Pequeños Comerciantes Coreanos (Pelucas)

Immigrant Small Business and International Economic Linkage: A Case of the Korean Wig
Business in Los Angeles, 1968-1977

Author(s): Ku-Sup Chin, In-Jin Yoon and David Smith
Source: The International Migration Review, Vol. 30, No. 2 (Summer, 1996), pp. 485-510
Published by: Center for Migration Studies of New York, Inc.
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Immigrant Small Business and

International Economic Linkage:
A Case of the Korean Wig Business
in Los Angeles, 1968-197?
Ku-Sup Chin
University of California, Irvine
In-Jin Yoon
Korea University, Seoul
David Smith
University of California, Irvine
This article investigates factors that have contributed to the growth of the
import-export business among Asian immigrants. The central argument is

that the development of Asian immigrants' import-export business has been
closely related to the increasing economic linkages between Asian countries

and their countrymen in the United States. Such economic linkages are a
product of the global economic restructuring whereby some developing

countries of Asia have become major exporters of low cost/low price consumer
goods to the United States. The Korean immigrants' wig business in Los
Angeles is studied as a case of contemporary import-export trade among Asian
immigrants, with major findings summarized as follows: first, the increased
reliance of the United States on imported goods by the 1970s led to a rapid
growth of the export-oriented industry in South Korea; second, wigs became
the major export item of South Korea due to its cheap labor force and
government-aid loans to the wig industry, third, a strong vertical integration
developed between Korean wig manufacturers in South Korea and Korean

importers, wholesalers, and retailers in the United States - that integration
provided Korean immigrants with initial business opportunities in the U.S.

economy, particularly in the low-income minority areas.
Immigrant small business in the United States is a subject of intense interest

since entrance into ethnic small business has long been regarded as a typical
way of economic adjustment to the United States among some immigrant

groups (Glazer and Moynihan, 1963; Waldinger, 1989). Despite widespread
skepticism about it - backward, doomed to extinction in industrial societies -
small business in the United States not only continued to exist, but actually
increased in size during the 1970s and 1980s (Fain, 1980; Light, 1984;
1An earlier version of this thesis was presented at the Annual Meeting of the American
Sociological Association, Miami, Florida, August 12-16, 1993. For their comments on an
earlier draft of this article, we would like to thank John Liu, Edna Bonacich, Samuel Gilmore,
and the anonymous IMR reviewers.
IMR Vol. xxx, No. 2 485
486 International Migration Review
Howard, 1990). The self-employment rate increased
to 9.0 percent in 1980, and 9.7 percent in 1990

1973:806-809,1983:47-48,1993:22). The continued
ness and a continuing overrepresentation of immigra
past two decades spurred further research on ethn

1989). Many of these studies focused on the question
groups concentrate in entrepreneurial activities, and
phenomenon (Light, 1972; Min and Jaret, 1985;

Ward, 1990).
In dealing with the issues of immigrant small b
researchers tend to address their topic only with
Although the significance of international economic
grant sending and receiving countries has been repea
1981, 1988; Nowikowski, 1984; Kim and Hurh, 1
1988), the global dimension of immigrant small b
sufficient attention.
This lack of attention can be attributed partly to
development in several Asian countries and to the m

to the United States that gained momentum only in
the importance of economic integration between As
home countries for business development and over
the United States can no longer be neglected or und
era in which commodities, capital, information, a
across the Pacific Ocean at ever-increasing rates (S

thermore, the cultural, social and economic ties betw
their emigrants to the United States are becoming st
advancement of communication and transportatio
capability of immigrant entrepreneurs to link overseas
coethnic entrepreneurs in the United States will beco
for the development of Asian immigrant entreprene
The import-export business among Asian immigr

rapidly growing economic linkages between several
expatriates in the United States. Since the mid-1960s
groups, such as Chinese, Asian Indians, and Korean
the import-export trade - which includes importing,
low cost consumer items manufactured mainly in th
1976; Koos, 1982; Wong, 1987).
The import-export trade is not something unique
1965 Asian immigrants. In fact, international tra
entrepreneurs has a long history, although it has no

tion from researchers. For example, as early as 1852
Francisco imported rice, tea, silks, sugar, opium (op
Korean Wig Business in Los Angeles 487
California until 1881), wheat, flour, ginseng, mercury, dried sea
products from China (Ma, 1984:101). The Chinese mercha
exported gold and silver, wheat, flour, ginseng, mercury, and dri
to their homeland. The growth of the Chinese fishing industr

in the 1870s and 1880s increased export of dried fish, abalone,
China (McEvoy, 1977; Chan, 1986:85).
Like the Chinese, many Japanese immigrants engaged in im
trade by importing "cooking ingredients for fellow immigrants
goods such as lacquerware, china, parasols, fans, scrolls, tea, and
Euro-American customers" (Chan, 1991:40-41). Silk became t
able item in the trade between Japan and the United States i
1913, thirteen large import-export firms accounted for 25 perc
by Japanese/Japanese-American owned businesses (Yamato, 198
While the late nineteenth century Asian import-export tra

meet the demand of coethnic and Euro-American customers for
goods, the Asian import-export trade in the late twentieth cen
as part of global economic restructuring in which several East A
supply labor-intensive manufactured goods to more advanced
the United States. For this reason, the market for import-expo
recent Asian immigrants often extends beyond coethnic me
general population. In the case of the Korean import-export tra
African and Hispanic Americans became the major consumer gr
types of Korean-manufactured, imported, and distributed pr

wigs, handbags, and accessories.
Given the increasing importance of the import-export business
immigrant communities, a global approach is required to explore t
sion of immigrant entrepreneurship. While some studies have take
tive (Light and Bonacich, 1988), the impacts of the international t
the growth of immigrant entrepreneurship remains poorly under
Thus, the primary purpose of this article is to investigate how
economic linkages between immigrant sending and receiving
shaped and facilitated import-export enterprise among Asian im
the United States. In exploring the impacts of international l
development of immigrant small business, we use the "comm
model proposed by Hopkins and Wallerstein (1986) and further
Gereffi and Korzeniewicz (1990). We also explore the market co
which the import-export business is most likely to develop amo

First, we differentiate the import-export ethnic business from
ethnic small business. After critically reviewing recent theories
small business, we propose that the access to products and mark
factor in the development of the import-export business. This
an application of the commodity chains model to th
Los Angeles during the 1968-1977 period.
The Korean wig industry was chosen for our case s
one of the first export items of South Korea. By do
distributing, and retailing in the wig industry, K

vertical integration in this industry. Moreover, the
entry point of many Korean immigrant entrepreneu
come minority areas. Many successful Korean entr
the wig business in African-American areas during
then moved upward to more capital-intensive and
business. Thus, without the help of wigs, it would ha
Koreans to establish businesses in minority neighbo
Even if they had managed to do so, their entranc

markets would have been delayed.
LITERATURE REVIEW AND THEORETICAL OVERVIEW

Immigrant Small Business
The literature on immigrant small business identifies two types of business

opportunities. One is ethnic markets and the other is minority areas in large cities
(Light 1972; Bonacich, 1973; Portes and Manning, 1986; Cobas, 1987; Light
andKarageorgis, 1994). These are distinguished from each other by several criteria:
customers, suppliers, and business locations. Ethnic markets develop out of the
demand of members of culturally defined groups for their distinctive products and
professional services offered by coethnic professionals. Once ethnic markets
become established, they sell not only ethnically specialized items but also goods
produced in the host country to coethnic customers. Spatially, ethnic-market

businesses concentrate in the ethnic community to offer fast and convenient
service for the needs of their coethnic members. Businesses in Koreatown in Los
Angeles and Chinatown in New York illustrate this case.
In contrast, minority areas provide business opportunities for some immi?

grant entrepreneurs who are willing to fill a marginal market which is aban?
doned or neglected by large businesses because of a low profit margin and high
crime rates in those areas. Most residents of those communities are low-income
and do not have means of transportation. As a result, they prefer or are forced
to make frequent shopping trips for small quantities of items at "mom-andpop" grocery and general merchandise stores in their neighborhoods. Further?
more, the interracial succession of residences and businesses in U.S. central

cities during the 1960s created replacement business opportunities in those
racially transitional areas. The urban disturbances in the 1960s, like the 1965
Watts riots in Los Angeles, accelerated the pace of outmigration of Jewish and
Italian immigrant merchants who had dominated the local business scene
(Aldrich and Reiss, 1970). Such ecological changes, coupled
mies of low-income minority areas, lowered the barriers to entr
in terms of capital requirements, business skills, and compet
businesses, thereby facilitating the entry of immigrant entrepr
Immigrant businesses in minority areas are often portraye
minority businesses that distribute the products of U.S.
low-income minority customers. By their liaison role betwee
and the oppressed minorities, they are said to enrich the form
the brunt and hostility of the latter (Bonacich, 1973; Che
1989; Min, 1993). Middleman minorities are said to perform
market place because of their marginal status in society, wh
to deal more objectively and indifferently with local custome
members (Becker, 1956; Blalock, 1967; Sway, 1980). In times of
however, they become easy targets for the frustration and an
towards the elite, since they are the masses' primary channe
the elite and the elite are too powerful to challenge.
One problem with the above classification of business opp
assumption that those two types represent the entire domain of
business. Other types of business opportunities exist for
business which do not fit neatly into either category. The imp
is a case in point. As Table 1 illustrates, the import-export trade

ethnic-market business in that it serves both coethnic and non
and is spatially dispersed. It is also different from middleman m
in terms of the products it handles. If immigrant entrepr
products from U.S corporations and distribute them to the lowe
they play a traditional middleman role. However, immigrant
the import-export business deal with goods that are manu
imported from their home country. For example, Yoon's (1991
small businesses in Chicago's black neighborhoods showed that
of them relied solely on Korean suppliers, who imported and
products as general merchandise, clothing, footwear, and wigs
Asian countries, including South Korea. In this sense, it seems ap

the import-export business as an export outlet of the homeland
Global Economic Restructuring
The past quarter century has witnessed significant changes in
division of labor (Frobel, Heinrichs and Kreye, 1980; Walt

Dunn, 1990; Ross and Trachte, 1990). The classical mode
division of labor was characterized by "the export of raw ma
periphery to the core" and "export of manufactured goods f
the periphery" (Chase-Dunn, 1990:Ch. 7). However, studies
TABLE 1
Three Types of Business Opportunities for Immigrant Entrep
_Criteria_Ethnic Market_Minority Market_Imp

Customer Coethnic Nonethnic Nonethnic
Supplier Coethnic Nonethnic Coethnic

Spatial Concentration Concentrated Dispersed Dispersed
Origin of Goods_Home country_Host country_Home country
the mid-1960s, a new international division of labor emerged as more and
more goods were manufactured in developing countries for export to advanced
countries. The globalization of production is becoming the dominant charac?
teristic of the modern capitalist system. This swift change occurred as a

consequence of a falling rate of profit for manufacturing firms in advanced
countries, largely because of high labor costs. High wages compelled firms in
advanced countries either to decentralize the production by assigning labor-
intensive work to smaller firms or to relocate production to developing

countries in order to utilize cheap labor there.
One consequence of this global shift was a rapid increase of exports from
developing countries to advanced countries. Export-oriented manufacturing
industry targeted on advanced countries grew especially in the Asian

semiperiphery of South Korea, Taiwan, and Hong Kong (Ross and Trachte,
1990:Ch. 6). The burgeoning wig industry was an early product of this
economic restructuring.
As production became globalized, the flow of products from manufacturing
sites in developing countries to the final consumer markets in advanced

countries became complicated. Gereffi and Korzeniewicz (1990) use the
"commodity chains" model to analyze recent international commodity flows
of goods manufactured in developing countries for export to advanced coun?
tries. In their research on international footwear production, they examine

both forward and backward sequences of the production process that include
the supply networks of raw material, sequences of manufacturing, and distri?
bution and marketing networks. While their commodity chains model was
initially developed to locate the places where economic surplus is produced or
"captured," we use it to identify the conditions that facilitate or impede the
development of the immigrant import-export business.
In exploring the impacts of international linkages on the development of

immigrant small business, we attempt to integrate insights from studies of both
immigrant business and global economic restructuring. In this sense, our approach
departs from conventional theories of immigrant entrepreneurship, such as cul?
tural theory, middleman minority theory, disadvantage theory, and ethnic enclave
theory All these approaches tend to focus on the adaptation patterns of irnmigrants
within the U.S. economic system, with little attention to the economic ties with
the home countries that irnmigrants strategically use for establishing and main-
taming small business. In contrast, our approach aims at i
external (e.g., international economic linkages) and intern
market conditions) factors that facilitated or impeded the dev
import-export business among immigrants. The central thesis of
that this type of immigrant enterprise developed in relation t
changes between immigrant sending and receiving countries, rath
of characteristics of immigrants themselves (e.g., cultural
trepreneurship or sojourning orientation) or the disadvant
immigrant workers in the American labor market. In this sense,
in line with that of Light and Bonacich (1988) and Min (1988),
explaining immigrant small business in the international economi
a global perspective that ties internal aspects of the domestic

external economic changes.
We propose that access to products is a key factor behind t
of the import-export enterprise among immigrants. Immigran
access to products when their home country is a major expor
tured goods to the U.S. market. However, this international tr
not automatically lead to the development of import-export
when immigrants can get preferential access to products,
reduced price, can this trade linkage be translated into tangi

development of the import-export enterprise.
The access to markets is another important factor that determ
and growth of the import-export business. Unlike the access to p
immigrant entrepreneurs can have some degree of control, the a
is often exogenous to the characteristics and will of immigrant en
is because market conditions of the host country are largely deter
in tastes and lifestyles of the native population. Thus, the openin
new markets conducive for immigrant businesses are usually
timing of arrival of immigrants and their characteristics. Non

market conditions greatly affect the likelihood of import-export
and grow.
In the following sections, we first explain the data and methodology of this
study. Next, we briefly describe the historical development of the wig industries
in South Korea and Hong Kong. Special attention is focused on the differences
between the two countries in the wig export and distribution processes. That
comparison enables us to explain why the wig retail business has developed
among Korean immigrants but not among Hong Kong Chinese immigrants.
DATA AND METHODOWGY

The data for this study was drawn largely from two sources: published materials
and field interviews. The published materials include U.S. Wig Market, edited
and published in 1975 by Korea Trade Promotion C
Export Market from 1968 to 1975, published by Ko
Corporation; Prospects for Wig Export, issued by Korea
and 1971; and U.S. General Import horn 1968 to 19

Department of Commerce.
KOTRA publications contain detailed information no
wig industry, but on the U.S. and Hong Kong wig indu
to obtain more detailed information on the wig boom a
newspaper articles from both the Korea Times (Los An
New York Times from 1968 to 1975. A professiona
Hairdresser/Salon Owner, published by the National H
tologist Association, also provided valuable information
Additional data was gathered through field interview
Angeles area between July and December of 1991. We inte
wig businessmen; three manufacturers in South Korea (
importers, seven retailers, two staff members of the K

Association, and one Chinese staffmember of the Chinese
in Los Angeles. The snowball sampling method was used
who have been involved in the wig industry since the late
All the interviewees, except two, were male. Most of the in
in shops and offices. Open-ended inquiry was focused o

business links, supply networks, business location, and
Unfortunately, no Chinese immigrant wig merchants w
survey partly due to the fact that few Chinese immigrants en
Interviews with Korean merchants confirmed that.
In computing the number of wig shops run by Korea
Angeles, we relied on a Korean business telephone direc
censuses since the latter severely undercounts minority
Korean Directory of Southern California has been comp
Keys Printing Co. under the direction of the Korean A
California since 1972. Its yellow pages section lists firm

according to business type.
The directory, however, has its own limitation. Sin

voluntary report basis and is intended to circulate within
certain types of businesses whose customers are non-Kor
represented (Bonacich and Jung, 1982:78-79). Nonet
businesses list their names in the directory to attract a
suppliers and prospective Korean wig shop owners. Thu
underreporting, the directory contains the most compreh
the number, type, and location of Korean businesses in L
2Korea Trade Promotion Corporation is a government agenc

encourage overseas marketing.
THE KOREAN WIG INDUSTRY DURING THE 1968-
Other researchers note that the import-export trade is an im
activity among post-1965 Asian immigrants. According to Sun
sive survey on the occupational distribution of Chinese immigra
States, the import-export trade marked the second largest job
Chinese immigrants in New York's Chinatown. Wong (1987)
Chinese goods are widely distributed to the United States due
immigrant import-export traders. Koos' (1982) study on South A
in the garment industry showed that the majority of Asian I
garment entrepreneurs import finished goods from India for th
Similarly, Koreans in Los Angeles engaged heavily in the wig
the 1968-1977 period. As a result, wig retailing became the
business among Korean immigrants during that time. As o
rean-owned stores were estimated to account for over 90 p
shops in the Los Angeles area (Bonacich, Light and Wong, 1
The period of 1968-1977 is important for our study for tw
the wig boom started in the early 1960s, reached a peak in th
early 1970s, and declined afterward. Thus, the 1968-1977 per

of the growth, apex, and decline of the Korean wig industry.
influx of Korean immigrants to the United States started du
The timing of Korean immigration to the United States wa
the wig boom in the United States, but it turned out to be critic
of the Korean wig business.
Although our primary concern is the Korean wig industry,
contrast it with that of Hong Kong. The facts that Hong Kon
major wig exporting countries and that a massive immigratio
Chinese started simultaneously with Korean immigration rais
question - why did the wig retail business come about onl
immigrants?
Despite the salience of the wig retail business among Korean immigrants, it
has rarely been investigated. Although some researchers (Bonacich, Light and
Wong, 1976; Light and Bonacich, 1988) acknowledged the importance of wig
retailing for Korean immigrants, treatments of it were very brief. Only Illsoo
Kim's (1981) study of the wig industry in both South Korea and the United
States provides in-depth analysis. However, his largely descriptive study, which
inspired our study, leaves out a number of issues that need further exploration.
Our study attempts to elaborate on these issues.
Growth of the Wig Industries in South Korea and Hong Kong

Historically, the United States had an indigenous wig industry. Traditional
wig makers processed natural hair imported from Europe and East Asia and
produced expensive custom-made wigs. As the wig fashion
in the mid 1960s, however, U.S. wig manufacturers we
'explosive' demand for wigs through domestic productio
Exchange Bank, 1971). According to a contemporary ne
York Times, in I960 nationwide wig retail sales were estim
They had grown to $500 million in 1969, an increase of
(Gourse, 1969). One national survey conducted by Da
1974 showed that about 38 percent of American women
possessed at least one wig (KOTRA, 1975).

To meet such an exploding demand for wigs and to cope
wages at home, U.S. wig firms began to either establish fo
or import foreign manufactured wigs. Many processes i
highly labor intensive so that newly developing countrie
cost labor force were particularly attractive manufactu
conditions, Hong Kong and South Korea emerged as majo
The United States was the largest wig market, and the
world s wig exports were destined to go to there. As show
of U.S. wig imports in the world market accounted for
73.6percentin 1972, and 71.5 percent in 1974. As Table
ranked first in the export of wig products to the Unit
1965, Hong Kong supplied 45.5 percent of all wigs im
States; its export reached a peak in 1970 by supplying ha
to the United States. Hong Kong's dominance in the
however, began to decline from 1972 onward, as Sout
formidable competitor. In 1972, South Korea became the
country to the United States, increasing its market sha
1965, to 89 percent in 1974, and 90 percent in 1978.
share of Korean-manufactured wigs decreased in the 198
for more than 80 percent of all wigs imported to the Un
the 1980s.3
Production Network
The wig industries in Hong Kong and South Korea came into existence as U.S.
wig firms imported raw material (human hair) from both nations in the early
1960s (Moon, 1973). Human hair scouting became popular in both countries
(Kim, 1981). One manufacturer we interviewed in South Korea commented:
^During 1991-1993, the proportion of wigs imported from South Korea abrupdy plummeted,
whereas the amount of wies manufactured in ancf imported from China, Indonesia, and Thailand
strikingly increased. The relocation of South Korean wig manufacturing factories to China, Indonesia,
Malaysia, and other Southeast Asian countries is partly responsible for the sudden rise of wig imports
from these Asian countries (U.S. Bureau of Census, 1991,1993).
TABLE 2
Proportion of U.S. Wig Import in the World Market, 1970-1974 ($ Thou
\ear_Total_ILS._Germany Japan_England France_Other
1970 276,826(100)196,191(70.1)34,416(12.3) 9,030(3.0)22,208(7.9)3,424(1.2) 14,558(5.2
1971 168,033 (100) 105,342 (62.7) 20,309 (10.1) 23,842 (15.0) 23,824 (15.0) 4,857 (3.1) 7,422 (4.1
1972 120,342(100) 88,625(73.6) 9,109(7.6) 8,238(6.9) 5,774(4.8)4,483(3.7) 4,133(3.4
1973 108,022(100) 77,022(71.3) 9,708(7.4) 6,923(6.4) 7,464(6.9)4,717(4.4) 3,861(3.4

1974 91,296(100) 65,307(71.5) 9,295(10.2)8,643(9.5)1,107(1.2)4,650(5.1) 2,294(2.5)
Source Korea Trade Promotion Corporation, U.S. Wig Market, p. 18, Table 4,1975.
Note: Figures in parentheses indicate percentages.
TABLE 3
U.S. Wig Import from Selected Countries, 1965-1978 ($ Thousand)
Year_Total_Korea Hong Kong Taiwan_Japan_Other

1965 36,815(100) 1,850(5.0) 16,738(45.5) 41(0.1) 6,711(18.2) 11,477(31.2)
1966 40,175(100) 10,612(26.4) 10,873(27.1) 63(0.5) 4,278(11.8) 14,349(35.6)
1967 75,549(100)20,740(27.5) 34,630(45.8) 891(1.2) 7,358(9.7) 11,930(15.8)
1968 96,506(100) 30,899(32.0) 44,994(46.6) 1,520(1.2) 8,946(9.3) 10,147(10.5)
1969 135,971(100) 52,233(38.4) 66,458(48.9) 1,739(1.3) 7,065(5.2) 8,476(6.2)

1970 196,191(100) 85,393(43.5) 99,494(50.7) 2,167(1.1) 2,571(1.4) 6,356(3.2)
1971 105,342(100)47,304(44.9) 51,026(48.4) 1,960(1.9) 1,408(1.3) 3,644(3.5)

1972 88,605(100) 54,646(61.7) 28,293(31.9) 1,415(1.6) 638(0.7) 3,649(4.1)
1973 77,002(100)60,627(78.7) 11,955(15.5) 1,865(2.4) 462(0.6) 2,093(2.7)
1974 65,307(100)58,082(88.9) 4,911(7.5) 1,089(1.7) 364(0.5) 861(1.3)
1975 55,559(100)50,130(90.2) 2,996(5.4) 1,099(2.0) 516(0.9) 818(1.5)
1976 53,374(100)48,020(89.9) 2,859(5.3) 1,091(2.0) 361(0.7) 1,043(2.0)
1977 45,679(100)41,134(90.1) 2,428(5.3) 514(1.1) 403(0.8) 1,200(2.0)

1978 48,508(100)43,735(90.2) 2,034(4.2) 483(1.0) 337(0.7) 1,919(3.9)
Source: U.S. Department of Commerce; U.S. General Import, 1965-1978.
Note: Figures in parentheses indicate percentages.
Hong Kong manufacturers had one advantage. They could buy human hair from
mainland China at much lower prices. That's why the Hong Kong wig export beat
the Korean wig export in the early 1960s.
In 1968 synthetic wigs, called Kanekalon, were invented in Japan. This was
a turning point in the wig industry. As the demand for inexpensive synthetic
wigs had grown rapidly, the shift from the export of raw material to the export
of manufactured products took place in South Korea and Hong Kong. In the
first five months of 1973, 10,728,212 synthetic wigs were sold in the United
States (NHCA, 1973). Instead of merely exporting human hair, the two
countries started manufacturing wigs for the U.S. market. The local industry
grew dramatically in the following years. In Hong Kong, there were merely
eight wig factories and fewer than 300 workers in 1963 (KOTRA, 1975).
However, as Table 4 shows, the number of Hong Kong wig firms and workers
increased to 422 and 30,990, respectively, in 1970. In South Korea, there were
43 wig manufacturers with 8,251 workers at the e
pinnacle of 169 wig manufacturing firms and 44,623
and then began a gradual downhill trend. As a result, b
Korean wig firms and workers dropped to 96 and 21,50
Promoted as part of a development strategy of "export-o
tion," wigs became a major export item during the late 1
both countries. In South Korea, wigs once marked the thir
accounting for roughly 9.5 percent of the value of total e
nearly 11.2 percent in 1970 (United Nation, 1972,197
proportion of wigs in the total exports rose from 0.3 perce
in 1968, making wigs the fourth largest export item (M
Export Network
The key feature of the wig industry in Hong Kong and
it was an export-oriented industry. While both Hong
depended heavily on foreign markets, however, the tw
different arrangements for export. The wig export indu
solely dominated by U.S. buyers (KOTRA, 1975). In cont
from South Korea were mosdy arranged by three differen
U.S.-based branch offices of Korean wig firms, and Kor
Figure 1 illustrates key players in exporting and marke

Korean wig industry.
US. Buyers
Although we do not know exacdy what amount of wigs
from Hong Kong and South Korea, it is certain that
the wig trade in the early stages in both countries. They b
firms with specifications and styles and supplied w
wholesalers and department stores in the United State
tinued to play a crucial role in the export of Hong Kon
gradually declined in South Korea as local factories e
export channels and Korean immigrant traders began im
United States (KOTRA, 1975).
US.-BasedBranch Offices of Korean Wig Manufactu
At the end of 1960s, some Korean wig manufacturer
branch offices in New York, Los Angeles, and Chicago i
their sales abroad. By 1972, at least twelve companies h
Los Angeles {Korea Times, February 1, 1972; Keys P
order to establish their own distribution channels, bran
497
Korean Wig Business in Los Angeles
TABLE 4
Wig Firms in Korea and Hong Kong, 1966-1975

Korea
Hong Kong
Average Average Average Average

"Number Number of Export Number Number of E
Number of Workers Value per Number of Workers V
of Firms Workers per Firm Firm3 of Firms Workers per Firm
1966
n/a
1967
43
n/a
n/a
77
4,752
61.0
1.8
8,251
191.1
4.8
143
10,369
73.0
2.4
2.3
n/a
1968
61
14,985
223.7
4.6
197
15,088
76.5
1969
146
27,589
189.0
3.6
347
25,486
73.4
1.9
1970
134
32,920
245.6
6.4
422
30,990
73.4
2.4
1971
118
30,156
255.6
4.0
381
21,933
51.5
1.3
1972
169
44,623
264.0
3.2
233
10,705
45.9
1.2
1973
150
34,618
230.7
4.0
130
3,382
26.0
0.9
1974
109
23,541
216.0
5.3
68
1,246
18.3
0.7
1975
96
21,503
224.0
5.2
n/a
n/a
n/a
n/a
Source: Republic of Korea, Economic Planning Board, foport on Mining and Manufacturing Swrwy, V&G-WV, Hong Kong, Department
of Commerce, Trade Statistics, 1966-1974.
"Average export value per firm is calculated by dividing the amount of exports by the number of firms (unit: $ hundred thousand).
Figure 1.
Wig Commodity Chain?,
U.S.
Department!
Wig Firms
Stores
(Buyers)
L Domestic .
Synthetic
Wholesale
Fiber
Distributors
Integrated
Wig
Production'
Korean Jj
Firms
(U.S. Branches)
Beauty
Salons
Human
Hair
Korean
Immigrant;
importers
Wig
Shops
Raw Material
Supply Production Export Marketing
Network Network Network Network

Source: Gereffi and Korzeniewicz (1990:52).
make direct contracts with U.S. domestic wholesalers an
offering lower prices for wigs than U.S. importers cou
Subsequendy, U.S. wig firms and importers that had
Hong Kong wig manufacturers began to change their
Korea (KOTRA, 1974,1975). As a direct result, the sha
in the U.S. wig market shrank. By 1978, wigs impor

accounted for only 4.2 percent of the total value of
compared to 90.2 percent for Korean-made wigs (seeT
Immigrant Importers
The Korean exports were further enhanced by the entr
wig traders. Although several Korean immigrants had a
hair importing business on an individual basis before
branch offices, their number and activity remained ne
April 23, 1970). It was through the Korean branch off
number of Korean immigrant entrepreneurs could acti
wig importing direcdy from South Korea. According to
Korea Times (April 3,1973), as of March 1973 there wer
importers throughout the United States, including 28 imp
Korean wig importers' contribution to the Korean wig
far greater than their numbers. From these immigrant

Korea wig manufacturers could obtain information on
trends. Since they were not able to develop new styles o
U.S. hair designers continuously developed innovative
wig manufacturers had to depend entirely on Korean im
for information on trends in U.S. wig fashion.
Upon recognizing the significant role of Korean immig
wig export, the Korean government began to support an
ways. First, it dispatched delegates of Korean wig manu
cities for an on-site inspection [Korea Times, November
between the delegates and Korean immigrant wig importer
forum for exchanging information, revising price policy,
kinds of administrative support. Second, the Korean go
supported Korean immigrant wig importers through the
(KEB). The establishment of the Los Angeles branch of KEB
business activities among Korean immigrants in the Los An
business supporting loans. At first, the bank had to take t
aging Korean irnmigrants to borrow because they did not k
financial system. Due to its support, several immigra
companies grew rapidly in the early 1970s (Korea Times
Central Daily News, March 25,1975; September 15,1
Distribution Network
Department stores, beauty shops, and specialized shops retail
ment stores had been the major retailing establishments unti
wig shops in the United States dealt with only expensive hig
made of human hair. The price of natural hair wigs could be t
as that of synthetic ones. With the arrival of low-price synthetic
for human hair wigs rapidly declined (Gourse, 1969). As s
salons that sold synthetic wigs mushroomed, the market shar
stores decreased from 64 percent in 1970 to 43 percent in 19
accordingly, beauty salons and wig shops increased their market
than 40 percent in 1970 to 50 percent in 1973 (seeTable 5).

Access to Products
Hong Kong and South Korea took different strategies in dev
of production, export, and distribution of wigs. Those differ
turn, resulted in Hong Kong and Korean immigrants having d
to the wigs manufactured in their homelands. To illustr

industries in Hong Kong and South Korea were different, we
and degree of independence of local firms in the two countr

significant impacts in determining export strategies of each
and Korzeniewicz, 1990; Levy, 1990).
Despite a heavy dependence on the U.S. market, there were few
or U.S.-invested wig firms in either Hong Kong or South Kor
1974). Instead, subcontracting was the dominant form of U.S.
ment in the wig industries of the two countries. As compared to
the wig industry relied less on U.S. capital for two major rea
manufacture was a typically labor-intensive industry and he
capital to get started than other industries; thus, many local b
run their own small factories without infusions of U.S. capital. S
exceptions, U.S. wig firms were not large corporations. They we
investing a huge amount of capital in foreign countries (KOTR
Despite similarly dependent subcontracting relationships w
Korean and Hong Kong wig firms were different in their siz
independence. In size, Korean wig firms were, on average, larg
Kong firms. As Table 4 shows, the average Korean firm was f
of the average Hong Kong firm in terms of workforce, an
average export value per firm. In independence, Hong Kong
heavily dependent upon U.S buyers for export, whereas Kore
some level of autonomy from the U.S. buyers. Unlike their K
parts, the Hong Kong wig firms were not able to establish th
channels owing partly to their small size. As Levy (1990
TABLE 5
Domestic Market Share
Shop_1970 1973
Department Store 64% 43%
Beauty Salon n/a 25%
Wig Shop n/a 25%
Door-to-Door, Mail Order_n/a_7
Source: American Hairdresser/Salon Owner (June, 1974), National
dresser and Cosmetologist Association, New York.
economically advantageous for the small-sca

on U.S. buyers for orders and export oudets
ment reduced the transaction costs of search

offshore enterprises.
In contrast, the Korean wig firms were cap
oudets, with the help of the Korean govern
The Korean government pursued an active e
Kong colonial government was committed
encourage export, the Korean government use
aid loans, which were allocated to trading com
export record. One staff member of the Kor

commented as follows:
At that time, government-aid loans were crucial. The
the rise and fall. Each wig manufacturer made a fran
one company set up a branch office in the Unite

competitively began to establish their own.
Unlike U.S. buyers, who distributed wigs on
department stores and wholesalers, Korean fir
scale retailers (see Figure 1). The very existen

United States set up conditions under which
could easily purchase wigs. Thus, the U.S.-b
mechanism for connecting Korean immigrant
wig manufacturers in Seoul.
In contrast to the liaison role played by
offices, the absence of Hong Kong branch off
the opportunity for Hong Kong Chinese imm
lack of access to wigs, in turn, impeded the
business among the Hong Kong Chinese imm
In the wig retail business, access to the produc
immigrants with opportunities and resources

One Korean wig retailer explained how he got
I read an advertisement on wigs in an ethnic newspa
would sell wigs to retailers. From what I read, I coul
were low. I decided to jump into wig retailing.
As Illsoo Kim (1981) points out, the wig industry pro
entry point for Korean immigrants. Many Korean imm
retailing without any knowledge of wigs, since setting up
neither much initial capital nor specialized business skills
ranged from $2,000 to $20,000, depending on the locat
shop. That amount of capital could be easily financed thro
and loans from family, friends, and rotating credit associati

remarked on the attractiveness of his business:
Unlike meat and vegetables, wigs didn't go bad, and were not bulky
need a large storage place. I used the wig boxes for display stands. W
into the wig business, I didn't know the types of wigs and fashion tr
were just the prices. Nevertheless, I did a thriving business. I bought
per piece and sold them at $15 to $20. The wig business was a real
The main advantage that Korean immigrant wig retail
and more established department stores and beauty shops
get wigs at reduced prices. Because Korean merchants
directly from Korean manufacturers or Korean immigr
could undersell department stores and beauty shops. Furth
retailers easily obtained extended credit from Korean impo
retailer put it, "such preferential treatment was almost

American wholesalers."
As the business prospered and the number of Korean
some Korean immigrants began to participate in wig imp
South Korea, bypassing the Korean branch offices. One
retailer established direct trade relations with manufacturin
relatives in Seoul:
As I engaged in the wig retail business, I realized that wig importing
job. But I didn't know even how to open an L/C [letter of credit]. L
up knowledge on the trade piece by piece by overhearing sales agents
to a branch office to purchase wigs.
One successful immigrant importer in Los Angeles built
South Korea and imported wigs from them. A former repres
branch office quit his job and set up his own importing tr
people who had ventured into the wig business soon began to
by their success, more and more Korean immigrants entered w
6 shows, the number of Korean wig shops in Los Angeles r
to 152 in 1975 - later falling to 129 in 1977. In sum, the bran
wig firms and independent Korean wig importers were co
Korean immigrants had over other immigrant groups. Tho

enabled Korean immigrants to monopolize wig retailing in
MARKET CONDITIONS FOR THE WIG RETAIL BUSINESS

The Korean immigrant wig retail business would not have succeeded unless
Korean immigrants had opportunistic market conditions. As a matter of fact,
the entry of Korean immigrants into the retail business was gready facilitated
by the segmented nature of the American wig market. As Wind (1978) points
out, the domestic consumer market of an advanced country is not homogene?
ous; it is fragmented in terms of income and consumption patterns. Some

portions of the consumer market are dominated by well-known brand names
and large-scale national industrial organizations, whereas others are neglected
by large businesses. The latter market segments are likely to be targets of

immigrant small business because of the low barriers to entry with respects to
initial capital, business skills, and business competition. Thus, a common

strategy among Korean entrepreneurs had been to specialize in these specific
market niches, such as retailing inexpensive wigs to low-income AfricanAmerican clients. One interviewee explained his decision to open his wig shop
in an African-American neighborhood:
I discovered a strong demand for cheap wigs among black people. Unlike white
people, they were not concerned much about the quality. It was much easier to deal
with them than to deal with white clients.
Regarding competition from local businesses, he continued:

I knew that there were few, yes, only a few shops which sold wigs in this area. As far
as competition was concerned, this area was like a calm belt.
Figure 2 provides graphic evidence that Korean wig shops tended to cluster
in low-income black areas, especially in South Los Angeles. By 1975, almost

70 percent of Korean wig shops were located in South Los Angeles. When we
relate major clustering sites of Korean wig shops with the areas' racial compo?
sition, we find that the majority of residents were African Americans. As can
be seen in Table 7, the black population in these census tracts ranged from 50
to 91 percent in 1970 (with the Downtown area as an exception).

The concentration of Korean wig shops in the African-American commu?
nity was facilitated by the American wig market structure, which was seg?
mented by race and income. Although African Americans made up only 12

percent of the U.S. population, they purchased more than 30 percent of the
wigs sold in the United States (Dougherty, 1971). Despite this high level of
demand, there were not many wig retailing oudets in the black community.
In light of this, they were "underserved" by the large wig retailing estab?
lishments. Realizing the gap between the demand for and supply of wigs,
Korean immigrants began to set up stores in the African-American residential
areas. Thus, the notable absence of wig retail shops in those minority areas
lowered the barriers to entry for small-scale immigrant wig retailers. The result,
TABLE 6
Number of Korean Wig Shops in Los Angeles
Total Number of Number of Percent of
Year_Korean Shops'*_Korean Wig Shops_Wig Shops

1972
454
57
12.6
1975b 1,689 152 11.1
1977_2^036_129_63_
Source: Korean Directory of Southern California, 1972,197

Southern California and Keys Printing Company.
'Nonprofit organizations, alumni associations and churches a

bAdditional data for this year are gathered from supplement
in the words of a former president o
that "the wig retail business in black
hands of Korean wig retailers."
If the neglect of markets in minority
level of business competition, the inte
in racial 'transition areas' of Los Angele
overhead costs. As African American
areas of the 1940s and 1950s, the wh
the area at the intersection of the 86th
2382 and 2383), the white populatio
1960 and 1970, whereas the African-
to 10,680. As Aldrich and his colleagu
followed by white shop owners leavin
businesses (Aldrich et aL, 1983). This
install retail shops in these transition
IMPORTANCE OF WIG INDUSTRY FOR GROWTH OF

KOREAN IMMIGRANT ENTREPRENEURSHIP
The wig industry is of enormous importance to the growth of Korean immigrant
entrepreneurship. First, the wig industry precipitated the emergence of the

entrepreneurial class among Korean immigrants. Because of easy access to wig
products, large numbers of recent arrivals from South Korea could become
instant entrepreneurs by entering into the wig business. Encouraged by the
success of the forerunners in this industry, Korean immigrants gravitated to the
industry, forming 'entrepreneurial chains' in addition to 'immigration chains.'

In fact, the wig industry was instrumental in providing entrepreneurial drive
for new immigrants through capital formation and accumulation of business

know-how. As wig retailing declined in the mid-1970s due to the drastic decline
in demand for wigs and fierce competition among Korean wig retailers, some
wig retailers sold their shops to incoming Korean immigrants and entered into
more capital intensive lines, such as liquor retail, garment manufacturing,

restaurant, or dry-cleaning and laundry businesses (Kim, 1981).
504
International Migration Review
Figure 2. Geographical Distribution of Korean Wig Shops in Los Angeles

(by Zip Code)
L.A. Down Town

35th &.Jefferson
63rd &.Pacific
6th &.Broadway
Martin Luther King &.Crenshaw
58th,86th &.Vermont
I over 12 shops
16-11
EE3 2-5
Source: Korean Directory of Southern California, 1975, Los Angeles: Korean Association of Southern California and Keys Printing Co
Note: Street names indicate the concentration area of Korean wig shops within the given zip code.
TABLE 7
Changing Population Composition of Selected Areas
Area
Census
1960
1970
1980
Track No.
White Black
White Black
White Black
Martin Luther King &

Crenshaw
86 & Vermont
Pico & Crenshaw
2342
2343
1,103
673
3,357
1,104
472
548
2382
2383
3,349
3,559
746
1,035
1,633
2181
3,049 1,218
3,181 844
2,567 1,843
2212
2213
Los Angeles
Downtown
2076 2,574
2077 2,609
2079 1,702
609
3,907
195
154
3,927
4,112
6,586
263
436
4,420
5,745
1,137
1,597 3,196
3,672 1,361
1,507 4,614
190
35
14
976
30
15
1,028
1,704
1,537 2,696
3,376 643
1,943 4,380
136
1,138
532
12
262
170
Source: U.S. Bureau of the Census, U.S. Census of Population, I960,1970: Census Tracks, Los Angeles-Long Beach SMSA, Table P-l; U.S.
Census of Population and Housing, 1980: Census Tracks, Los Angeles-Long Beach SMSA, Table P-7.
Second, the wig industry led the growth of import-export
Korean immigrants. Once Korean immigrants realized the po
low-cost items in minority markets, some Korean immigrant en
to import goods produced in South Korea, utilizing business ex

in the wig import business. Like wigs, all of this merchandise
in South Korea, imported by Korean importers, and sold by
recent years, however, Korean retailers prefer merchandise man
and China to Korean-made because of lower prices. The risin
Korean workers reduced the competitiveness of Korean-made m
international commodity market. Some South Korean manufact
factories from South Korea to China, Indonesia, and Malaysia

labor costs, following the path of the United States and Japan
The increased import of low-cost manufactured items fro

connected to the proliferation of swap meets in Latino and
residential areas in Los Angeles (Chang, 1990:Ch. 4). Thes
swap meets are no longer traditional bazaars where people tr
dise, but retail oudets of new imported goods. Clothing, foo
handbags/luggage, and accessories are among the most popul
indoor swap meet stores. The increased import of general m

China, Taiwan, and Indonesia, in turn, has accelerated the r
wholesale industry. Nowadays, hundreds of Korean wholesal
Los Angeles distribute imported goods not only to the local r
retailers from U.S. major cities. They are energetically expan
territory to overseas by exporting imported goods from Asia t

In this process, they are expanding the horizon of immigrant
CONCLUSION
This article focused on the factors that have facilitated the growth of on
prominent immigrant business - the import-export business. The central arg
ment is that the emergence of the import-export immigrant business and its success
were closely related to global economic restructuring. As production became
globalized to take advantage of cheap labor overseas, labor-intensive goods beg
to be produced in developing countries for export to more advanced countrie
One consequence of such a global shift in production was a rapid increase in w
exports from South Korea and Hong Kong to the United States.
The U.S.-based branch offices of Korean wig firms played a liaison role
connecting Korean immigrant entrepreneurs to wig manufacturers in South
Korea. With the help of strongly linked international trade networks, Kore
immigrant entrepreneurs could purchase wigs at low prices, obtain credit f
an extended period, and get early information about new styles of wigs. Tho
advantages enabled Koreans to monopolize the wig retail business in the la
1960s. In contrast, the heavy dependence of the Hong K

U.S. buyers prevented Hong Kong Chinese immigrants
wigs, which helps explain why the wig retail business d
Chinese immigrants.
The fragmented nature of the wig consumer mark
graphic changes in U.S. cities also contributed to the
Korean wig retail business, especially in low-income Af
Korean immigrants took advantage of vacated busines
nority areas, which were neglected by large business est

low profit margins and high crime rates.
With regard to research on immigrant entrepreneurship
need for incorporating changes in the international econ
study of immigrant entrepreneurship. Previous theor
trepreneurship tend to focus on cultural or personal charac
themselves or on economic environments of the immigran
while paying less attention to the global economic structur
of attention seems to stem from long traditions of n
perspectives in studies of immigration, assimilation, and r
the importance of economic integration between Asia
emigrants in the United States can no longer be neglecte
the era of the rising importance of the Pacific Rim -
information, and people are exchanged across the Pacific O
rates. One key to business development and overall econo
immigrants may be their capability to link overseas ma

coethnic entrepreneurs in the United States.
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Immigrant Small Business and International Economic Linkage: A Case of the Korean Wig

Business in Los Angeles, 1968-1977

Immigrant Small Business and

import-export business among Asian immigrants. The central argument is

closely related to the increasing economic linkages between Asian countries

product of the global economic restructuring whereby some developing

immigrants, with major findings summarized as follows: first, the increased

developed between Korean wig manufacturers in South Korea and Korean

provided Korean immigrants with initial business opportunities in the U.S.

Immigrant small business in the United States is a subject of intense interest

way of economic adjustment to the United States among some immigrant

and the anonymous IMR reviewers.

IMR Vol. xxx, No. 2 485

486 International Migration Review

Howard, 1990). The self-employment rate increased

to 9.0 percent in 1980, and 9.7 percent in 1990

ness and a continuing overrepresentation of immigra

past two decades spurred further research on ethn

phenomenon (Light, 1972; Min and Jaret, 1985;

In dealing with the issues of immigrant small b

researchers tend to address their topic only with

Although the significance of international economic

grant sending and receiving countries has been repea

1981, 1988; Nowikowski, 1984; Kim and Hurh, 1

1988), the global dimension of immigrant small b

This lack of attention can be attributed partly to

development in several Asian countries and to the m

the importance of economic integration between As

home countries for business development and over

the United States can no longer be neglected or und

era in which commodities, capital, information, a

across the Pacific Ocean at ever-increasing rates (S

their emigrants to the United States are becoming st

advancement of communication and transportatio

capability of immigrant entrepreneurs to link overseas

coethnic entrepreneurs in the United States will beco

for the development of Asian immigrant entreprene

The import-export business among Asian immigr

expatriates in the United States. Since the mid-1960s

groups, such as Chinese, Asian Indians, and Korean

the import-export trade - which includes importing,

low cost consumer items manufactured mainly in th

1976; Koos, 1982; Wong, 1987).

The import-export trade is not something unique

1965 Asian immigrants. In fact, international tra

entrepreneurs has a long history, although it has no

Francisco imported rice, tea, silks, sugar, opium (op

Korean Wig Business in Los Angeles 487

California until 1881), wheat, flour, ginseng, mercury, dried sea

products from China (Ma, 1984:101). The Chinese mercha

to their homeland. The growth of the Chinese fishing industr

China (McEvoy, 1977; Chan, 1986:85).

Like the Chinese, many Japanese immigrants engaged in im

trade by importing "cooking ingredients for fellow immigrants

goods such as lacquerware, china, parasols, fans, scrolls, tea, and

Euro-American customers" (Chan, 1991:40-41). Silk became t

1913, thirteen large import-export firms accounted for 25 perc

by Japanese/Japanese-American owned businesses (Yamato, 198

While the late nineteenth century Asian import-export tra

goods, the Asian import-export trade in the late twentieth cen

as part of global economic restructuring in which several East A

supply labor-intensive manufactured goods to more advanced

recent Asian immigrants often extends beyond coethnic me

general population. In the case of the Korean import-export tra