Documento de Trabajo CIIE, No. 2008-08

The Rise and Fall of Socially Embedded Entrepreneurial Spin offs
Gonzalo Castañeda
Abstract
This paper develops an overlapping generations model to analyze the construction and ulterior collapse of ethnic business networks. The micro-foundation of the network expansion is based on bounded rationality, heterogeneous agents and their embeddedness in a particular form of social governance. The solution of the model, by graphical means and numerical simulations, offers valuable insights on how a downfall in this type of network is endogenously generated. The mathematical model and the simulations are motivated with some qualitative observations of the Barcelonnettes’ business empire, a group of French immigrants who setup an immigration chain in Mexico in the XIX century.

JEL Code: L14, N86, C15
Key works: business networks; immigration chains; social embeddedness; non-linear dynamics