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AnotherDay,AnotherDollar:EnterpriseResilienceUnderTerrorisminDevelopingCountries

OanaBranzei

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SamerAbdelnouri

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AnotherDay,AnotherDollar:EnterpriseResilienceUnderTerrorisminDevelopingCountries

ABSTRACT

This studyextends the literatureonentrepreneurship indeveloping countriesbyofferinga two-stage explanation for the paradoxical observation that enterprise activities often flourish underextreme adversity. Our findings complement the base-of-pyramid and peace-through-commerceattentiontothegrowingroleofbusinessininternationaldevelopmentbyfleshingoutthefunctionsof enterprise resilience under terrorism. We first explain how terrorism conditions (outbreak,escalation, and reduction)may create psychological incentives for enterprise resilience; thenweshowthat,controllingforexanteterrorismconditions,enterpriseresilienceyieldsmorefavorableeconomicpayoffsathigherlevelsofterrorism,especiallyforinformalentrepreneurs.

Keywords:entrepreneurshipinemergingmarkets;economicdevelopment;marketturmoil;low-incomemarkets;bottomofthepyramid;peace-through-commerce;internationaldevelopment

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INTRODUCTION

Peopledream,hopeandachieveeveninthedirestofcircumstances.Enterprisehasanextraordinarypowerofemancipationforpeoplelivingindeeppoverty(Seelos&Mair,2007).MahajanandBanga(2006)estimatethat86%oftheworld’s6billioninhabitantsliveincountrieswithapercapitagrossnationalproductoflessthan$10,000.Enterpriseisendemicindevelopingcountries(Rangan,Quelch,Herrero,&Barton,2007).Insomesettings,smallfamilybusinessaccountsformorethan95%oftheworkforce(Casillas,Acedo,&Moreno,2007);womenownoroperatebetweenonefourthandone-thirdofsmallandmediumenterprises(SMEs)intheworld(Smith-Hunter,2006).Informal(Webb,Tihanyi,Ireland,&Sirmon,2009)andlesser-educated(Yunus,1998)entrepreneurscanalsocreateandexploitlucrativeopportunities,craftingpathsoutofpovertyforthemselvesandtheirfamilies(deSoto,1989,2000).

Theliteratureonentrepreneurshipindevelopingcountries,aswellasthebroaderinternationalentrepreneurshipliterature,hassofarpaidonlylimitedattentiontothepoorandespeciallythemarginalizedentrepreneur(e.g.,women,Ayadurai&Sohail,2006;informalsectorparticipants,deSoto,1989;orthelessereducated,Yunus,1998).Thisisdespitegrowingevidencethatentrepreneurshipplaysanimportantroleincreatingsocialandeconomicvalueinsubsistencemarketsettings(Abdelnour&Branzei,2009a;Cross&Morales,2007;Weiser,Kahane,Rochlin,&Landis,2006).Webroadenthenotionoftheentrepreneur,centralininternationalentrepreneurshipresearch(McDougall,Shane&Oviatt,1994),todrawgreaterattentiontotheincidenceandpersistenceofentrepreneurshipunderpoverty,adversityandconflict.Wedosobymarryingthepeace-through-commerceliterature’spredictionsabouthowbusinesshelpsthepoorovercomedisruptionswiththebase-ofpyramid(BOP)emphasisoneconomicincentivestobusiness–large(Prahalad,2004)orsmall(London,2009)–indevelopingcountries.

Peace-through-commercescholarsarguethatbusinessplaysanimportantroleinpost-conflictstabilization,reconstructionandpeace-building(Fort&Schipani,2004;Wenger&Mo¨ckli,2003).Althoughmostpeace-through-commercestudiesadvocategreaterengagementbymultinationalenterprisesinthepeace-buildingprocess(Williams,2008),researchontheroleofenterprisesandentrepreneurshipisgainingmomentum(Gerson&Colletta,2002).Economic(re)engagementinmicro-andsmallenterpriseshelpssustainlivelihoodsintimesofturmoil(SEEP,2007)andstructuralupheaval(Honig,2001).Conflictcanalsoemancipatemarginalizedactorsintoentrepreneurialroles(Fadahunsi&Rosa,2002).Some‘‘envisionandrespondtotheebbandflowofsocialconflictaslife-givingopportunitiesforcreatingconstructivechangeprocessesthatreduceviolence,increasejusticeindirectinteractionandsocialstructures,andrespondtoreal-lifeproblems’’(Lederach,2003:14).Yetweknowlittleaboutwhatmaymotivateentrepreneursindevelopingcountriesto(re)engageineconomicactivities–especiallyintheaftermathofemergencies,crisesandpoliticaldisruption(Abdelnour&Branzei,2009b;Cross&Morales,2007;MacSweeney&Tanburn,2008).

ForBOPresearchers,thepoorrepresentanuntappedmarketsegmentwheremultinationalenterprisescancreate‘‘fortunes’’(Hammond,Kramer,Robert,Tran,&Walker,2007;Prahalad,2004),attimesatthecostof‘‘misfortunes’’forlocalmarketparticipants(Karnani,2007;Walsh,Kress&Beyerchen,2005).BOPstudiesfocuslargelyontheeconomicpayoffstocorporateandinternationalventuresinemerging-marketsettings(Simanisetal.,2008).Theyacknowledgethe

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socialbenefitsofgrassrootsventuresintheBOPspace(i.e.,empowerment,legitimacy,andsocialtransformation;Lodge&Wilson,2006;London,2009)ascomplementarytotheircontributiontoeconomicvaluecreation(Weiseretal.,2006;Wilson&Wilson,2006).However,theBOPliteratureremainslargelysilentontheemergenceandpersistenceofenterpriseunderextremepoverty(Seelos&Mair,2007)oradversity(Honig,1998).

The(still)limitedoverlapbetweenthepeacethrough-commerceandBOPliteraturesspeakstoagrowingdisconnectbetweenthefocusofinternationalentrepreneurshipresearchandthegrowingnumbersandsocialandeconomicimportanceofthepoorandthemarginalizedentrepreneursinsubsistencemarketplaces(Cross&Morales,2007;London,2009).Internationalentrepreneurship,broadlydefinedas‘‘therecognition,discussion,evaluation,andexploitationofopportunities–acrossnationallimits–tocreatefuturegoodsandservices’’(Oviatt&McDougall,2005:540),providesrichpredictionsabouthowglobalizationhelpsorhinderseconomicvaluecreationbySMEs.However,discussionofthepro-socialandpro-peacefunctionsofenterpriseremainnotablymissing,despitegrowingagreementthatindevelopingcountriesthesefunctionsareimportantintheirownright(Abdelnour&Branzei,2009a)andcanfacilitatevaluecreation(Wilson&Wilson,2006).

Withonlyahandfulofexceptions(e.g.,Fadahunsi&Rosa,2002;Honig,1998),thecausesof,contingenciesto,andreturnstoentrepreneurshipamongthepoorindevelopingcountriesremainunexplored.Thisresearchgapiswiderformarginalizedentrepreneursand/orthepoorindevelopingcountries.Recentstudiescallgreaterattentiontotheroleofwomenentrepreneurs(Cala´s,Smircich,&Bourne,2009;Salway,Rahman,&Jesmin,2003;Sethuraman,1998),informalentrepreneurs(Bacchetta,Ernst,&Bustamante,2009;Webbetal.,2009),andlesser-educatedentrepreneurs(Yunus,1998).Weknowcomparativelymuchlessaboutthemanyentrepreneurscopingwiththeadverseconsequencesofglobalization(Griffith,Cavusgil,&Xu,2008)thanwedoaboutthethrivingSMEssprawlingacrossinternationalboundaries(Wright,Filatotchev,Hoskisson,&Peng,2005;Zahra,Ireland,&Hitt,2000).

Weknownotablylittleabouttheparadoxofenterpriseemergenceandpersistenceunderadversity.Ahandfulofpriorstudiesobservedgreaterentrepreneurialactivityaftereconomicshocks(Skoufias,2003),disasters(Tang,2006),conflict(SEEP,2007),andwar(ElJack,2007),yettheoreticalandempiricalresearchontheincidenceandpersistenceofenterpriseunderterrorismremainslimited.

ENTERPRISERESILIENCEUNDERTERRORISM

Thisstudyexploresenterpriseresilienceunderterrorism.The1999UnitedNations’InternationalConventionfortheSuppressionoftheFinancingofTerrorismdefinesterrorismas‘‘anyactintendedtocausedeathorseriousbodilyinjurytoacivilian,ortoanyotherpersonnottakinganactivepartinthehostilitiesinasituationofarmedconflict,whenthepurposeofsuchacts,bytheirverynatureorcontext,istointimidateapopulation,orcompelagovernmentoraninternationalorganizationtodoortoabstainfromdoinganyact’’(Article2b,quotedbyVázquez,Pérez-Sales,&Hervás,2008:64).

Povertyiscommonlyunderstoodas‘‘therootcause’’ofterrorism(Smith,2008:184)andprotractedconflict(Oberschall,2007).Economicdevelopmentcan‘‘addresstheunderlyingrootsof

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theopenviolenceinwaysthatmoresystematicallyredressfundamentalpatternsofinjustice,particularlyinthearenaofpovertyandeconomicdisparity’’(Lederach,2008:100–101).Itcanalsoofferanantidotetoterrorismbyeliminatingormodifyingtheconditionsthathaveproduceddiscontent.Wefocusoneconomic(re)engagementthroughenterprise–definedasentryintonewproductsandmarketsand/ornewbusinesses,whetherthoughthecreationofanewfirmorviaexistingfirms(Lumpkin&Dess,1996).

IntendedContribution

Wecontributeatwo-stageargument.Wefirstdrawonpositivepsychologypredictionsaboutovercomingsuddenshocks,copingwithpersistentadversity,andhopingforabetterfuturetoexplainhowentrepreneurshipmayvaryacrossterrorismconditions.Ourworkinghypothesisisthatpeoplecanovercomethedisruptioncausedbyterrorismbydevelopingpsychologicalresilience(Joseph&Linley,2008;Tedeschi&Calhoun,2004;Val&Linley,2006).Wethendiscusswhyandwhenenterpriseisresilienttoterrorism.Weargueandshowthatentrepreneursearncomparativelymorethannon-entrepreneursacrossterrorismconditions,andinformalandlesser-educatedentrepreneurshavelessereconomicdisincentivesrelativetoformalandmore-educatedentrepreneursathigherlevelsofterrorism.

Researchsetting

Wefocusonenterpriseresilienceinurbanslums.Thecombinationisneitheruncommonnortrivial.UnitedNationsHabitat(2003)estimatesthat924million,or31.6%oftheworld’surbanpopulation,livedinslumsin2001,andtheUnitedNationsDepartmentofEconomicandSocialAffairs(2004)estimatesthat2billionpeople,oronefifthtoonequarteroftheworld’spopulation,willprobablyconsistofurbanpoorlivinginslumsorslum-likeconditionsby2030.Urbanslumsareathighriskfordifferentkindsofconflict(Smith,2008),includingcivilunrest,ethnicclashes,andterroristevents(Smith,2008).ThetwinphenomenaofslumsprawlanddomesticpoliticalterrorismarecommonacrossSouthAsia,andyieldgrowingglobalrelevance(Smith,2008).BoththeconditionsandthelevelofterrorismvaryacrossurbanslumsinBangladesh(Chowdhury,2003;Kumaraswamy,2007),providinganoptimalempiricalsettingforunderstandinghowterrorismmayinfluenceenterpriseresilienceindevelopingcountries.Ourempiricalfindingsarebasedonsingle-countrytests.Therelationshipbetweenterrorismandenterpriseresilienceholdsbroadertheoreticalimplicationsformarginalizedentrepreneursacrossdevelopingcountries,especiallythepoorinurbanslumsettings.

THEORYANDHYPOTHESES

Figure1summarizesourtheoreticalframeworkofenterpriseresilienceunderterrorism.Wefirstexplainhowdifferentterrorismconditionsinfluenceenterpriseresilience(Hypothesis1),contingentonentrepreneurs’gender(Hypothesis2).Thenwepredicteconomicreturnstoenterpriseresilience(Hypothesis3),contingentonentrepreneurs’informality(Hypothesis4)andeducation(Hypothesis5),acrossdifferentconditionsandlevelsofterrorism.

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TerrorismConditions

Oneexplanationfortheparadoxicalobservationthatenterprisesoftenflourishunderextremeadversityreliesonpositivepsychologypredictionsthatdisruption,shock,andtraumamayencourage(re)engagementinenterpriseactivities(Richardson,2002).Herewefocusonenterpriseresilienceunderthreedistinctterrorismconditions:outbreak,escalation,andreduction.Wearguethatterrorismoutbreakhonescopingskillsinthefaceofunexpectedadversity(Waugh,Fredrickson,&Taylor,2008),thatterrorismescalationmayenableposttraumaticgrowth(Bonanno,Galea,Bucciarelli,&Vlahov,2007;Westphal&Bonanno,2007),andthatterrorismreductioninstillshope(Garlan,Butler,&Spiegel,2005).

Terrorismoutbreak.Thenotionofstrivingunderadversityhasbeenfoundationalinentrepreneurshipresearch:entrepreneurshaveahigheradversityquotientthannon-entrepreneurs(Baron&Markman,2000).Theyaremorelikelytoremainoptimisticinthefaceofadversity(Markman,Baron,&Balkin,2005);theyarealsomorelikelytotakeactiontocounteractunexpectedstressors(Morland,Butler,&Leskin,2008).Adversitycanalsobeahotbedofopportunity(Aidis&vanPraag,2007;Fadahunsi&Rosa,2002).Byflagginglucrativeincongruencesandopeninguptransitionalopportunities(Webbetal.,2009),toughtimesoften‘‘incubate’’entrepreneurs(Ayadurai&Sohail,2006;Honig,2001).Setbackscanalsostimulatecounterfactualthinkingandenableopportunitycreationthroughlucrativeresourcereconfigurations(Branzei&Peneycad,2008).Asindividualscopewithsuddendistress,theybuildpsychologicalandsocialcapital(Hmieleski&Carr,2007),whicharestrongpredictorsofeconomic(re)engagementthroughenterpriseacrosspost-disastercontexts(SEEP,2007).

Hypothesis1a:Forurbanslumdwellersindevelopingcountries,terrorismoutbreakispositivelyassociatedwithenterpriseresilience.

Terrorismescalation.Whenadversityescalates,individualsaremorelikelytosearchformeaninganddevelopasenseofagencyinspiteofthetrauma–thatis,comingtoanunderstandingthat‘‘theywerestrongandresourcefulinwaysthattheyhadnotpreviouslyknown,andanappreciationthatthisself-knowledgewouldservethemwellinthefuture’’(Maitlis,2009:69).WestphalandBonanno(2007:418)highlightthesilverliningofpsychologicaltrauma:experiencingtraumaticeventscanhelpsomepeople‘‘growtowardmoreoptimalfunctioning’’.LinleyandJoseph(2004:11)furtheremphasizethatthemere‘‘processofstrugglingwithadversity[may]propeltheindividualtoahigherleveloffunctioningthanthatwhichexistedpriortotheevent.’’Studiesofeconomic(re)engagementfollowingpeaceprocessesinNorthernIreland,Bosnia,IsraelandPalestine(Oberschall,2007),interventionsinIraq,responsestothehumanitariancrisesinRwanda

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andSudan(Jacoby,2008),andmobilizationtoactionintheaftermathofrecentterroristeventsintheUS,Spain,theUK,andIndia(Vázquez,Cervellón,Pérez-Sales,Vidales,&Gaborit,2005)suggestthatpost-traumaticgrowthcanencourageagencythroughenterpriseactivities.

Hypothesis1b:Forurbanslumdwellersindevelopingcountries,terrorismescalationispositivelyassociatedwithenterpriseresilience.

Terrorismreduction.Areductioninterrorismoffersaglimmerofpeaceandsecurity–bringingforthhopeforabetterqualityoflifeinthefuture(Lederach,2008).Areductioninterrorismreplacesnegativeemotions,suchasfear,withpositiveemotions,suchashopeandjoy.Positiveemotionsimprovetheoddsofovercomingandremovingconstraints(Fredrickson,2006:96–97).Whilefearnarrowsthinkingandhelpspeoplecontinuealongapriorlineofthinkingoraction,positiveemotionsbroadenmindsetsandmotivateexploration,experimentationandengagement(Fredrickson,Tugade,Waugh,&Larkin,2003).Endemicentrepreneurshipunderextremeadversityoftenstartswiththemereimaginationofabetterfuture(Davis,2006;deSoto’spoignant‘‘pathsoutofpoverty,’’2000).Thevisionofabetterfuturereinstatestherighttothepursuitofhappiness(Lindner,2009).Enterpriseactivitiesrepresentameanstothisgreaterend.Enterpriseemancipates(Rindova,Barry,&Ketchen,2009):entrepreneursfirstimagine,andthenbuild,abetterfutureforthemselvesandtheirfamilies.

Hypothesis1c:Forurbanslumdwellersindevelopingcountries,terrorismreductionispositivelyassociatedwithenterpriseresilience.

GenderandTerrorismConditions

Womentypicallyfacegreaterbarrierstoentrepreneurshipinbothdeveloped(Lerner,Brush&Hisrich,1997)anddevelopingcontexts(Sethuraman,1998;Shehabuddin,2004)–yettheyarecomparativelymorelikelytoemergeasentrepreneursunderadversityandconflict(Smith-Hunter,2006),afterdisasters(Bonannoetal.,2007)ordisruption(Fadahunsi&Rosa,2002),andduringsystematicupheaval(Honig,1998).Womenmayalsorespondmorestronglythanmentodifferentterrorismconditions.

First,womenentrepreneursmaybemoreresilientthanmenfollowingsuddenterrorismoutbreaks.Whennecessitypushesthemintoentrepreneurialroles,womenareopportunity-orientated,resourcefulandhighlymotivated(Langowitz&Minniti,2007).Interventionprogramsoftentargetwomenandthustendtoasymmetricallyimprovetheirabilitytocopewithunexpecteddifficultiesandsetbacks(SEEP,2007).

Second,womenentrepreneursmaybemoreresilientthanmenwhenterrorismescalates.Althoughpervasiveorstabledifferencesinhowgendersadapttoadversityare‘‘tooearlytocall’’(Tennen&Affleck,1998:89),thereissomeevidencethatwomenadaptmoreswiftlytotraumaticexperiences(Vrana&Lauterbach,1994).Lifenarrativesofwomen(re)engagingineconomicactivitiesintheaftermathofmajordisruptionsandhumanitariancrisesspeaktowomen’scomparativelyhigher

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propensitytoseekmeaningandpurposeindistressingsituations,andtorethinkandadjusttheirrolesandresponsibilities(ElJack,2007;Nelson,2000).

Third,areductioninterrorismmayencouragegreaterenterpriseresilienceforwomenthanmenbecausethepost-conflicttransitiontomoreinclusive,dignified,andequalitarianapproachesoftenlevelstheplayingfieldforpreviouslymarginalizedgroupsingeneral(Lindner,2009)andwomeninparticular(Ayadurai&Sohail,2006).Transitionsfromconflicttostabilityoftencreategreateropportunitiesforemancipationforwomen(ElJack,2007).Womenmayalsobemorelikelythanmentotakeadvantageoftheseopportunitiesbecausetheyaremoreattunedtosocialchange(Cala´setal.,2009)andquickertoadjusttheirrolesinresponsetosocialchanges(deBruin,Brush,&Welter,2007:334).

Hypothesis2:Forurbanslumdwellersindevelopingcountries,gendermoderatestheeffectsofterrorismconditionsonenterpriseresilience,suchthat(a)terrorismoutbreak,(b)terrorismescalation,and(c)terrorismreductionhaveastrongerpositiveeffectforwomenthanmen.

EnterpriseResilience

Wehavealreadyexplainedhowexanteterrorismconditionsinfluenceenterpriseresiliencebydescribingpsychologicalmechanismsofpositiveadaptationtoterrorismoutbreak,escalation,andreduction.Wenowturntothelogicalnextquestionandaskwhyandwhenenterpriseactivitiesmaybeaneconomicallyrationalchoiceintheaftermathofterrorism.Ourworkinghypothesisisthatenterpriseactivitiesgeneratehighereconomicreturnsthanalternativeemploymentopportunitiesacrossterrorismconditions(Hypothesis3).Wefurtherarguethatenterpriseactivitiesmaybecomecomparativelymoreattractivetoinformal(Hypothesis4)andlesser-educatedentrepreneurs(Hypothesis5),becausehigherlevelsofterrorismreducetheeconomicpenaltytoinformality(deSoto,1989)andtheeducationpremium(Yunus,1998).

Terrorismnotonlydisruptsthenormalcourseoflifeandbusiness,butalsomotivatesindividuals(Honig,2001)andcommunities(Peredo&Chrisman,2006)totakestepstoovercomeormitigaterisk(SEEP,2007).SouthAfrica’semergencefromtheapartheidyearswaspartiallycreditedtoanoutburstinentrepreneurialactivity:Aymes(1989)foundabusinessoperatingineveryfifthtownshiphouse;aboutone-thirdoftheseventuresemployedatleastonefamilymember.Entrepreneurialactivityisendemicandoftenscalesupunderconstraint(Fadahunsi&Rosa,2002)andcrisis(Honig,2001).Italsoprovidesasensitiveindicatorofthelocalresolvetorecoverfromthedestructionanddisruptioncausedbyterroristevents–theNovember2008Mumbaiattacks,the2005Londonand2004Madridtrainbombings,andtherecurrentattacksinGazaaretellingexamples.

Themoststraightforwardexplanationfortheparadoxofenterpriseresilienceinthefaceofadversityisthatreturnstoentrepreneurialactivitiesarecommensuratewithrisk(Azevedo,2005).Entrepreneursincursignificantlyhigherlevelsofpersonalandbusinessrisk,andthusshouldrationallyexpecttoearngreaterreturns(Aidis&vanPraag,2007;Fadahunsi&Rosa,2002).Returnstoenterpriseactivitieshavebeenelusiveintimesofadversity,whenthenatureandfrequencyofpaymentsbecomelesspredictable(Honig,2001).Payoffstendtobeparticularlyunreliableforenterprisesintheinformalsector(Azevedo,2005;Mead&Morrisson,1996).

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Furthermore,differencesinthenatureandtimingofpaymentsacrossdifferentoccupations–entrepreneurialandnonentrepreneurial–makeeconomicpayoffstoeconomicactivitieshardtoquantifyandcompare.Nevertheless,inlower-incomesettingssuchasurbanslumsindevelopingcountries,incomeisaccuratelyreflectedinthenutritionalintakeofthehousehold,especiallyinthemealsprovidedtotheirchildren(Carter&Maluccio,2003).Weheedtherecommendationofseveralpriorstudiesandusehouseholdnutritionalintakeasaproxyforincomeintimesofadversity(Carter&Maluccio,2003),naturaldisasters(delNinno,Dorosh&Smith,2003),andeconomiccrises(Skoufias,2003).Entrepreneurscanearngreaterreturnsthannonentrepreneursacrosslevelsofterrorismbecausetheyaremorelikelytorecognize,devise,andimplementtimelyandinnovativeresponsestocrises(MacSweeney&Tanburn,2008).Becausetheycandrawonalternativesourcesofinputsandlabor,theyarealsobetterpositionedtoovercometemporaryparalysis(Lederach,2008)andtofindorcreatelucrativeopportunitiesinandaroundthedisruption(Fadahunsi&Rosa,2002).Enterpriseactivitiesacceleratepost-conflictrecoverybothdirectly(e.g.,byrestoringsocio-economicexchanges;Fadahunsi&Rosa,2002)andindirectly(e.g.,byfosteringlocalexperimentation,self-sufficiency,andtalent;Lederach,2008).

Hypothesis3:Forurbanslumdwellersindevelopingcountries,greaterenterpriseresilienceisassociatedwithhigherlevelsofincome.

Informality

Informalityiscommonindevelopingcountries(Webbetal.,2009),andisespeciallyprevalentinurbanslumsettings(Davis,2006).Informalityistypicallylegitimatewithinthecommunity(Webbetal.,2009)becauseitofferspathsoutofpoverty(deSoto,2000)andcontributestosocio-economicdevelopment(SEEP,2007).WefocusonlegitimateinformalenterprisesinBangladeshiurbanslums.Bangladeshhasaculturelargelysupportiveofentrepreneurialpursuits,andarapidlyemergingsocio-economicinfrastructure.GrameenBankandBRAC,1twooftheworld’smostsuccessfultemplatesforlarge-scalehumandevelopmentandempowermentthroughmicroenterprise,firstemergedinBangladesh.Theinformalsectoralsoencompassesillegalbutlegitimateactivities,suchastradinggoodsacrossclosednationalboundaries(Aidis&vanPraag,2007;Fadahunsi&Rosa,2002)andillegalandllegitimateactivities,suchastraffickingdrugsandarms(Goodhand&Hulme,1999).IllegitimateinformalityisneithercommonnorsystematicinBangladesh(Azim,2008),orinurbanslumsmorebroadly(Davis,2006).

Informalitytendstobemoreprevalentintimesofadversityandconflict.Informalenterprisehelpssustainfamiliesintimesofcrisis(Carter&Maluccio,2003;Skoufias,2003)byprovidingemploymentandincome(Azevedo,2005).Informalityisfunctional,becauseitenablestherecognitionandexploitationoflucrativeopportunitiesinspiteof,andattimesbecauseof,inadequateeconomic,political,andculturalinstitutionalarrangements(Webbetal.,2009).However,informalityincursfinancialpenalties:informalentrepreneursoftenearnlessandincurhighercosts(Davis,2006)thanformalentrepreneurs.Theexactpenaltyforinformalityhasrarelybeenquantified,owingtoapaucityofrigorousmeasurementofinformalactivity.Nevertheless,thereislittledisagreementthattheinformalitypenaltyremainspervasiveandproblematic(Azevedo,2005;Mead&Morrisson,1996).

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Oneexplanationfortheincidenceandpersistenceofinformalenterprisesacrossterrorismconditionsisthathigherlevelsofterrorismmaylessentheeconomicpenaltyforinformalitybyreducingtheearningsgapbetweenformalandinformalenterprises(Webbetal.,2009).Terrorismmaybecomparativelylessdisruptivetoinformalenterprises,whichtendtorelyonsociallyembeddedexchanges,thantoformalventures,whosegreaterdependenceoneconomicinfrastructuremaytemporarilystalltheiractivitiesorraisetheircostsduringpost-conflictinterventions(Williams,2008).Adversitymayalsotemporarilyshiftdemandawayfrompremiumgoodsandtowardslower-costsurvivalgoods,indirectlytransferringreturnsfromformaltoinformalenterprises.

Hypothesis4:Forurbanslumdwellersindevelopingcountries,thenegativeeffectofinformalityonincomeisweakerathigherlevelsofterrorism.

Education

Educationhasarobustpositiveassociationwithventurelaunchandsuccessinbothdeveloping(Manolova,Carter,Manev,&Gyoshev,2007)anddevelopedcontexts(Lerner,Brush,&Hisrich,1997).Educationisacriticalpredictorofenterpriseresilienceindevelopingcountries(VanderSluis,vanPraag,&Vijverberg,2005),especiallyforinformal(Yunus,1998)andmicro-entrepreneurs(Honig,1998).Lackofeducationdoesnotdiscourageentrepreneursfromtrying(Aidis&vanPraag,2007;Fadahunsi&Rosa,2002);nordoesadditionaleducationalwaysencourageentrepreneurship(Nelson,2000).However,lackofeducationhasbeenlongdecriedasapersistentcontributortopoverty(Yunus,1998)andabarriertoeconomicreengagement(SEEP,2007),especiallyintheaftermathofconflict(Nelson,2000).Thereisalsoevidenceofaneducationpremium.Becauseeducationimprovesentrepreneurs’self-confidence(Langowitz&Minniti,2007),optimism(Markmanetal.,2005),andpsychologicalcapital(Hmieleski&Carr,2007),ithelpsthembetteridentify,create,and/orexploitopportunities,andthusyieldscomparativelygreatereconomicreturns(MacSweeney&Tanburn,2008).

Higherlevelsofterrorismmaylessenthiseducationpremium,becausethedisruptionofformersocio-economicstructures(Honig,2001)andtheirreplacementwithnewwaysofdoingbusiness(Abdelnour&Branzei,2009b)maytemporarilychangethepayoffstoeducation,sothateducatedentrepreneursmayhavealesseradvantageinidentifyingandexploitingopportunities,whileuneducatedentrepreneursmaybeatalesserdisadvantage(Fadahunsi&Rosa,2002).

Hypothesis5:Forurbanslumdwellersindevelopingcountries,thepositiveeffectofeducationonincomeisweakerathigherlevelsofterrorism.

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METHOD

Researchdesign

Weusedanaturalexperimentdesignthatspanneda4-yearwindow(February2001–January2005),reconstructedfrommultiplearchivalsourcesthatreportedonlocalterroristeventsinthesixlargestBangladeshicities2.WestartedwiththeTerrorismKnowledgeBase(TKB)developedbytheMemorialInstituteforthePreventionofTerrorism(MIPT),andextracteddetailedinformationoneachterrorismevent,includingdate,location,andreportednumberoffatalitiesandinjuries.MIPTcross-checksalltheTKBincidentsummariesagainstreportsbyseveralorganizations,includingacademicinstitutions,privatemonitorgroupsandaUSfederalgovernmentagency.WeverifiedthecompletenessoftheTKBreportsbytriangulatingtherecordsextractedfromtheTKBagainstbothlocalandinternationalmediasources.

Naturalexperimentgroups.Comparingtheincidenceofterroristeventsbetweenthefirst2years(February2001–January2003)andthenext2years(February2003–January2005)yieldsfournaturalexperimentconditions.Terrorismwasabsentintwocities,RajshahiandBarisal,whichweresparedanyterroristattacksduringthe4-yearwindowperiod.Twoothercities,KhulnaandSylhet,witnessedaterrorismoutbreak:theyhadnoterrorismincidentsinthefirst2-yearperiod,butexperiencedasuddenonsetofterroristeventsinthefollowing2-yearperiod.Bangladesh’stwolargestcities,DhakaandChittagong,hadterroristeventsinthefirst2-yearperiodandsawrespectivelyanincreaseandadecreaseinterrorismeventsinthenexttwo(seeAppendix).

Levelofterrorism.Weoperationalizedthelevelofterrorismusingthestandardizedcompositemeasureofintensity,frequency,andscoperecommendedbyRoss(1993)forpoliticalterrorism.Wemeasuredthelevelofterrorismduringthe2yearsfollowingtheterrorismoutbreak,escalationorreduction,thatis,fromFebruary2003toJanuary2005.Intensitydescribesthevalueconflictingactorsplaceontheirgoals(Jacoby,2008).Terrorismintensitywascomputedastheaveragenumberofcasualtiesperincident,measuredasthetotalnumberofcasualties(fatalitiesandinjuries)dividedbythenumberofincidentsreportedwithineachcity(Blomberg,Hess,&Orphanides,2004).Inourstudy,theaveragecasualtycountpereventfromFebruary2003toJanuary2005was24.5deadorinjured.Frequencyreferstothemagnitudeandpaceatwhichconflictunfolds(Jacoby,2008).Terrorismfrequencywasmeasuredasthetotalcountofincidentsreported.ItwashighestinDhaka(26eventsoverall,16fromFebruary2003toJanuary2005),andlowestinChittagong(1event);KhulnawitnessednineterroristeventsandSylhetfive,alloccurringbetweenFebruary2003andJanuary2005.Scopegenerallydescribestheextentofthesetbackforaspecificaudience,suchasthenumberofgoalsthwartedortheextentofthedisruptionexperienced(Jacoby,2008:19).Weproxiedterrorismscopebythenumberofdaysbetweenthelatestoccurrenceofterrorismineachofthefourmunicipalitiesafflicteduntiltheendofourterrorismdatacollection,January2005:4daysinSylhet,162daysinDhaka,188daysinKhulna,and1091daysinChittagong.Terrorismintensity,frequency,andscopehadanaverageinter-itemcorrelationof0.92.Cronbach’salphaforthecompositemeasurewas0.94.

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Sample

Foreachconflictconditionweobtaineddetailedhousehold-leveldatafromtheNutritionalSurveillanceProject(NSP)ofHelenKellerInternational(HKI)inBangladeshforFebruary2005–January2006,sothatboththeconditionsandlevelsofterrorismwerelaggedby1yearfromourprimarymeasuresofenterpriseactivities(i.e.,resilience,informality,andeducation)andtheirpayoffs(i.e.,income).HKI’sNSPprovidesanindependentsourceofhigh-qualitydataforBangladeshihouseholds,3andisakeyreferenceforpolicyanddevelopmentinterventionsforhealth,nutrition,foodsecurity,homesteadfoodproduction,genderdisparities,andruralandurbanpoverty.

Thedatacollectionfollowedatwo-stageclustersamplingdesign.Inthefirststage,628slumswereselectedfrom32distincturbanslumwardsinthesixlargestcitiesinBangladeshusingsimplerandomsampling.Inthesecondstage,householdsweresystematicallysampledwithineachsluminroughproportiontothenumberofurbanslumwardsineachcity–thatis,approximately50householdsperurbanslumward–foratotalsampleof9000households(seeAppendix).

Responseswerecollectedthroughface-to-faceinterviewswiththemotherineachhousehold.Verbalconsentwasobtainedfromeachrespondentafterexplainingthepurposeandscopeofthedatacollection.Theinterviewswereconductedbyfieldteamscomposedoftwodatacollectionofficers,atleastoneofwhomwasawoman.AlltheinterviewersweretrainedbyHKIbeforeeachroundofdatacollection;duringeachround,monitoringteamsfromHKIvisitedfieldsitestosupervisedatacollection.Qualitycontrolteamsalsorecollected5–10%ofthedataonthefollowingday.AlldatawereenteredbystaffoflocalNGOspartnersusingasoftwarepackagedevelopedbyHKI.Duplicate,mismatch,consistency,andrangecheckswereconductedonthefinaldatasetintheDhakaofficeofHKIbyexperiencedstaff.

DependentVariables

Enterpriseresilience.HKIincludeddetailedinformationontheself-reportedoccupationofthemainhouseholdearner,definedfortheNSPasthepersonwhoprovidedthemajorityofthehouseholdincome,duringthelatest2months.BasedonasystematicreviewoftheliteratureonemploymentalternativesinBangladesh(e.g.,Choudhury&Wahid,1995),weconstructedadummyvariablethattookavalueof1ifthemainhouseholdearnerhadapayingbutnon-salariedoccupation(businessman,rickshaw/cart/vanpuller/babytaxidriver/boatman,householdhelp,pettybusinessman,collectionforsale).Salariedoccupations(salariedworker,professional,skilledlaborer,unskilledlaborer,garmentfactoryworker,factoryworker,cottageindustryworker,householdhelp,agriculturaldaylaborer)andnon-payinglabor(beggar,housewife,retired,unemployed,andothers)receivedascoreof0.

Income.Weoperationalizedincomeusingthenutritionalintakeofeachhouseholdonaweeklybasis.HKIinterviewersaskedeachmotheraboutthenumberoftimes(inthepast7days)thattheirhouseholdhadconsumedthestapledal(lentils),greenleafyvegetables,yellowororangefruitsandvegetables,eggs,fish,poultry,orothermeats.Weaggregatedthesesevenmeasuresintoanadditiveindex.

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PredictorsandModerators

Gender.HKI’sNSPrecordedthegenderofthehouseholdheadasadummyvariablethattookavalueof1ifthehouseholdheadwasfemaleand0ifthehouseholdheadwasmale.

Informality.Toclassifyentrepreneurialactivitiesaseitherformalorinformalwecross-referencedHKI’sdataonhouseholdhead’smainoccupationsagainstoccupationalethnographiesandresearchstudiesinBangladesh(Choudhury,2003;Choudhury&Wahid,1995;Islam,1997;Opel,2000;Saha&Rahman,2006a,2006b;Salwayetal.,2003).Weconstructedadummyvariablethattookavalueof1ifthemainhouseholdearnerengagedininformalbusinessactivities,thatis,payingbutnon-salariedoccupations(businessman,rickshaw/cart/vanpuller/babytaxidriver/boatman,householdhelp,pettybusinessman,collectionforsale),and0iftheyengagedinformalbusinessactivities(businessman).

Education.TheHKIdatabaserecordedthenumberofyearsofeducationforboththemotherandthefatherofeachhousehold.Becausethesetwomeasureswerehighlycorrelated(inter-itemcorrelation0.56,Cronbach’salpha0.72),weconstructedacompositemeasureforeducation,addingthestandardizedscoresofmaternalandpaternaleducation.Allourresultsarerobusttoincludingonlythelevelofeducationofthehouseholdhead.

Analyses

Allourmodelsweretestedusingatwo-stageinstrumentedvariableapproach(Stata’sivreg2).Allmodelsusedrobusterrorestimation,controllingforerrorcommonalitiesduetosimilaritieswithinurbanslumwards(seeAppendix).

Firststage.Thefirststageofthemodelspredictsenterpriseresilience,usingfivedifferentinstruments:twoindicatorsofhouseholdneeds(HouseholdsizeandMotherage)andthreeindicatorsofhouseholdresourcefulness(Sanitaryinfrastructure,Waterinfrastructure,andHouseholdaccommodation).Householdneedsvarywithfamilysizeandfamilyage(Davis,2006).HKIprovidesinformationontheexactnumberofmembersineachhousehold,definedas‘‘thegroupofpeoplewholivetogetherandtakefoodfromthesamecookingpot’’(Householdsize).TheHKIdefinitionincludeshouseholdmemberslivingelsewherebutstayingatthehouseforatleastonenightin3months,aswellasnon-familymemberswhohadlivedwiththehouseholdmembersforatleast6months.HKIalsorecordstheageofthemotherineachhousehold(Motherage).Waterandsanitaryinfrastructurearescarceinslumareas,andaccesstosuperiorwaterandsanitaryinfrastructureoffersimportantproxiesforthehouseholdresourcefulnessinovercominglocalconstraints(Davis,2006).WeoperationalizedSanitaryinfrastructureusingadummyvariablethattookavalueof1iftheusualplaceofdefecationforthehouseholdwasalatrine(openorclosed),and0ifhouseholdmembersusuallydefecateinthebush/openfield,attheriver/pondside,inadrain,canalordustbin,orother.Waterinfrastructurewassimilarlyoperationalizedusingadummyvariable,whichtookavalueof1ifthesourceofdrinkingwaterforthehouseholdwasataporahand-pump,and0ifthesourcewasrain,spring,pond,river,canal,orwellwater.Alargerlivingareaisanothergoodindicatorofsuperiorhouseholdresourcefulness(Davis,2006).HouseholdaccommodationwasderivedfromtheHKImeasurementsofthelengthandwidthorthemainlivinghouseforeachhousehold.

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Ourfirst-stagemodelsalsoincludefivedummycontrolvariablestoaccountfordifferenteconomicopportunitiesinthesixgrowingseasons:February–Marchforspring(Bashonto),April–Mayforsummer(Grishmo),June–Julyfortherainyseason(Borsha),August–Septemberforpre-autumn(Sharot),October–Novemberforlateautumn(Hemonto),andDecember–Januaryforwinter(Sheeth).Springwasourreferencecategory.WealsocontrolforthelevelofLocalunemployment,usingtheHKI’sNSPdatatoinferthepercentageofnonpayinglabortopayingoccupationsacrossalltheurbanslumswithineachofthesixcitiesincludedinthestudy.Sensitivityanalysesconfirmthatourresultsarerobusttonarrower(onlyunemployed)orbroader(includingbeggar,housewife,retired,and/orothers)operationalizations.

Secondstage.Thesecondstageofourinstrumentedvariablemodelspredictsincomeusingthefittedvaluesofenterpriseresilience,regressedoninstrumentsandcovariatestoisolatevariationinenterpriseresilienceuncorrelatedwiththepredictionerrorforincome.Becauseusingfittedvaluesinevitablycausesalossintheefficiencyofestimation(Wooldridge,2002),weverifiedthatthelossofefficiencyisacceptablebytestingwhethertherelevanceandorthogonalityconditionsarefulfilled(Murray,2006).Relevancereferstothestrongfitbetweentheendogenousregressorandtheinstrumentsusedtomodelit.Themostrobustandconservativetestofrelevanceisthefirst-stageF-statistic,whichteststhehypothesisthatallthecoefficientsoftheinstrumentsusedequal0;significantF-statisticsthatexceedthethresholdof9.08forthreeinstruments,and10.83forfiveinstruments,reflectstronginstrumentsthatsatisfytherelevancecondition(Stock&Yogo,2004).Theorthogonalityconditionverifiesthattheinstrumentsarenotcorrelatedwiththeerrorterm,thatis,thatatleastoneinstrumentisexogenous(Wooldridge,2006).Violationoftheorthogonalityconditioncausesinconsistentestimation(Bascle,2008).WeusedtheHansenJ-statistictotestthisassumption,becauseourerrortermsareheteroscedastic;afailuretorejectthisstatistic(i.e.,anon-significantHansenJ)offersassurancethattheinstrumentscanbeconsideredexogenous.Allourmodelsmettherelevanceandorthogonalityconditions.AllF-statisticsweresignificantatp<0.001;theyrangedfrom13.5to24.09forthecross-groupanalyses,and5.96to17.11inthesubgrouppost-hocanalyses.AllHansenJ-statisticswerenon-significant.

Causality.Thedecisiononwhetherornotoneshouldengageinenterpriseactivitiesmaydependongender(Smith-Hunter,2006),formalvsinformalsectoropportunities(Webbetal.,2009),education(SEEP,2007),andonthelevelsandconditionsofterrorism(Wenger&Möckli,2003).Ourtwo-stageinstrumentedregressionmodelsaccountforthepossibilityofreversecausality,forexample,thatgreaterfrequency,intensityandscopeofterrorismorinformalityandeducationbarriersinfluenceenterpriseresilience.Allfirst-stagemodelsestimatetheeffectsofthelevelofterrorismfollowingeachterrorismconditionandtheeffectsofgender,informalityandeducationonenterpriseresilience.Controlsfortheeffectsofthecovariates,thatis,Localunemploymentandthe(unreported)effectsofthefivegrowingseasondummyvariables,arealsoincludedinallourmodelsinthefirststage.

Commonmethodvariance.Werelyonindependentsourcesofprimaryandsecondarydatatomitigateconcernsofcommonmethodvariance.Theoperationalizationsoftheconditions(Hypothesis1)andlevelsofterrorism(Hypotheses4and5)relyonsecondarydata,triangulatedagainstmultiplereportsofterroristevents.Bothgender(Hypothesis2)andenterpriseresilience(Hypothesis3)arebasedonself-reportscollectedbyresearchteams(andinsomecasesverifiedbysupervisoryteams).Confidenceintheproposeddirectionofcausalityisreinforcedbythe1-yeartimelagbetweenourfirst-stagecriterion(enterpriseresilience)andpredictors(terrorism

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conditions),andbetweenoursecond-stagecriterion(income)andmoderator(levelofterrorism).Enterpriseresilienceandincomearecollectedusingthesameinstrumentatthesamepointintime.However,enterpriseresilienceisinstrumentedusingself-reportsofobservablevariables,somevalidatedbythedatacollectionteamsinthefield(e.g.,Householdaccommodation).Informalityandeducationarealsocollectedusingthesameinstrumentandatthesamepointintimeasincome.However,ouroperationalizationofinformalityindependentlyclassifiestheself-reporteddescriptionsofoccupationsaseitherformalorinformal,relyingonstudiesthatanalyzeeconomicactivitiesinBangladesh.Weusecumulativemeasuresofeducation,whichnecessarilyprecedetheobservedoccupationandincome.

RESULTS

Thesampledescriptiveandzero-ordercorrelationsareshowninTable1.Enterpriseresilienceandincomearepositivelyassociated(0.032,p<0.05).Informalityandincomearenegativelyassociatedwhenwepartialoutthelevelofterrorism(-0.157,p<0.05),indicatinganinformalitypenalty.Educationandincomearepositivelycorrelatedwhenwepartialoutthelevelofterrorism(0.272,p<0.05),confirminganeducationpremium.Contrastsbetweenthesepartialcorrelationsandthezero-ordercorrelationsreportedinTable1offerpreliminarysupportforthepredictedmoderationeffects.

Table1alsosupportsourinstrumentation:enterpriseresilienceisdrivenbyhouseholdneeds;headsoflargerandyoungerhouseholdsarealsomorelikelytoengageinenterpriseactivities(Householdsize,0.049,p<0.05;Motherage,-0.025,p<0.05).The9000householdssurveyedaveragedabout5members,rangingfrom2to19members.Inoursample,motherswereonaverage25yearsold,withawideagedistributionfrom13to60.Livingconditionsweremodest.Althoughthevastmajorityoftheinterviewedhouseholdshadaccesstoanopenorclosedlatrine,andthreequartershadaccesstotaporhand-pumpsourcedwater,theaveragedwellingwasonly158ft2(14.7m2).

InsertTable1AboutHere

Table2providesadditionalsupportforourinstrumentation.HouseholdsizeandHouseholdaccommodationarerobustpredictorsofenterpriseresilience.Motheragehasanegativeeffect:netofconstraintsandresources,youngermothersaremarginallymorelikelythanoldermotherstoengageinenterpriseactivity.Sanitaryinfrastructurealsohasamarginalbeneficialeffect.Allthemodelsmeettherelevanceandtheorthogonalityconditions(F=35,p<0.001;HansenJ-statistic=9.837,p=0.079).

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InsertTable2AboutHere

TerrorismConditions

Inoursampleof9000householdslivinginurbanslumsinthesixlargestmunicipalitiesinBangladesh,weobservethehighestenterpriseresilienceintheterrorismescalationcondition(mean0.495,s.d.0.500),followedbyterrorismabsence(mean0.485,s.d.0.499),terrorismoutbreak(mean0.471,s.d.0.499)andterrorismreduction(mean0.445,s.d.0.497).AlthoughBonferronicontrastsshownostatisticallysignificantdifferencesamongconsecutivemeans,betweenconditionsdifferencesaresignificant(F=4.15,p<0.01).Specifically,enterpriseresilienceissignificantlyhigherintheterrorismescalationconditionthanintheterrorismreductioncondition(p<0.01),andenterpriseresilienceismarginallylowerintheterrorismreductionconditionthanintheabsenceofterrorism(p<0.10).Thechangesinthenumberofenterprisesbetweenterrorismconditions(a5%differencebetweenescalationandreduction;a4%gapbetweenreductionandabsence)arealsopracticallymeaningful.

Ourmodelstesttheeffectsofthenaturalexperimentconditionssimultaneously;terrorismabsenceisourreferencecategory.Thereportedeffectsarefullyreplicatedwhentestingeachconditionseparately.Model1inTable2reportstheeffectofterrorismoutbreak,escalationandreductionconditions(i.e.,thechangefromthefirst2-yearwindowtothesecond2-yearwindow)withoutaccountingforthelevelofterrorismmostrecentlyexperiencedbytherespondents(i.e.,acompositeindicatoroftheintensity,frequency,andscopeofterrorism;Ross,1993).However,thelevelofterrorismmayinfluenceenterpriseresilience.Higherlevelsofterrorismincreaseperceivedrisk.Becausereturnstoenterpriseactivitiesshouldincreaseatleastroughlyproportionallytoperceivedrisk,weexpectapositiveassociationbetweenenterpriseresilienceandincome.Model2inTable2confirmsthisexpectation.Thelevelofterrorismexplains10%additionalvarianceinincome.Boththesignificanceandthemagnitudeoftheeffectsarerobusttotheinclusionorexclusionofthecovariatesandtheinteractioneffects.Becausethedecisiononwhetherornotoneshouldengageinenterpriseactivitiesmaydependontheconditionsandlevelsofterrorism(Smith,2008;Wenger&Möckli,2003),ourtwo-stageinstrumentedregressionmodelscontrolformutualcausalitybytestinghowthelevelofterrorismmayaffectenterpriseresilienceinthefirstplace.Model2showsacounterintuitiveeffect.Thelevelofterrorismhasapositiveeffectonenterpriseresilience.Greaterincidenceandpersistenceofenterpriseactivitiesathigherthanlowerlevelsofterrorism,controllingforterrorismconditions,lendsupporttoprioranecdotesandargumentsthatenterpriseactivitiescanflourishunderextremeadversity.

Thepositiveeffectoftheterrorismoutbreakconditiononenterpriseresilience(0.331,p<0.05,Model1,Table2)issuppressedbythepositiveeffectofthelevelofterrorismfollowingtheoutbreak(-0.718,p<o0.10,Model2,Table2).Controllingforthelevelofterrorismfollowingtheincreaseinconflict,theterrorismoutbreakconditionhasanegativeeffectonenterpriseresilience.Hypothesis1aisnotsupported.

Theterrorismescalationconditionalsohasanegativeeffectonenterpriseresiliencewhenweaccountforthelevelofterrorismfollowingtheescalation(-1.764,p<0.05,Model2,Table2),andnoeffectotherwise(-0.001,n.s.,Model1,Table2).Hypothesis1bisnotsupported.

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Thesenon-findingsarenoteworthy,becausetheysplittheparadoxicalobservationofgreaterenterpriseresilienceunderextremeadversityintotwoseparatearguments.Ononehand,worseningterrorismhindersenterpriseresilience,andterrorismescalationhindersenterpriseresiliencemorethanterrorismoutbreak.Ontheotherhand,thelevelofterrorismfollowingeitherasmalloralargeaggravationhasacounterintuitive,positiveeffectonenterpriseresilience,perhapsbecausehigherlevelsofterrorismincreasetheeconomicpayoffstoenterpriseactivitiesrelativetoalternativelivelihoods.

Aspredicted,theterrorismreductionconditionhasapositiveeffectonenterpriseresilience(0.343,p<0.05,Model2,Table2),robusttothelevelofterrorismfollowingthereduction(0.493,p<0.05,Model2,Table2).Hypothesis1cisborneoutbythedata.Thisfindingprovidesempiricalsupportforoneofthestronger-heldworkingassumptionsofpeace-through-commerceinterventions–thatpost-conflict,war-torncommunitieshaveastrongincentiveto(re)engageinenterpriseactivitiesandrebuildlivelihoods(Lederach,2008).Wealsoshowthatterrorismreductionhasarobustpositiveeffectonenterpriseresilience,evenwhenthelevelofterrorismfollowingthereductionremainshigh.

Gender

Hypothesis2predictsgreaterenterpriseresilienceforwomenthanformenintheterrorismoutbreak(Hypothesis2a),escalation(Hypothesis2b),andreduction(Hypothesis2c)conditions.Model3inTable2reportsthesimultaneouseffectsofthethreegendermoderationeffectsontheinstrumenteddependentvariableforourfirst-stagemodel,enterpriseresilience.Examiningeachmoderationeffectseparatelyfullyreplicatesthereportedresults.Noneofthepredictedgendermoderationsisborneoutbythedata:enterpriseresilienceisnotsignificantlydifferentbetweenwomenandmen.Post-hocprobingwithineachterrorismconditionreportedinTable3showsanon-significantmaineffectofgenderonenterpriseresilienceintheterrorismoutbreakcondition.Furthermore,thepercentageofwomenentrepreneurswassimilarintheterrorismoutbreak(4.9%)andtheterrorismabsence(4.7%)conditions.Takentogether,theseresultstriangulatethenon-significantmoderationreportedinModel3,Table2.Hypothesis2aisnotsupported.Post-hocprobingreportedinTable3furthershowsthatgenderhasanegativeeffectonenterpriseresilience,thatis,enterpriseresilienceislowerforwomenthanmen,forboththeterrorismescalationandtheterrorismreductionconditions.Theprevalenceofwomenentrepreneurswasthreetimeslowerintheterrorismescalationcondition(2.3%)thanintheterrorismreductioncondition(6.3%).TheseobservationsconfirmthenegativemaineffectofgenderreportedinTable2,andprovidefurtherinsightintothenon-significantresultsforHypothesis2bandHypothesis2c.

Theabsenceofgendermoderationforenterpriseresilienceunderterrorismisnoteworthy.Notonlydoourfindingschallengepriorqualitativeevidencethatwomenmaybemorelikelytostepintoentrepreneurialrolesunderextremeadversity(Abdelnour&Branzei,2009b;Ayadurai&Sohail,2006;ElJack,2007),buttheyalsoprovideasystematiccomparisonofthebaseratesofwomenandmenentrepreneursacrossdifferentterrorismconditions.Ourdesignmayunderestimatetheincidenceofwomen-ledenterprise(i.e.,womenmayengageinenterpriseactivitieswhenthemalehouseholdheadisalsoanentrepreneur).Yetthecontrastisstark:womenentrepreneursheadedonlyonein25ofthe9000householdssurveyed.Whenterrorismescalated,womenentrepreneursheadedonlyonein50households.

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EnterpriseResilience

Enterpriseresiliencehasapositiveeffectonincome.Hypothesis3receivesstrongsupport(Model3,Table2).Table3furthershowsthatreturnstoenterpriseresiliencearesignificantwithineachterrorismcondition,andhigherinmagnitudeinenvironmentswithrecurrentconflict(terrorismreductionandoutbreak)thaninenvironmentswithoutpriorterrorism(terrorismabsenceandterrorismoutbreak).Thepositiveeffectofenterpriseresilienceonincomeisrobusttotheinclusionofthehypothesizedtwo-wayinteractioneffectsbetweeninformality,respectivelyeducation,andthelevelofconflict(Models4–5,Table2).Itisalsorobusttotheinclusionofthe(nonsignificant)three-wayinteractioneffect(Models6–7,Table2).OLSrobustnesschecksshowthataddingenterpriseresiliencetoaregressionmodelexplains1.3%additionalvarianceinincomeaftercontrollingforthelevelofterrorism,informalityandeducation.

InsertTable3AboutHere

TheInformalityPenalty

Inourinstrumentedvariableregressions(Model4,Table2),informalityhasaconsistentnegativemaineffectonincome.Thisempiricalresultcorroboratesearlierpredictionsthatinformalentrepreneursearnlessthanformalentrepreneursinthedevelopingcountrysettingsingeneral(deSoto,1989),andurbanslumsmorespecifically(Davis,2006).Hypothesis4explainswhythenegativeeffectofinformalityonincomemaybeweakerathigherlevelsofterrorism.Theinteractiontermissignificant,adding2%explainedvariance,andpositive,confirmingourexpectationthatthepenaltytoinformalitymaybelowerathigherlevelsofterrorism.Theresultsaccountforthepossibilityofmutualcausation,controllingforanybeneficialeffectsofinformalityonenterpriseresilienceinthefirst-stagemodels.InOLSrobustnesschecks,informalityexplains2.5%additionalvarianceinincomeaftercontrollingforlocalunemploymentandthegrowingseason,and1%aftercontrollingforeducation.Figure2presentsthepost-hocmoderationprobing.Ashypothesized,theslopeisnegativeandflatterathigherlevelsofterrorism.

TheinteractioneffectbetweeninformalityandthelevelofterrorismpredictedbyHypothesis4isborneoutbythedata.Thisfindingcomplementsrecenttheorizingaboutthereturnstoinformalitybysuggestingthatthepenaltytoinformalitymaybecontext-contingent.Weshowthattheexpectedgapbetweenformalandinformalentrepreneursnarrowsathigherlevelsofterrorism.Informalitymaynotonlybecomeaneconomicallyrationalchoiceunderextremeadversityand/orconflict;itmayalsofulfillatemporaryemancipationratherthanapersistententrapmentfunction.Byexplicatingthecontextualcontingenciestotheinformalitypenalty,modelsofentrepreneurshipindevelopingcountriescantheorizeinformalityasaviabletransitionalstage(Webbetal.,2009).

InsertFigure2AboutHere

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TheEducationPremium

Inourinstrumentedvariablemodels,educationhasaconsistentpositivemaineffectonincome,corroboratingpriorevidenceofaneducationpremium:bettereducationyieldshigherpayoffstoenterpriseactivitiesacrossawidevarietyofcontextsandoccupations(Honig,2001;Lerneretal.,1997;Manolovaetal.,2007).InOLSregression,educationexplains5.2%additionalvarianceinincomeaftercontrollingforlocalunemploymentandgrowingseason,and3.7%aftercontrollingforinformality.

Hypothesis5explainswhythepositiveeffectofeducationonincomemaybeweakerathigherlevelsofterrorism.Model5inTable2reportsanon-significantinteractionbetweeneducationandthelevelofterrorism.Post-hocmoderationprobinginFigure2showstheexpectedpositiveslope,whichdoesflatten–butonlyslightly–athigherlevelsofterrorism.Educationyieldssimilarpositivepayoffsasthelevelofterrorismincreases.Hypothesis5isnotsupported.

Becauseless-educatedentrepreneursaremorelikelytooperateintheinformalsector,theymayincurthedualpenaltyofinformalityandlackofeducation(Azevedo,2005;Mead&Morrisson,1996).Thethree-wayinteractionamonginformality,education,andthelevelofterrorismwasnon-significant(Models6and7,Table2).Table3confirmsthedualpenaltyintheterrorismabsencecondition;informalityandeducationhaveindependentdirectandterrorism-contingenteffectsinalltheotherterrorismconditions.

DISCUSSION

Thisstudybeginstofleshoutamissingbutimportantfacetofentrepreneurshipindevelopingcountries,byexplainingthecausesandconsequencesofenterpriseresiliencewithinandacrossterrorismsettings.Webuildcloselyonpriorinsightsintotheantecedentsandconsequencesofinternationalentrepreneurshipinsmallfamilybusiness(Casillasetal.,2007),womenentrepreneurshipintheglobalmarketplace(Salwayetal.,2003;Sethuraman,1998;Smith-Hunter,2006),andinformalentrepreneurship(Bacchettaetal.,2009;Webbetal.,2009).Ourpropositionsandfindingsbegintofillinthe(still)missinglinkbetweentherolethatbusinessmightplayinunstableandpostconflictsettingsandtheeconomicmotivationforentrepreneurshipinBOPsettings.Wesuggestthatentrepreneurshipcanprovideatwo-steptransitionfromthedisruptioncausedbyterrorism,andexplorewhenandwhyurbanslumdwellersindevelopingcountries(re)engageineconomicactivitiesintheaftermathofterrorism.Wealsoseektodrawgreaterattentiontohow,whyandwhenurbanslumdwellerstakeonentrepreneurialrolesinlower-incomemarketsindevelopingcountries,despitedeeppovertyandscarcity(London,2009),systematicbarriers(SEEP,2007),andpervasiveconstraints(Yunus,1998).

TheoreticalContributions

Ourstudymakesadistinctivecontributiontointernationalbusiness(Tung&vanWitteloostuijn,2008)bybeginningtoarticulatethepsychologicalandeconomicrationalefor(re)engagementinenterpriseactivitiesinthedirestofcircumstances.Thestraightforwardclaimthatenterprisecanemancipatethepoorisnotnew(Davis,2006;deSoto,1989,2000).Developmenteconomistshavelongarguedthat(re)engagementineconomicactivitieshelpsrestorethesocialfabricinwhich

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economicexchangescanflourish(Nelson,2000).Recentresearchreaffirmsthisbeliefinpeacefulcontexts(Branzei&Peneycad,2008)andpostconflictsettings(Abdelnour&Branzei,2009a).Norisevidenceofenterpriseresilienceintimesofconflict(Ayadurai&Sohail,2006;ElJack,2007).Severalstudiesnoteagreaterincidenceorpersistenceofentrepreneurshipincontextstornbysuddenorrecurrentterrorism(e.g.,Ireland,US,UK,Spain,India,Yemen,SriLanka,andIraq).However,ourtheoreticalandempiricalfocusonentrepreneurshipunderadversityisfirmlyanchoredintheentrepreneurshipliterature,andextendsthisliteratureinthreeimportantways.

First,itdrawspoignantattentiontoalargeandgrowingpopulationofentrepreneurs,whohavebeensofaronlysporadicallyaddressedinboththepeace-through-commerceandtheBOPliteratures,despitetheircriticalroleinsocialandeconomicvaluecreation.Althoughtheseentrepreneursarenottypicallyinvolvedintransactionsthatcrossnationalboundaries,theybearthebruntofglobalization–especiallyitsunintendedconsequences(Bacchettaetal.,2009;Griffithetal.,2008;Opel,2000).Theyoftenrepresentimportantparticipantsinglobalvaluechains(Lodge&Wilson,2006;Wilson&Wilson,2006;WorldBank,2007)andmayhelp(re)structureeconomicexchangesinsubsistencemarkets(Abdelnour&Branzei,2009a;Azim,2008;Fadahunsi&Rosa,2002).

Second,wearguethatsomeofthemostwellacceptedpremisesofentrepreneurshipneedtobecarefullyrethoughtandretestedinpost-conflictsettings.Ourhypothesesreaffirmtheoften-mentionedbarrierstowomen(Smith-Hunter,2006),thepenaltytoinformality(Webbetal.,2009),andtheeducationpremium(Yunus,1998).Butwealsoexplainwhythesebarriersmaybelesspervasiveoroppressiveintheaftermathofterrorism.Inoursingle-countrytests,controllingfortheconditionsandthelevelofterrorism,genderdoesnotmoderatethepropensitytotakeonentrepreneurialrolesineachterrorismcondition.Thepayoffgapbetweenformalandinformalenterprisenarrowsathigherlevelsofterrorism.Theeducationpremiumalsodecreases,butonlyslightly.

Third,weprovideamorenuancedunderstandingoftheroleofbusinessinpost-conflictsettings(Wenger&Möckli,2003)bydiscussingtherecursiverelationshipbetweenterrorismandenterpriseresilience.Wespecificallyunpackthepro-peacefunctionsofenterprisebyshowingthatthe(in)abilityofenterpriseresiliencetomitigatedisruptionanddestructionisduallycontingentonboththeconditionsandthelevelofterrorism.Ourfindingsconfirmtheintuitiveexpectationthatareductioninterrorismismostlikelytoencourageenterpriseactivities,andthatreturnstoenterpriseresiliencearehigherinthiscondition,especiallyforinformalentrepreneurs.Thisinsightdovetailswithrecentargumentsthatinformalentrepreneurshipmayrepresentatransitionalstage(Webbetal.,2009),deservingofattentionandsupport–especiallyduringpost-conflictstabilizationandreconstruction.Ourfindingsfurthershowthatterrorismescalationdiscouragesentrepreneurship.Onlyafewmaygrowintoentrepreneurialrolesinthefaceofadversity;mostfallbackonothermeanstoprovidefortheirfamilies.Forthefew,however,economicmotivatorsareparticularlystrongunderrecurrentdisruption:heightenedriskyieldshigherreturnstoenterpriseresilienceintheterrorismescalationcondition.Inourstudy,terrorismoutbreakisthemostparalyzingtoenterpriseactivities:itbothstalls(re)engagementandprovidestheleasteconomicmotivation(i.e.,returnstoenterpriseresiliencearelowerunderterrorismoutbreakthaninallothercases).

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LimitationsandFutureResearch

Althoughourcross-sectionalresearchdesigncannotdirectlyexaminetheevolutionofenterpriseresilienceasterrorismunfolds,thesystematiccontrastacrossconditionsofterrorismmayofferapromisingstartingpointforfuturestudiesonconflictlifecycles.Takingonestepbeyondourempiricalfindings,thepatternofresultshasenterpriseresiliencedecreasefromthepre-violencetotheviolencestageandincreasefromtheviolencetothepost-violencestage.ThissuggestsapossibleU-shaperelationshipbetweentheconflictlifecycleandenterpriseresilience(Wenger&Möckli,2003:32).Understandinghowtheincidenceofandreturnstoenterpriseactivitieschangeacrosstheconflictlifecyclecanextendthepeace-throughcommerceresearchtomoreopenlyaddressthepropeacefunctionsofenterpriseandtheinterfacebetweenenterprisesandotheractors,includingMNEs.

Thepoorandmarginalizedindevelopingcountriesrespondtochangesinterrorismconditionsandlevelsinwaysthatmaysystematicallypatternvaluecreationandmarketexchanges.Explicatingtherelationshipbetweenenterpriseresilienceandterrorismcomplementsgrowinginterestintherolesoftransnationalcorporationsinconflictprevention(Wenger&Möckli,2003)andpostconflictstabilization(Williams,2008).AlthoughitistooearlytopredictwhetherorhowenterpriseresilienceenablesorhindersMNEengagement,weencouragepeace-through-commercetomoresystematicallyaddresstheinterfacebetweensmallandlargefirms,andespeciallybetweenformalandinformalventures.WeneedtomovebeyondthesimplequestionofwhetherMNEsshouldengage,towhereandwhenMNEscanworktogetherwithsmallandlocalentrepreneurstostabilizemarkets,forgenewexchangerelationships,andreconfigurevaluechainstocreatebothsocialandeconomicvalue.

Asecondarytheoreticalimplicationofourstudyconcernstheapplicabilityofourfindingstoothertypesofconflict(Jacoby,2008)–thatis,intheaftermathofsuddenorrecurrentcrisis(e.g.,earthquakes,tsunamis,Tang,2006),structuralupheaval(Honig,2001),displacement(ElJack,2007)orprolongedcombat(Abdelnour&Branzei,2009b).OurfindingsspeakdirectlytospecificeconomiceffectsofterrorisminurbanslumsinBangladesh.Generalizationstoothernational,institutional,andculturalsettingsaffectedbyterroristevents(inSouthAsia,Kumaraswamy,2007;orglobally,Smith,2008)shouldproceedwithcaution.Ourtheoryandfindingsmaynotapplytootherformsofviolencesuchasethnicorarmedconflict(Oberschall,2007),orotherformsofsocio-economicdisruptions,suchasrepressiveregimesand/orsystematicmarketdistortions(Cross&Morales,2007).

Athirdextensionconcernsthemethodologyusedtograpplewiththedynamicnatureofenterpriseresilienceacrossdifferenttypesandtrendsofconflict.Mixedmethoddesignscanprovidecomplementarystrengths.Forexample,actionresearchthattracksthespecificgoalsandconsequencesofenterpriseinterventionspostconflict(Abdelnour&Branzei,2009b)canbecomplementedwithentrepreneurs’evolvinglifenarrativestotrackhowtheirperceptions,attributions,andmotivationsmaychangeinresponsetoconflictlifecycles.Large-scalesurveysthatexplorethelongitudinalormultileveleffectsofconflictcanbesupplementedbyexperimentsconductedinnaturalisticsettingstoshedlightonthespecificmechanismsunderpinningtheobservedtrendsoreffects.

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PracticalImplications

Ourfindingsadvancepriordebatesonwhetherenterprise-focusedinterventionsareworthwhileintheaftermathofconflict(Nelson,2000),tohowandwhensuchinterventionscanyieldgreatersocialand/oreconomicvalue.Enterpriseresilienceplaysanimportantroleinpromotingsustainablepeace(Fort&Schipani,2004)andcreatingsocialandeconomicvalue(Simanisetal.,2008).Althoughthepro-peacefunctionsofenterprisearedeemedincreasinglyimportantinrestoringsocioeconomicstability(SEEP,2007),andthebeneficialeffectsofenterpriseactivitiesaresupportedbyethnographicobservationsinpost-conflictsettings(e.g.,inSudan,Abdelnour&Branzei,2009b;inSouthAfrica,Aymes,1989),therearehardlyanyrigorousstudiesofenterpriseresilienceat,andacross,differentlevelsofconflict.Ourstudyholdsseveralkeyimplicationsforpost-conflictinterventionstargetingenterprisedevelopment.

Becauseenterpriseresilienceissimultaneouslyinfluencedbytheconditionsandthelevelofconflict,werecommendthatinternationaldevelopmentinterventionstakebothintoaccountindecidingwhichsettingsand/oratwhattimesmaybenefitthemost.OurfindingsinBangladeshsuggestthatdevelopmenteffortsmaybebestchanneledtowardssettingsthathaveexperiencedareductioninterrorism,especiallyifthelevelofterrorismfollowingthechangeremainshigh–acombinationofconditionsthatmayprovidethehighestreturnstoenterpriseactivities.Wealsosuggestthatinterventionsmaybeleasteffectivewhenterrorismescalatessuddenly,especiallyifthelevelofterrorismfollowingtheescalationremainshigh.Last,wereconcilepriorsuccessesandfailuresunderpersistentadversity.Whenterrorismisrecurrent,returnstoenterpriseactivitiesarehigh,butveryfewarewillingorabletobeartherisk.Wecanextrapolateourfindingstospeculatethatitmaybemuchharderto‘‘turnaround’’acontextafterasuddenoutbreakthantostabilizeacontextthathasexperiencedareductioninthelevelofterrorism.Takinganother(speculative)stepbeyondtheempiricalsettingofourresearch,interventionsmaybemorelikelytosucceedwhentheyworkwith,ratherthanagainst,thelifecycleofconflict.

CONCLUSION

Thisstudyextendstheliteratureofinternationalentrepreneurshipbyexplaininghow,why,andwhentheurbanpoorindevelopingcountriesmayemergeasentrepreneursintheaftermathofterrorism.Wedevelopbothpsychologicalandeconomicexplanationsforthecounterintuitiveobservationthatenterprisemayflourishunderextremeadversityandconflict.Wemodelthereturnstoenterpriseactivitiesatdifferentconditionsandlevelsofterrorism,andsuggesthowtakingbothintoaccountcanincreasetheoddsofsuccessforinternationaldevelopmentinterventionsinpostconflictsettings.

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NOTES

1BRACwasinitiallycalledtheBangladeshRehabilitationAssistanceCommittee.

2Accordingtothe2001PopulationCensus,BangladeshBureauofStatistics,StatisticsBangladesh2006,http://www.bbs.gov.bd/dataindex/stat_bangladesh.pdf.Accessed7July2009.

3AhouseholdwaseligibleforinclusionintheNSPifitcontainedatleastonephysicallyablechildunder5yearsofage,andifthemotherwaspresent.

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Table1–Zero-ordercorrelations

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Table2–Resultsofinstrumentedvariablesregressions

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Table3–Post-hocprobingwithterrorismconditions

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Figure1–Atwo-stagemodelofenterpriseresilienceunderterrorism

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Figure2–Interactioneffects

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APPENDIX

iTheauthorsthankPaulBeamishforhisinsightsandguidancethroughoutthisproject.OurcolleaguesTimaBansal,GeoffKistruck,SrinivasSridharan,andStewartThornhillalsoofferedhelpfulsuggestionsonpriorversionsofthemanuscript.WearegratefultotheSpecialIssueeditorsandreviewers,andespeciallytoouractioneditor,MaryAnnVonGlinow,fortheirfeedbackduringthereviewprocess.FinancialsupportwasprovidedbytheSocialSciencesandHumanitiesResearchCouncil,a2007–2008Canadian-AfricanCapacityBuildingGrantforPrivateSectorDevelopmentResearchinAfricaco-fundedbytheInvestmentClimateandBusinessEnvironmentResearchFund(ICBERF),TheInternationalDevelopmentResearchCentre(IDRC)andTrustAfrica(FordFoundation),andtheRichardIveySchoolofBusinessatTheUniversityofWesternOntario.Apriorversionofthemanuscriptwaspresentedatthe2009AcademyofManagementMeetingsinChicago,whereitreceivedtheEntrepreneurshipdivisionnominationfortheall-academyCarolynDexteraward.