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Literature Review
The following chapter outlines theoretical background and past researches on the topic.
Immigrant Entrepreneurship
Immigrants are a driving force for human capital which is important for mobilizing entrepreneurial activity base for countries around the globe (Turkina and Thi Thanh Thai, 2013). Self-employment rates among immigrant populations are higher than native populations in several parts of the world and many countries – including Australia, Canada, and Germany – have designed and implemented programs ensuring special entry procedures and schemes in order to facilitate movement of immigrant entrepreneurs (Clark and Drinkwater, 1998; Fairlie and Woodruff, 2004; and Schuetze, 2005). A recent study by Irastorza & Peña (2014) indicates that immigrants have a higher chance of becoming entrepreneurs than natives. Immigration brings much needed diversity in business because immigrants bring in new ideas from around the world along with their diverse cultural heritages and mindset: these are all essential ingredients in forming new business ideas, developing new products, opening up the markets to new influences, and accelerating technological innovation (Marczak, 2013). In line with the cultural theory of entrepreneurship, entrepreneurship also provides a means to immigrant entrepreneurs to showcase their culture in the host country (Yeasmin, 2016). By choosing to be entrepreneurs, immigrants play a vital role in socioeconomic development of their host countries (Herman and Smith, 2010). Hence, if policymakers want to use immigrant entrepreneurship as a growth lever for the economy, it is vital to find out what drives immigrants to take the entrepreneurship path (Turkina and Thi Thanh Thai, 2013).
Entrepreneurship as an Alternative
According to Singh & Gupta (2015), an entrepreneur by nature is an innovator who confronts the uncertainty surrounding him or her and paves a way forward using innovation. One argument for individuals choosing to become entrepreneurs is the difference in the expected present value of earnings from entrepreneurship compared with the expected present value of salary from being an employee (Ibrahim and Galt, 2003). Opting to be an entrepreneur as opposed to taking a salary depends on wealth and liquidity constraints of an individual (Evans & Javanovic 1989). For immigrant entrepreneurs there is an additional reason: for many, entrepreneurship is a logical alternative to unemployment or an exit strategy in case of dissatisfaction with the host labor market (Yeasmin, 2016). By starting a business, immigrants are able to employ themselves as workers in the labor market, and in this way entrepreneurship represents an alternative to low-paying and low-image jobs that pull down their social status in the society and marginalize them (Yeasmin, 2012). Wahlbeck (2013) asserts that it is an established fact that immigrants are indeed forced to take the entrepreneurship path if they cannot find regular jobs. According to Prescott & Robinson (2011), conditions in labour markets are not all that rosy for immigrants with frequent instances of discrimination as well as treatment immigrants receive in real life can also be harsh – both these factors contribute to what they call “environmental push” that forces an immigrant to become an entrepreneur. Migrant communities are often viewed as homogeneous populaces with restricted financial assets Wahlbeck (2013). Mukhtar-Landgren (2016) refer to Malmö as an example with expanding social holes, expanded rejection and open threat between distinctive social and ethnic gatherings.
Ethnic Entrepreneurship
In today’s multicultural society we are witnessing a rise of the concept of ethnic entrepreneurship (Masurel et al.,2002). The rise of urban areas as epicenters of the multicultural society has created conditions for entrepreneurship with roots in specific socio-cultural habits of an ethnic segment of the population (Waldingar, 1989). Although ethnic groups are still regarded as ‘problématique’ for modern city life, there is a reorientation of views taking place where ethnicity may be turned into a business opportunities if suitable startup culture and conditions can be created (Light & Rosenstein 1995; Waldinger 1996; and Ward & Jenkins 1984). Ethnic entrepreneurship are now hence seen as a new form of self-employment and cities are developing strategies to encourage ethnic entrepreneurship as a means to resolve structural unemployment problems in ethnic communities (Van Delft et al.,2000). According to Basu and Goswami (1999) outsiders carry with them from their nation of root a gathering of socio cultural assets that can advance or frustrate accomplishment in the new society. This is further supported by research that in many cases ethnic social capital can only help firms scale up to a certain level and in fact does not guarantee long-term survival and development of a sustainable business enterprise (Bates, 1994; Portes and Sensenbrenner, 1993). On balance it may be stated that although some immigrant entrepreneurs may choose to embed their economic activities in an ethnic environment, like rest of the entrepreneurs their foremost priority is economic well-being and growth of their business (Masurel et al.,2002).
Social Context and Social Capital
Entrepreneurship is a social activity and the social context not only provides business opportunities to the entrepreneurs but also sets a boundary around them (Aldrich and Zimmer, 1986). Social context helps us understand how, when, and why entrepreneurship happens and it also helps us identify the various stakeholders in this process (Welter, 2011). An entrepreneur’s ties with the environment where he or she operates are a key determinant of his or her business success (Aldrich and Zimmer, 1986; Carsrud and Johnson, 1989). This is especially relevant in the case of immigrant entrepreneurs as they have limited networks in their host country and their success is closely tied to how well they can overcome their social constraints and conduct business like native entrepreneurs (Kloosterman and Rath, 2003; Pieterse, 2005). Social capital is, consequently, regarded as a key driver of entrepreneurship (Aldrich and Martinez, 2010; Thornton and Flynn, 2003) and several studies stress its importance in context of immigrant entrepreneurship (Deaux, 2006; Giorgas, 2000).A host country’s networking, trust, and trustworthiness norm are closely linked to immigrants entrepreneurs’ access to information and resources and finally their entrepreneurial success (Turkina and Thi Thanh Thai, 2013). According to Putnam et al.(1993) there are two types social networks, vertical and horizontal, wherein vertical networks are hierarchical and often impede the development of social capital for immigrant entrepreneurs while in contrast horizontal networks provide ideal conditions for development of social capital. According to Maloney & Robteutscher (2007) and Newton (2009), horizontal networks include a broad range of NGOs, intermediary organizations, community associations, and think tanks. Horizontal networking is crucial for immigrant entrepreneurs because starting and running a business requires “intense networking” (Putnam et al., 1993; Narayan, 2002). Trust is usually divided into interpersonal trust and institutional trust (Turkina and Thi Thanh Thai, 2013). Newton (1999) regards interpersonal trust as crucial for immigrant entrepreneurship because it helps newcomers take risks in an unfamiliar new environment. Institutional trust is “confidence in institutions) as defined by Paxton (1990) and level of trust in institutions in the host country plays a decisive role in success of immigrant entrepreneurship (Turkina and Thi Thanh Thai, 2013). Finally, norms of trustworthiness are reflected in honesty, fair treatment, and objectivity in business dealings according to Putnam (1993) and Ostrom (1990), and are a key driver of immigrant entrepreneurship.
Social Constraints for Immigrant Entrepreneurs
Immigrant entrepreneurs face several social barriers or constraints in setting up and running businesses. First, immigrants are usually forced into establishing businesses due to social barriers in the job market including downright lack of job opportunities for immigrants (Yeasmin, 2016). Second, immigrant entrepreneurs running businesses based on their cultural heritage find it difficult to scale up and operate in the mainstream market as they start getting associated with the community they are doing business with (Ram, Jones and Villares-Varela, 2017). Ethnic entrepreneurship helps up to a particular point, but after that it may become a disadvantage for an immigrant business (Portes and Sensenbrenner, 1993). Third, immigrants are unable to take advantage of the “knowledge spillover” due to their (1) lack of education, regarding host country business laws and practices (Ghio et al.,2015; Plummer & Acs, 2014; Volery, 2007). In particular, dialect capability has for quite some time been seen as key barrier faced by immigrant entrepreneurs in the new society (Borjas, 1990; Kloosterman et al.,1998). Fourth, recent anti-immigrant political rhetoric is also reflecting negatively on immigrant entrepreneurship in general and leading to image problems for immigrant entrepreneurs (Yeasmin, 2016).
Table of contents :
1 Introduction
1.1 Background
1.2 Problem Discussion
1.3 Purpose
1.4 Research Question
1.5 Delimitations
1.6 Report Structure
2 Literature Review
2.1 Immigrant Entrepreneurship
2.2 Entrepreneurship as an Alternative
2.3 Ethnic Entrepreneurship
2.4 Social Context and Social Capital
2.5 Social Constraints for Immigrant Entrepreneurs
3 Methodology
3.1 Research Approach
3.2 Research Design
3.3 Research Strategy
3.4 Data Sources
3.5 Data Collection
3.6 Interview Guideline
3.7 Sampling
3.8 Data Analysis
3.9 Quality
3.10 Ethical Issues
4 Results
4.1 Insights into the Business
4.2 Entrepreneurial Opportunities and Challenges
4.2.1 Entrepreneurial Opportunities
4.2.2 Entrepreneurial Challenges
4.2.2.1 Overcoming Challenges
4.3 Social Constraints
4.3.1 Social Constraints for Immigrant Entrepreneurs
4.3.2 Overcoming Social Constraints
5 Discussion and Conclusions
5.1 Social Constraints faced by Immigrant Entrepreneurs
5.2 Overcoming Social Constraints
6 Recommendations
6.1 Recommendations for the State
6.2 Recommendations for the Entrepreneurship Advisory Industry
6.3 Recommendations for Immigrant Entrepreneurs
7 Future research
References
Appendix
