Abstract

Final version published by Academy of Management Journal, 31(2). Not to be reproduced without written permission. __________________ The authors have benefited from comments received at the Academy of Management meetings and are indebted to Thomas Lawrence, William Warden, and Murdith McLean for their valuable time and feedback on early drafts of this manuscript. Editor Tom Donaldson and reviewers for Academy of Management Review provided very helpful comments on the draft first submitted. 2 TOWARD A THEORY OF COMMUNITY-BASED ENTERPRISE Abstract Theoretical models that separate social, political and environmental factors from the economics dimensions of entrepreneurship cannot account for the failed experiences in business development among very poor populations. In this article, we develop the concept of Community-Based Enterprise (CBE) and argue that it provides a potential strategy for sustainable local development. We maintain that in this emerging form of entrepreneurship, typically rooted in community culture, natural and social capital are integral and inseparable from economic considerations, transforming the community into an entrepreneur and an enterprise. Drawing on interdisciplinary and multilevel approaches, we propose a theoretical model of the determinants, characteristics, and consequences of CBEs. Nevertheless, scarce resources, overpopulation and environmental degradation in rural communities in poor countries are leading to out-migration to already overcrowded cities. Immigrants subsist there in miserable shantytowns amid increasing insecurity and social violence and without significant possibilities for income Authorities from the United Nations (2001) and the World Bank While appreciating that the global inter-connectedness of all societies is vital, it is equally important to understand the imperative of acting at the local level. Value creation and innovation through local business development are essential means for the alleviation of poverty and preservation of the natural environment. But the employment of business development as a means to overcome poverty requires an understanding of the specific socio-economic environment in which that development is to take place (Peterson 1988). Diverse macroenvironmental conditions, societal arrangements, and cultural values play a vital role in fostering entrepreneurial activities At the center of our argument is the concept of "Community-Based Enterprise" (CBE), which we define as a community acting corporately as both entrepreneur and enterprise in pursuit of the common good. CBE is therefore the result of a process in which the community acts entrepreneurially, to create and operate a new enterprise embedded in its existing social structure. Furthermore, CBEs are managed and governed to pursue the economic and social goals of a community in a manner that is meant to yield sustainable individual and group benefits over the short-and long-term. We elaborate the concept of CBE more fully later in this paper. We believe CBE represents a promising strategy for fostering sustainable local development. Whereas the community is typically treated in the literature as an exogenous part of the environment for entrepreneurship (e.g., Ardichvila, Cardozo, & Ray, 2003; This conceptual trinity and the proposals emerging from it are important for several reasons. Second, although we focus on the benefits of CBE for less-developed economies the concept may have wider applications. The notion of the community as enterprise and entrepreneur may yield new and fruitful ways of thinking about entrepreneurship in developed economies even though it represents a perspective on the extreme of a continuum of ideas. The 6 notion of an entrepreneurial venture as a "single independent operation linked to other similar operations only through arms-length, contractual exchange relationships" is also an extreme conceptualization, yet this understanding has led to important insights (Taylor, 1999: 3, 6). Third, because our theoretical model of CBE is based on documented grassroots efforts in impoverished local communities in a variety of settings it should be significant for policy-makers and practitioners given the growing interest in entrepreneurship and sustainability as tools for local development. This is particularly important because most efforts to assist in the improvement of developing regional economies have been unsuccessful, primarily because such efforts have either been unmindful of local cultures and values or have been simply charitable programs that failed to address the root causes of poverty The purpose of this article is to develop a theoretical model of community-based enterprise as an alternative representation of how entrepreneurial activity may be harnessed to ameliorate chronic poverty. The article is organized as follows: In the next section, we develop the theoretical foundation of the proposed model. We discuss the importance of entrepreneurship in the process of economic development, emphasizing in particular its possibilities in the context of poverty as a process involving people, not just as individuals but also collectively as members of a community. We employ ideas and insights from anthropology to highlight cooperation as an engine of collective action, with community identified as a vital asset in an integrated approach to local development. We also employ social network theory to draw connections between entrepreneurial activities and the building and maintenance of communities. Following this, we develop the concept of CBE and examine the components of its creation, as well as its 7 characteristic structure and operation. We then conclude by proposing some implications for future research and practice, and discuss the limitations of the model presented. ENTREPRENEURSHIP AND ECONOMIC DEVELOPMENT IN POOR COMMUNITIES In an effort to alleviate poverty, international development agencies from industrial countries and multinational organizations have been heavily involved in interventions in the developing world over the last fifty years. Despite good intentions, the most widely adopted approaches have often been paternalistic; seeking, even if unintentionally, cultural assimilation, while ignoring the strength of local organizations