The article offers a structurationalist analysis of the embeddedness of Arab entrepreneurs in the political economy of Israel in two stages. Firstly, we consider entrepreneurs’ agency in the context of socio‐spatial structural aspects concerning tangible networks that are directly associated with business operation. Secondly, we consider agents’ horizons of awareness of opportunities in the market in the context of their accessibility to support institutions and elites. The analysis focuses on exposing barriers to economic growth and the understanding of their root causes. From the three structural dimensions studied in the first stage – regional scale, ethnicity and peripherality – we found that while agents struggle to embed themselves in the national economy, ethnicity and peripherality create barriers to the expansion of networks beyond home regional networks. While ethnicity seems to be a secondary barrier, peripherality emerges as the more significant mechanism that maintains low development capacity in the Arab sector in Israel. The major mechanisms that maintain Arab entrepreneurs’ peripheral status include: selective state policies that privilege Jewish New Towns over neighbouring Arab ones; the abuse of power by Jewish corporations; and a vicious circle of low profitability created by the large number of small competitors. The research demonstrates that even the great effort made by Arab entrepreneurs to embed themselves in business networks on a national scale does not enable them to transform these networks to economic success.