Social Capital and its effects on Small-scale Entrepreneurship: A Case Study from Santa Elena, Ecuador

Abstract

Due to the scarcity of entrepreneurs’ means in developing countries, a crucial resource for them is Social Capital. The role of Social Capital in entrepreneurship has become an increasingly prominent topic in the literature. While early contributors highlight the positive effects on entrepreneurial ventures, recent approaches argue that it can impede entrepreneurship. Both contributions, however, are mostly restricted to the developed world’s orbit. Adding to this debate, this thesis explores both the positive and negative effects of Social Capital on entrepreneurship. Particularly the topic of rural small-scale entrepreneurs in the Global South has been underresearched to date. This thesis attempts to complement the combined literature streams with empirical findings and recommend approaches for future research and interventions in the project area. Based on Woolcock and Narayan’s (2000) definition of Social Capital and Dudwick et al.’s (2006) approach to assess it, a conceptual framework was developed. It aims to identify which form of Social Capital entrepreneurs use and examine its impact on the five dimensions of entrepreneurial effects outlined by Kebede (2018). The data collection was conducted in form of a case study in the rural Santa Elena province, Ecuador, using qualitative data. The analysis is based on the findings from 20 semi-structured interviews with Ecuadorian small-scale entrepreneurs in combination with field observations. The empirical findings identify four main networks harnessed by the entrepreneursto draw resources from. They confirm the current research by outlining the importance of dense family networks. Moreover, the results show benefits resulting from membership in alternative networks which fosters collaboration among each other and with external actors such as NGOs and government entities. The findings further shed light on negative effects affecting certain entrepreneurs due to strong norms, obligations, and the lack of ties outside their main networks. By providing unique, context-specific insights about the effects of Social Capital on entrepreneurship, this thesis contributes to the existing literature with empirical data, which further advances the combined literature stream in developing countries. Future research should mainly investigate two issues. First, more research shall be conducted about the negative effects that can result from the usage of Social Capital with an emphasis on marginalized group. Second, future studies shall address which channels can be built or supported for the entrepreneurs to enhance access to ties outside their typically used networks.