The Community
Wellbeing Index
The Community Wellbeing Index (CWI) has allowed us to conduct research to gain a better understanding on how local social capital affects entrepreneurial activity.
Prof Tomasz Mickiewicz, Dr Anastasia Ri, Dr Neha Prashar and Prof Mark Hart, Aston University
The Enterprise Research Centre (ERC) and the Centre for Business Prosperity (CBP) at Aston Business School are centres of excellence for research on small business, entrepreneurship, innovation, productivity and trade, focused on informing better UK policies and business practices.
A team of researchers from both centres recently came together to complete a study into local social capital and the role that it plays in supporting start-up activities.
Local social capital refers to features within a neighbourhood that facilitate cooperation – such as social ties, trust between citizens and norms of reciprocity. Studying the relationship between local social capital and entrepreneurship can help to develop better understanding of how to foster conditions that improve prospects for entrepreneurial entry.
To conduct the research, two unique datasets were used: the Community Wellbeing Index (CWI) with its very granular and rich geo-localised data that acts as a reliable tool to measure local social capital, and Global Entrepreneurship Monitor, which tracks entrepreneurial activity by collecting data from a representative sample of UK working age individuals across different locations.
CWI data was used to estimate the strength of local social capital in areas where individuals who were creating a new venture lived - to understand if this played a role in supporting the start-up activity.
Research findings showed that robust local social capital, by fostering exchanges between people, mutual support and collaboration, is critical for necessity entrepreneurs – those who are pushed into entrepreneurial activity because of a lack of alternative employment prospects.
Findings suggest that an improvement in social infrastructure, especially by creating safe local places where people can meet, exchange ideas and come together with common projects may strengthen local social capital and play a crucial role in supporting entrepreneurial activity. This is particularly true of less affluent neighbourhoods where necessity entrepreneurship is commonplace, giving those who are disadvantaged an option to support themselves by starting their own businesses and widening their range of options on labour markets.
Research and policy action has previously been focused on opportunity entrepreneurs - those who start a business out of personal aspirations in pursuit of growth, profit and innovation rather than due to a lack of alternatives. There is the expectation that these opportunity-driven ventures will result in strong benefits for society.
However, necessity entrepreneurship remains very important for those who are socially underprivileged. It helps to provide an escape from a situation of dependency, from degradation of skills by inactivity and from the poverty trap and allows entrepreneurs to gain new knowledge and skills which may lead to the discovery or creation of additional opportunities and towards more ambitious venture creation in future. Necessity entrepreneurship also plays a role in developing and supporting communities, contributing to the levelling up agenda – which is why thinking about what supports this form of entrepreneurship matters.
CWI data was used to carefully measure the social environment in which both types of new businesses, necessity and opportunity-driven, were nurtured. Two CWI dimensions in particular - Relationship & Trust and Voice & Participation - provided good, rich, multidimensional measures of local social capital, showing that these play an important role in supporting necessity entrepreneurs and should be strengthened through greater investment in social infrastructure.
This research was presented at the Institute of Small Business and Entrepreneurship (ISBE) conference in October 2022. Feedback from the conference has helped to form the next steps in the research pipeline, including fine tuning the initial findings by bringing in other sources of data, such as from the Office of National Statistics, to control for other factors related to social capital and social infrastructure. This will further help with understanding the important relationship between local social capital and entrepreneurship.
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