and services in the country under consideration.
Representations of Entrepreneurship
Unlike the off-the-books economy where there is a strong consensus regarding what it is,
entrepreneurship has proven far harder to pin down. This has been the case for a long time.
As Cole (1969: 17) put it nearly four decades ago, “for ten years we ran a research centre
in entrepreneurial history and for ten years we tried to define the entrepreneur. We never
succeeded.” Some two decades later, the literature was still no closer. As Brockhaus and
Horowitz (1986: 42) concluded, “there is no generic definition of the entrepreneur” while
Shaver and Scott (1991: 24) argued that “entrepreneurship is like obscenity: nobody
agrees what it is, but we all know it when we seen it.”
Today, little has changed. In a now notorious phrase, Hull, Bosley and Udell (1980)
likened the search for a definition of the entrepreneur as akin to “hunting the heffalump.”
An agreed definition remains as distant as ever. Why might this be the case? In one very
insightful explanation, Jones and Spicer (2005: 235) contend:
But what if research into the entrepreneur has, in its very failure, iden-
tified something critically important about the operation of the catego-
ry of the entrepreneur, that is, that it is essentially indefinable, vacuous,
empty? What if entrepreneurship has not failed at all, but has uncovered
something significant about the underlying structure of entrepreneurial
discourse, that is, that “the entrepreneur” is an empty signifier, an open
space or “lack” whose operative function is not to “exist” in the usual
sense but to structure phantasmal attachment?
This is an important insight because even if the literature has been unable to reach any
consensus on how to define entrepreneurship, there does seem to be strong and broad
agreement on two issues regarding its representation.
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THE PREVALENCE OF OFF-THE-BOOKS ENTREPRENEURS IN UKRAINE 57

Nearly all representations in the voluminous literature, first, depict entrepreneurship in


a positive and virtuous manner and second, portray it in a relatively clean and sanitized
way. Indeed, for the purposes of this paper, as well as this special issue which seeks to
understand why many activities in morally, legally and ethically contested contexts are not
usually considered as entrepreneurship, this insight is crucial. It is perhaps this overarch-
ing desire of the “mainstream” entrepreneurship literature to provide a positive, virtuous
and clean portrait of entrepreneurs that results in other (and “othered”) forms of entrepre-
neurship being consigned to the margins or even put outside the boundaries of entrepre-
neurship. As Jones and Spicer (2005: 237) explain, such a portrayal:
offers a narrative structure to the fantasy that coordinates desire. It
points to an unattainable and only vaguely specified object, and directs
desire towards that object… One secures identity not in ‘being’ an
enterprising subject but in the gap between the subject and the object of
desire. This lack is central to maintaining desiring … it is precisely the
… mysterious nature of entrepreneurship discourse that allows it to be
so effective in enlisting budding entrepreneurs and reproducing the
current relations of economic domination.
Viewed in this manner, it quickly becomes apparent why off-the-books entrepreneurs have
been written out of mainstream entrepreneurship. To detail how off-the-books enterprises
and entrepreneurs are an inherent part of the lived practice of contemporary entrepre-
neurship, to put it plainly, would tarnish this object of desire and curtail people’s emotive
attachment to achieving this fantasy state of being.
To see that nearly all definitions and depictions of entrepreneurship represent it as a
desired object, one needs only consider how they are acclaimed as what Cannon (1991) calls
“economic heroes” or Burns (2001: 1) views as “the stuff of ‘legends’ … held in high esteem
and held up as role models to be emulated”; they are “super heroes” (Burns, 2001: 24).
This super-heroic status is apparent whichever theoretical approach to entrepreneur-
ship is adopted (see Cunningham and Lischeron, 1991: 47). Whether one adopts the “great
person” perspective that views them as born (rather than made) and reads them as pos-
sessing a “sixth sense” along with intuition, vigor, energy, persistence and self-esteem and
contrasts them with “mortals” who “lack what it takes,” or one adopts the more socially
constructed theoretical approaches of the classical, management, leadership or intrapre-
neurship schools of thought, the assumption is that the entrepreneur is a super heroic fig-
ure possessing virtuous attributes that “lesser mortals” do not. In none of these schools are
negative attributes ever attached to the entrepreneur.
What, therefore, are these positive qualities possessed by the entrepreneur? This is the
subject of much debate. Different commentators and schools of thought put forward con-
trasting attributes, champion certain qualities over others, argue over whether particular
traits are applicable or not, and debate the emphasis given to different qualities, or sets of
qualities. Indeed, so much so that it feels somewhat like walking into a minefield to pro-
vide here a list of the possible characteristics, traits and/or qualities of entrepreneurs. Yet
this needs to be briefly done if one is to more fully understand how the entrepreneur is
being defined and depicted in this voluminous literature as well as how they are always
represented in heroic terms. Here, therefore, and following Burns (2001: 27), the various
characteristics, traits and/or qualities possessed by entrepreneurs that are being debated in
the literature are listed as: the need for independence; the need for achievement; internal
locus of control; ability to live with uncertainty and take measured risks; opportunistic;
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58 WILLIAMS

innovative; self-confident; proactive and decisive with higher energy; self-motivated; and
vision and flair. Many similar lists exist, albeit with slightly different emphases (e.g., Baty.
1990; Blanchflower and Meyer. 1991; Bolton and Thompson. 2000; Brockhaus and
Horowitz. 1986; Carr. 2002; Chell, Haworth and Brearly. 1991; Kanter. 1983;
McClelland. 1961; Schumpeter. 1996; Storey and Sykes. 1996).
The intense debates over each and every one of these characteristics need not here over-
ly concern us. What is important is that all of these qualities construct a representation of
the entrepreneur as a heroic figure. To see this, one needs only consider that if the above
are the qualities of entrepreneurs, then the dualistic opposite, the “non-entrepreneur,” is
somebody who is dependent, lacks the will to achieve, believes in destiny, cannot live
with uncertainty and avoids risks, fails to take opportunities, lacks the ability to innovate,
lacks confidence, is reactive, indecisive and lacks energy, lacks the ability to motivate
themselves and has no vision or flair.
Put in more theoretical terms, the entrepreneur/non-entrepreneur dualism represents
what Derrida (1967) calls a binary hierarchy. For this apostle of post-structuralist thought,
hierarchical binaries lie at the core of western thought which, first, conceptualizes
objects/identities as dualisms where each side is stable, bounded and constituted via nega-
tion and second, reads the resultant binary structures hierarchically in that the first term
(the superordinate) is endowed with positivity and the second term, the subordinate (or
subservient) “other,” with negativity. Viewed through this lens, it is quickly apparent that
entrepreneurship is a superordinate endowed with positivity while the unnamed non-
entrepreneurship category is the subordinate “other” endowed with negativity whose
meaning is established solely in relation to its superordinate opposite.
To contest such binary hierarchical thought, Derrida (1967) argues that first, one can
revalue the subordinate term, namely the non-entrepreneur. The problem, however, and as
he points out, is that revaluing the subordinate in a binary hierarchy is difficult since it
also tends to be closely associated with the subordinate terms in other binary hierarchies
(e.g., non-entrepreneur is associated as shown above with dependency, an external locus
of control, risk avoidance, an inability to innovate, indecision, no vision, a lack of flair,
motivation and energy). A second strategy is thus to highlight the inter-dependencies
between the two sides of the dualism and a third strategy is to blur the boundaries between
the terms so as to undermine the solidity and fixity of identity/presence.
It is this latter strategy that is adopted in this paper. The intent is to show the dispari-
ty between the ideal-type representation and the everyday realities of entrepreneurship
where participants do not always play by the rulebook in order to sully the clean, sanitized
and virtuous image of the entrepreneur as always possessing positive attributes. To
achieve this, I here focus upon unraveling the nature of entrepreneurship in Ukraine so as
to bring to the fore how many entrepreneurs engage in off-the-books transactions in their
daily practices in order to challenge the notion that these are super-heroic figures. Before
doing so, however, it is first necessary to briefly review what is already known about
entrepreneurs who engage in off-the-books work.
Entrepreneurship and Off-the-Books Work
Over the years, a small but steadily expanding stream of entrepreneurship thought has
explicitly challenged this largely wholesome representation of entrepreneurship. The
study by Kets de Vries (1977) is one of the best known attempts to attach negative attrib-
utes to entrepreneurs by arguing that they are the product of unhappy family backgrounds,
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THE PREVALENCE OF OFF-THE-BOOKS ENTREPRENEURS IN UKRAINE 59

particularly situations in which the father is a controller and manipulator who is remote
and often seen as a deserter. The classic study of the entrepreneur as somebody who does
not always play by the rulebook, meanwhile, is that of Collins, Moore and Unwalla
(1964), partially corroborated by Bhide and Stevenson (1990). There are also more recent
attempts to deconstruct the virtuous and positive image of the entrepreneur (e.g.,
Armstrong, 2005; Deutschmann, 2001; Fournier, 1998; Jones and Spicer, 2005, 2006;
Williams, 2007). Here, I wish to further contribute to this tarnishing of the entrepreneur
by taking as a starting point the “old adage that if you scratch an entrepreneur you will
find a ‘spiv’” (Burns, 2001: 4) and studying whether entrepreneurs engage in off-the-
books transactions.
In most countries, a significant proportion of economic endeavor takes place in the
off-the-books economy. This is the case whatever region of the world is considered. In the
diverse array of countries that constitute the Third World, one of the most widely accept-
ed estimates is that between one-half to three-quarters of non-agricultural employment is
located in the off-the-books economy and that the majority who engage in such work do
so on an own account or self-employed basis. Some 48% of non-agricultural employment
in North Africa is estimated to be off-the-books, 51% in Latin America, 65% in Asia and
72% in sub-Saharan Africa (ILO 2002b). Differentiating between those working off-the-
books on their own account in self-employment and those in off-the-books waged
employment (such as casual day laborers, domestic workers, temporary workers without
secure contracts or social protection), moreover, the finding is that the self-employed
comprise a greater share of off-the-books workers than waged employees, representing
70% of informal workers in sub-Saharan Africa, 62% in North Africa, 60% in Latin
America and 59% in Asia (ILO, 2002b).
Indeed, in recent decades, it has been increasingly recognized that many of these self-
employed operating off-the-books display entrepreneurial qualities (Browne, 2004; Cross,
2000; De Soto, 1989, 2001; Franks, 1994; ILO, 2002a; Rakowski, 1994). From street-sell-
ers in the Dominican Republic (Itzigsohn, 2000) and Somalia (Little, 2003), through off-
the-books garment businesses in India (Das, 2003; Unni and Rani, 2003) and the
Philippines (Doane, Srikajon and Ofreneo, 2003), to home-based micro-enterprises in
Mexico (Staudt, 1998) and Martinique (Browne, 2004), the now widespread consensus is
that this is a sphere of enterprise and entrepreneurship (Itzigsohn, 2000; Otero, 1994;
Rakowski, 1994). As the ILO (2002a: 54) state, the off-the-books economy acts as “an
incubator for business potential and … transitional base for accessibility and graduation
to the formal economy” and many off-the-books workers show “real business acumen,
creativity, dynamism and innovation.” During the past few years, and reflecting this, a
similar representation has begun to emerge when discussing the off-the-books economy
in the western world (Evans, Syrett and Williams, 2006; Renooy et al., 2004; Small
Business Council, 2004; Williams, 2004, 2006, 2007) and importantly given the focus of
this paper, also the transition economies of East-Central Europe (Smallbone and Welter,
2001).
Indeed, in transition economies, this representation of the off-the-books economy both
as a site of, as well as “seedbed” for, entrepreneurship has been widespread for some time
(Smallbone and Welter, 2001; Szelenyi, 1988). Until now, however, there has been a
paucity of evidence on the degree to which entrepreneurs start-up on an off-the-books
basis. Although numerous studies enumerate the size of the off-the-books economy, few
if any have so far evaluated the proportion of business ventures that start-out in this
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60 WILLIAMS

sphere. This is a significant gap in our understanding that needs to be filled. Below, in con-
sequence, one of the first known studies to investigate this is reported.
Evaluating Entrepreneurship in Ukraine
Ukraine, the second-largest successor state of the former Soviet Union, is a country in
which there exist strong tensions between the state and society and severe economic prob-
lems. As the 2004 New Europe Barometer reveals, although two-thirds of people in new
EU member states state that most public officials are corrupt, 92% in Ukraine believe this
is the case—the highest figure in all 13 East-Central European countries studied (Rose,
2005). The outcome is low “tax morality”; few Ukrainians believe in paying tax since they
do not trust the state to use it for redistributive or collective purposes. When coupled with
the fact that official employment declined by about one-third between 1990 and 1999
(Cherneyshev, 2006) and that 73% of Ukrainians assert that they receive insufficient from
their main income to buy what they really need (Rose, 2005), it would be surprising if off-
the-books transactions were not rife in contemporary Ukraine.
Until now, however, and despite numerous contemporary surveys of the Ukraine labor
market, including the Ukrainian Longitudinal Monitoring Survey (Brown, Earle and
Vakhitov, 2006; Kupets, 2006; Lehmann and Terrell, 2006; Lehmann, Pignatti and
Wadsworth, 2006), the Labor Force Survey-based modular Decent Work Survey, the
Enterprise Labor Flexibility and Security Survey and the People’s Security Survey
(Cherneyshev, 2006; Standing, 2005; Standing and Zoldos, 2001), no attempt has been
made to directly collect data on off-the-books working practices (Dean, 2002). Instead,
only indirect measurement methods using proxy indicators have been used to estimate its
size. According to these, the off-the-books economy in Ukraine is equivalent to
47.3–53.7% of GDP using physical input proxies (Schneider and Enste, 2000) and
55–70% using currency demand (Dzvinka, 2002), with official Ukrainian government
estimates, based on such proxies, asserting that it is equivalent to 55% of Ukraine’s GDP
(NCRU, 2005). Indeed, this perhaps explains why the official government statistics for
Ukraine identify that the official unemployment rate in 2006 (using the ILO definition) is
7.9% when only 57.1% of the total population aged 15–70 in 2006 were in employment
(State Statistics Committee of Ukraine, 2006).
Nevertheless, both OECD experts in their handbook on measurement methods
(OECD, 2002) and the most recent European Commission report on undeclared work
(Renooy et al., 2004), as well as a host of academic evaluations (Thomas, 1992; Williams,
2004, 2006; Williams and Windebank, 1998) conclude that proxy measures are very lim-
ited in their usefulness. Indeed, for our purpose here which is to investigate the proportion
of businesses that start-up in the off-the-books economy, such indirect proxy indicators
are of little use beyond suggesting that a significant proportion of business might be oper-
ating in this sphere.
In consequence, and in order to estimate the proportion of businesses that start-up on
an off-the-books basis, as well as the size and nature of the off-the-books economy, dur-
ing late 2005 and early 2006, a direct survey was conducted. Given the significant differ-
ences previously identified in the magnitude and nature of the off-the-books economy
across affluent and deprived, as well as urban and rural, populations (Williams and
Windebank, 1998), a maximum variation sampling technique was used based on these two
variables to select four contrasting localities. First, and in the capital of Kiev, an affluent
area was chosen, namely Perchersk, along with a deprived neighborhood, namely
Vynogardar. Continuing the process of maximum variation sampling, a deprived rural area
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THE PREVALENCE OF OFF-THE-BOOKS ENTREPRENEURS IN UKRAINE 61

near Vasilikiv was then chosen, and finally, a town on the Ukrainian/Slovakia border was
selected, U hgorod. Within each locality, a spatially stratified sampling methodology was
then employed to select households for interview (Kitchen and Tate, 2001). In each of the
four localities, 150 households were interviewed (600 in total). In consequence, if there
were 3,000 households in the area and 150 interviews were sought, then the researcher
called at every twentieth household. If there was no response and/or the interviewer was
refused an interview, then the twenty-first household was visited, then the nineteenth,
twenty-second, eighteenth and so on. This provided a spatially stratified sample of each
area.
To investigate whether people had started up new business ventures and whether they
had done so off-the-books, structured face-to-face interviews were conducted. Some new
to this subject might believe that respondents would be unwilling to divulge such infor-
mation to interviewers. However, the common finding of direct surveys across the world
is that just because this work is hidden from the state for tax or social security purposes
does not mean that people are unwilling to openly discuss such work with academic
researchers (for a review, see Williams, 2004). Here, therefore, face-to-face interviews
were conducted.
First of all, this gathered data on gross household income, the employment status of
household members, their employment histories, ages and gender, as well as whether they
had engaged in self-employed endeavor over the past 36 months and/or started up some
new business venture. Second, they were asked about the forms of work they most relied
on to maintain their living standard. Third, closed-ended questions were asked about the
forms of work both used by their household to get common tasks completed as well as
whether members supplied both unpaid and off-the-books jobs in relation to specific
tasks, followed by open-ended questions about other off-the-books work conducted and
its relative importance to their household income. Fourth and finally, and using five-point
likert scaling, attitudinal questions were posed about their views of the economy, politics,
everyday life and their future prospects. Below, the findings are reported on, first, the
importance of off-the-books work to their living standards and second, whether those who
had started up self-employed and/or new business ventures in the past 36 months had done
so by conducting some or all of their transactions on an off-the-books basis.
The Prevalence of Off-the-Books Practices in Ukraine
To understand the degree to which the surveyed population rely on off-the-books
transactions for their livelihoods, respondents were asked about the form of work most
important to their standard of living, along with the second most important. One in six
(16.4%) reported that they rely primarily on off-the-books work for their livelihoods (see
Table 1). Moreover, a further quarter of respondents state that off-the-books work is the
second most important contributor to their standard of living. Some 28% of all households
primarily dependent on subsistence production, that is, cite off-the-books work as their
secondary strategy, 22% reliant principally on mutual aid, 30% chiefly reliant on formal
employment and 14% primarily dependent on state benefits. In total, therefore, some 40%
of all Ukraine households cite off-the-books work as either the principal or secondary con-
tributor to their livelihood.
Who, therefore, depends on off-the-books working practices? Contrary to the “mar-
ginality thesis” which holds that off-the-books work is concentrated amongst marginal-
ized groups such as the unemployed or deprived populations (e.g., Gallin, 2001; Kim,
2005), this survey finds that this is not the case. As Table 2 displays, just 12.5% of house-
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62 WILLIAMS

Table 1. Primary and second most important form of work for living standard: % of households
Secondary strategy
Self- Unpaid Off-the-
Formal job Benefits All
provisioning mutual aid books work
Self-
0.9 1.7 2.2 2.4 0.5 7.7
provisioning
Mutual aid 0.2 0.9 1.0 1.4 1.0 4.5
Primary Off-the-
3.4 4.1 1.5 6.0 1.4 16.4
strategy books work
Formal job 10.3 17.5 18.4 9.5 5.7 61.4
Pension/
2.9 4.1 1.4 0.5 1.0 9.9
Benefits
Source: 2005–06 Ukraine survey.

holds with no formal wage earner cite off-the-books work as their primary strategy com-
pared with 23.5% of households with one formal wage earner and 13.9% of households
with multiple formal wage-earners. Indeed, of all households primarily reliant on off-the-
books work for their livelihood, some 51% are multiple-earner households (58% of all
households surveyed), 43% single earner households (29% of surveyed households) and
just 6% no-earner households (12% of surveyed households). This study thus reinforces
the wealth of previous literature that has refuted the marginality thesis both in western
nations (Jensen, Cornwell and Findeis, 1995; van Geuns, Mevissen and Renooy, 1987;
Renooy, 1990; Williams, 2005) and transition economies (Rosser, Rosser and Ahmed,
2000; Wallace and Latcheva, 2006). In consequence, the off-the-books economy is not
some marginal sphere of minor importance to a limited range of households but, rather, is
an important practice for a large proportion of the Ukraine population.

Table 2. Primary sphere relied on by Ukraine households, 2005–06: by type of household


Primary strategy
Unpaid mutual Off-the-books Formal
% Self-provisioning Pension/benefits
aid work employment
Employment status of household
Multiple earner 4.7 1.5 13.9 78.6 1.1
Single earner 8.4 4.8 23.5 56.0 7.2
No earner-
37.5 18.8 12.5 18.8 12.5
working age
No-earner-retired 5.4 3.6 5.4 10.7 75.0
Gross Household Income/month (gr)
<600 9.6 4.1 15.1 41.1 30.1
600–1399 6.7 3.3 13.4 61.9 14.6
1400–2199 6.6 4.1 17.3 71.1 0.8
2200–2999 3.4 1.7 18.6 73.3 1.7
3000–3799 10.2 2.6 15.4 69.2 2.6
3800+ 4.5 0 22.7 72.7 0
Source: 2005–06 Ukraine Survey.
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THE PREVALENCE OF OFF-THE-BOOKS ENTREPRENEURS IN UKRAINE 63

What types of off-the-books work, therefore, do these respondents engage in for their
livelihoods? The ILO (2002b), as discussed earlier, sub-divides participants in off-the-
books work into those who are self-employed and those engaged in waged employment
on an off-the-books basis. If a significant proportion of off-the-books workers in Ukraine
are in waged employment, then this sphere cannot be represented as a hidden enterprise
culture and seedbed for new enterprise creation. The finding, however, is that just 28% of
those engaged in off-the-books work are in waged employment. This is similar to the ear-
lier reported finding by the ILO (2002b) that elsewhere in developing nations some
30–40% of off-the-books workers are found to be in waged employment on an off-the-
books basis.
The vast majority of off-the-books workers (72%), however, are not waged employ-
ees but doing so on an own account basis. Below, therefore, we analyze one segment of
these self-employed, namely those who have started-up a new business ventures during
the past three years so as to enumerate the degree to which entrepreneurs start up on an
off-the-books basis.
How Many Entrepreneurs Start-Up Trading Off-the-Books?
The 600 face-to-face interviews conducted revealed a high-level of entrepreneurship in
contemporary Ukraine. Some 331 individuals asserted that they had started-up an enter-
prise in the past three years. Of these, just 33 (10%) stated that their business ventures
were wholly legitimate operations that were registered with the state, in possession of the
required licenses and conducting all of their transactions on a declared basis for tax and
social insurance purposes. The remaining 298 entrepreneurs (90%) stated that their busi-
ness ventures operated wholly or partially in the off-the-books economy. Some 39% of all
entrepreneurs starting-up a business venture in the past three years, that is, had a license
to trade and/or the business was registered but a portion of their trade was conducted in
the off-the-books economy, while 51% operated on a wholly unregistered basis with no
license to trade and all of their trade was conducted on an off-the-books basis. In conse-
quence, over half of all business start-ups are not even on the radar screen of the state and
of those business start-ups registered and on the state’s radar screen, some 80% operate
partially in the off-the-books economy.
Who, therefore, are these nascent entrepreneurs operating wholly or partially in the
off-the-books economy? Above, it has been already displayed that those most dependent
on the off-the-books economy are not the unemployed and relatively low-income popula-
tions as depicted in the marginality thesis. Instead, they are already in formal employment
and spread across the income spectrum. The same applies when analyzing those entrepre-
neurs starting-up business ventures. On the whole, some 55% are in formal employment
and operating their business alongside their formal waged work as an “on-the side” busi-
ness venture and the remaining 45% are a mixture of various categories of people regis-
tered as non-employed including the “economically inactive” such as housewives and oth-
ers unregistered as engaging in any form of employment, pensioners and people claiming
unemployment benefit. This finding reinforces the evidence elsewhere that those starting-
up enterprises tend to be people in waged employment, often depicted as straddling the
legitimate and off-the-books economy as a “risk-reduction strategy” (McCormick, 1998),
and that it is only later in the development of the enterprise that they might become fully
self-employed and to leave their waged employment (e.g., Reynolds et al., 2002). As a
study in Russia has displayed, 26.5% of the new self-employed work on an off-the-books
basis as a second job at the outset, displaying how the off-the-books sphere is an incuba-
tor for new self-employed businesses (Guariglia and Kim, 2006).
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64 WILLIAMS

Turning to the gender of those starting-up enterprises operating wholly or partially in


the off-the-books economy, moreover, although the split between men and women entre-
preneurs was 40:60 for wholly off-the-books nascent enterprises, the gender ratio for own-
ership of nascent legitimate enterprises conducting a portion of their trade off-the-books
was 70:30 in favor of men. Wholly off-the-books nascent enterprises, therefore, are oper-
ated more by women, while legitimate nascent enterprises trading off-the-books were pre-
dominantly operated by men. Most wholly off-the-books business start-ups, moreover, are
relatively small-scale piecemeal operations operated as part of a survival strategy by the
owner, whilst the legitimate enterprise start-ups operating partially in the off-the-books
economy are relatively larger-scale and operated by their proprietors more to “get-ahead”
that to “get-by.” Indeed, nearly all wholly off-the-books business start-ups had no employ-
ees, while some 35% of registered business start-ups working partially off-the-books had
additional employees. Examining the sectors in which such enterprises operated, the vast
majority (90%) were service sector rather than manufacturing sector enterprises, and most
of these (85%) sold chiefly to final users rather than other firms (i.e., they were chiefly
consumer service or business-to-consumer enterprises rather than business-to-business
firms). This consumer service sector focus, nevertheless, was more marked amongst
wholly off-the-books business start-ups than amongst registered business start-ups con-
ducting a portion of their trade off-the-books (95% of wholly off-the-books start-ups were
in the consumer services sector compared with 70% of registered start-ups trading
partially off-the-books).
Of those setting up an enterprise, about 80% use the skills, tools and/or social net-
works directly related to their current or previous formal employment and/or employ-
ment-place in their off-the-books business ventures. For example, those working as
plumbers in their formal occupation tend to operate plumbing enterprises “on the side” or
tend to use contacts from their employment-place in order to find work for their off-the-
books enterprise. An example would be university teachers who offer University entrance
examination candidates tuition on an off-the-books basis in order to help them pass their
entrance examinations. The remaining fifth of those starting-up a business are doing so in
fields that arose out of what Stebbins (2004) refers to as some “serious leisure” such as a
hobby or interest that leads them to set up enterprises selling goods produced or services
resulting from it. This included those who had learned some skill by pursuing some hobby
or interest (such as painting, carpentry) and had then decided to establish an enterprise
based on this skill.
In Ukraine, therefore, the vast majority (90%) of entrepreneurs are starting-up their
business ventures either partially or wholly on an off-the-books basis. Such entrepreneurs,
in consequence, cannot be depicted as some small segment of the totality of entrepreneurs
existing in the margins. They are the “mainstream” of total entrepreneurial activity and it
is legitimate entrepreneurs who inhabit the margins. If entrepreneurship is to be under-
stood in Ukraine, then it is little use adhering to the more wholesome and virtuous text-
book representation of entrepreneurs as legitimate super-heroes and focusing upon solely
this group since they are only a small minority of all entrepreneurs.
Conclusions
The starting point of this paper was that much of the entrepreneurship literature errs
towards representing entrepreneurs first, in a positive and virtuous manner, and second, in
a clean and sanitized way. The problem, however, is that there seems to be marked dis-
crepancy between such textbook celebratory odes to the entrepreneur as wholesome super
heroes and the lived realities of entrepreneurship.
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THE PREVALENCE OF OFF-THE-BOOKS ENTREPRENEURS IN UKRAINE 65

In this paper this has been shown by highlighting how many entrepreneurs work on an
off-the-books basis. Until now, and despite the common representation of entrepreneurs
as risk-taking heroes, it has been seldom if ever questioned whether this means that they
always keep to the rules. Notable by its absence from most literature on entrepreneurship,
that is, is the notion that risk-takers might weigh up the probability of being caught and
the level of punishments and decide to do some or all of their business on an off-the-books
basis.
Reported the results of one of the first known surveys to identify the proportion of
businesses that start-up in the off-the-books economy, this paper has revealed that in
Ukraine during 2005–06, just 10% of those who had started up business ventures in the
past three years were operating on a wholly legitimate basis, 39% had a license to trade
as self-employed and/or had registered their businesses but were conducting a portion of
their trade in the off-the-books economy while the majority (51%) operated wholly unreg-
istered off-the-books enterprises and/or did not have a license to trade as self-employed
and conducted all of their trade on an off-the-books basis.
Here, in consequence, the depiction of enterprise culture as composed of super-hero
entrepreneurs playing by the rulebook in their business lives is transcended. Although
there may be a gleaming “whiter-than-white” textbook depiction of entrepreneurship, this
is here asserted to represent but the tip of the iceberg and beneath the surface, so far large-
ly ignored, exists a large hidden enterprise culture composed of entrepreneurs who do not
always play within the bounds of the law. By shining a light on this hidden enterprise cul-
ture beneath the waterline, the aim has been to begin to tarnish the sanitized and clean rep-
resentation of entrepreneurship by revealing the everyday lived realities. Of course, not all
entrepreneurs engage in illegitimate off-the-books transactions and it is not the intention
here to say that they do. Denoting entrepreneurs as always breaking the rules is as erro-
neous as asserting that they are always virtuous and follow the letter of the law. The point
is that some of these so-called “super-heroes” are not perhaps as clean-cut and above
board as is asserted in text-book depictions.
This finding has major implications for public policy. Until now, a common tendency
especially in East-Central Europe has been to seek to eradicate the off-the-books econo-
my by increasing the actual or perceived likelihood of detection and the level of penalties
for those caught. However, this paper has revealed that if governments pursue such a pol-
icy of eradication, they will with one hand be stamping out precisely the enterprise cul-
ture that with another hand they are so desperately seeking to foster. To resolve this, gov-
ernments need to perhaps concentrate on facilitating the legitimization of such off-the-
books enterprises rather than simply seek to eradicate them. This requires a shift in pub-
lic policy away from the current punitive deterrence approach and towards a more
enabling approach that seeks to help off-the-books enterprise move into the legitimate
economy. Measures that might be used include regulatory and tax simplification initia-
tives, the provision of business advice and support on how to put their affairs in order,
amnesties for off-the-books enterprises making a voluntary disclosure of their past tax
evasion activities, as well as broader awareness raising campaigns and education on the
benefits of tax compliance (see Williams, 2006). If pursued, then the current discrepan-
cies and contradictions in public policy towards entrepreneurship and the off-the-books
economy would be overcome.
Of course, whether it is the case in other countries that business ventures often start-
up off-the-books, and the degree to which this is the case, now needs to be investigated.
williams.qxp 9/12/2008 3:14 PM Page 66

66 WILLIAMS

This study of Ukraine pinpoints a potentially important facet of entrepreneurship that has
been so far subject to little empirical investigation. It is perhaps time therefore that further
research was conducted to evaluate the proportion of business start-ups in other countries
that are wholly legitimate ventures, the share that are registered enterprises conducting a
portion of their trade off-the-books and the percentage that are wholly unregistered enter-
prises conducting all of their trade on an off-the-books basis. If this paper stimulates such
research and encourages greater consideration of the lived realities of entrepreneurship so
as to transcend the virtuous ideal-type of the entrepreneur, then it will have achieved its
objective.
Acknowledgements
This paper arises out of a project entitled “Surviving post-socialism: evaluating the role of the infor-
mal sector in Ukraine,” funded by the UK’s Economic and Social Research Council (Grant No.
RES000220985).
Contact Information
For further information on this article, contact:

Colin C Williams, Professor of Public Policy, Centre for Regional Economic and Enterprise
Development (CREED), School of Management, University of Sheffield, 9 Mappin Street, Sheffield
S1 9DT, United Kingdom

E-mail: C.C.Williams@sheffield.ac.uk
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Extracting Value from Their Environment: Some


Observations on Pimping and Prostitution as
Entrepreneurship
Robert Smith, The Charles P. Skene Centre for Entrepreneurship,
Aberdeen Business School, The Robert Gordon University, Aberdeen,
Scotland
Maria L. Christou, Criminologist and Independent Academic
ABSTRACT. There has been an upsurge in academic studies relating to the underclass as a marginalized group.
Notwithstanding this, the literature seldom represents the underclass as an economically active grouping. This
study counters this stance by considering street prostitutes and pimps as economically active members of an
entrepreneurial underclass. Although previous studies have wrapped the prostitute (and particularly the
Madame) in the mantle of entrepreneurship, none have sought to do so in relation to the pimp who traditionally
has been portrayed as a swaggering, flamboyant, violent, ruthless, calculating individual existing at the margins
of society. In reality they remain an elusive and difficult to research genre. Few ever publicly accept the persona.
Indeed, pimping runs contrary to accepted masculine doxa of what it means to be a man, making it deeply
shameful to live off the immoral earnings of women. This paper, based upon the observations of the authors,
adopts a semiotic perspective to refocus these elusive characters in the entrepreneurial and criminological gaze.
By concentrating upon prostitution and pimping as an entrepreneurial behaviour, and not on the prostitutes and
pimps as entrepreneurial types, the paper contributes to extant knowledge by developing an appreciation of
entrepreneurial strategies employed by them to create and extract value from their environment. The methodol-
ogy circumvented the issues of access allowing a wider sociological discussion to develop, as well as high-
lighting other ethical issues of researching street-level entrepreneurship.
RÉSUMÉ. On a constaté chez les universitaires une flambée d’intérêt pour le quart-monde en tant que groupe
marginalisé. Malgré cela, la documentation représente rarement le quart-monde comme un groupement
économiquement actif. La présente étude renverse cette attitude en considérant prostituées et souteneurs comme
des membres économiquement actifs du quart-monde entrepreneurial. Bien que des études précédentes aient revê-
tu les prostituées (et en particulier les tenancières de maison close) du manteau de l’entrepreneuriat, aucune n’a
cherché à le faire en relation avec les souteneurs, traditionnellement décrits comme des fanfarons flamboyants,
violents, impitoyables et calculateurs qui vivent en marge de la société. En réalité ils représentent un genre
difficile à joindre et à étudier, et peu d’entre eux acceptent publiquement cette image. En fait, être souteneur va
à l’encontre de l’idéal masculin qui couvre de honte celui qui vit des gains immoraux des femmes. Cet article,
basé sur les observations des auteurs, adopte une perspective sémiotique afin de livrer ces personnages
insaisissables au regard entrepreneurial et criminologue. En se concentrant sur les activités de prostitution et de
souteneur en tant que comportements entrepreneuriaux, et non sur les prostituées et les souteneurs en tant que
types entrepreneuriaux, cet article contribue aux connaissances existantes en développant une appréciation des
stratégies entrepreneuriales visant à créer et exploiter de la valeur à partir du milieu ambiant. Cette méthodologie
contourne les problèmes d’accès et permet une discussion sociologique plus large, tout en soulignant d’autres
questions morales concernant la recherche sur l’entrepreneuriat de la rue.

Introduction
Traditionally the underclass are viewed as an economically surplus and thus marginalized
social grouping. This paper examines a form of street-level entrepreneurship practiced in
an underclass environment, concentrating primarily upon the thriving Scottish city of

Journal of Small Business and Entrepreneurship 22, no. 1 (2009): pp. 69–84 69
Smith-Christou.qxp 9/12/2008 3:14 PM Page 70

70 SMITH AND CHRISTOU

Aberdeen, but using research material gathered in other British cities. In criminology, of
late several academic studies have sought to (re)construct the underclass (Hayward and
Yar, 2006; Johnson et al., 2006). Mention of constructionism brings wider socio-cultural
issues into play—in popular culture, being of the underclass is synonymous with being
streetwise. In entrepreneurial mythology much is made of the streetwise nature of many
entrepreneurs. In this paper we therefore consider street-level prostitutes and pimps as
entrepreneurial types.
At the outset, this work was conceived as a study of “the pimp as entrepreneur.”
Although existing studies such as those of Heyl (1978) and Francis (1986) have wrapped
the prostitute in the mantle of entrepreneurship, traditionally the pimp has been portrayed
as a swaggering, flamboyant, violent, ruthless, calculating, cowardly individual existing
at the margins of society. We find it ironic that these words are also commonly used to
describe entrepreneurial behaviour. By logical extension it is perhaps plausible (in some
cases) to socially reconstruct the pimp as an entrepreneur figure rather than the prostitute.
However, as the study progressed we found that concentrating upon the ideal type of pimp
and prostitute we encountered obscured appreciation of the entrepreneurial strategies used
by many street-level prostitutes and pimps to extract value from their environment. Thus,
in seeking to establish whether the pimp (as an ideal type) could be found on the streets
of a British city we initially fixated upon floating social constructions of the pimp and the
entrepreneur establishing many parallels between the pimp and entrepreneur in both the
constructs and literature; however, it was not until we adopted a more holistic view of
pimps and their prostitutes by observing them in action in their environment that we came
to appreciate the full extent of their entrepreneurial income generating strategies.
This paper resulted from a chance encounter between the authors at a criminology con-
ference. During the ensuing discussions the subject of pimps arose and an area of mutual
research interest developed. The second author recounted her research activities into pros-
titution, articulating that researching prostitution is both ethically and physically danger-
ous. She told an intriguing tale of the field (in the manner of Van Maannen, 1988) of how
when conducting street research she had been physically assaulted and verbally abused by
a pimp and his entourage, who were annoyed that she would not pay him for using up his
girls’ time. These aspects and other ethical issues will be further developed in the method-
ology section. As experienced researchers, the authors appreciated that gaining research
access to an actual pimp would be difficult to negotiate because few would publicly
acknowledge this stigmatized label. From this standpoint emerged the idea of conducting
a study using observations gathered in the field. This was made possible by the extent of
the empirical street research conducted by the second author in American and British
cities over a number of years.
This paper has four sections. The first relates to a literature review of the entrepre-
neurship–prostitution nexus, setting up a theoretical underpinning enabling comparisons
to be drawn between the pimp and the entrepreneur. Section two discusses important
methodological and ethical issues, whilst section three presents observations gathered
during the actual research. Section four discusses the implications of the research and in
particular its contribution to entrepreneurship theory.
Understanding the Entrepreneurship–Prostitution Nexus
According to Ringdal (1997) and Van Brunschot et al. (1999: 47), the practice of prosti-
tution has been labeled “the world’s oldest profession.” Academic appreciation of the
entrepreneurship–prostitution nexus is not a new phenomenon and a limited number of
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studies portray prostitutes and madames as entrepreneurs. Studies that emphasise the
entrepreneurial nature of prostitution include those of Heyl (1978) and Francis (1986).
However, these studies concentrate upon the female control of prostitution as opposed to
the male domination of vulnerable women by pimps.
This section provides a literature review of the entrepreneurship–prostitution nexus
concentrating upon the dearth of literature in relation to the pimp as a genre. We adopt the
definition posited by Anderson (1995, 2000), for whom entrepreneurship can be articulat-
ed as the “creation and extraction of value from an environment.” This definition has
merit in relation to our analysis of prostitution as entrepreneurship because by its very
nature the concept of value remains vague and elusive. Also, Anderson (2000) applies this
definition in relation to the notion of periphery, which is also of interest because the
periphery is traditionally seen as a poor environment. Prostitutes work on the periphery of
legality but still manage to extract value from their environment. However, it is necessary
to stress three class-based themes that run through the literature of entrepreneurship
(Smith, 2006). These are (1) the focus on the entrepreneurial middle classes; (2) the eulo-
gisation of the working class entrepreneur and its associated storyline of the poor-boy-
made-good; and (3) the hagiography of the respectable peasant entrepreneur. These three
theoretical frameworks lead us to consider the possibility of underclass entrepreneurship.
Considering the Possibility of an Entrepreneurial Underclass
Emergence, ethnicity and marginality are all hallowed and recurrent themes in entrepre-
neurial narrative. Nevertheless, it is a valid observation that despite society’s fascination
with the Algeresque (and clichéd) storyline of the poor-boy-made-good, the equally pow-
erful constructions of the entrepreneur as hero, and entrepreneurship as a morally delin-
eated activity, serve to exclude the underclass from a permanent position in entrepreneur-
ship theory. The themes of overcoming poverty, discrimination and blighted education are
merely starting points in the epic story that is entrepreneurship. Indeed, entrepreneurship
is billed as an escape from an impoverished environment. The entrepreneur is cast as
somehow being special, as being different. Seldom is consideration given to the possibil-
ity that entrepreneurship may be an integral part in the fabric of underclass existence.
Thus the working and middle classes have the entrepreneur as a role model and the under-
classes—their criminal counterparts. If the very fabric of society is woven from individ-
ual acts of entrepreneurship, why are members of the underclass excluded from this rich
tapestry, particularly when eminent economists such as Baumol (1990) accept that entre-
preneurship can be productive, unproductive and destructive? For us, prostitution is, at
best, an unproductive, and, at worst, a potentially destructive form of entrepreneurship.
Prostitution can be viewed as a deviant behaviour, nevertheless Cloward and Ohlin
(1960) argued that some manifestations of deviance are attributable to the presence, or
absence, of institutionalised opportunities to achieve culturally preferable results compli-
ant with the “dream of material success and being your own boss.” Moreover, Claster
(1992: 130) describes the emergence of criminal subcultures where legitimate means for
achieving success are inadequate, but illegitimate avenues of prosperity exist such as pros-
titution, gambling, and illegal drugs. Cloward & Ohlin (1960) argue that the absence of
illegal avenues of wealth creation make society worse because the displaced energy is
channeled into retreatist (drugs) or conflict (violence) subcultures. Cloward and Ohlin’s
good versus evil model is built on the premise that “those from the humblest origin aspire
at the outset to success as defined by the dominant majority and only resort to delinquent
behaviour as barriers arise.” These arguments are the criminological equivalent to
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72 SMITH AND CHRISTOU

Baumol’s argument that entrepreneurs emerge from all strata of society and that entrepre-
neurs and criminals come from the same societal pool. Thus, those who live off the
immoral earnings of prostitutes can be considered entrepreneurs. Notwithstanding this,
there are issues of social constructionism to be considered.
Dealing with the Issue of Social Constructionism
Various conflicting social constructions combine to make consideration of the prostitute
and pimp as entrepreneur problematic. These are the socially constructed nature of: entre-
preneurship (Chell et al., 2000); the underclass (Morris, 2002); urban space (Baker, 2006);
sexuality (Brison, 2001); prostitution and pimping (Van Brunschot et al., 1999).
These often conflicting constructions set up competing narratives, ideologies and
social imageries, which are difficult to reconcile. We have already touched upon the pre-
dominant social constructions of the entrepreneur as hero and saint and also noted that the
underclass (as a genre) are generally not regarded as being entrepreneurial per se.
Prostitution is generally regarded as a problem associated with urbanity. Indeed, Baker
(2006) makes reference to the social construction of urban space where whores and pimps
make a living. In addition, sexuality is a taboo subject as are prostitution and pimping. The
prostitute is commonly portrayed in the media as “a morally depraved woman” (Van
Brunschot et al., 1999: 56). This particularly gendered social construction is tempered by
the caveat that she has been led astray. In the folklore of America, the prostitute is allowed
a place alongside the entrepreneur as a folk hero, as evidenced by such ballads as
“Hickory Hollers Tramp” (O.C. Smith) where the women is wronged by a philandering,
alcoholic husband who leaves her to raise 14 hungry children. She does this by turning to
prostitution but remains an all-American mom to be proud of. In a similar manner, Boje
(2001: 202) in researching the striptease business in America tells of the “rags to riches
story told by big business to attract labor” and of the lure of easy money, citing the movies
Showgirls and Gypsy as examples. Boje (2001: 205) eloquently narrates the stories of
showgirls selling us the “spectacle of rags to riches, the American Dream realized in the
career move from Strip Club to Showgirl, from strip tease to Big Bucks Casino Shows.”
These examples illustrate how prostitution, like deviance and criminality, can be linked to
the American Dream and thus entrepreneurship. However, Van Brunshot et al. (1999) also
highlight another social construction, visible in contemporary discourse—namely the
prostitute as a deviant and morally depraved junky. The overall tone towards prostitution
as socially constructed is that of moral disproval.
The pimp is another stigmatised social construction (Baker, 2006). Pimping runs con-
trary to accepted masculine doxa of what it means to be a man, making it deeply shame-
ful to live off the immoral earnings of women. Indeed, Paoli (2003: 70) stresses that the
Italian Cosa Nostra initially forbade the organization of prostitution as being dishon-
ourable. In a similar vein, Volkov (2002: 104) writing of the Russian Mafiya stresses,
“Although quite profitable, prostitution, was regarded as an inferior business, capable of
downgrading the relative status of the group, since it lived off women’s income.” This
ingrained stigma may also account for the dearth of studies in relation to pimps per se and
may be an artefact of the difficulty in negotiating research access, as few men ever pub-
licly accept the persona. Psychologically, this stigma may run deeper in that Tsang (1996)
argues that prostitution is not consistent with dominant Protestant or Catholic values.
Ideologically, this makes prostitution incompatible with entrepreneurial ideology with its
espousal of morality and reverence of traditional values. Thus in Western societies a num-
ber of related factors conspire to drive the entrepreneur in the sex trade underground, or
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into red-light areas where they are more difficult to research. This further restricts the
opportunity of researchers to study prostitutes and pimps as predatory street actors.
However, in popular culture, the pimp is commonly portrayed in the media as a pan-
tomime figure, a stereotypical representation of an archetypal figure embedded in the
social consciousness. Such misleading ideal typifications, steeped as they are in the semi-
otics of American street culture, result from a body of socially constructed imagery per-
petuated in the media. Such images are misleading because the symbolism and meanings
associated with class based semiotics associated with individual ethnic groupings and
their cultures do not always transfer across cultures. These stereotypes may indeed
obscure from view the fact that, as underclass actors, prostitutes and pimps are economi-
cally active and form part of a wider alternative street economy.
However, at an abstract level, these apparently disparate constructs can be linked by
the notion of deviance. Nevertheless, theories of entrepreneurship are primarily focused
on the individual, their attributes and behaviours and not on the concept of place and envi-
ronment. As will be seen, the environment is an important element in the social construc-
tion of underclass entrepreneurship.
Repositioning the Prostitute within the Entrepreneurial Underclass
Perhaps the most widely known study of the entrepreneurship–prostitution nexus was that
of Heyl (1978) in her seminal study “The Madame as Entrepreneur.” However, Heyl had
preceded this study with a similar one in 1977 entitled “The Madame as Teacher.” This is
a significant distinction because it acknowledges the divisions of practice and takes cog-
nizance of the different roles the madame performs in separating the craft side of prosti-
tution from its practice as a business. Both activities are examples of co-terminus social
organization. The madame and the brothel play a central role in the organization of pros-
titution primarily because they create a different, more controlled dynamic from the street
prostitutes surveyed in this study. The presence of a madame and the semi-legitimacy of
the brothel reconstruct the sexual experience in a more civilized manner. The “woman to
woman” engagement literally takes the “man” out of “management” and the girls away
from the domination and violence of the pimp. An appreciation of the madame as an entre-
preneur also has other historical precedents. Indeed, Hudson (2002) discusses the remark-
able life story of Mary Ellen Pleasant, born a slave but as a free woman achieved entre-
preneurial success. She developed the trusting persona of “Mammy” and transformed
prostitution in San Fransico, becoming an entrepreneur and literate abolitionist.
Other academics have sought to reconstruct prostitution as entrepreneurship. Francis
(1986) researched “The street queen as a sexual entrepreneur,” and Phillip and Dann
(1998) describe the bar girls/prostitutes in central Bangkok as entrepreneurs. To continue
this theme, Hershatter (1989) discusses the role of the petty entrepreneur in a historical
perspective in the hierarchy of Shanghai prostitution between 1870 and 1949. Sun (2002)
discussed Anhui women as invisible entrepreneurs because of their gender in a patriarchal
China, classing those in domestic servitude and those engaged in prostitution as being
entrepreneurs without an enterprise. This is significant from the perspective of underclass
entrepreneurship because Arlacchi (1986) in researching the Italian peasant also consid-
ered this possibility. This point introduces the concept of subsistence entrepreneurship.
Indeed, Valenzuela (2001) argued with some conviction that the literature of entrepre-
neurship is primarily elitist, concentrating upon proprietorship and does not engage with
the activities of the underclass. Valenzuela (2001) classified these workers under the dis-
advantageous rubric of survivalist entrepreneurs. This label could equally apply to the
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74 SMITH AND CHRISTOU

street prostitute and the pimp. The idea that prostitution is a form of entrepreneurship is
fast gaining momentum as evidenced by three recent studies by Della Giusta et al. (2007,
forthcoming and forthcoming) who seek to explore prostitution from an economic and
thus entrepreneurial perspective. Indeed, Della Giusta et al. (2007) refer to prostitution as
a denied industry and interestingly talk of feminist economics. This is relevant because
entrepreneurship is studied from the perspective of masculine economics.
Schaab (2005) stresses that the types of work offered to women who lack education
often pay significantly less than what a man would make as a laborer, therefore making
prostitution a viable proposition. This example illustrates the disparity between feminine
and masculine economics. Schaab introduces the concept of social capital into the argu-
ment by the use of the phrase “Her Body, His Capital.” This begs the question of whose
capital one has to consider in assessing entrepreneurial proclivity? Bourdieu (1986) posit-
ed different categories of capital—financial, social, and human. Pimping spans all three
and, because of street encounters, involves an unwritten triadic contract and often a clash
of capitals. Emotional capital may also come into play in the relationship if a love inter-
est is involved between the pimp and prostitute.
However, the Madame and pimp are not the only entrepreneurial typologies available
to those engaged in the sex industry. Indeed, Van der Poel (1992) stresses that male pros-
titution is generally regarded as a deviant, challenging activity and argues that this is so
because researchers concentrate upon problematic categories and have avoided studying
successful male prostitutes who may naturally be more enterprising. Van der Poel studied
male prostitution as a career choice in Amsterdam, a rational commercial service-
orientated business with economic and social characteristics in common with other small
and medium sized businesses. The successful gigolo can also be socially reconstructed as
a predatory entrepreneurial type.
Considering the Pimp as Entrepreneur
Although men do not appear to willingly accept the title of pimp, other acceptable mas-
culine labels exist, namely “Hustler” and “Player.” These labels are also commonly used
to describe entrepreneurs. Academic studies of hustling abound (Steward, 1991; Wright
and Colhoun, 2001; and Gates, 2004). Wright and Calhoun (2001), using an ethnograph-
ic approach, profile the activities of Tyrone, a hoodlum who is a part-time pimp and hus-
tler, and of Oscar, who describes himself as being kind of entrepreneur, both operating out
of a barber shop in a southern American city. The shop provides three levels of activity,
namely legal, quasi-legal and illegal services. Indeed, Gates (2004) writes of young black
kids having a new entrepreneurial spirit. Desman (n.d.) discusses the socio-pathology of
entrepreneurs and criminals and states that prostitution, bootlegging, black-marketing,
and illicit gambling are common delinquent threads running through both genres.
Furthermore, Kloosterman (2001) describes prostitution as an easy market for immigrant
entrepreneurs to engage in because of its ease of accessibility and lack of start up capital
required. Prostitution enables entrepreneurs to extract large profits from the work of
women under their control thereby accumulating a considerable amount of capital quick-
ly. Furthermore, Butkevich and Storr (2001) discuss entrepreneurs as cultural characters,
noting how in hostile environments they adapt to the opportunities available even if that
entails pimping or thieving. This again resonates with the work of Baumol (1999).
On the Importance of Place
Place is important because it links in with social constructionism. Moreover, as this study
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takes place at a street level it makes it incumbent upon us to understand the influence of
place. Rojeck and Urry (1997: 7) discuss how traditionally, since Victorian times, the
street has been reconstructed as a dangerous playground for the rich and the middle
classes—a “fantasy land” where one can engage with prostitutes. The street scenario is
enacted as a socially constructed script in which the pimp, prostitute and the punter know
their place. There is a symbiotic element present whereby all accrue benefit in the man-
ner of a relation of exchange as envisaged by Volkov (2002: 25). This concept lies at the
very core of this paper and is central to understanding prostitution and pimping as entre-
preneurship because Volkov (2002: 15) talks of the “city as a market place for needs” and
of “free economies of exchange.” For entrepreneurship to occur there must be a taking
between and an exchange of value(s). Furthermore, Volkov (2002: 21) refers to “Predatory
man.” This phraseology is relevant because it encompasses the pimp as entrepreneur and
the customer as punter. The prostitute is also a predator because customers are merely
pound notes or dollar bills or “Mugs” and “Punters” as envisaged by Hobbs (1986) who
populate the lowest level of his entrepreneurial scale. Nor does social constructionism end
there, because a form of living street theatre ensues whereby all three have to look and act
the part. The pimp has to be recognisable as such to act as a visual deterrent; the prosti-
tute has to look risqué; and the punter knows that he will fare better if he is mild mannered
and well dressed. The pimp and prostitute scan the environment looking for deviations
from this well-rehearsed social script in case their quarry are undercover police or other
predators. The pimp must project an aura of latent violence; the prostitute must exude a
halo of dangerous sexuality; and the punter must project a suitably subdued and ashamed
persona. If all stick to the script then the three actors collectively create and extract value
from the environment (as envisaged by Anderson, 1995).
As this study is set in a British context it is necessary to consider entrepreneurship,
prostitution and pimping from a cultural perspective because so far many of the studies of
prostitution as entrepreneurship have been American or Asian. Sociologists writing about
class in a British context have long appreciated that prostitution allowed many poor mar-
ried working-class women and widows an avenue out of poverty. Indeed, Bourke (1994:
38) reminds us that many working-class women “sought social mobility through prostitu-
tion, using the job to save money to buy a tobacconist shop or simply to live at a higher
standard of luxury.” Nevertheless, other historical studies shed light on the issue of under-
class enterprise and particularly those who engage in prostitution or live off immoral earn-
ings. One classic study is that of Quennell (1960) who presented selected sections of the
original works of the Victorian researcher Henry Mayhew. In this work, Quennell (1960:
103) discusses the roles of such enterprising street actors as procuresses, pimps, bullies,
clandestine prostitutes, fancy men and panderers, and in doing so paints a vivid word pic-
ture of self-enterprise at street level. Interestingly, Mayhew (no doubt influenced by his
exposure to Victorian masculine doxa and the socially constructed nature of Victorian sex-
uality) had little to say about the subject of pimps. Despite acknowledging that they were
frequently spoken about, he preferred to doubt that many actually existed, stressing that
women were more likely to act as pimps than men. We believe that this was merely an
early example of how social constructionism, combined with masculine doxa, influenced
the middle class research gaze because professional Victorian men could not envisage
men acting in such an ungentlemanly manner. Like Mayhew before us, we went in search
of the elusive pimp. In seeking to reconstruct the pimp as an entrepreneur, it is necessary
to stipulate that there is no one all-defining definition of entrepreneurship. In the
literature, particularly in the British context, one senses a pejorative attitude towards the
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76 SMITH AND CHRISTOU

entrepreneur articulated so succinctly by Baker (in Chapman, 1968: 9), who describes
“the petty entrepreneurs and the slick smart Alecs of Grab Street who thrive on the society
who spawns them.”
Having considered the entrepreneurship-prostitution nexus and issues of social con-
structionism and class, it is helpful to discuss ethical issues that impinge upon this
research.
Ethical Issues
The purpose of this section is to discuss ethical issues relating to this research and to
develop an appreciation of street-level entrepreneurship. The research raises a number of
ethical issues of interest to other researchers. The first relates to issues of access. As stat-
ed in researching elusive social groups, such as pimps, it can be difficult to gain research
access. The second author has conducted numerous research forays into areas where street
prostitution is carried out, both in the US and in major cities in the UK. Such research can
lead to conflict with other street stakeholders. One simply cannot just turn up and start
asking questions of pimps without becoming an accepted part of the street scene because
street-girls are adept at telling people what they want to hear. One has to earn their respect
by talking to them and demonstrating that as a researcher you know what you are speak-
ing about. Confidences are not developed instantly. It can take many evenings.
It is also a dangerous activity. On one occasion when conducting research, the second
author became involved in an altercation with a pimp who was annoyed that she was tak-
ing up the time of his girls. He demanded payment. When this was refused he assaulted
her. Nosy researchers are bad for business. It is simply not ethical to offer payment for
research access. This led to her taking the unusual step of hiring the services of a body-
guard for protection. When conducting research it is easy to lose focus of everything but
one’s respondent. However, this also has the effect of changing the street dynamic because
the bodyguard can be mistaken for a “Minder.” It would be easy for other street actors to
misread the signs. The consequences could have serious ramifications because they could
be mistaken for competition by other firms of villains. Yet, there is simply no other way.
On several occasions the second author has encountered hostility from street cops who
cannot understand her presence on their streets. This is despite having a policy of writing
to the individual forces expressing her intentions. She has been threatened with arrest and
has had to stand her ground when told in no uncertain terms to leave the area. This takes
dedication and courage. As a result the prostitutes and pimps now treat her with a wary
respect. However, if her bodyguard was attacked and had to defend himself she could find
herself in court having to defend her actions. This makes the research all the more ethi-
cally and physically dangerous. Understandably, her research practices, bold as they are,
do not ingratiate her with the pimps.
Observations on Pimping and Prostitution
This section reports on the empirical research conducted by the second author. We are
aware that in choosing to research street level prostitution we may have limited our
chances of encountering examples of entrepreneurship because of the stratified nature of
the organization of prostitution. Gutauskas et al. (2004: 213), who studied prostitution in
Lithuania, stress that it is conducted on three distinct levels: the lowest tier being drug
addicts and the homeless; the second tier being those who prostitute themselves in bars,
restaurants, and hotels without a pimp; and the third and most profitable form of prostitu-
tion is organised and conducted by pimps. Most Lithuanian pimps supervise from seven
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to 10 prostitutes and can take from 50% to 70% of the money generated by the prostitute
(Gutauskas et al., 2004: 213–14). This model is almost universal in western countries.
Although the research is set in Aberdeen, the second author has conducted research in
London, Manchester, Hull, Edinburgh (Leith), and Glasgow. This underpins the findings
in relation to Aberdeen. Leith is the least accommodating alongside Manchester to
research because both are major cities with extreme drug-related problems. Manchester,
however, is mainly more problematic because of the obvious presence of the pimps who
are more than willing to show the girls precisely who is in charge. Glasgow girls also
appear to be more willing to risk their safety, whereas Edinburgh ladies use networking
and converse with each other using mobile phones and texts to warn each other of prob-
lem customers or perverts. This example of entrepreneurial cooperation does reduce the
need for an individual minder/pimp and obviously increases their earning power by cut-
ting out the middleman.
Aberdeen is a major city and is the third largest in Scotland, after Glasgow and
Edinburgh. It has a population of 202,370. It is a relatively wealthy city, being the oil cap-
ital of Europe, and has a large thriving seaport and vibrant industries. As is the case in
many major cities, prostitution is stratified. There are several lap-dancing bars, which
comprise the legal side of the sex industry. According to one respondent, there is a street
trade in rent-boys and male prostitutes carried out discretely in the city centre. There are
also several brothels in the west end of the city reputedly owned and organised by busi-
nessmen. These tend to service a wealthy middle-class clientele and the prostitutes are
more up-market, often students paying their own way through university. The business-
man acts as a father figure and mentor. As an aside, there is a suggestion that Eastern
European organized crime groups have set up brothels run by pimps (along the lines of
those described by Gutauskas et al., 2004). An interesting aspect is that for an additional
fee the proprietors of the brothels videotape the encounter and hand the customers a CD
or video to take home and watch later. This is clear evidence of entrepreneurial strategies
in action. Aberdeen has a tolerance zone/red light district situated (where the trade had tra-
ditionally been operated) in the harbour area. Other Scottish cities such as Glasgow and
Edinburgh had tolerance zones but abandoned them. The tolerance zone makes research-
ing prostitution easier and less dangerous. Prior to discussing the pimps themselves it is
helpful to discuss the street based prostitutes.
Prostitutes and Street Prostitution
The street prostitutes surveyed operated in the tolerance zone. In relation to Scotland it is
difficult to find the average street prostitute because of the different geographic areas and
regional differences and socio-cultural settings. The most visible girls tend to be older
than they look. A mean age in Glasgow is 23, whilst in Edinburgh it is 27. Almost all of
the prostitutes surveyed were on drugs or alcohol, or both. This is in line with research
that suggests that 97% of street prostitutes in Britain have drug misuse issues. Only two
prostitutes claim never to have used drugs and hope to avoid it in the future. They
acknowledge that they are exceptions.
All but one in Aberdeen are White. In Edinburgh, Glasgow and Dundee they are all
White. Most have poor communication skills, though this is likely to be more attributable
to their constant drug/alcohol use than any reflection on their intellectual capacity. One
older and articulate prostitute (aged 47) displays remarkable business acumen but lacks
the drive and/or funds to get started. Many prostitutes narrate a background of abuse
both physical and sexual. The women surveyed come from different socio-economic
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78 SMITH AND CHRISTOU

backgrounds with the middle class and even upper class being represented. Interestingly,
drug use had brought them to the streets, resulting in their families ignoring their exis-
tence. Glasgow in particular had a high proportion—in fact all the women spoken to had
been sexually abused as children, either by a relative, family friend or other person in
authority. 75% of those in Glasgow had been raised in a local authority home, and of
those three quarters had removed themselves and lived on the streets before they reached
16 years of age. In contrast, in Edinburgh only 25% had been subjected to sexual abuse
as a child whereas one third claimed to have had no abuse. Heroin was the most com-
monly used drug, though cocaine was used by approximately 25% of all Scottish prosti-
tutes surveyed. Other drugs, including prescription medication, were also used when
available but particularly when their main choice was not obtainable due to lack of funds
or scarcity. There is thus no ‘typical’ street prostitute. Many common threads tie them
together, but equally many keep them apart. Many choose not to disclose their history for
various reasons and others tell different stories to different people/agencies. Alcohol and
drug use are common, but again not every prostitute has an addiction; one or two (claim)
to have overcome their addiction but still solicit because the money is better than state
benefits. Pathways into prostitution are complicated.
The Traditional Pimp
The traditional pimp–prostitute relationship is a coercive (predatory) relationship entail-
ing luring vulnerable girls and women into relationships. The pimp acts as a lover and
undermines the confidence of the girl generally through abusive bullying and violent
behaviour and coerces her into acting as a prostitute. The relationship may become that of
entrepreneur–lover. In Aberdeen, Edinburgh and Glasgow there is not a culture of pimp-
ing in the traditional sense we understand exists in other countries. Thus the authors did
not encounter stereotypical pimps and certainly no flamboyant examples such as those
encountered whilst researching in America. This is to be expected because it demonstrates
the ideal typification of the pimp as socially constructed. Such images are caricatures,
grotesque parodies of the American Dream. Nevertheless, it must be remembered that in
its place within the culture that spawned it, does have a currency as street “cred.” In
Britain very few of the pimps observed fit this ideal typification.
In Britain, the vast majority of pimps observed are more careful about flaunting their
occupation for obvious reasons. No metallic pink Mercedes cars with alloys, no fur coats
or white suits. Such pretensions do not sit well with the British psyche and are bad for busi-
ness because they attract unwanted police attention, not to mention ridicule. Instead, the
British pimp carefully cultivates the regional variation of their hard-man image. This is evi-
dence of the rationalisation of conduct to maximise the extraction of value (and thus entre-
preneurship). At another level many pimps have other income streams such as drug deal-
ing, smuggling contraband, extortion and so forth in which prostitution is but one part of
their business portfolio. These illegal entrepreneurial activities qualify them for consider-
ation of being criminal entrepreneurs. It could be argued that the traditional pimp provides
an entrepreneurial service to their prostitutes if both are engaged in a joint enterprise.
There are quite considerable regional variations (as one would expect). Those areas
where the pimps are more overt in their actions and behaviour are places such as parts of
London, Manchester, Hull and parts of Newcastle. Here their dress style and their behav-
iour patterns are quite different. They dress in a more obvious business style with busi-
ness suits worn with a somewhat crass style and jewellery (bling). Their vehicles tend to
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be Range Rovers and other large 4X4 vehicles. Occasionally, for those individuals who
are less inclined to show their money, or because of financial constraints, cars are made
to look more “high end” than they actually are—such as making the exhaust bigger/
louder, etc. The pimps also tend to work in groups of more than two in these areas. These
are the most obvious entrepreneurial types, the top end of the entrepreneurial scale—boys
doing business (Newburn and Stanko, 1995), controlling their assets. Teamworking is evi-
dent and the atmosphere is tense. In the larger cities in England such as Manchester and
Liverpool pimps adopt a gangstery persona. This was not found to be the case in Aberdeen
or other Scottish cities.
It may well be that the girls surveyed are reluctant to admit that their partner is a pimp.
Those girls who do admit this (primarily those from south of the border) tend to be more
wearily resigned to their role as “worker” though many still defend the pimp and his actions
(e.g. they are violent, but the girls—like many in domestic situations—blame themselves
for making their men angry). Also, the pimps—according to the girls—do a good job in
protecting them, but again they acknowledge that they work harder and longer than they
probably would if they had no one there. They also admit that they are annoyed about giv-
ing their money away, but many feel there’s no alternative or—more importantly—no
escape. In the night-time economy the streets of our major cities can be dangerous places.
Alcohol- and drug-fuelled violence is often unleashed as well as verbal abuse, taunts and
disrespect. Thus it could be argued that some pimps do provide a service to the girls, allow-
ing them to work unmolested. However, in Scotland the predominance is for the consen-
sual boyfriend–girlfriend variety.
Pimp-prostitute Partnerships
These are generally partners in life and in crime. The prostitution is merely another
income stream to provide money for drugs and feeding the children. Such partners are
usually in their mid 20s or slightly older. They are either generally from established crim-
inal families or have gravitated from a criminal culture of drug abuse and alcohol depend-
ency, and usually both have criminal records for petty crime such as assault, theft by
shoplifting, robbery, carrying weapons and other street crimes. The main point is that both
partners are streetwise and come to the realization through life experience that selling sex
is easier and less risky than committing street crimes because the penalties are lower.
Those girls who work with “boyfriends” are grateful for their presence as it makes them
feel safer. These are exploitative but protective partners who use sex as a strategy to pro-
vide the wherewithal to obtain alcohol and drug money. The boyfriend acts as driver, min-
der and negotiator. Turning a few tricks to them is less immoral than robbing or stealing.
This particular dynamic seems to be applicable in Aberdeen and Leith (Edinburgh),
whereas Glasgow appears to have a mixture of consensual and non-consensual partner-
ships underway. The prostitution provides a stability of income in an otherwise chaotic
lifestyle. It can break the vicious cycle of crime, court appearances, and jail. Admittedly
it is an illegal form of subsistence entrepreneurship. These low-level street entrepreneurs
are entrenched in the underclass milieu and are unlikely to climb the entrepreneurial lad-
der to success. Such pimp-prostitute partnerships can be viewed as being co-preneurial
couples as envisaged by Marshack (1973). These couples are usually husbands and wives
or long-term common law partners, although the authors are aware of a case study where
a man was pimping a very young-looking girl in Aberdeen. The girl looked well under 16
and her protector was in fact a father figure. Enquiry with other prostitutes confirmed that
Smith-Christou.qxp 9/12/2008 3:14 PM Page 80

80 SMITH AND CHRISTOU

this was indeed her father, who was exploiting the fact that the 17-year-old looked much
younger and therefore fetched a higher price. Leaving aside issues of morality, it is evi-
dence of entrepreneurial guile.
This is a very different dynamic because the boyfriend will not adopt the street per-
sona of a pimp, nor engage in the visual semiotics of bragging associated with that genre.
It also makes the prosecution of pimping very difficult from a policing perspective
because it is difficult to prove that the boyfriend is living beyond their means—the ethos
behind this genre of prostitutes is summed up by Sterk (n.d.) as “Tricking and Tripping.”
Hunt (1990) argues that the link between drug-taking and prostitution has turned prosti-
tution into a more consensual crime and discusses how drugs lure female addicts into
committing a battery of crimes such as prostitution, robbery, shoplifting and burglary.
Hunt also stresses that the street-level drug dealer is often an individual entrepreneur who
is in a position to use his near monopoly to his advantage. This frenetic activity is an entre-
preneurial activity because it is the extraction of multiple income streams as envisaged by
Carter et al. (2004). Their activity is a risk based opportunity model of income generation.
However, the need to achieve is mood driven because once they have earned sufficient
income to meet their needs they stop working (see Figure 1 for a visual representation of
street level entrepreneurship achieved via extracting multiple income streams).

Figure 1. Entrepreneurial income streams.

The Pimp as an Entrepreneur of Violence


The pimp can also be regarded as an entrepreneur of violence by extending Vladim
Volkov’s (2002) concept of “violent entrepreneurship.” For Volkov (2002: 25), violent
entrepreneurship is a legitimate method of extracting income. The anthropologist Anton
Blok (1972) also used the term to describe a particular genre of Italian Mafioso as “vio-
lent peasant entrepreneurs.” Volkov (2002: xiii–xiv) refers to an “exclusively male world
where male virtues associated with violent contest prevail.” This aptly describes the vio-
lent underworld domain inhabited by the pimps in our study. The pimps observed could
Smith-Christou.qxp 9/12/2008 3:14 PM Page 81

PIMPING AND PROSTITUTION AS ENTREPRENEURSHIP 81

be described as entrepreneurs of violence because to them violence was merely another


commodity to exploit as a form of exploitable social capital, which gives them leverage
to extract value from their environment. The girls are commodities to be bought and sold.
Violence and threats are used to protect their property (the girls) and their patch, and to
punish the girls if they step out of line. As entrepreneurs of violence the pimps use their
reputations, social capital and social skills to dominate their environment. In doing so
they shape their professional and personal identities, both of which revolve around being
the man. Thus the semiotics of gangsterism and machismo combine to present a cultural-
ly credible symbolism enabling and empowering them to control their environment phys-
ically, mentally and symbolically. These are thus techniques and stratagems for the main-
tenance of masculine dominance.
The pimps observed during this study can be classified as entrepreneurs at many dif-
ferent levels—as entrepreneurs of violence, or as enterprising individuals or couples cap-
italising on their specific socio-cultural capital. Alternatively, others are businessmen or
criminal entrepreneurs.
Concluding Observations
This paper contributes to extant knowledge by developing an appreciation of street-level
entrepreneurs who operate in a shadow economy. There are limitations to the research
practices of observing and street-level interviewing. It does not permit direct access to
pimps, nor does it allow one to research the dynamics of mixed entrepreneurial income
streams. Many questions remain unanswered: Is it their main income generation activity
or do they have multiple income streams? Are these all illegal or do they bolster legal
entrepreneurial incomes? Also, how do pimps reinvest their earnings? Do they reinvest it
in small businesses (shops, taxi firms, etc.) or is it their undeclared beer-money to rein-
vest in hedonistic lifestyles—partying, drug misuse, gambling, betting, expensive restau-
rants? If this is the case then the illegal money re-circulates in the legal economy. Are all
pimps men? Do women use violence to gain competitive entrepreneurial advantage? Do
they make the girls work double shifts or in other avenues in the sex industry? The answer
to these questions and others requires further research using different methodologies and
techniques, making it a legitimate field of research because entrepreneurship is not mere-
ly found in legal commerce or in small and family businesses.
Another interesting avenue of research lies in exploring the modus vivendi pimps and
other street entrepreneurs have with street actors such as taxi drivers, pub owners, hotel
concierges and even street cops. Is this space achieved via bribes, payments, or by the
sheer force of personal magnetism? Or is it achieved by the projection of a hardman image
and a reputation for extreme violence? It would be also beneficial to research the link
between libido and entrepreneurial proclivity because the pimp, through the prostitute,
provides a basic human need.
We found little evidence of the (elusive) archetypal pimp in Aberdeen or other Scottish
cities. We cannot state categorically that they do not exist, but they are certainly elusive.
From our research it appears that the typical pimp in Scotland is more likely to be a
boyfriend or father figure. Nevertheless, our research also demonstrates that there is evi-
dence of individual entrepreneurship manifested at a street level. Therefore, it can be
argued with some justification that some pimps (but not all) are entrepreneurs. The pimps
and prostitutes surveyed for this study make a living out of the exchange by extracting
value from an environment and some even practice entrepreneurship as envisaged by
Anderson (1995).
Smith-Christou.qxp 9/12/2008 3:14 PM Page 82

82 SMITH AND CHRISTOU

In writing the paper we were struck by the recurring theme of morality and how and
why pimping and prostitution are accorded various moral statuses. However, the rela-
tionship between entrepreneurship and morality is very complicated. This caused us to
question the connection between entrepreneurship and morality or whether it is a stance
adopted by the wider populace that bears little, if anything, to do with the act of enter-
prising. Might entrepreneurship, in other words, be conceived of as a morally neutral act
which adds or extracts social value accordingly? Entrepreneurship is an amoral concept
but paradoxically entrepreneurs are not amoral or neutral—they are either imbued with
morals or they are not. Arguably, as entrepreneurial processes—opportunity identification
and exploitation are also neutral it is merely the evaluation placed upon it by the entre-
preneurs, their peers and society which is morally laden. The notion that entrepreneurship
need not be as Anderson (1995) suggests the creation and extraction from an environment
but the extraction of value is a significant step forward from the original definition. The
significance of criminal/deviant entrepreneurship lies within the entrepreneur and not the
concept. It is only how it is operationalised that differs.
Contact Information
For further information on this article, contact:

Robert Smith, The Charles P. Skene Centre for Entrepreneurship, Aberdeen Business School, The
Robert Gordon University, Aberdeen, AB10 7QE

E-mail: r.smith-a@rgu.ac.uk.

Maria L Christou, Criminologist and Independent Academic

E-mail: mlc@ukgateway.net

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backpages22-1.qxp 9/12/2008 3:15 PM Page 85

Contributors
GEORGIOS ANTONOPOULOS is lecturer in criminology at the University of Teesside, UK.
His research interests include illegal markets.
DAVID M. BOJE is the Endowed Bank of America Professor at the College of Business,
New Mexico State University, Las Cruces, New Mexico.
MARTIN BOUCHARD is Assistant Professor at the School of Criminology, Simon Fraser
University. His main line of research focuses on various dimensions of illegal drug mar-
kets, with a special emphasis on the marijuana cultivation industry.
CLAUDE B. DION is a research assistant at the University of Montreal. Her research focuses
on illegal drug markets.
KIRK FRITH is a research student. His particular area of interest is entrepreneurial cogni-
tion and the development of entrepreneurial insight and learning.
FARZAD R. KHAN is Assistant Professor at the Suleman Dawood School of Business,
Lahore University of Management Sciences (LUMS), Lahore, Pakistan.
GERARD MCELWEE is Reader in Rural Enterprise and editor of the International Journal
of Entrepreneurship and Innovation. His research interest is Rural Entrepreneurship.
JAY MITRA is the Founding Professor of Business Enterprise and Innovation, Director of
the Centre for Entrepreneurship Research at the University of Essex, and Head of the
School of Entrepreneurship and Business at the University of Essex, Southend, UK.
COLIN C. WILLIAMS is Professor of Public Policy and Director of the Centre for Regional
Economic and Enterprise Development (CREED) in the School of Management at the
University of Sheffield in the United Kingdom. His research interests are in the informal
economy and its public policy implications. Recent books include Re-thinking the Future
of Work (Palgrave-Macmillan, 2007) and The Hidden Enterprise Culture (Edward Elgar,
2006).

85
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