be more common than will mixed-nationality versus -ethnicity ones. The impact on the entrepreneurial performance is expected to be positive.
To summarise, the literature is remarkably consistent with respect to the ‘similar-to-me’ hypothesis across various different relationships and many dimensions of similarity. Homophily does characterise network systems, and homogeneity does embody personal networks. Even though several divergences exist the patterns of homophily are noticeable robust over these broadly varying types of relations. Baseline patterns, for instance, strongly shape networks by influencing opportunity structures of contacts, both within large populations and within smaller groups. Inbreeding homophily often complements baseline, such that smaller categories of individuals who would otherwise have networks dominated by the majority group actually have contacts that are much more similar to them than we would predict from the opportunity structure. Consequently, I can conclude that the principle of homophily does shape the structure of the work teams in a company, which remains stable in a dynamic perspective. How does this particular work team structure impact the entrepreneurial performance?
6.4 The impact of homophily on entrepreneurial performance
In opposition to the principle of homophily, many functionalist theories of task-group composition argue for the importance of diversity among members, especially with respect to achieved characteristics such as leadership skills and task expertise. This may be true for founders and founding teams. For instance, subsequent research and theorising on organisational founding teams has explored the extent to which entrepreneurs draw on diverse, complementary skills that may lie beyond the abilities of any individual founder, especially in high technology industries (Vesper, 1990). Moreover, Eisenhardt and Schoonhoven (1990) linked team diversity to functional performance, noting that organisational growth among semiconductor firms was higher
65 A work team is considered to be nationally or ethnically homogenous if more than 70 per cent of its
for organisations with heterogeneous founding teams. At a more micro level, Ancona and Caldwell (1992) reported benefits of functional diversity for communication and innovation in their study of product teams.
However, I am not concerned about how the founding team will affect the economic performance of the firm in the future but about how the composition of the work teams will do. Accordingly, my objective is to investigate in immigrant entrepreneurship context how members of staff within an established company, in particular their structural composition by ascribed characteristics (demographics such as nationality and gender), will influence the firm’s outcome. On the other hand, I search for empirical evidence on whether employee-customer versus employee-supplier homophily will lead to improved economic performance measured by volume of sales per employee.
6.4.1 Employee – customer homophily
Most research of the employee-customer relation is based on the importance of homophily. Various related theories suggest that the similarity between employee and customer with respect to ascribed characteristics can improve the economic performance of the business venture. In this context, social identity theory (Tajfel and Turner, 1986), similarity-attraction theory (Tsui, Egan and O’Reilly, 1992), social- categorisation theory (Tajfel and Turner, 1986) and Becker’s theory of customer discrimination (1957) require special attention. In these studies, familiarity – the desire to consider similar individuals as holding worthwhile characteristics – and preferences to be close to those who consider the in-group lead to preferences for doing business with similar others.
A higher level of homophily caused by ascribed characteristics may also improve the employees’ understanding of costumers’ preferences and how the latter vary in dynamic perspective. Additionally, members of staff can also attract customers using their social network within the community (Cox, 1993; Ibarra 1995). As a result, an employee’s social relationships often provide support in bringing customers to the workplace and thus lead to increasing volume of sales.
Moreover, Jennifer Lee (2001) has identified, for instance, two additional motives for storeowners to hire employees possessing characteristics similar to customer’ demographics in her study of retail stores in predominant black neighbourhoods. She found that white and Korean shopkeepers face disputes that can
quickly escalate and gain a racial tinge. Consequently, storeowners in her inner-city sample prefer to hire at least one black as a member of staff who is competent to resolve a tense situation without overtones of race. In addition, owners prefer that at least one black employee is visible all the time, so that customers feel the store returns to the community where it is located.
The employee-customer homophily with respect to ascribed features may also lead to declining communication costs. Speech pattern, slang and jargon all vary by demographic groups. Even among native speakers, diverse nationalities and gender differences often make communication among them difficult. These communication costs’ objections grow in importance when a large number of potential customers do not speak the language of the host country well. Although most immigrants learn English rapidly (Friedman and DiTomaso, 1996), for instance, in many cities large immigrant enclaves contain a substantial number of people who cannot or prefer not to speak English.
All these motivations can encourage profit-maximising employers to desire a labour force that is demographically similar to its customers. In spite of the many theories supporting this idea, the evidence for this effect is weak in general and documents two essential issues. First, previous research in this area provides only little, and what we have is mixed, evidence as to whether customers prefer to be served by similar others in retail and service occupations, although the evidence is more consistent in other spheres. Second, employers often act as if customers have this preference.
Besides the lack of consistent conformation, proponents of diversity routinely advocate that employers have to hire a dissimilar labour in order to attract diverse customers. Empirical proof can be found in trade publications including those serving marketing departments (Bertagnoli, 2001), stock brokerages (Lee, 2000), voluntary associations (Baker, 1999), restaurants (Lieberman, 1998), real estate (Liparulo, 1998), healthcare providers (Chyna, 2001) and numerous others. With respect to baseline expectations, however, the existing literature supports the hypothesis that
Hypothesis 3: Employee-customer homophily with respect to ascribed