Fabian Diaz ’21 Ph.D. has focused much of his research on the legitimacy regulations provided to working-class industries’ “low-tech” services, where firms tend to experience slow growth and where founders tend to be less educated.
“Low-tech entrepreneurs are, by far, the largest group of entrepreneurs, but we don’t tend to study them,” he explains. But, Diaz explores this facet of entrepreneurship, which doesn’t necessarily have readily available data, and he has done the leg work needed to collect data to answer the questions that interest him. This August, he will defend his dissertation, “Regulative Legitimacy and Entry in Working-Class Industries,” which examines how regulations, like licensing, affect the number of new businesses.
In his research, Diaz uses data from the California Public Utility Commission on licensed moving firms and data from the popular online business directory Yelp to compare licensed and unlicensed service quality. He finds that licensing does not guarantee higher service quality, while unnecessarily increasing start-up costs without helping entrepreneurs attract business.
“In many cases, regulations and licensing create hoops to jump through before new legal businesses can start operating,” Diaz says. “When an industry is relatively new, entrepreneurs need these to legitimize themselves, their businesses and even their industries. But, these benefits lose value as new ways to legitimize themselves become available. Regulations can help new sectors grow, but, at some point, they prevent industries from reaching competitive levels by lowering the number of potential businesses.”
Diaz also explains that when industries are well known, consumers tend to assume that businesses are licensed. “Only 1 in 7 moving companies ever apply for a license in California. In fact, I find that consumers tend to rate unlicensed moving companies more highly on Yelp than licensed companies,” he explains. “Consumer reviews are a new way that entrepreneurs legitimize themselves, which provides an alternative to licensing.”
“Licensing might even be more costly now because consumer reviews influence the financial performance of businesses,” Diaz adds. “If unlicensed entrepreneurs get better ratings because they can charge lower prices, then licensing may lower businesses’ ratings by increasing operating costs, which in turn, may lower their revenue.”
Diaz knows first-hand the power of working-class entrepreneurship. He grew up in Mexico and came to the United States in 1999 with his family. Later, Diaz found and operated The Classic Movers in 2010, a moving service company in Fremont, California. Its success helped him pursue his educational goals—first completing both a bachelor’s and a master’s degree in economics from San Jose State University, and then, a Ph.D. from the Whitman School.
He is grateful for the opportunity to pursue his research interests as a Ph.D. candidate and a fellow at the Institute for an Entrepreneurial Society (IES).
“I wanted to come to Syracuse,” Diaz says. “What sold me was my advisor, Maria Minniti (director of the IES and the Louis A. Bantle Chair in Entrepreneurship and Public Policy). I could tell that she was the kind of advisor I needed—someone who was going to call me out and keep me working.”
“Everyone here has been amazing, and it’s been beneficial to be surrounded by others studying a variety of areas,” he adds. “People at conferences know the Whitman School of Management, and they know my advisor and my colleagues. I’ve gained a lot through my association with the Department of Entrepreneurship and Emerging Enterprises.” In his next chapter, Diaz will take his research ideas and entrepreneurial spirit to the University of Louisville, where he will begin his new role as an assistant professor in the fall of 2021.
Learn more about the Ph.D. experience at the Whitman School of Management.
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