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Poverty and Entrepreneurship in Developed Economies

Michael H. Morris, Susana C. Santos and Xaver Neumeyer

While extensively explored as a solution to poverty at the base of the pyramid, this is the first in-depth examination of entrepreneurship and the poor within advanced economies. The authors explore the underlying nature of poverty and draw implications for new venture creation. Entrepreneurship is presented as a source of empowerment that represents an alternative pathway out of poverty.
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Index

Michael H. Morris, Susana C. Santos and Xaver Neumeyer

ABC Life Literacy Canada 108
absolute poverty 3
accelerators 126, 134, 139, 145, 147, 232
ACCION 165
Acs, Z.J. 45
adult literacy 87, 1013
Adult Reading Program 112
advisors 235
affordable energy 138
aggressive growth ventures 65, 120, 127
Airbnb 172
Aldag, R.J. 61
alertness 72, 767
Alibaba 120
Alvarez, S.A. 79
Amadora Empreende 148
Amazon 24, 120, 126
American Institute of CPAs 111
Amorós, J.E. 39, 41
AngelList 169
Apple computers 212
associations, microfinance 167
Australia, entrepreneurship and poverty in 3, 39, 165, 222
bad decisions 118, 1957
Banana Republic 172
Banco do Nordeste 1656
Banerjee, A.V. 46
bank guarantees, microfinance 167
banks
community bank 65, 167
debt financing from 16062
and financial institutions 1415
for-profit banks 167
Baradaran, M. 161
Barney, J.B. 79
Barton Reading and Spelling System 113
Bates, T. 162
Benevolent 169
Ben-Shalom, Y. 223
Berkman, E. 77, 197
BET see Black Entertainment Television (BET)
Better Life Index 1
Bhatt, N. 161
Black Entertainment Television (BET) 65
Black-owned business 162, 199
Blanchard, L. 162
Blanchflower, D.G. 162
Block, J. 62
Boardman, J.D. 50
bona fide opportunities 71
bootstrapping 95, 99, 100, 157, 159, 1845, 188
Bridging Allowance programs 225
broadband access 123, 133, 140, 144, 150
Bronx Business Bridge 148
Burtless, G. 14
Business Development Program 172, 226
business literacy 95, 98101, 103
business model 21, 256, 64, 87, 95, 98, 157, 183, 195
Business Technology Simplified 129
Canada, entrepreneurship and poverty in 7, 39, 90, 165, 222
capital access programs (CAPs) 226
CAPs see capital access programs (CAPs)
car-sharing services 137
Caskey, J.P. 141
Catalyst Grants 171
CDEs see Community Development Entities (CDEs)
CDFI see community development financial institution (CDFI)
Center for an Urban Future 36
Center for Urban Entrepreneurship & Economic Development 148
Center of Neighborhood Technology (CNT) 138
CHARO Community Development Corp. 148
Chase Bank 171
Chen, C.C. 50
child care 13, 15, 88, 102, 136, 181, 202, 232
child nutrition programs 15
Child Tax Credit 14
children
long-term poverty 7
low-income parents 7
poverty rate among children 4, 10, 11, 14
Choose to Save 111
Cira program 108
Clara’s Cleaning 127
cleaning ventures 127, 128
CNT see Center of Neighborhood Technology (CNT)
cognitive development, and literacy 856
commodity 44, 52, 67, 98
commodity trap 150, 2014, 235
community
poverty weakens 912
role of 22930
savings schemes 1723
community banking, microfinance 167
Community Development Entities (CDEs) 225
community development financial institution (CDFI) 166
competency
challenge of 1945
and entrepreneur 2830
of nation 1012
Competitiveness of Enterprises and Small and Medium-sized Enterprises (COSME) program 161, 226
continuum of learning 86, 87, 103
cooperative networks 234, 236
cooperatives, microfinance 167
coping strategies 182
Corak, M. 7
corridor principle 81
COSME program see Competitiveness of Enterprises and Small and Medium-sized Enterprises (COSME) program
cost-benefit analysis 95
Coursera 129
Couyoumdjian, J.P. 41
Covin, J.G. 22
craftsman 61
Craig, B.R. 161
creation opportunities 7980
CrediAmigo microfinance program 165
credit card
business 160
fraud 60
personal 1589
requirements 137
credit unions, microfinance 161, 166, 167
creditworthiness 162
Crick, A. 50
crime rates 11, 42, 45
Cristi, O. 39
CRM see customer relationship management (CRM)
crowdfunding 1689, 1725, 180
Crump, J. 139, 140
culture of poverty 89, 60
customer funding 164, 172
customer relationship management (CRM) 126
cycle of poverty 7, 8, 30, 34
debt financing 16062, 164
decision-making 17, 27, 95, 98, 115, 118, 182, 1957
Deep Dive Coding Bootcamps 129
deliver-and-resell model 172
Dell Computers 172
democracy, poverty weakens 11
democratization of credit 162
developed countries
entrepreneurial ventures 3031
entrepreneurship and poverty in 3941
Human Poverty Index 3
microcredit 166
savings 158
teen birth rates 6
DeVol, P. 42, 181
differentiation 52, 67, 99, 2014, 234, 235
digital divide 115, 123, 141
Digital Literacy Training for Adults 109
Digital Promise 110
Dimock, M. 59
discovery opportunities 80
discrimination 6, 7, 59, 162
document literacy 89, 104
donation-based crowdfunding 169
Dreussi Smith, T. 181
Duflo, E. 46
Dupas, P. 197
Earned Income Tax Credit (EITC) 14, 15, 2245, 236
eBay 24, 126
EBT system see electronic benefits transfer (EBT) system
e-commerce 123, 126, 127
economic development 3031, 39, 41, 90, 134, 148, 171
economic literacy 945, 97, 10713
economic model 52, 53
features 236
margins 231
well-designed 234
ecosystems 52, 126, 130, 1334, 1459, 235
education
higher 12
importance 59
literacy 88
lower-quality 6
OECD 90
post-secondary 13
and training 1389
effectuation 189
Eisenberg, M.B. 123
EITC see Earned Income Tax Credit (EITC)
electronic benefits transfer (EBT) system 227
EMEDUS 109
emergence 28, 31, 72, 73, 81, 114, 161
emotional resources 48, 86, 182
emphasis 82, 86, 102, 103, 126, 130, 232, 235
energy poverty 138, 143
entrepreneur
challenges for 13645
characteristics and values 5861
competencies and 2830
finding patterns in diversity 57
infrastructure and 1323
low-income see low-income entrepreneurs
low-income start-up 668
opportunity horizon 7780
preparation of 233, 235
technology for 11620
types of 613
ventures created by 636
who grew up in poverty 47
see also entrepreneurship
Entrepreneurial Action stage 232
entrepreneurial alertness 72, 767
entrepreneurial ecosystem 52, 126, 130, 1334, 1459, 235
Entrepreneurial Foundation Building 232
entrepreneurial inclination 195
entrepreneurial process 24, 26, 48, 81, 82, 96, 101, 139, 149, 174
entrepreneurship 1517
competencies and 2830
definition 212
in developed countries 3941
economic development 3031
enhancing among poor 513
financing 15475
implications for 415
infrastructure 13250
literacy 85103
low-income 3541
as mindset 224
myths in 16
natural instinct towards 457
navigating 278
opportunity 7182
planning and strategy 194206
policies 22137
as process 247
profit 20720
resource constraints 17892
technology 11430
in United States 359
as way out 34
Entrepreneurship 2020 Action Plan 39
entrepreneurship impact 34, 36, 39, 41, 42, 48
EPAP see European Platform against Poverty and Social Exclusion (EPAP)
equity-based approach 163
equity investors 99, 147, 159, 1624
Erasmus for Young Entrepreneurs Exchange Program 171
Ergungor, O.E. 141
ESBN see European Basic Skills Network (ESBN)
EURead 110
Europe, entrepreneurship and poverty in 39, 40, 137, 160, 171
European Basic Skills Network (ESBN) 110
European Charter for Media Literacy 109
European Commission’s Entrepreneurship 2020 Action Plan 39
European Platform against Poverty and Social Exclusion (EPAP) 222
EU-SILC see EU Survey on Income and Living Conditions (EU-SILC)
EU Survey on Income and Living Conditions (EU-SILC) 138
EV Car Sharing Pilot for Disadvantaged Communities 137
EveryoneOn 110
experimentation 81, 118, 198, 220
FabLab Lisboa 148, 229
fablabs 30, 32, 134
Facebook 63, 119
Fairlie, R.W. 42, 199
family
financing 159
needs 3
poverty weakens 10, 11
tax liability 224
transportation 136
vacation 1
Fedex 171
Filley, A.C. 61
Financial Education Evaluation Toolkit, The 111
Financial Football 112
financial institutions 133, 135, 1415, 159, 160, 180, 229
financial knowledge 162
financial literacy 934, 97, 10713
Financial Literacy Programme 10910
financial resources 4, 154, 180, 182
see also financing
financing 1545
crowdfunding 1689
customer funding 172
debt financing from banks 16062
emerging sources 16473
equity investors 1624
family and friends 159
grants for small businesses 17072
local community savings schemes 1723
microcredit revolution 1648
needs 1557
ongoing gap 1745
personal credit cards 1589
personal savings 1589
stages 1557
traditional sources 15764
ventures of poor in stages 1734
formality 162
for-profit banks 167
for-profit venture 170
Freire, Paulo 181
friends, financing 159
functional literacy 86, 923, 97, 10713
Gainesville Entrepreneurship and Adversity Program (GEAP) 148
Gans, H. 59
GCFLearnFree.org 113
GDP see gross domestic product (GDP)
GEAP see Gainesville Entrepreneurship and Adversity Program (GEAP)
generational poverty 34, 7, 8
global competitiveness 1012
GoFundMe 169
Gorski, P. 59, 60
Grameen Bank 1645
grants 15, 17072, 2278
Greene, P.G. 50
gross domestic product (GDP) 1, 31
growth
annual growth rate 635
fear of 2056
lack of cash flow 45
management and 100
microcredit 166
stage 1557
guarantees 160, 161, 167, 226
guerrilla behavior 18891
Hansen, J.W. 122
Haskins, R. 14
HCV Program see Housing Choice Voucher (HCV) Program
Head Start 14
health problems 7, 1113, 221
health risks 10, 11
healthy dissatisfaction 22
Hernandez, D.J. 41
Herold, B. 125
hidden rules, knowledge of 182
holism 150
Honour Loan program 226
housing 13940, 144
housing assistance 15, 30, 139, 228
Housing Choice Voucher (HCV) Program 227
HPI see Human Poverty Index (HPI)
HUBZone program 223
Human Poverty Index (HPI) 3
Hutt, R. 124
ICT see information and communication technology (ICT)
idea stage 21, 1556
income subsidy programs 225
incorporated self-employment 53
incubators 126, 134, 135, 139, 1478, 150, 227, 232
IndieGoGo 169
Inditex 65
informal economy 46, 60, 712, 79, 98
information and communication technology (ICT) 140, 144
infrastructure
challenges
access to basic technology 14041
affordable energy 138
banks and financial institutions 1415
education 1389
housing 13940
transportation 1367
components 1335, 142
divide, overcoming 14950
ecosystems 1459
and entrepreneur 1323
programs 143
supportive 233, 235
weak 140
Innovation Vouchers 171
Instagram 119
institutional context 79
intellectual property resources 180
Internet 98, 102, 1235, 157, 168, 235
inventory tracking 118
invoice discounting 175
in-work poverty 39, 53
iPhone 212
Jackson, W.E. 161
job training 15, 223
John, D. 467, 65, 199
Johnson, Lyndon 13, 123
Johnson, Robert 65
Kallas, K. 45
Karney, B.R. 59
Kauffman Foundation 35
Kauffman Index of Entrepreneurial Activity 38
Khan Academy 129
Kickstarter 169
Kim, K. 137
Kiva 169
Koellinger, P. 62
Kohut, A. 59
Koum, Jan 47, 82
Kugler, M. 38
Kuratko, D.F. 22
La Cocina 1478, 229
labor efficiencies 218
learned helplessness 78
leveraging 52, 68, 100, 1858
leveraging community resources 234
Levine, P.B. 162
Levi-Strauss, Claude 185
Levitt, T. 202
Lewis, O. 8
lifestyle ventures 635, 77, 98, 122, 127, 147, 150, 183, 232
LIFT see Low Income Fast Track Entrepreneurship Program (LIFT)
LINCS see Literacy Information and Communication System (LINCS)
line of credit 160
literacy
adult 1012
business 95, 989
business model development 989
challenge 1023
cognitive development and 856
continuum of learning 87
economic literacy 945, 97
exit/harvest 101
financial literacy 934, 97
fluency 87
functional 86, 923, 97
implementation and adaptation 100
improving 1012
language based 87
management and growth 100
non-financial literacy 95, 98
opportunity recognition 96, 98
resources
acquiring 99100
assessing 99
social dimension 87
technology 956, 98, 1226
trends and patterns in 8890
venture creation and poor 96101
Literacy Information and Communication System (LINCS) 112
LiteracyLink 11011
Loan Fund 166
loan guarantees 161, 226, 236
local community savings schemes 1723
locus of control 13, 50, 58
long-term poverty 7, 24
loss leaders 210
Low Income Fast Track Entrepreneurship Program (LIFT) 148
low-income entrepreneurs 127
cash flow issue 94
challenge 72, 978
as effectuator 18991
finance for 16473
infrastructure for 13250
natural barriers for 126
preparation of 233, 235
push and pull motives 63
struggles 129
supportive physical spaces 229
low-income entrepreneurship
framework 51
motives of 4850
patterns in 3541
policies and programs 21237
rate by state 37
low-income households 14, 36, 137, 138, 224
low-income neighborhoods 36, 512, 78, 86, 123, 129, 134, 13640, 14850
low-income start-up 668
MacMillan, I.C. 22
Magento 126
makerspaces 30, 32, 134
managed growth ventures 65, 163
Mani, A. 197
margins 67, 2012, 204, 2089, 21113, 21517
Maryland Economic Development Assistance Fund 170
matchmaker models 172
matchmaking 234
McGrath, R.G. 22
Media Awareness Network (MNet) 108
Medicaid 15
mentoring 2930, 148, 229, 235, 236
mentor–protégé programs 149, 172
Merry Maids 127
microcredit/microfinance 134, 145, 147, 149, 150, 1648, 228, 229
Microfinance Gateway 165
Microloan Program 161
MicroVentures 169
middle class, poverty weakens 10, 11
mindset 224, 30, 68, 184, 191, 196
Miner, J.B. 61
Minority Business Development Agency 170
MNet see Media Awareness Network (MNet)
Moffitt, R.A. 223
MoneyMinded program 107
Money Smart 111
money sources 173
Morris, M.H. 63, 66
motivation, low-income entrepreneurship 4850
Mullins, J. 172
multiple-cause opportunities 73
multiple-effect opportunities 73
NAAL see National Assessment of Adult Literacy (NAAL) project
National Assessment of Adult Literacy (NAAL) project 879
National Federation of Independent Business (NFIB) 154
National Household Travel Survey 136, 137
National Telecommunications and Information Administration (NTIA) 123
nation’s global competitiveness, poverty weakens 1012
Native Financial Education Coalition (NFEC) 111
NeighborWorks Financial Capability Program, The 111
Network for Teaching Entrepreneurship (NFTE) 30, 229
New Markets Tax Credit (NMTC) 225
New Markets Venture Capital program (NMVC) 164
New Start-Up Subsidy 225
NFEC see Native Financial Education Coalition (NFEC)
NFIB see National Federation of Independent Business (NFIB)
NFTE see Network for Teaching Entrepreneurship (NFTE)
NGOs see non-governmental organizations (NGOs)
NMTC see New Markets Tax Credit (NMTC)
NMVC see New Markets Venture Capital program (NMVC)
non-financial literacy 95, 98
non-governmental organizations (NGOs) 167
non-profit organizations 149, 166, 170, 173, 224, 229
NTIA see National Telecommunications and Information Administration (NTIA)
occasional opportunities 72
OECD see Organisation for Economic Co-operation and Development (OECD)
“off the books” ventures 60
online community platforms, microfinance 167
Open Meadows Foundation 171
operating leverage 20810, 21920
Operation Hope – Banking on Our Future 112
opportunists 61
opportunity
alertness and poor 72, 767
as beginning point 712
corridor principle 81
emergence 81
existence of 71, 73
nature of 724
sources of 75
technology as 11415
uncovering 746
to ventures 812
opportunity horizon 7780, 2334
opportunity recognition 96, 98, 1268
Organisation for Economic Co-operation and Development (OECD) 1, 8990
organizational resources 180
Ortega Gaona, Amancio 65, 82
Painter, G. 161
paperwork 162
pay-in-advance model 172
Payne, R.K. 7, 8, 42, 181, 183
peer-to-peer lending 173, 228, 234
Pell Grants 15
people resources 180
perennial opportunity 72
personal credit cards 1589
personal savings 93, 1589, 173, 174
Pew Charitable Trusts 5
Pew Research Center 5960
physical resources 180, 182
planning
bad decisions and discipline of 1957
commodity trap 2014
competing, challenge of 1945
fear of growth 2056
reactive/tactical/strategic thinking 1979
shotgun and rifle dilemma 200201
underprice 2045
planning horizon 65, 1957
policies
Basic Survival 2312
communities role 22930
overall policy gap 2224
principal policy levers 2248
priorities 235
proactively fostering entrepreneurship 2212
SPODER framework 2326
poverty
assistance programs 1415
communities and nations 912
complexities of 69
conditions of 415
culture of 89, 60
cycle of 7, 8, 30, 34
definition 34
in developed countries 3941
entrepreneurship 1517
escape from 1213
household income distribution 2
long-term 7, 24
rate 46
reducing 1011
solutions 1315
in United States 359
see also entrepreneurship
poverty level 3, 5, 12, 37, 137, 227
poverty solutions 1315, 31, 39
Power of Broke, The (John and Poisner) 47
pre-start-up planning stage 145, 1556, 173
PRIME Program 170
private companies 149, 171, 229
process technology 11516
procurement 67, 227, 232
product technology 11516
profit
challenge 21314
components, connecting 21112
features 236
growth potential 21420
logic of 20811
margins 2089, 21517
operating leverage 20910, 21920
revenue drivers 210, 220
as signpost 2078
volumes 209, 21719
profitability 87, 162, 163, 183, 209, 210
Project Adult Literacy Society 109
Project Read 113
Promálaga Urban Incubators 148
prose literacy 89, 103
Prosper Canada 108
public policy 13, 17, 2212
public sector 232, 236
pull entrepreneurs 62
push entrepreneurs 612
quantitative literacy 86, 89, 103
QuickBooks 118
Rainwater, L. 14
Raspberry Pi Foundation 126
reactive thinking 1979
Reagan, Ronald 14
record-keeping 95, 118
redlining 137, 162
regulatory relief 228
relational resources 180
relationships 31, 141, 159, 168, 182, 183
relative poverty 3
Research Triangle 126
resource gaps 1814
resource needs 17981
resources 256
bootstrapping 1845
guerrilla behavior 18891
leveraging 52, 1858
low-income entrepreneur as effectuator 18991
ongoing challenges 1912
Reuters 141
revenue capture 208, 211, 214, 216, 236
revenue drivers 21013, 220
Richmond Vale Academy 7
Robb, A. 42, 162, 199
Robert, S.A. 50
Roberts, P. 91
Robinson, J. 197
RocketHub 169
role models 42, 52, 79, 168, 182, 232
Roosevelt, Franklin D. 222
ROSCAs see rotating savings and credit associations (ROSCAs)
Rosen, A. 30
rotating savings and credit associations (ROSCAs) 168, 1723
Salesforce 119
Sarasvathy, S.D. 189, 191
Saver Plus program 107
savings 93, 141, 1589, 1723, 197
SBA see Small Business Administration (SBA)
SBA Loan Program 226
scarcity 196, 197
Scholz, J.K. 223
Schultz, Howard 47, 82, 205
science, technology, engineering, the arts and math (STEAM) learning 125
SCORE see Service Corps of Retired Executives (SCORE)
Scott III, R.H. 160
self-efficacy 50, 589, 101, 168
Self-Employment Learning Project of the Aspen Institute 37
self-employment opportunity 7980
Self-Help 166
SEP see socioeconomic position (SEP)
Service Corps of Retired Executives (SCORE) 148, 228
Servon, L.J. 161
Shah, A.K. 196, 197
Shane, S. 160
Shared Use Mobility Center 137
Shelter Eradication Program 140
Shopify 126
shotgun approach 200
Silicon Valley 126
situational poverty 3, 13
Slivinski, S. 36, 38
small and medium-sized enterprises (SMEs) 161
Small Business Administration (SBA) 36, 129, 148, 161, 164, 170, 173, 223, 226
small business development centers 134, 145, 148, 228, 235, 236
small businesses
grants for 17072
internship programs 230
lack of exposure 44
Smart Grants 171
Smeeding, T.M. 14
SMEs see small and medium-sized enterprises (SMEs)
Smith Family program, The 107
Smith, N.R. 61
Smith, T.D. 42
SNAP see Supplemental Nutrition Assistance Program (SNAP)
social context 79, 102
socioeconomic position (SEP) 1234
sources
of differentiation 52, 234
of financing 154, 15673
of opportunities 75
South Side Innovation Center 147, 229
spiritual resources 182
SPODER framework 51, 2326
Squarespace 126
SSBCI see State Small Business Credit Initiative (SSBCI)
stabilization stage 1557, 173
Starbucks 47, 82, 205
start-up
among poor 46
biotech 145
experimentation 198
low-income 668
motivation 48
national data on 35
New Start-Up Subsidy 225
pre-start-up planning stage 145, 1556, 173
profit 207, 208
stage 1556
training program 150
start-up rates 35, 36, 39, 51, 60, 154
State Small Business Credit Initiative (SSBCI) 226
STEAM learning see science, technology, engineering, the arts and math (STEAM) learning
Stephens, M. 140
Stevens, A.H. 13
strategic thinking 52, 1979
StreetShares Foundation 171
Supplemental Nutrition Assistance Program (SNAP) 14, 227
Supplemental Security Income 15
survival ventures 63, 120, 127, 150
Symphony Commerce 126
tactical thinking 1979
TANF program see Temporary Assistance for Needy Families (TANF) program
Tang, S.Y. 161
tax incentives 224, 225, 232, 234, 236
taxation policies 2245
Tech Square Labs 129
technological literacy 956, 98, 10713, 1228
technology
absence of 118
adoption and low-income Americans 124
costs of avoidance 11620
for entrepreneurs 11620
infrastructure 14041
as opportunity and challenge 11415
products versus processes 11516
venture types and 12022
Telecentre Europe 109
Temporary Assistance for Needy Families (TANF) program 14, 225
Tervo, H. 62
Thomson, J.B. 161
Tirado, L. 197
Toronto Public Library 109
Trail, T.E. 59
transportation 13, 42, 1367, 143
underprice 2045
unemployment rate 12, 78, 95
unincorporated self-employment 53
United States
entrepreneurship and poverty in 359
gross domestic product 1
household income distribution 2
poverty level 3
Small Business Administration 36, 129, 148, 161, 164, 170, 173, 223, 226
values, of entrepreneurs 89, 5861
Van Steen, G. 140
VCs see venture capitalists (VCs)
Venkatesh, S.A. 60
venture capitalists (VCs) 164
ventures
challenges 668
competencies 29
creation 22, 96101
entrepreneurial ecosystem components 146
financial needs and stages 1557
funding 1734
implementation 26
labor efficiencies 218
opportunity 812, 1268
profit 21320
resources 17981
technology 12022, 1268
types 636, 12022
see also entrepreneurship
volumes 209, 21019
vouchers 227, 232, 235
Wagner, M. 62
“War on Poverty” 13, 14
Watts Entrepreneur Business Accelerator (WEBA) 126
Wave Accounting 118, 129
WEBA see Watts Entrepreneur Business Accelerator (WEBA)
Webb, J.W. 712
WhatsApp 47, 82
WIC see Women, Infants, and Children (WIC)
Williams, C.C. 39
Wilson, W.J. 8
Wishbone platform 169
Women, Infants, and Children (WIC) 15
Yinger, J. 162
Your Financial Toolkit 108
You’re the Boss program 107
YouTube 129, 191
Yunus, Muhammad 164, 165
Zara 65, 82
Zhao, B. 162
Zimmerman, D.J. 162