Guest editorial

About the Guest Editor Professor David Deakins is currently Acting Dean of Paisley Business School and holds a Chair in Enterprise Development at the University of Paisley and is Director of Paisley Enterprise Research Centre (PERC), which is based at Paisley campus. He has also established the Crichton Centre for Rural Enterprise (CCRE) which is based at the University’s Crichton campus in Dumfries. He is responsible for curriculum development, research, seminars and conferences connected with enterprise development and entrepreneurship at the University of Paisley’s campuses with special, events run under PERC or CCRE. In 2002, he established an annual conference in Rural Entrepreneurship which now attracts a growing network of researchers in rural enterprise.As a teacher, he has 15 years’ teaching experience in higher education, covering lectures, tutorials, case study workshops and research degree supervision at undergraduate and postgraduate levels. As an academic researcher, he is Research Director of PERC and the CCRE, responsible for managing a research team and progressing research students. He has carried out research and published papers on finance and small firms, the role of advisers, mentors and non-executive directors, ethnic minority entrepreneurship, rural enterprise, innovation, women’s enterprise and entrepreneurial learning. As Director of PERC and CCRE, he has led and completed research for the Small Business Service, the British Bankers Association, Local Enterprise Companies, the Scottish Executive and the Scottish Parliament.Additional posts held have included the President of the Institute for Small Business Affairs (ISBA) from 1998-2001 and a Director of ISBA from 1995-2001. He has also held a number of appointments as external examiner for entrepreneurship courses and has been appointed external examiner for over 15 PhD candidates in areas of entrepreneurship connected with his research. E-mail: deak-em0@wpmail.paisley.ac.uk

Rural entrepreneurship: a distinctive field of study

This editorial is written at a time when rural entrepreneurship is becoming established as an area of special study. The papers published in this edition of the journal reflect a growing interest in the topic and were selected from the 3rd Rural Entrepreneurship Conference held at Dumfries in October 2004. We might ask what are the features of rural entrepreneurship that justify attention in this topic as a special programme of study? Although there is still an academic debate about whether we can separate rural issues from the influence of city regions (Bryman et al., 2001; Rosa, 2003), it is arguable that rural entrepreneurship does have distinctive characteristics that make it worthy of special attention.

One lens with which to view the distinctiveness of rural entrepreneurship is the resource-based view (RBV) of enterprise which suggests that competitive advantage is determined by the nature and command of resources (Penrose, 1959; Sirmon and Hitt, 2003). It is feasible to argue that entrepreneurial activity and performance depends upon access to and acquisition of different forms of resources and capital (human, financial and social). Sirmon and Hitt (2003, p. 343) argue for a fourth form of capital that they term “survivability or patient financial capital”to which we will return. In essence, however, we can begin to delineate the distinctiveness of rural entrepreneurship by taking a RBV approach; that is, the nature and distinctiveness of rural entrepreneurship in acquiring human,financial and social capital. A brief explanation of each concept with a comment on their relevance in rural areas is given before examining each of the three papers in this special edition. We then give a brief conclusion on the distinctiveness of rural entrepreneurship as an area of study.

Human capital

Human capital represents the skills and knowledge acquired by entrepreneurs and their employees through experience, education and training. There are contrasting views on the acquisition of human capital in rural areas. Rural areas have traditionally suffered from net emigration of younger and more skilled members of the population (Bryman et al., 2001),hence making access to strong human capital problematic. Others argue that employees in rural areas are more loyal and can be highly skilled (Smallbone et al., 2002). The picture is also complicated by a relatively recent phenomenon; the desirability and attractiveness of rural areas for alternative lifestyles. In-migrants, often with strong human capital due to previous experience, knowledge and skills, can provide a rich source of new entrepreneurs (Glancey, 2004). Overall then, the human capital perspective suggests diversity in resources but factors such as migration and population dynamics need to be given special consideration.

Financial capital

It has been argued that the limited and dispersed networks typical of rural areas combined with isolation from financial centres militate against rural entrepreneurs accessing formal sources of capital. There are a number of studies that suggest that location is a factor in accessing finance. For example, Paul et al. (2002) indicate that informal investors prefer to invest in businesses within easy travelling distance. Informal sources of finance are also limited due to the dispersed nature of the community,although in-migrants could be a new source of entrepreneurial finance. Sirmon and Hitt (2003, p. 343) argue that it is important for entrepreneurs to access patient financial capital or long term finance. For example, family firms have a resource advantage due to their access to “generational”investment.

Social capital

Conceptually, social capital refers to the ability of decision makers,including entrepreneurs, to draw on resources from their social networks (Lin et al., 1981; Portes, 1998),or as a result of social exchange (Emerson, 1972). In a Government review of the literature social capital was defined as:

… social capital consists of the networks, norms, relationships, values and informal sanctions that shape the quantity and co-operative quality of a society’s social interactions (Cabinet Office, 2002, p. 5).

Such social networks and their associated values may be based on a number of different but complementary (and possibly competing) networks including family,community and business networks including local business clubs and business forums. Social capital then is an “umbrella term” (Davidsson and Honig, 2003), covering a potential multitude of relationships between entrepreneurs, their families, friends and community. An assumption made by a number of commentators is that rural entrepreneurs will have limited social capital due to the extended nature of rural communities; although those networks that do exist can have strong ties. For example, Jack (2005),in a study of rural entrepreneurs, indicates the importance of strong ties and their role in relation to invoking weaker ties.

It is argued that social capital is an important influence for determining entry decisions by nascent entrepreneurs. For example, Davidsson and Honig (2003) claim that strong bonding and ties are important in explaining entrepreneurial start-up decision making (Davidsson and Honig, 2003, p. 304).

Bonding social capital based on strong ties, such as having parents who owned businesses or close friends who owned businesses, was a good predictor in differentiating those engaged in nascent entrepreneurship from the control population, as was active encouragement from family and friends.

It is well established in the literature that strong business and community networks based on trust provide the basis for entrepreneurial development. Therefore, it is arguable that entrepreneurs in rural areas face disadvantages because of the restricted ability to develop networks and the more limited resources available in rural environments which implies lower levels of social capital (Vaessen and Keeble, 1995; Anderson, 1997). However, the complexity and diversity of rural environments is important and some studies show that the rural environment can be marketed as a business asset (McKain, 2003). Further, appropriate business networks can overcome some of the difficulties of remoteness and dispersion of rural environments (Deakins et al., 2004).

The papers and rural entrepreneurship

Mochrie, Galloway and Donnelly examine growth and entrepreneurial ambitions in a telephone-based survey of rural business owners in Scotland. Interestingly,they find no evidence that supports the contention that in-migrants are any more entrepreneurial than non-migrants. However, entrepreneurial attitudes were found to be a determining factor in business growth; indicating that the nature of human capital as invested in the entrepreneur is a key factor. The authors suggest that differences in firm performance in different rural areas (such as Orkney and the Borders) is explained by the nature of the rural community,suggesting that access to social and financial capital is more developed in some rural areas.

Pyysiäinen, Anderson, McElwee and Vesala examine the acquisition of skills in human capital by studying in detail the entrepreneurial skills required by farmers to achieve successful diversification. In a timely paper,given the current policy support for farmers to diversify their businesses, the authors argue that there are distinctive entrepreneurial skills at a “meta”level that need to be acquired if farmers are to achieve successful diversification. They use a case study of farmer who abandoned an attempt to diversify into cheese-making to illustrate the main issues. An implication of their paper is that we need to recognise such skill gaps before advocating policies of diversification.

Smith uses narrative analysis to chart the decline of subsistence entrepreneurship in a traditional rural fishing community in Scotland. It dramatically demonstrates the dynamic nature of rural entrepreneurship over a 60-year period illustrating some of the changing patterns of life and employment in such communities. We must remember that in rural environments the pattern of entrepreneurship is constantly changing. This case illustrates a decline in the availability of entrepreneurial resources especially social capital. In other environments, such as Orkney, an influx of resources especially financial capital has led to increased entrepreneurial activity as noted by Mochrie,Galloway and Donnelly.

Conclusion

In this editorial, we set out to briefly review some of issues that account for a growing interest in rural entrepreneurship. Adopting a RBV provides a framework to examine the distinctiveness nature of rural entrepreneurship. Clearly, there are unambiguous characteristics that can determine the “nature of rural entrepreneurship” based on differences in access to human,financial and social capital. However, we have also noted that diversity in rural entrepreneurship is a factor that also demands recognition.

David DeakinsGuest Editor