Business, Entrepreneurship and Innovation Toward Poverty Reduction

ABSTRACT

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 such that extreme poverty has fallen to less than ten percent of world population. However, it is increasingly clear that while some countries and regions have seen 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. This Special Issue has set the goals of publishing work that builds knowledge about thenature of poverty reduction and business, entrepreneurship and innovation activities in both developed and developing economies, as well as their models, antecedents and consequences related with the current platform.

KEYWORDS:

• Poor
• poverty alleviation
• entrepreneurship
• innovation
• research perspectives
• regional development
• global contexts

Introduction

Poverty reduction has increasingly become a core subject for researchers across the social sciences from economics and finance, to management and entrepreneurship (Ahlin and Jiang 2008; Chen, Chang and Bruton, 2017; Dollar, and Kraay, 2002; Dollar, Kleineberg, and Kraay 2016; Sutter, Bruton, and Chen 2019). This is in response to the severity of the problem of extreme poverty and the decidedly mixed results of poverty alleviation measures (Easterly 2006). These measures include foreign aid programs, microfinance and property rights promotion, and bottom of the pyramid initiatives (Alvarez, Barney, and Newman 2015), These initiatives have not had much impact on extreme poverty and may have actually created some additional problems (Easterly 2006; Roodman 2012).

Yet in recent years, researchers have started to examine economic growth and its link to poverty reduction through entrepreneurship and the development of new technology and new techniques (Ahlstrom 2014, 2015; Bloom et al. 2013; Bloom, Draca, and Van Reenen 2016; McCloskey 2017). This has in turn generated new approaches to (and ways of looking at) poverty reduction which challenges existing poverty research theory traditionally more centred on financial aid and other basic poverty alleviation measures (Easterly 2002; Sachs 2003; Whitacre, Meadowcroft, and Gallardo 2019). The fast and increasingly widespread economic growth in recent decades has enabled large numbers of people to move out of poverty (Ahlstrom 2010) such that extreme poverty has fallen to less than 10% of the world’s population (Dollar, Kleineberg, and Kraay 2016; Roser and Ortiz-Ospina 2017). However, it is evident that while some countries and regions have seen dramatic improvement of poverty, there are other places with large numbers of people still in poverty that can greatly benefit from poverty alleviation efforts.

Research ranging from trade policy and globalization (Pearce 2005; Bergh, Mirkina, and Nilsson 2016; Bhagwati and Srinivasan 2002; Dollar and Kraay 2004) to legal and institutional reform (Rodrik, Subramanian, and Trebbi 2004) to management (Bloom et al. 2013) are making dramatic progress on understanding many key factors in the alleviation of extreme poverty and the seeding of economic growth (Tomizawa, Zhao, Bassellier, and Ahlstrom, 2019). In particular, management as well as related research in economics have made some strides in identifying its cause and ways in which poverty can be reduced through institutional reform, microfinance, innovation and new venture creation (Ahlstrom 2010; Bloom, Draca, and Van Reenen 2016; Bruton, Ketchen, and Ireland 2013; Chen, Chang, and Bruton 2017; Perkins et al. 2013). Researchers increasingly recognize that entrepreneurship may offer a significant part of the solution to poverty around the world (Alvarez, Barney, and Newman 2015; Bruton, Ketchen, and Ireland 2013). The challenge is to further understand entrepreneurship’s link to poverty reduction and how productive entrepreneurship can be encouraged (Baumol et al., 2009b, 2009a; Si et al. 2015). A related focus regarding the ways in which poverty can be reduced through network/digital and sharing economies still needs to be better understood.

This Special Issue in Entrepreneurship and Regional Development on Business, Entrepreneurship and Innovation Toward Poverty Reduction has set the goals of first publishing work that builds knowledge about the nature of poverty reduction, business, entrepreneurship and innovation activities in both developed and developing economies, and second developing further a theoretical foundation with different perspectives for future research under the current political, technological, economic and global contexts. In this lead paper of the special issue, we seek to provide an overview of the existing literature with respect to poverty and poverty reduction. We analyze the poverty research of where poverty and entrepreneurship research now stands and, in turn, develop an understanding of where the research needs to move in the future. We then develop and analyze the current hot issues of poverty research in the platform, network/digital and sharing economies. The 10 papers in this special issue, individually and each in their own way, offer key insights into how we might better understand how to reduce poverty through business, innovation and entrepreneurship as we develop an agenda for future poverty reduction research.¹ This special issue intends to mainly address these important but underexplored issues with different perspectives that explain the current research of poverty research, and predict its likely development trajectory and its impact on future research.

Poverty and entrepreneurship’s role

The more extreme form of poverty as focused on in this special issue is that where the poor suffer from serious deprivation such that they live at or near subsistence, and their health and well-being can be under serious threat with minor set-backs. According to the biennial ‘Poverty and shared prosperity: Putting together the poverty puzzle,’ living on less than $3.20 a day represents the poverty line for lower-middle income countries while extreme poverty is defined as living on less than $US 1.90 per day (in 2011 dollars). Extreme poverty fell to less than 10% of the world’s population in 2018, or about 630 million people, though the pace of poverty reduction has slowed somewhat (Goalkeepers report, 2018).

As foreign aid and other infrastructure schemes have not been shown to be very effective in terms of poverty reduction (Easterly 2002, 2013), entrepreneurship’s role in poverty reduction research has become an increasingly important topic in management (Bruton, Ketchen, and Ireland 2013; Bruton et al. 2015; Sutter, Bruton, and Chen 2019). Entrepreneurship is widely defined in terms of situations in which new goods, services, raw materials, markets and organizing methods can be introduced through the formation of new means, ends, or means-ends relationships (Eckhardt and Shane 2003; Shane and Venkataraman 2000). Indeed, entrepreneurship can be seen as encompassing radical change in terms of innovation and new ventures (Acs and Audretsch 1988; Denning 2016) that may extend to social or institutional spheres or improving on the poor’s social standing through improved social entrepreneurship. (Battilana, Leca, and Boxenbaum 2009; Rindova, Barry, and Ketchen 2009). As noted, other entrepreneurship topics held as a solution to poverty, including ‘microfinance’, ‘crowdfunding’, ‘informal firm’, ‘informal economy’, ‘social entrepreneurship’, ‘base of the pyramid,’ and disruptive innovation are discussed within the special issue. This special issue also holds that while poverty is typically measured in economic terms, poverty can be multidimensional. As such, poverty may also involve a variety of other challenges beyond economic ones including plight (Sen 1999), marginalization, and social poverty (Halpern-Meekin, 2019). This may suggest some different business and entrepreneurial solutions as addressed in this special issue.

Poverty reduction through entrepreneurship

Over the past years, scholars have conducted a manifold research on poverty reduction that has been published increasingly in the top journals. In general, the existing research on poverty and business and entrepreneurship cover many topics and perspectives. This paper provides an overview of a list of significant poverty literature that’s selected from top-tier journals and some prestigious journals in Table 1

Table 1. Selected significant literature on poverty with business and entrepreneurship.

Author	Journal	Year	Title
Hofstede,Haveman Pearce	Academy of Management Review Administration Science Quarterly Academy of Management Journal	1978 1993 Pearce 2005	The Poverty of Management Control Philosophy Follow the leader: mimetic isomorphism and entry into new markets Organizational Scholarship and the Eradication of Global Poverty
Vaona	Research Policy	2005	Understanding Globalization, Employment and Poverty Reduction
Fairchild	Journal of Business Venturing	2008	The Influence of Residential Segregation and Its Correlates on Ethnic Enterprise in Urban Areas
Mair and Marti	Journal of Business Venturing	2009	Entrepreneurship in and Around Institutional Voids: A Case Study from Bangladesh
Bruton	Academy of Management Perspective	2010	Business and the World’s Poorest Billion – The Need for an Expanded Examination by Management Scholars
Ahlstrom	Academy of Management Perspective	2010	Innovation and Growth: How Business Contributes to Society
Kaplinsky	Research Policy	2011	Schumacher Meets Schumpeter: Appropriate Technology below the Radar
Mair, Marti, and Ventresca	Academy of Management Journal	2012	Building Inclusive Markets in Rural Bangladesh: How Intermediaries Work Institutional Voids
Kistruck et al.	Academy of Management Journal	2013	Mitigating Principal-Agent Problems in Base-of-the-Pyramid Markets: An Identity Spillover Perspective
Bruton, Ketchen, and Ireland	Journal of Business Venturing	2013	Entrepreneurship as a Solution to Poverty
Tobias, Mair, and Barbosa-Leiker	Journal of Business Venturing	2013	Toward a Theory of Transformative Entrepreneuring: Poverty Reduction and Conflict Resolution in Rwanda’s Entrepreneurial Coffee Sector
Khavul, Chavez, and Bruton	Journal of Business Venturing	2013	When Institutional Change Outruns the Change Agent: The Contested Terrain of Entrepreneurial Microfinance for Those in Poverty
Kent and Dacin	Journal of Business Venturing	2013	Bankers at the Gate: Microfinance and the High Cost of Borrowed Logics
Sutter et al.	Journal of Business Venturing	2013	Entrepreneurs’ Responses to Semi-Formal Illegitimate Institutional Arrangements
Allison, McKenny, and Short	Journal of Business Venturing	2013	The Effect of Entrepreneurial Rhetoric on Microlending Investment: An Examination of the Warm-Glow Effect
Ault and Spicer	Strategic Management Journal	2014	The Institutional Context of Poverty: State Fragility as a Predictor of Cross-National Variation in Commercial Microfinance Lending
London et al.	Strategic Entrepreneurship Journal	2014	Connecting Poverty to Purchase in Informal Markets
Gras and Nason	Journal of Business Venturing	2015	Bric by Bric: The Role of the Family Household in Sustaining a Venture in Impoverished Indian Slums
Chliova, Brinckmann, and Rosenbusch	Journal of Business Venturing	2015	Is Microcredit a Blessing for the Poor? A Meta-Analysis Examining Development Outcomes and Contextual Considerations
Rivera-Santos, Holt, and Littlewood	Academy of Management Perspective	2015	Social Entrepreneurship in Sub-Saharan Africa
Cobb, Wry, and Zhao	Academy of Management Journal	2016	Funding Financial Inclusion: Institutional Logics and the Contextual Contingency of Funding for Microfinance Organizations
George et al.	Strategic Management Journal	2016	Social Structure, Reasonable Gain, and Entrepreneurship in Africa
Woodson	Research Policy	2016	Public Private Partnerships and Emerging Technologies: A look at Nanomedicine for Diseases of Poverty
Fischer	Research Policy	2016	Why New Crop Technology is not Scale-Neutral – A Critique of the Expectations for a Crop-Based African Green Revolution
Zhao and Lounsbury	Journal of Business Venturing	2016	An Institutional Logics Approach to Social Entrepreneurship: Market Logic, Religious Diversity, and Resource Acquisition by Microfinance Organizations
Shantz, Kistruck, and Zietsma	Journal of Business Venturing	2018	The Opportunity not Taken: The Occupational Identity of Entrepreneurs in Contexts of Poverty
Bhuiyan and Ivlevs	Journal of Business Venturing	2019	Micro-Entrepreneurship and Subjective Well-Being: Evidence from Rural Bangladesh
Sutter, Bruton, and Chen	Journal of Business Venturing	2019	Entrepreneurship as a Solution to Extreme Poverty: A Review and Future Research Directions

1. Remediation perspective

Remediation is the perspective that entrepreneurship can alleviate poverty when resources and capital are directly addressed (Sutter, Bruton, and Chen 2019). The remediation perspective has several common underlying assumptions, in that it sees poverty as driven by scarce resources such as a lack of seed capital or other physical assets (Alvarez and Barney, 2014; Berge, Bjorvatn, and Tungodden 2014; Chliova and Ringov 2017; Karlan and Valdivia 2011Wu and Si 2018). It assumes that resources and other capital assets are at the centre of entrepreneurial activity (Ahlin and Jiang 2008; Sutter et al., 2014) and thus providing resources through grants, foreign aid, microfinance is a key to poverty reduction (Newman, Schwarz, and Ahlstrom 2017). The remediation perspectives thus holds that entrepreneurial activity can be better funded and that entrepreneurship among the poor will result in a ‘win-win’ that benefits all participants (e.g., London, 2009; Khavul 2010). Thus, this perspective generally focuses on the resources.

Related to the remediation principle is one whereby poverty is researched and addressed more from a development economic perspective that tends to focus more on capital endowments and returns, particularly improved productivity (Perkins et al. 2013). Typically, the research contends that more endowments in land, labour, education, resources, and infrastructure result in lower poverty (Leff 1979; Lucas 2002; Romer 1986). In addition, some other scholars have examined research on poverty from a transitional or developing economic perspective that has tended to focus on microloan, low technology-based industries, informal debts, and e-commerce. Others in the rural areas such as China and Brazil focused their developmental efforts in these ways, particularly toward the expansion of rural and farmer economics toward poverty reduction (Harding, 1987). Microloans and other economic and financial help led by the government, wealthy charities are largely applied to poverty reduction.

A variety of new solutions centred more on resources such as crowdfunding and other internet platforms largely related with the internet, digital and sharing economies that enable individuals to solicit small investments, donations, or loans over the Internet from a wide variety of funders; they have emerged as a new and potentially important source of funds for entrepreneurial and philanthropic initiatives (Ahlstrom, Cumming, and Vismara 2018). The capital and resources view has some support (e.g., Sachs 2003) but is not without controversy. Foreign aid, in particular, has shown a very limited ability to impact poverty due to the misallocation of resources and other policy problems (Easterly 2013; Easterly, Levine, and Roodman 2004). Microfinance and other capital provision schemes have been likewise limited in their effect on poverty (Bruton et al. 2015; Chen, Chang, and Bruton 2017). Related to this, in terms of the efficacy of capital provision and accumulation to grow economies and alleviate poverty (Lucas 2002; Findlay & O’Rourke, 2009; Piketty, 2014), recent work in economic history has shown that in Britain, an early exemplar of economic growth, investment in physical capital as a share of national income was actually below European norms of the nineteenth century and earlier (McCloskey 2010, 2017). Though capital accumulation and provision have garnered some support in the literature for its seeding of economic growth and new venture creation – though much of it is strictly deductive evidence (Van Zanden 2009) – it has not historically conferred lasting advantages to an economy and its firms and citizens (McCloskey 2010, 2017).

2. Reform perspective

A second perspective to entrepreneurship and poverty reduction centres less on resources and capital investment and more on a reform perspective (Sutter, Bruton, and Chen 2019). This perspective address reform in institutions, both formal and informal (Scott, 2013; Alston, 2018). If formal institutions can be fixed, according to this perspective; entrepreneurship is more likely to be encouraged and nurtured (Acemoglu & Robinson, 2012; Tomizawa, Zhao, Bassellier, & Ahlstrom, 2019). Thus, the reform perspective assumes that poverty is significantly due to institutional voids and other social issues including the exclusion of the poor, such as limiting women’s access to the market. In this view, a good institutional regime generally has three broad characteristics. These include the enforcement of property rights for broad segments of society, so that individuals, particularly entrepreneurs, can receive funding and make investments, in terms of both financial and human capital. Also, important in this view are the constraints on the actions of politicians, well-connected elites, and other powerful groups, so that they cannot expropriate the innovations and incomes of others while preventing competition from new ventures and innovations. Generally, a productive institutional regime encourages innovation and entrepreneurship and discourages extractive, zero-sum behaviour (Acemoglu & Robinson, 2012). Such a good institutional regime contrasts with that of many economies lacking property rights and allowing societal elites to run roughshod over firms and entrepreneurs.

There is evidence that institutions matter a great deal in terms of economic growth (Rodrik, Subramanian, and Trebbi 2004). Significant differences in institutional quality between two countries such as South Korea and Bolivia, for example, explain much of the two countries’ differences in per capita income. The difference between the quality of institutions (using a standard measure) in Bolivia compared with South Korea is equivalent to one standard deviation in measured institutional quality, which portends a sixfold difference in terms of explained income. In other words, if Bolivia was to successfully improve its institutions to the comparable quality of Korea’s, its per capita GDP would be predicted to rise to about $40,000 from its recent level of about $7000, and these hypothesized levels are in line with the actual per capita GDP of the two countries (Rodrik, Subramanian, and Trebbi 2004; CIA World Factbook, 2017). While the remediation perspective would examine how to provide female entrepreneurs, for example, with the financing they need to participate in markets, the reform perspective would examine how to give woman access to markets and what formal institutions need to be present to insure female entrepreneurs can own their properties and businesses. (e.g., Mair, Marti, and Ventresca 2012). Thus, poverty alleviation through entrepreneurship occurs as the institutional or social context is changed (e.g., Ghani et al., 2014; Sutter, Bruton, and Chen 2019).

3. Social and plight perspectives

A third perspective is the social poverty and plight perspective. In this context, plight means poverty in that the poor’s difficult situation is likely caused by a variety of economic, social and personal reasons in which change is impeded by a variety of difficulties and restrictions. In this view, poverty can be reduced, though stubborn pockets are likely to persist. Based on recent studies of poverty (e.g., Si et al. 2015), some countries and regions, charities and organizations and governments often call for reducing poverty, but they seem to be avoiding the multiple factors leading to the difficult intractability of plight in poor communities. Thus, an emphasis on basic handouts as a solution for solving poverty problems is likely to be ineffective, which recent evidence has shown to be the case (Easterly 2002, 2013; Hwang and Christensen 2008).

We recently tested various solutions to poverty reduction in the different regions in the world and find the plight is a key issue of poverty reduction (e.g., Si et al. 2015). Ways in which the poor can be helped to get out of plight through the solving of specific difficulties and removing burdensome restrictions can prove an effective, individual or community level solution. By this solution, the poor people could consciously or unconsciously change their attitudes and behaviours and tend to be subsistence entrepreneurs (e.g., Lin and Si, 2014; Si et al., 2015). Thus, researchers should do more in-depth research of the plight, as well as the analysis of plight entailing the reform of not only formal, but informal institutions and other factors that may be interacting to cause the stubborn persistence of poverty.

The social and plight perspective also generally assumes that markets are the primary drivers of poverty alleviation, though markets need institutional restructuring in order to be more inclusive (e.g., George, McGahan, and Prabhu 2012; Sutter et al. 2017). Finally, the perspective also pays attention to the socially constructed realities of the poor, and the challenges in making institutional change, particularly of informal institutions (McCloskey 2010). This social and plight perspective suggests ways that can make poverty alleviation through helping improving poverty people’s mindset to be out of poverty. This perspective also suggests that social and institutional change can help incorporate the poor into more inclusive markets, while the related revolution perspective questions the very essence of informal institutional structures as they are currently organized (e.g., Sud and VanSandt 2011). The social and plight perspective also pays attention to how power is exercised to reproduce the existing social order and how the empowerment of the poor can be enhanced (e.g., Levy, 2008).

4. Learning and change perspective

This perspective focuses on poor’s learning mindset and behaviour change. A shift from passive to active attitudes and behaviour towards fighting poverty, particularly toward a growth mindset that permits trial and error learning may be key for effectively reducing poverty in the poor areas (Dweck 2007; Si et al. 2015). The growth mindset boosts learning while encouraging entrepreneurship and not punishing the failure that can yield learning innovation (Dweck 2007; Sims 2013). Investigating many poor people in the different countries and regions, evidence suggests that they are able to actively change their attitudes and behaviours toward entrepreneurship, trial and error and achievement through learning and achievement, even if that mindset was not actively encouraged in the schools (Dweck 2007; McClelland 1967; McCloskey 2010). Encouraging learning, trial and error entrepreneurship, allowing for mistakes, and strengthening the social validation for those activities (McCloskey, 2006, McCloskey 2010) enables poor societies to find ways to create new approaches to help them move out from their plight.

For example, it was long thought that Confucian societies that favour order and harmony, such as that of China or Korea would resist entrepreneurship, and only experience faster economic growth if large, stable organizations were established in those societies (Weber, 1932). But this turned out to be incorrect, Confucian-based societies proved very able to innovate and create new ventures (Ahlstrom and Wang 2010). It turned out that improving how entrepreneurs and business people were accorded liberty and dignity in their societies and encouraged to pursue entrepreneurial ventures likely made a big difference in seeding and sustaining economic growth (McCloskey 2010). China’s former Premier Deng Xiaoping made multiple trips to Special Economic Zones and entrepreneurial firms during China’s early reforms in the 1980s and 1990s to ensure the legitimacy of those ventures and to provide encouragement and dignity to entrepreneurs trying to make their way in an increasingly competitive and open East Asian commercial environment (Ahlstrom and Bruton 2001). This likely accorded and validated learning and trial and error entrepreneurship in China while further sustaining economic reforms there (Ahlstrom, Bruton, and Yeh 2008; Ahlstrom and Wang 2010).

In the existing literature of poverty reduction, microfinance and other governmental and institutional props (e.g., Baumol et al., 2009b, 2009a; Busenitz, Gomez, and Spencer 2000; Hu et al., 2000; Fu, 2006; Scott, 2013) were seen as main solutions to poverty. These were mostly reliant on external support and intervention to alleviate poverty. Yet the traditional model of governmental country-to-country grants on a very large scale that have often been and advocated are now generally viewed as ineffective on their own (in absence of learning and social validation of entrepreneurship) (Easterly 2002, 2013; Hwang and Christensen 2008). The importance of the poor’s learning and attitude-behavior change from passive to active status, as well as the society valuing entrepreneurship further (McCloskey 2010) has been observed in empirical and case-based studies in the faster growth parts of both Asia and Africa (Hwang and Christensen 2008; McCloskey 2017). An active attitude-behavior in the literature can be defined as personal initiative at the base of a work behaviour defined as self-starting and proactive (Tomizawa et al., 2019). Such a learning-based attitude and the actions which stem from it can overcome barriers to achieve a goal that can enable people to deal with job difficulties more actively and relate to success as entrepreneurs (e.g., Frese and Fay 2001). Impoverished people with proper entrepreneurial attitudes and behaviour can also learn and improve as they receive feedback from their work (Ashford and Tsui 1991; Dweck 2007).

5. Subsistence and innovation entrepreneurship

In addition to the learning perspective above, when the poor people acquire an active set of attitudes and behaviour and legitimacy, they may be further empowered to move beyond mere subsistence levels and try to upgrade their status to becoming subsistence entrepreneurs. The subsistence entrepreneurship refers to ventures in settings of poverty in which a new venture offers little in terms of the potential to significantly improve the entrepreneur’s life or that of the entrepreneur’s family and subsistence entrepreneurs engage in entrepreneurial activities out of necessity. As such, another area of poverty reduction is an emphasis on new venture creation and innovation. This goes beyond delivering resources to the poor and seeding development as in the resources line of research above. It seeks to create a more sustaining development at the individual and household level through the development of local enterprise, microfinance and also the delivery of simple innovations such as in the base of the pyramid (BoP) research (Prahalad and Hammond 2002).

The creation of new business has particularly been examined through the lens of disruptive innovation theory (Christensen and Raynor 2013). For example, major new markets created in recent decades by disruptive microcomputers such as notebook computers other portable information technology devices, which have grown to more than 10 times that of the previously dominant mainframe computer market (Anthony et al. 2008). The disruptive innovation of the microcomputer opened up major new markets for computing not only directly through job creation and improved business opportunities but also by bringing inexpensive and uncomplicated computing products to increasing numbers of new users, which has in turn has seeded numerous turnkey businesses, even in BoP markets (Prahalad 2006; Zeng and Williamson 2007).

Many such possibilities for entrepreneurs and firms exist at the lower end of world markets, where many earn less than $1,500 annually but are starting to demand some of the goods and services previously available only to wealthier people or organizations (Ahlstrom 2010; Friedman, 2000). Consider the circumstances that lead to the success of a disruptive innovation. The product or service must be a weak substitute for an existing product, one that initially is not as good but is more accessible in terms of price, convenience, or simplicity (Anthony et al. 2008). Thus, disruptive innovation can develop well in new or less demanding applications, often among customers and applications outside of the mainstream or in developing economies. (Prahalad 2006).

Previous studies of BoP have not linked to disruptive innovation a lot; however, disruptive innovation helps regional entrepreneurship and economies grow in the poverty regions through the creation of new businesses, subsistence entrepreneurships and the development of new products. Disruptive innovation also helps poor people to find and develop potential markets and customers, while providing users with important products previously out of reach. This is why disruptive innovation has been regarded as an approach moving out of plight (e.g., Si et al. 2015). In addition, some scholars (e.g., Hart and Christensen, 2002; Prahalad 2006) observed that disruptive innovation also facilitates entrepreneurship by giving access of new technologies and products to smaller, lower end firms that they can, in turn, integrate into their existing and new products and services. Low-end retailers have been helped greatly by advanced point of sale and inventory technology that can be bought cheaply or even used in app form on the newer mobile phones and tablets. Inexpensive communications devices have been particularly beneficial to farmers in the poorer rural regions where access to outside information such as current crop prices was limited. With the new, mobile devices, farmers can access the Internet and get better prices for their crops (Prahalad 2006).

Companies may also be able to work with entrepreneurs in developing economies to co-develop disruptive products that can serve lower-income communities (Hart, 2010). A number of years ago, Abbott chose to reorient its strategy toward cost-effective medicine, which seeks to develop lower end alternatives to more expensive medical treatments (Collins 2001). Abbott enabled a new group of providers and patients to enter the market for such products and procedures, often for client and providers in remote clinics or villages (Hwang and Christensen 2008; Prahalad 2006). In addition to facilitating new markets and consumption, these disruptive innovations help to create new ventures, economic growth. They address the poverty problem from the demand side (new venture creation) and supply side (serving the base of the pyramid).

Special issue articles

Entrepreneurship and Regional Development has published a few articles related to the issue of poverty reduction (e.g., Tasavori, Zaefarian, and Ghauri 2015; Sarkar 2018; Yessoufou, Blok, and Omta 2018). The current special issue expands existence understanding of poverty reduction. The papers in this special issue are briefly reviewed below and summarized in Table 2.

Table 2. Summary of papers in this special issue.

Authors	Title	Findings
Cumming, Johan, and Uzuegbunam 2019	An Anatomy of Entrepreneurial Pursuits in Relation to Poverty	An empirical study examines the relationship among income inequality, poverty, and entrepreneurship. The authors find that inequality influences entrepreneurial activity, while entrepreneurial activity in turn can alleviate absolute poverty. In addition, the authors also find antipoverty public policy aimed at encouraging work would hinder entrepreneurial activity, highlighting the importance of associating public policy aimed at poverty alleviation with public policy aimed at encouraging additional entrepreneurship.
Lin, Winkler, Wang and Chen 2019	Regional Determinants of Poverty Alleviation through Entrepreneurship in China	An empirical study employing the economic theory of dual structure, this study examines regional determinants of poverty reduction. While entrepreneurship can facilitate poverty alleviation in general, the effect of entrepreneurship on poverty alleviation is stronger in urban areas than in rural areas, and in developed areas than in underdeveloped areas. Furthermore, it is also observed that financial development at regional level can moderate the influence of entrepreneurship on poverty reduction.
Wierenga 2019	Uncovering the Scaling of Innovations Developed by Grassroots Entrepreneurs in Low-income Settings	A qualitative study examines entrepreneurship in low-income settings through the theoretical lens of entrepreneurial bricolage. Based on the grounded theory approach, the author finds that a unique group of grassroots entrepreneurs from India developed, commercialized, and scaled innovations by utilizing and combining locally available contacts and a broader network as resources in novel ways. The author also contributes to the literature by uncovering the scaling process of innovations developed by these grassroots entrepreneurs.
Goel and Karri 2019	Entrepreneurial Aspirations and Poverty Reduction: The Role of Institutional Context	A conceptual study explores the poverty reduction across different institutional environments by integrating institutional theory and a subjective view of entrepreneurial action. Institutional context is found to affect the subjective value of resources, and thus can moderate the effect of aspirations on entrepreneurial action. Further, the poor can observe unique ways to exploit entrepreneurial opportunities with the change of aspirations among them. In contrast with interventionist approaches, this study sheds light on poverty reduction by providing the ‘poor-as-owners’ model.
Wu, Song, and Yang 2019	Untangling the Effects of Entrepreneurial Opportunity on the Performance of Peasant Entrepreneurship: The Moderating Roles of Entrepreneurial Effort and Regional Poverty Level	An empirical study investigates the influence of different types of opportunities to the performance of peasant entrepreneurship. The authors find that dependence on self-identified opportunities can positively enhance entrepreneurial performance, whereas dependence on social network-identified opportunities and government-identified opportunities do not contribute to the performance. They further observe that both entrepreneurial effort and regional poverty level play a significant role in moderating the above relationships. The study helps answer the question why some entrepreneurial activities facilitate poverty reduction while others not.
Haugh 2019	Call the Midwife! Business Incubation, Enterprise Development and Entrepreneurship Enablement in Developing Economies	An empirical study examines the role that business incubation and enterprise development play in poverty reduction in developing economies. With the help of empirical data from four philanthropy-funded business incubators, business incubation and enterprise development are found to alleviate poverty by creating sustainable new ventures and forms multiple capitals. This study offers valuable insights on poverty reduction through enabling domestic entrepreneurship.
Jain and Koch 2019	Crafting Markets and Fostering Entrepreneurship within Underserved Communities: Social Ventures and Clean Energy Provision in Asia	A qualitative examination of four social ventures across India, Bangladesh, and Cambodia that crafts new markets by introducing clean energy solutions for underserved local communities. The authors find these social ventures incorporate their technologies with local institutions in several ways and contribute to local communities by seeding micro-entrepreneurship activity, generating employment, and improving their standards of living. This study underscores the significance of the engagement with local institutions for crafting markets and poverty reduction.
Korosteleva and Stępień-Baig 2019	Climbing the Poverty Ladder: The Role of Entrepreneurship and Gender in Alleviating Poverty in Transition Economies	An empirical study examines the relationship among entrepreneurship, gender and poverty alleviation in the context of transition economies. By distinguishing self-employment and business ownership, this study contributes to our understanding of which entrepreneurial process is possible to contribute to poverty reduction in the region. The authors also provide interesting findings with regard to the important role of women in poverty reduction via entrepreneurship.
Su et al. 2019	Trust, Poverty, and Subjective Wellbeing Among Chinese Entrepreneurs	An empirical examination of the significance of trust, poverty, and formal institutions to subjective wellbeing of entrepreneurs. Drawing on a sample of Chinese entrepreneurs, the authors find that generalized trust is positively associated with entrepreneurs’ subjective welling. The relationship is contingent on economic poverty and social poverty, as well as the degree of institutional voids. Compared with economic poverty, the level of trust across the regions is more relevant in social poverty.
Hall and Matos 2019	An exploratory study of entrepreneurs in impoverished communities: When institutional factors and individual characteristics result in non-productive entrepreneurship	A qualitative study with a concentration of institutional factors and individual characteristics of entrepreneurs examines why some entrepreneurial activities in impoverished regions fail. Based on the data collected from an impoverished community in Brazil, the authors find that temporal myopia, misjudgment of the abilities, and counter-productive use of the social network would lead to non-productive entrepreneurship. This study indicates that non-productive entrepreneurship is a result of the interactions between individual characteristics and the institutional environment.

The first paper is “An Anatomy of Entrepreneurial Pursuits in Relation to Poverty by Douglas Cumming, Sofia Johan and Ike Uzuegbunam. Their study examines the causal relationships between inequality, poverty, and entrepreneurship. They hypothesize that income inequality influences entrepreneurial activity, and in turn entrepreneurial activity alleviates absolute poverty. Findings drawn from a longitudinal analysis of a dataset from all 50 U.S. states over an 18-year period provide robust support for these hypotheses. Furthermore, the results showed that antipoverty public policy aimed at encouraging work (i.e. Earned income tax credit, EITC) can be detrimental to entrepreneurial activity. These findings underscore the importance of linking public policy efforts aimed at poverty alleviation with those aimed at encouraging additional entrepreneurship.

The second paper in the special issue is “Regional Determinants of Poverty Alleviation through Entrepreneurship in China” by Song Lin, Christoph Winkler and Shanshan Wang. Based on the economic theory of dual structure, the authors of this study conducted an empirical analysis on the relationship between entrepreneurship and poverty alleviation using panel data collected in 31 provinces in China from 2000 to 2017. The study arrived at three conclusions. First, entrepreneurship in urban and rural areas can generally facilitate poverty alleviation. Second, the correlation between entrepreneurship and poverty alleviation in urban areas is significantly stronger than in rural areas. Moreover, the correlation is also significantly stronger in developed areas than in underdeveloped areas. Third, the level of financial development in an area can moderate the effect of entrepreneurship on poverty alleviation. These conclusions suggest that entrepreneurial activities in emerging economies have a stronger effect on alleviating poverty in urban regions instead of helping less developed or rural areas. The authors recommend that government agencies should institute policies aimed at vigorously improving the business environment in rural and underdeveloped areas. Particularly a strengthening of the financial system in these areas could further enhance the positive effect of entrepreneurship on poverty alleviation.

The third paper is ‘Uncovering the Scaling of Innovations Developed by Grassroots Entrepreneurs in Low-income Settings’ by Marleen Wierenga. Low-income entrepreneurs operating in resource-scarce settings are typically referred to as subsistence entrepreneurs – informal, operating on a small scale and selling products developed and produced by others. This study establishes the notion of a unique category of low-income entrepreneurs who have developed, commercialized and scaled innovations and are self-employed by choice. Further, the paper investigates the scaling process of these innovative grassroots entrepreneurs. The sample consists of four grassroots entrepreneurs from India who founded an enterprise to sell their self-developed innovations. The study follows the grounded theory approach, which is suitable for the exploration of complex questions in unusual settings. The theoretical lens used in this study is entrepreneurial bricolage since the interest of the study lies in understanding action and the usage of existing resources. The contribution of the paper is twofold. First, it contributes to the literature on low-income entrepreneurship by bolstering the theoretical archetype of grassroots entrepreneurs and developing a process model for their scaling process. Second, the study contributes to the literature on bricolage by introducing the notion of grassroots bricolage as a behaviour to utilize and combine both locally available contacts and a broader network as resources in novel ways.

The next paper is “Entrepreneurial aspirations and poverty reduction: The role of institutional context“ by Sanjay Goel & Ranjan Karri. Integrating insights from institutional theory and a subjectivist view of entrepreneurial action, they developed a conceptual model of poverty reduction in different institutional environments through the mediating influence of aspirations. Our model portrays institutional context moderating the influence of aspirations on entrepreneurial action by affecting the subjective value of resources. In addition, because our starting premise is the agency by the poor, and because the value of resources is subjective in our exposition, our model suggests conditions and contexts where a change in aspirations among the poor may provide them with unique insights to exploit entrepreneurial opportunities visible only to them. Our ‘poor-as-owners’ model can be contrasted with interventionist approaches to poverty reduction. Several policy implications can be derived from our paper that may be more effective in achieving regional development and reducing regional disparities that arise from a higher incidence of poverty.

The fifth paper is ‘Untangling the Effects of Entrepreneurial Opportunity on the Performance of Peasant Entrepreneurship: The Moderating Roles of Entrepreneurial Effort and Regional Poverty Level’ by Wu, Song and Yang. The literature suggests that entrepreneurship is a critical means of poverty alleviation and that entrepreneurial opportunity is at the heart of entrepreneurial activity. Yet, the extant research has devoted little attention to the role of entrepreneurial opportunity in entrepreneurial activity and poverty reduction. This paper explores the relationship between the types of entrepreneurial opportunity and entrepreneurial performance of peasant entrepreneurs. Using a sample of peasant entrepreneurs from Zhejiang, China, the authors find that while dependence on self-identified opportunities is positively associated with entrepreneurial performance, dependence on social network- or government-identified opportunities does not contribute to the performance. Furthermore, we find that both entrepreneurial effort and regional poverty level moderate the relationship between entrepreneurial opportunity and performance. This article theoretically contributes to the study of peasant entrepreneurship and poverty alleviation by demonstrating a more complex and nuanced role of entrepreneurial opportunity in achieving improved entrepreneurial performance.

The sixth paper is ‘Call the midwife! Business incubation, enterprise development and entrepreneurship enablement in developing economies’ by Helen Haugh. Enabling domestic entrepreneurship is one pathway for alleviating poverty. In developing economies, however, public policies prioritize health and education above entrepreneurship promotion. While international development funding has traditionally supported social and environmental interventions, more recent corporate philanthropic funding has been invested in business incubators to support domestic entrepreneurship. This article examines how business incubation and enterprise development impact on poverty alleviation in developing economies. From the analysis of empirical data gathered from four philanthropy-funded business incubators, their role in how sustainable new venture creation and multiple capital formation contributes to poverty alleviation is explained. The findings contribute to entrepreneurship enablement theory.

The seventh paper is “Crafting markets and fostering entrepreneurship within underserved communities: Social ventures and clean energy provision in Asia“ by Sanjay Jain & James Koch. In this paper, the authors conceptualize markets for underserved communities as being constituted by local institutions that reflect the modalities of these individuals’s lives. Using data on the activities that four social ventures across India, Bangladesh and Cambodia have undertaken to craft new markets for their clean energy solutions, we highlight how these actors incorporate their technologies within native material understandings, develop transaction systems consistent with resident consumption practices and entrench their organizations into the existing infrastructure. These processes are termed indigenizing, microprovisioning and codeveloping, respectively. In meshing local context as part of their market crafting efforts, these ventures seed micro-entrepreneurship activity, generate employment for locals as well as improve standards of living within the community through the provision of productivity-enhancing products and services. Our findings highlight the significance of engaging with local institutions as part of market crafting efforts in these scenarios. This paper offers insights that contribute to the sociology of markets, and poverty reduction via entrepreneurship literatures as well as have important practical and policy implications.

The eighth paper is Climbing the Poverty Ladder: The Role of Entrepreneurship and Gender in Alleviating Poverty in Transition Economies by Julia Korosteleva & Paulina Stępień-Baig. Poverty reduction remains a critical issue for a vast proportion of the population globally. Substantial body of literature on poverty reduction has focused on the role played by government support and charity institutions, whereas entrepreneurship as a channel for poverty reduction, and the role of gender in shaping this relationship has been under-researched, especially in the context of transition economies.

Using the recent wave of the EBRD Life in Transition Survey III (2016) data, this study explores the relationship between poverty alleviation, entrepreneurship and gender. They extend the understanding of the mechanism via which entrepreneurial process is likely to contribute to poverty reduction in this region, distinguishing between self-employment and business ownership, with the latter regarded as Schumpeterian entrepreneurship (Block, Fisch, and van Praag 2017). The study provides some interesting findings shedding light on the important role women play in shaping the entrepreneurship–poverty relationship.

The ninth paper is ‘Trust, Poverty, and Subjective Wellbeing Among Chinese Entrepreneurs’ by Yiyi Su and Shaker Zahra. Entrepreneurs’ subjective wellbeing has become an important topic in research; entrepreneurs undertake risks and create their companies seeking personal satisfaction and fulfilment. As a result, researchers have given considerable attention to the antecedents and the conditions under which wellbeing materializes especially in emerging economies where poverty may be acute. In this study, the authors propose that generalized trust serves as an informal institution that affects entrepreneurs’ subjective wellbeing. Further, we advance that this relationship is subject to boundary conditions of economic and social poverty as well as context-specific formal institutional features. They test the predictions using a multi-sourced sample of 818 Chinese entrepreneurs and found that trust is positively associated with entrepreneurs’ subjective wellbeing. This association is moderated by both economic poverty and social poverty. When high or low institutional voids are evident among the different regions of China, the main and moderating effects are further differentiated. The study suggests that as a mechanism to mitigate the negative effect of lacking formal institutions, the level of trust in different regions is more relevant in social poverty rather than in economic poverty.

Finally, ‘An exploratory study of entrepreneurs in impoverished communities: When institutional factors and individual characteristics result in non-productive entrepreneurship’ by Jeremy Hall and Stelvia Matos. It is widely acknowledged that entrepreneurship can help the poor escape poverty. However, while many people in impoverished regions engage in entrepreneurial activities, many fail to develop successful businesses. This paper examines why impoverished people may choose to engage in entrepreneurship, the characteristics that shape their entrepreneurial behaviour and the struggles they face. The authors draw on the entrepreneurship literature that suggests institutional factors and individual characteristics shape new venture development. Following an inductive methodological approach utilizing a survey, interviews and focus groups collected from an impoverished community in Brazil, they develop an exploratory study of entrepreneurial behaviour focused on perceived alertness, utilization of social networks, formal business registration and participation in training. The paper also found that temporal myopia, misjudgment of their abilities, and counter-productive use of their social network result in non-productive entrepreneurship. As such, the paper thus contributes theoretically by suggesting that, in addition to productive, unproductive and destructive entrepreneurial outcomes shaped by institutions, non-productive entrepreneurship is also a prevalent problem, but is heavily shaped by the interactions between individual characteristics and the institutional environment.

Discussion

1. Poverty reduction status quo

Looking around the world over the years, large numbers of people moved out of poverty through variety of ways. Some historically poor countries like China, India and Africa have made great achievement in reducing poverty. Particularly, China, followed by India has made the most contribution to reducing the world’s poverty in the past few decades. The United Nation (UN) Millennium Development Goals Report 2015 pointed out that China has contributed more than 70% of the world’s poverty reduction in recent years (Si et al. 2015; Zhejiang Statistics Bureau 2016). Today, poverty is lower than ever. Recent estimates suggest those living in extreme poverty (less than 1.90 US dollars per day) has dropped to under 10% of the world population, perhaps for the first time in recorded history. Growth in China and India and increasingly Africa have been prime movers behind this decline.

2. Poverty standards

Dynamically define and understand the poverty standards that should be a prerequisite for poverty research and practice. Actually, it seems pretty clear, but, objectively speaking, that is because people view this issue as a static and constant case. How to understand the poverty standards? We observed that when the governments, relevant organizations and people act for poverty reduction, they often mechanically understand the existent poverty standard and follow it to implement. However, as a matter of fact, the poverty standards are changeable over time and this dynamic characteristic of poverty standard is for the current poverty reduction practice and research. For instance, China has publicly announced that it will eliminate absolute poverty nationwide by 2020 (China’s poverty alleviation database 2019). This goal is to eradicate poverty in a specific year may prove quite difficult in that it ignores that the nature of poverty standards is changeable over time, not in a static and constant case.

Although scholars have completed a lot of valuable research with increasingly extensive insights about poverty reduction (e.g., Mair, Marti, and Ventresca 2012; Haveman 1993; George et al. 2016; Sutter, Bruton, and Chen 2019), there are problems of clarity with respect to poverty definitions and not conflating poverty incorrectly with income inequality (or even wealth inequality). Thus, some of the existing research could be technically well done but conceptually flawed and thus generate misunderstandings regarding poverty. In this special issue, we raise this question and argue that poverty standards are changeable case rather than static, and have searched for a standard definition and application regardless of what country or region may be studied.

3. Social poverty

Social poverty is a new problem arisen that some poor people escape poverty economically, they do not escape poverty socially. There are still plenty of mental and behavioural mismatches with their economic status that generates a phenomenon that there is a growing population, they are rich economically but poor socially. These people, though no longer poor, often have a negative impact on society and may be included with people who are considered socially poor. Thus, the issue of how to help poverty people move out of both poverty and social poverty which may be a new poverty research issue and research question, especially in developing countries and emerging economy countries.

This problem may be the most intractable in that institutional systems need to be changed (particularly informal ones) with respect to how entrepreneurship is valued and the dignity accorded to entrepreneurs (McCloskey 2010). Weber argued that the Protestant work ethic was important for resolving the social entrepreneurship problem, that is resolving how much people worked as well as how hard they worked. But not only the attitude of the poor that has to be addressed in the social aspect of entrepreneurship, but also the liberty, dignity and legitimacy accorded to entrepreneurs and private enterprise by the society. Societies can do this through legitimacy building activities and other inculcation strategies regarding entrepreneurship, innovation, and earning profit (Ahlstrom, Bruton, and Yeh 2008; McCloskey 2010). That is to provide increased liberty and dignity for entrepreneurs. The liberty comes in terms of property rights and the legal protection from professional and governmental elites (McCloskey 2017; Ogilvie, 2019). The dignity is the stronger social validation that entrepreneurs receive from society so they can get more legitimacy and support (McCloskey 2010; Tomizawa et al., 2019). Liberty for entrepreneurs and dignity accorded to them, along with a tolerance of failure is crucial to improving the social entrepreneurship environment for new venture creation (McCloskey 2016; Wang, Ahlstrom, Nair, and Hang 2008).

4. Technology and poverty

In recent years, the technology development, especially digital technology, has promoted the social and economic development that directly generates new approaches and solutions to poverty reduction and challenges the existing poverty research theory. High technologies were usually used in high-tech firms, but, now they have been largely used in not only technological entrepreneurship but also inclusive entrepreneurship. Inclusive entrepreneurship is a key part of the inclusive development that explores the growing problem of social exclusion and narrow the gap between the rich and the poor (World Bank, 2012). In recent years, as more and more technological elements are incorporated into inclusive entrepreneurship that has been applied as an effective solution to poverty reduction. The companies such as Alibaba that use ‘Big data’ to help targeted poverty alleviation and make a series of great achievements. So, the relationships between technology and poverty reduction have been attracting more and more attention from both academic circle and policymakers.

Conclusion

This special issue shows that poverty reduction has garnered increased attention in recent years from researchers in business, entrepreneurship and innovation studies (Ahlstrom 2010; Bruton, Ketchen, and Ireland 2013; Sutter, Bruton, and Chen 2019). Research on subjects ranging from regional development, globalization and economic growth has emerged in recent years, and have dynamically defined poverty standards. It should be recognized that poverty standards can be changeable over time (referring to social measures as well as economic) and this dynamic characteristic of poverty standard is important for all for poverty research. And, it is equally important for researchers to not conflate poverty with income or wealth inequality as these are much different concepts and are not substitutable for each other. This special issue has addressed these important but underexplored issues with different perspectives that address and explain the current research of poverty research.

For instance, plight means poverty in that the poor’s difficult situation is likely caused by a variety of economic, and personal reasons in which change is impeded by a variety of difficulties and restrictions. Thus, how business and entrepreneurship can find ways to improve the plight in poor communities should be a topic researchers address regarding poverty reduction. The current basic handouts from governments, charities and organizations as a solution for solving poverty problems are likely to be ineffective, especially for the peaceful regions in the world (Easterly 2006; Easterly, Levine, and Roodman 2004). In addition to above, this special issue also addresses the issues of social poverty, inclusive entrepreneurship, crowdfunding and technology-based solutions.

Technology development, especially digital technology, has generated new approaches to (and ways of looking at) poverty reduction which challenges existing poverty research theory traditionally centred on financial aid and alleviation. This special issue in Entrepreneurship and Regional Development on business, entrepreneurship and innovation toward poverty reduction has published work that builds new knowledge about the nature of poverty reduction and business, entrepreneurship and innovation activities in both developed and developing economies, as well as addressing institutional factors and network/digital and sharing economies. This special issue has also developed further a theoretical foundation with different perspectives for future research under the current political, economic, network and global contexts (Ahlstrom and Bruton 2006). In addition to the above, this special issue has analyzed the poverty research of where poverty reduction and entrepreneurship research now stands and, in turn, allows us to develop an understanding of where the research needs to move in the future as we develop an agenda for future poverty reduction research.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1. The special issue will place five articles in this issue of Entrepreneurship and Regional Development and five in the next issue.