From poverty trap to commodity trap: entrepreneurship and well-being among the poor.
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| Authors: | Morris, Michael H.1 (AUTHOR) mmorri24@nd.edu, Soleimanof, Sohrab2 (AUTHOR) soleimanof@lsu.edu, Calle, Marcello3 (AUTHOR) marcalle@uazuay.edu.ec, Tucker, Reginald4 (AUTHOR) reg@ou.edu |
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| Source: | Small Business Economics. Aug2025, Vol. 65 Issue 2, p1159-1181. 23p. |
| Subject Terms: | *Poverty, *Entrepreneurship, *Market failure, *Scarcity, *Financial stress, Ecuadorians, Capacity building, Well-being |
| Geographic Terms: | Ecuador |
| Abstract: | Building on disadvantage theory and the capabilities framework, the research explores how two critical aspects of the poverty experience, experienced scarcity, and a limited opportunity horizon, can result in the creation of ventures that struggle to achieve marketplace success, which in turn detracts from the entrepreneur's perceived well-being. These business struggles are traced to a commodity trap, where the business is not well differentiated in the marketplace, suffers from low volumes and margins, has little bargaining power, and is labor-intensive and capacity-constrained. A set of hypotheses regarding these relationships are tested using data from a sample of entrepreneurs from poverty backgrounds within Ecuador. The results provide support for the hypothesized relationships. Disadvantages from poverty translate into disadvantages within a business, and failure to overcome these disadvantages results in a lower sense of well-being on the part of the entrepreneur. Implications are drawn for theory and practice. Plain English Summary: Poverty conditions can compromise the impact of new venture creation on a person's well-being. The authors explore how two critical aspects of the poverty experience impact the ventures created by low-income entrepreneurs: prolonged exposure to resource scarcity and the tendency of the poor to perceive a restricted range of opportunities in their environments. It is demonstrated that these two factors lead individuals to create marginal businesses that fall into the commodity trap, where they are undifferentiated from competitors, labor-intensive, with limited capacity and no bargaining power, and experience both low volumes and profit margins. The more severe the commodity trap, the lower will be the entrepreneur's perceived well-being. For researchers, the findings suggest the importance of recognizing the potential non-financial outcomes of entrepreneurial activity. Policymakers interested in entrepreneurship as a poverty alleviation tool are likely to find policies and programs that encourage venture creation are largely ineffective unless they include mechanisms that enable entrepreneurs to avoid or escape the commodity trap. With community ecosystems, intervention approaches should center on developing training, mentoring, and other forms of intervention that assist these entrepreneurs in addressing specific components of the commodity trap. [ABSTRACT FROM AUTHOR] |
| Database: | Entrepreneurial Studies Source |
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| Abstract: | Building on disadvantage theory and the capabilities framework, the research explores how two critical aspects of the poverty experience, experienced scarcity, and a limited opportunity horizon, can result in the creation of ventures that struggle to achieve marketplace success, which in turn detracts from the entrepreneur's perceived well-being. These business struggles are traced to a commodity trap, where the business is not well differentiated in the marketplace, suffers from low volumes and margins, has little bargaining power, and is labor-intensive and capacity-constrained. A set of hypotheses regarding these relationships are tested using data from a sample of entrepreneurs from poverty backgrounds within Ecuador. The results provide support for the hypothesized relationships. Disadvantages from poverty translate into disadvantages within a business, and failure to overcome these disadvantages results in a lower sense of well-being on the part of the entrepreneur. Implications are drawn for theory and practice. Plain English Summary: Poverty conditions can compromise the impact of new venture creation on a person's well-being. The authors explore how two critical aspects of the poverty experience impact the ventures created by low-income entrepreneurs: prolonged exposure to resource scarcity and the tendency of the poor to perceive a restricted range of opportunities in their environments. It is demonstrated that these two factors lead individuals to create marginal businesses that fall into the commodity trap, where they are undifferentiated from competitors, labor-intensive, with limited capacity and no bargaining power, and experience both low volumes and profit margins. The more severe the commodity trap, the lower will be the entrepreneur's perceived well-being. For researchers, the findings suggest the importance of recognizing the potential non-financial outcomes of entrepreneurial activity. Policymakers interested in entrepreneurship as a poverty alleviation tool are likely to find policies and programs that encourage venture creation are largely ineffective unless they include mechanisms that enable entrepreneurs to avoid or escape the commodity trap. With community ecosystems, intervention approaches should center on developing training, mentoring, and other forms of intervention that assist these entrepreneurs in addressing specific components of the commodity trap. [ABSTRACT FROM AUTHOR] |
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| ISSN: | 0921898X |
| DOI: | 10.1007/s11187-025-01045-y |
