Despite the growing interest in understanding the effects of income inequality on economic growth, the influence of entrepreneurship-related institutional constraints on the inequality–growth association remains less understood. Drawing on an institutional constraints perspective in the context of startup entry regulation and credit constraints, we propose that under increasing income inequality, ease of startup or access to credit from the financial sector is positively associated with per capita economic growth. In a sample of 92 countries, robust to alternate specifications, we find (...) support for our hypotheses. Our findings contribute to the debates about the income inequality–growth nexus and imply potential policy interventions in the form of lower startup regulations and domestic credit provision from the financial sector to enhance economic growth under increasing economic inequality. (shrink)

Firms are central to wealth creation and distribution, but their role in economic inequality in a society remains poorly studied. In this essay, we define and distinguish value distribution from value creation and value appropriation. We identify four value distribution mechanisms that firms engage in and argue that shareholder wealth maximization approach skews the value distribution toward shareholders and top executives, which in turn contributes to rising economic inequalities around the world. We call on organizational scholars to study the value (...) distribution role of firms and its consequences for society, and introduce the articles in this volume of the special issue on economic inequality, business, and society. (shrink)

We examine the extent to which host country income inequality influences multinational enterprises’ (MNE) expansion strategy for foreign production investment, depending on their specific strategic objectives. Applying a transaction cost framework, we predict that national income inequality has an inverted U-shaped relationship with foreign production investment. As inequality increases, MNEs accrue lower transaction costs arising from interactions with various local actors, leading to higher probability of investment. As income inequality increases further, its effect on location attractiveness will become negative, as (...) its attraction effect is increasingly offset by additional monitoring, bargaining, and security costs owing to the more fractious nature of high inequality societies. In addition, we suggest that the impact of income inequality is contingent on investment objectives: The inverted U-shaped relationship is stronger for efficiency-seeking investment but weaker for market-seeking and competence-enhancing investments. We find substantial support for our hypotheses through an analysis of 27 years (1986-2012) of data on Japanese MNEs’ overseas production entries. (shrink)

Income inequality has increasingly become more ubiquitous within rather than across countries. Yet much of the theorizing has been at macro levels and does not sufficiently account for the firms within regions, which are primary sources of income inequality. Moreover, much of the research that does implicate firms, assumes that firms impact inequality equivalently. It neither accounts for the heterogeneity of firms within regions nor the potential for differential impact from that heterogeneity. Our study challenges these assumptions through a theory (...) that connects a firm’s life cycle and recruiting and compensation strategies to its impact on income inequality within and across regions. We incorporate a set of contingencies that also have the potential to alter the model’s predictions, which are based on external shocks and ownership of the firm. The paper concludes with a discussion of the implications of this model for theory, policy, and practice. (shrink)

Entrepreneurial agency—the individual power to change environments—is central to entrepreneurship research. Yet, from a social inequality perspective, beliefs in an entrepreneurial agency might differ based on the social class environments individuals are born into. Drawing on social cognitive theories, our findings across three data sets among students from Germany and entrepreneurs from the United States indicate that social class origins are associated with entrepreneurial self-efficacy (ESE) beliefs in adulthood. Exploring the underlying mechanisms, we find that students’ early entrepreneurial experiences in (...) education and practice are indicative of reproducing the class gap in ESE. When individuals collect mastery experiences such as social mobility or entrepreneurial success, their lower social class origins turn out to be associated with enhanced entrepreneurial agency beliefs. We discuss the implications for further research on social class, inequality, and entrepreneurship. (shrink)

The article addresses how societal inequalities shape market arrangements. While business scholars developed important work about the interplay of organizations and societal economic inequalities, less has been said about the embeddedness of markets in unequal social structures. We argue that this issue may be addressed by cross-fertilizing the sociological approach of Bourdieu and the Strategic Action Fields perspective. To demonstrate our view, we assessed the extreme case of polyethylene terephthalate (PET) recycling markets in Brazil, conducting a qualitative study based on (...) the precepts of abductive analysis and using data from different secondary sources, interviews, and participant observation. We verified the existence of correspondences between the power of strategic action fields and the positions the individuals controlling them occupy in what Bourdieu calls the social space and show how these differences enable inter field connections that tend to reproduce social hierarchies. (shrink)