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This study argues that internal colonial conditions hamper economic development in minority markets, in the context of African American and Korean entrepreneurship in the ethnic beauty aids industry on the South Side of Chicago, Illinois. This situation results from several issues surrounding the relationship between mainstream society and minority markets. For instance, the variety of business establishments in minority markets is limited, and undercapitalization stunts the growth of many of them. This is particularly true for African American-owned businesses. In addition, large corporations in mainstream society contribute to the underdevelopment of minority markets. Mainstream conglomerates focus on selling goods and services in secure niches of minority markets and limit their activities in other areas. As a result, minority entrepreneurs are unable to compete directly with these larger companies and end up selling goods and services in less stable niches of minority markets. The effects of underdevelopment and economic dependence in minority markets are further complicated by racial discrimination in mainstream society. Minority entrepreneurs and consumers are often stigmatized in mainstream society and stereotypes are used to rationalize the limited scope of economic opportunities available to them.

This chapter examines contemporary African American manufacturers in the ethnic beauty aids industry on the South Side of Chicago, Illinois. The central argument of this chapter is that contemporary African American manufacturers focus on doing business in the professional niche of the ethnic beauty industry, since they believed capital constraints and racial discrimination close opportunities in other economic niches to them. The business orientation of black manufacturers in the ethnic beauty aids industry is explained by the concept of an economic detour. All of the African American manufacturers who were interviewed indicated that when they started their businesses, they had limited capital. In itself, such humble beginnings are no different than those of other entrepreneurs. However, African American entrepreneurship is also embedded in an environment where access to institutions, resources and networks in mainstream society is limited because of racial discrimination. All of the African American manufacturers who were interviewed reported that they had considered borrowing money from mainstream banks to expand their businesses. However, some were unable to borrow, since they need substantial collateral to secure such loans.

This chapter examines the development of separate economic niches for middleman and African American distributors in the ethnic beauty aids industry on the South Side of Chicago, Illinois. The central argument of this chapter is that these economic niches developed for distributors of ethnic beauty aids in response to each group's ability to mobilize class and ethnic resources, just as they did for merchants. As a result there is a close relationship between the economic role of middleman and African American distributors and that of middleman and African American merchants. Korean and Jewish distributors sell ethnic beauty aids primarily to Korean merchants who own retail stores in the African American community, and African American distributors sell ethnic beauty aids to African American merchants and African American salon owners in the African American community. Pressures on middleman entrepreneurs to mobilize capital in minority markets was magnified by the internal colonial setting that such markets were embedded in. In particular, all of the middleman distributors indicated that economic stagnation in the African American community forced them to adjust their credit policies and pricing structures. The soft economy in the African American community created a great deal of downward pressure on prices in the ethnic beauty aids industry, and declining sales cause many Korean merchants to experience trouble paying their bills.

This chapter examines the relationship between the class resources that Korean merchants bring to minority markets and the ethnic resources that African American employees bring to minority markets in the South Side of Chicago, Illinois. The central argument is that a symbiotic relationship has developed between Korean merchants and African American employees. Despite their importance as mediators in Korean-owned stores, African American employees remain in a subordinate position to their employers. The equilibrium between Korean merchants and African American employees is maintained by a number of social controls. For example, Korean merchants control information and capital in their stores, which gives them authority over African American employees. In addition, before opening their businesses, many Korean merchants learned stereotypes about African Americans through contact with mainstream society. A number of incentives exist in minority markets which encourage Korean merchants to hire African American employees, and these inducement outweigh factors which would otherwise deter Korean merchants from hiring African American employees. The Korean merchants on the South Side of Chicago used several additional criteria to evaluate employees, and most were based on informal mechanisms. In fact, none of the Korean merchants reported using formal mechanisms to recruit African American employees, such as newspaper advertisements or local employment agencies. On the other hand, It was especially important to retain African American employees, since Korean merchants benefited from the ethnic resources they brought to their stores. In the ethnic beauty aids industry, the role of African American employees was of particular importance. In fact, many of the Korean merchants indicated that they preferred to hire African American employees, since African American customers felt more comfortable being served by them.

This chapter examines how perceptions of economic stagnation during the early 1990s affected ethnic solidarity among African America and Korean merchants on the South Side of Chicago, Illinois. The central argument is that perceptions of economic stagnation led to growing competition and declining ethnic solidarity among Korean merchants, while they had no effect on competition and increased ethnic solidarity among African American merchants. In some instances, differences in the ability to mobilize class resources among the Korean merchants had a detrimental impact on ethnic solidarity. Growing competition created an environment where Korean merchants became wary of one and other. For instance, one Korean merchant discussed how he avoided advertising his prices, because when his competitors saw what items he had on sale they would undercut his prices. As stagnation in the economy persisted, the African American merchants on the South Side of Chicago focused on a specific niche in the ethnic beauty aids industry, the sale of professional products to African American beauticians and barbers. This segment of the ethnic beauty aids industry was smaller and less price competitive than the general retail market that Koreans merchants occupied. Rather than attempting to mobilize capital and compete directly with Korean merchants, African American merchants chose to confine their business activities to a smaller economic niche where the ability to mobilize ethnic resources had a greater effect on business success.

This chapter examines two issues that are critical to understanding the social and institutional forces that reproduce internal colonialism on the South Side of Chicago, Illinois, sojourning on the part of middleman minorities and the role of the welfare economy in producing economic dependence in the African American community. The central argument is that the relationship between middleman merchants, African American consumers and the social welfare system reenforces internal colonial conditions in the African American community. There are a number of similarities between the black and Korean merchants who were interviewed on the South Side of Chicago. They were all well educated. In fact, most had earned a bachelors degree. The African American and Korean merchants came from similar age cohorts, and entered business at a similar stage in their lives. All of the informants reported working long hours, often in excess of seventy hours a week. Both the African American and Korean merchants employed family members in their stores, although this was usually limited to a spouse or another immediate family member. The sojourning orientation of Korean entrepreneurs in minority markets is reenforced by the presence of racial cleavages in society. When asked about their future business plans, a number of the Korean retailers expressed an interest in doing something different, outside of the African American community.

This chapter argues that minority markets are created and maintained by racism and racial discrimination in mainstream society, as illustrated by minority markets on the South Side of Chicago, Illinois. The disadvantages that African American and immigrant entrepreneurs faced in the economy and the role of mainstream institutions in highlighting inequalities between them, should be considered as components of doing business in a minority market. An examination of African American, Jewish and Korean entrepreneurs must be sensitive to the degree to which each of these minority groups faces antagonism from mainstream institutions. When minority entrepreneurs are examined as actors within the context of the minority market, a number of common themes emerge. For instance, African American, Jewish and Korean entrepreneurs in minority markets all experience capital constraints. African Americans and Jews began to do business in minority markets on the South Side of Chicago during the Great Migration years. Their experiences with minority markets set the foundation for later entrepreneurs. In the early to mid-1900s, undercapitalization limited the scope of African American business on the South Side of Chicago. African American entrepreneurs found it difficult to enter into direct competition with better financed Jewish merchants, and this situation led to a number of ramifications.

This chapter examines the historical development of the ethnic beauty aids industry in Chicago, Illinois, from the perspective of African American manufacturers. Chicago has historically had one of the largest concentrations of ethnic beauty aids firms in the U.S. This development was the result of a number of interrelated factors. Being national in focus, the ethnic beauty aids industry needed to be centrally located and in close proximity to major railroad lines. Geographically, Chicago was an ideal location. In the early 1900s, when the ethnic beauty aids industry emerged, Chicago was also a new city, teeming with industry, growth and opportunities. Most importantly, Chicago was a major destination for African Americans during the Great Migration. The Great Migration spurred the development of a sizable market composed of African American consumers in Chicago. George Johnson, an entrepreneur in the ethnic beauty aids industry, experienced racism and growing competition from large white-owned companies. Johnson established the Johnson Products Company and launched its first product line, Ultra Wave Hair Culture. In 1976, Johnson Products was the target of selective regulation by the Federal Trade Commission (FTC).