Non-Farm Rural Entrepreneurs

Non-Farm Rural Entrepreneurs
Dr Gary Bosworth,
Reader of Enterprise and Rural Economies,
University of Lincoln Business School
Visiting Research Fellow, Plymouth Business School
Dr Juliana Siwale
Senior Lecturer
University of Lincoln Business School
ISBE Workshop on Rural Entrepreneurship, Plymouth, 1st July 2014
Defining Entrepreneurship
• “In almost all of the definitions of an entrepreneur, there is
agreement that it includes initiative taking, organising and
reorganising of social and economic mechanisms to turn resources
and situations to practical account and the acceptance of risk or
failure”. (Shapero, 1975).
• “Entrepreneurship is a dynamic process of creating incremental
wealth. The wealth is created by individuals who assume the major
risk in terms of equity, time/career commitment or provide value for
some product or service” (Kirzner, 1973).
• “Entrepreneurship is the process of creating something new with
value by devoting the necessary time and effort, assuming the
accompanying financial, psychic and social risks and receiving the
resulting rewards of monetary and personal satisfaction and
independence” (Hisrich and Peters, 2002)
The New Rural Paradigm (OECD, 2006)
• Rapid change in the international economy – globalisation, improved
communications and reduced transportation costs, changing trade
patterns for commodities, and the emergence of important non farm
activities in rural regions – confront rural regions with some obvious
threats but also with significant opportunities. Against this background,
policy makers increasingly recognise that traditional sectoral policies need
to be upgraded and, in some cases, phased out and substituted with more
appropriate instruments. Particular concerns are raised by the modest
positive impact that agricultural subsidies have on general economic
performance even in the most farming dependent communities. Indeed,
with farm families relying increasingly on off-farm employment, the
economic success of rural communities will depend on the development
of new economic engines.
• In this context, OECD governments are showing increasing interest in a
more place-based approach to rural policy that emphasises investments
rather than subsidies and that is able to integrate different sectoral
policies and improve the coherence and effectiveness of public
expenditure in rural areas.
What is the Rural Economy?
• Economic activity in rural areas – spatially
defined OR
Economic activity that itself might be
described as rural?
• Are there many different rural economies?
• “the economy of rural and urban areas has to
be seen as complimentary parts of a larger
economic entity. There is no such thing as
simply an urban economy, just as there is also
no rural economy” (Cabus & Vanhaverbeke 2003, p14)
What is the Rural Economy?
• The rural is presented as a place where population
densities are low, markets of all kinds are thin, and
the unit cost of delivering most social services and
many types of infrastructure is high.
• Ellis (2000) queries the tendency to equate the rural
with agriculture, noting the increasing
diversification of rural economies
• Shaped by urban-biased policies implemented
following their political independence.
• The dominant discourse in rural entrepreneurship is
concerned with agri-business
Rural Zambia
• Historical factors to take into account
• Neglect of rural areas and a massive exodus to
urban centres resulting in severe disorientation of
rural agricultural production.
• Household livelihoods – Key feature
• Characterised by small agricultural farms or retail
• The most remote rural businesses are less likely to
use ICT
• Lacking in infrastructural development
Some Zambian facts and figures
• UNECA (2007) estimates that c.70% of Africans and c.80% of the continent’s
poor live in rural areas and depend mainly on agriculture for their livelihood.
• The majority (64.4%) of the adult population live in rural areas, while 50% of
rural and 27% of urban adults do not have a regular monthly income
(FinScope, 2009).
• Over half (55%) of formal employment in rural areas is provided by
government and less than 3% of rural adults earn a salary or wages from a
company or business (FinMark Trust, 2011)
• Almost 70% of all households (rising to more than 90% in rural areas) are
involved in agriculture or fishing in some way. Agriculture is the sole
livelihood for 36% of households, and the rest farm for consumption or to
supplement other income purposes (FinScope Zambia 2009)
Main income generating activities: percentage of Zambian adults
Challenges of rural entrepreneurship
• North and Smallbone (2006) – development policies in
rural peripheries focus on new venture creation and
supporting viability & competitiveness of existing SMEs
• rural location = barrier to product & market
innovations. The limited size of the local market was
identified as the main constraint on product and
service innovation, while remoteness and
transportation costs were stressed in the case of new
market development.
• Areas with a history of intervention are better placed
to support rural peripheries (North & Smalbone 2006)
Opportunities of rural entrepreneurship
• Lagging regions can benefit from various societal
changes including increased demands for recreation and
locally produced, niche products, particularly when they
can be tied to a regional image or speciality. Ilbery and
Kneafsey (1998)
• policies to encourage entrepreneurship need to be
closely tied to improvements in the physical and social
infrastructure that will make these areas more attractive
places to live and work (North & Smalbone 2006)
• An approach which actively involves rural communities,
enterprises, and economic development agencies is
most likely to work best (North & Smalbone 2006)
Some UK facts and figures
• Over 80% of the rural workforce works not in farming or
tourism but distribution, retailing, public administration,
education and health, real estate and finance and in 2006
rural areas supported more than the national share of
workplaces in energy and utilities, construction, transport
and communications and manufacturing” (CRC 2008)
• Over 90% of rural firms are microbusinesses, employing
fewer than 10 people. They employ 26% of the workforce
in deepest rural areas
• Agriculture accounts for almost three-quarters of
England’s land area but by 2007, agricultural employment
was below 360,000 (CRC 2008)
“Countrysides of Consumption”
• We have moved to a rural economy that is driven by
consumption and our consumption demands are those of
an urban society (Slee, 2005; Woods, 2005)
• “Rural goods and services are directed toward and
consumed disproportionately by people with strong ties
to urban and big city populations” (Lichter & Brown, 2011)
• Sociologically, urban settlement is associated with
civilisations reaching a stage of development where they
can produce more than they need to subsist (Castells, 1977)
• What are the implications for rural entrepreneurs?
“Countrysides of Consumption” (Slee 2005)
Subsistence countryside?
“The Peasant Principle”
(Van der Ploeg, 2008)
• Depeasantization or re-peasantization?
• "The driving logic of subsistence and the maintenance of
some control over the means of production" (Johnson, 2004)
• Movement away from modernization hegemony?
• Multiple income rural households and diversified rural
businesses - entrepreneurship or subsistence, or both?
• The retirement migrant now working longer hours than
when in “full-time” choice or
economic trap?
“The Rural Penalty” (Malecki, 2003)
• “Low density of population and therefore a low density of
most markets, and greater distance to those markets as well
as to information, labour, and most other resources”
→ economies of scale arguments
• Limited incentive for markets to provide key services and
infrastructure (E.g. broadband internet)
• Lack of connection to regional and global opportunities,
knowledge and innovation
• Poorly educated & low-skilled workers, weak
entrepreneurial cultures, and entrenched racial inequalities
all serve to inhibit the participation of rural families and
communities in the new economy (Kellogg Foundation, US, 2003)
The Rural Business Environment
- Fewer direct competitors
- Environmental capital – tourism
- Land resources
- Close knit communities
- Lower labour and property costs
- Potential to create unique
business identity
- Less congestion
- Local knowledge
- Grant funding
- Can be portfolio entrepreneurs
- Potential for small firm to have
big impact locally
- Fewer customers
- Environmental
- Slower spread of technology
- Limited access to finance
- Close knit communities
- Sparse networks
- Lower labour and property costs
(reduces supply of high skilled
labour, reduces property market
- Transport costs
- Socio-cultural factors
What theories help us to understand
features of rural enterprises?
• Accessibility/connectivity
• Microfinance - rural beyond formal financing
• Globalisation - FDI, global commodity markets,
• Moving beyond subsistence
What are the common challenges for
rural businesses in the Global South?
• The lack of basic infrastructure in telecommunications,
transport networks, high operation costs
• Limited access to markets and financial institutions,
coupled with unreliable electricity supplies where available.
• Cultural perceptions and the fear of witchcraft in the event
that the entrepreneur becomes successful in business.
• Limited take up of ICT and very little access to market
• Low literacy levels –especially with women
• To raise livelihoods outside the farm
• Policy uncertainty
The Remote rural
• Agriculture, though the main source of livelihood, is still at a
subsistence level.
• These are areas where there are either no roads or only
gravel roads, and so travel is very difficult, especially after
heavy rains.
• Electricity supply in outlying areas (and also in cities) is
unreliable and in some areas non-existent.
• Mobility is a huge problem.
• This limited accessibility to electricity impacts negatively on
rural businesses with only 6% of small and medium
enterprises (SMEs) in the rural areas connected to the public
electricity grid, compared to 24% of urban SMEs (ZBS, 2010).
Source: Infrastructure Africa: African development Bank Group
Road infrastructure as catalyst for ‘survivalist’ businesses
Urban and Rural Delineations in
Yorkshire and Humberside and
the East Midlands of England
Low congestion and accessibility (UK)
• “We work with typesetters, designers and printers who are
dotted around the north east, within reasonable travelling
distance.” the A69 makes it accessible – “you can get anywhere
pretty quickly”
• “I was concerned that we’re out on a limb compared to most
wholesale companies but most of the hauliers reckoned that if
they had a trailer coming in through Dover, it didn’t matter to
them if they were going to drop off in Manchester, Newcastle,
here or Glasgow…In fact most of them preferred to say we’ll
come here first because they knew if they got in here they’d be
offloaded straight away and they’d be straight out…In the cities
you’ve got the traffic problems and if it’s a bigger warehouse you
have to log in and wait up to 3 hours to get unloaded”
Entrepreneurs: a catalyst for ICT provision (UK)
• “When we moved in we didn’t have broadband but that was
one of the things we found out as we moved up. We knew we
were going to need it and we were made aware of the plans for
broadband being installed so the month we moved in they
were just finishing off. We sat here this morning emailing
pictures we did yesterday to here there and everywhere
without having to leave the building”
• “We’re only a mile form the A1, it takes 15 minutes to get into
town and a lot of our work is proofed by email so we don’t
need to be in town.”
• “You can keep an eye on it on the screen now, we get emails
most days from big suppliers across the country so we don’t
really miss out.”
Labour market issues (UK)
• Attracting human capital to work in the local economy can
be a barrier to growth:
• “Rural areas are fine for recruiting low skilled workers but
if we ever needed a more skilled worker we might
• “I would say one of the hardest things has been staff…at
times staffing has been a real issue, particularly in the
kitchen…it’s very rural here so getting anyone to travel,
there’s no living accommodation here and as good a
calibre as we are as a restaurant, you’ve got to imagine
what an employee would see if they looked at this place.”
Location decisions of rural entrepreneurs
• Not always based on purely rational economics –
lifestyle choices and embeddedness matter
• Lack of congestion, lower costs and quality of the
environment more than compensate for distance
• Digital connectivity is more important for business
• Increased connectivity increases competition too
• Are we taking an urban-centric view on what matters
to rural businesses? Rural entrepreneurs see local
features as niche opportunities not necessarily
What is changing?
• Micro-enterprises seen as predominantly
‘survivalist’ rather than as an answer to any
identified need in the market place
BUT this is changing
• Retail going rural (–e.g. wholesalers) while
farming goes urban. Drivers being technology and
increased mobility
• Use of ICT makes it easier to access market
information and create a network system
Urban elite investi
commercial agricu
Accessible rural
Thank you, any questions?
Dr Gary Bosworth
[email protected]
Dr Juliana Siwale
[email protected]
University of Lincoln Business School
Brayford Pool
Lincoln LN6 7TS, UK