Disincentives to Business Development on the Navajo Nation
Vol. Volume 22, Number 2 June/2017
RYAN M. YONK, SIERRA HOFFER, DEVIN STEIN
In this paper, we explore the underdevelopment of the business sector on the Navajo reservation. We explore why the Navajo reservation continues to be economically depressed and find that formal and informal institutions unique to the reservation create barriers that disincentivize entrepreneurship. Our examination begins by first conducting a literature review on general barriers to entrepreneurship. Second, we conduct an institutional analysis of the Navajo reservation to understand how formal and informal institutions affect potential entrepreneurs. We then use a comparative case study to analyze how the Navajo reservation's institutions affect one town on the reservation compared to a similar town outside the reservation's borders. We conclude that there are three main barriers that discourage entrepreneurship. First, a dual bureaucracy and a complicated business license application process disincentivize new business development in the formal economy. Second, the federally held reservation land trust limits how entrepreneurs can access and develop land. Third, the Navajo reservation lacks access to lending opportunities, restricting the capital that is necessary to start a business. These barriers combine to create a vicious cycle of underdevelopment and poverty.
: Navajo; Entrepreneurship; Regulation; Property rights