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Poverty reduction has become a core subject for researchers across the social sciences from economics to finance, management and entrepreneurship.
In general, the faster and more widespread economic growth in recent decades has enabled large numbers of people to move out of poverty. The number of extreme poverty has fallen to less than ten per cent of the world population. However, it is increasingly clear that while some countries and regions have seen a dramatic improvement of poverty, there are other places with large numbers of people still in poverty that can greatly benefit from poverty alleviation efforts. Management scholars and economists increasingly recognize that entrepreneurship may offer a significant part of the solution to poverty around the world.
A related focus regarding the ways in which poverty can be reduced in through entrepreneurship and new venture creation, however, how to link the key issues above with the current platform, network/digital and sharing economies, how to find new ways and new solutions to effectively reduce poverty in now political, economic and global contexts still needs to be better understood. (1)
On the other side, research concludes that the picture needs to be adjusted. The research covers over 200 articles and 77 journals over a 28-year period. The research uses an extensive coding process to identify the assumptions embedded in this literature. These assumptions underpin three overarching perspectives, which they title remediation, reform, and revolution (2).
Remediation Perspective on Poverty Alleviation
Remediation is the perspective that poverty alleviation through entrepreneurship occurs when resource scarcity is addressed. This perspective sees poverty as driven by a lack of critical resources. Thus, this perspective generally focuses on the provision of scarce resources. Such as finances or training, as central to poverty alleviation. The remediation perspectives assume that markets will thrive as an entrepreneurial activity is unleashed. And that entrepreneurship among the poor will result in a ‘win-win’ that benefits all participants.
Opportunity identification involves either discovering or creating competitive imperfections in factor or product markets. Because the remediation perspective assumes poverty is the result of resource scarcity, there is a focus on partnerships. The resources they generate which help give rise to new opportunities. Partnerships between entrepreneurs in the context of poverty (often represented by non-governmental organizations) and large organizations (generally multi-national corporations) create interactions that will lead to the identification of new and valuable opportunities for those involved.
The remediation perspective provides important insights regarding entrepreneurship and poverty alleviation. The perspective emphasizes the power of unlocking markets for the poor. It is unlocking entrepreneurial potential among the poor. And the challenges of promoting growth for entrepreneurial firms founded by the poor.
Reform Perspective on Poverty Alleviation
The reform perspective is characterized by a different set of assumptions. This perspective assumes that poverty is the result of social exclusion. The poverty alleviation through entrepreneurship occurs as the institutional or social context is changed. For example, rather than exploring how to provide women with the financing they need to participate in markets, the reform perspective would question what social structures preclude such participation. The perspective will also look into how this structure might be altered to be more inclusive. This perspective generally assumes that markets are the primary drivers of poverty alleviation. Though markets need restructuring in order to be more inclusive.
From the reform perspective, opportunity identification encompasses the potential for social change. Given this broader view of opportunities than in remediation, the reform perspective highlights how institutions including culture, identity, social power, and rhetoric are used in opportunity identification. From this perspective, opportunity identification is viewed as a creative act which is shaped by institutional settings.
In the reform perspective, poverty alleviation is tied to opportunity identification in two distinct ways. First, entrepreneurial opportunities empower individuals that are otherwise marginalized. This mechanism highlights the power of markets to empower individuals, as well as the role of institutions in facilitating or constraining entrepreneurship. The second way that opportunity identification leads to poverty alleviation from the reform perspective is by identifying opportunities for social change. In this view, entrepreneurship (often institutional entrepreneurship) is used to directly change the social or institutional context, although the basic capitalist system is still in place.
The strength of the reform perspective is that it moves beyond addressing resource scarcity in its understanding of poverty alleviation. This perspective more fully embraces the social and institutional context of poverty and explores the implications of change. This perspective also allows for a much deeper understanding of how the poor can be included in markets through entrepreneurship, as well as the implications of such inclusion.
However, the reform perspective also confronts substantial scholarly challenges, primarily relating to the complexity and unpredictability of social change. Substantive questions arise regarding who should pursue opportunities and what shape entrepreneurship should take. The implementation of such ideals may prove more complicated in practice, as the entrepreneurial process unfolds.
Revolution Perspective on Poverty Alleviation
Revolution is the perspective that poverty alleviation occurs when entrepreneurship introduces alternatives to capitalism as it is currently constituted. The revolution perspective questions some of the basic assumptions of capitalism such as eco-nomic self-interest, efficiency, and an individualistic orientation.
The revolution perspective both critiques existing conceptualizations of opportunity identification and suggests different types of opportunities for identification. Much of the critique focuses on how dominant paradigms within entrepreneurship reproduce the existing social order.
The revolution perspective also suggests new types of opportunities that can be identified through entrepreneurship. Rather than focusing on purely economic opportunities, the revolution perspective highlights the potentially transformative power of entrepreneurship for society. Thus, entrepreneurs are conceptualized as not only pursuing economic rewards but seeking to create social welfare. Often, such opportunity identification efforts will be grounded in groups rather than individuals.
The revolution perspective calls attention to issues of power, discourse, resistance, and social structure and ties them back to the role of entrepreneurship in poverty alleviation. As such, the primary strength of this perspective is the critical examination of the role of entrepreneurship in poverty alleviation and the potential dark side of such approaches. This perspective also sketches out potential alternatives to individualistic, self-interested approaches to entrepreneurship.
The Three Different Perspective on Poverty Alleviation
Rather than perpetuating neoliberal social structure through entrepreneurship, the revolution perspective suggests that entrepreneurship can lead to different ways of economically organizing individuals and communities. The distinction between reform and revolution is more of a continuum rather than a bright line. However, at its core, the reform perspective suggests ways that social and institutional change can help incorporate the poor into more inclusive markets, while the revolution perspective questions the very essence of capitalistic markets as they are currently organized. The revolution perspective also pays attention to how power is exercised to reproduce the existing social order and how power can be challenged. The reform perspective generally assumes that the ultimate goal of poverty alleviation through entrepreneurship should be increased social equality, implying that economic outcomes, such as economic efficiency, are secondary considerations.
(1) Steven Si, David Ahlstrom, Jiang Wei and John Cullen: Business, Entrepreneurship and Innovation, Toward Poverty Reduction, Regional Studies Association (Published online: 12 Aug 2019).
(2) Christopher Suttera, Garry D. Brutonb, and Juanyi Chen: Entrepreneurship as a solution to extreme poverty: A review and future research directions. Journal of Business (Venturing 34 2019)
Lucubrate Magazine September 2019
The photo on the top of the article is taken in the Kibera slums in Nairobi, Kenya. More than 500,000 people live here without essential services. By treviandrea7