Who Is Immigrant Entrepreneurs Business Essay

Many successful entrepreneurs story told us how an immigrant set up or developed a business successfully, such as Steve Jobs who was born in US, but “He Was the Most Famous Arab in the World: The father of the innovative head of Apple was from Syria.” (The lede, Ner York Times, October 6); Sergey Brin, one of google’s co-founder, was born in Moscow, Russia and grew up in US (Forbes.com); Steven Wong, New Zealand crisps King was originally from China. He moved to New Zealand when he turned to an adult. Why do people name them as an immigrant entrepreneur even they were born or grew up in local? What have the immigrant entrepreneurs done for the world? What challenges and opportunities have they met or will they meet in the future? This research essay will focus on these questions.

Literature review

Who is immigrant entrepreneurs

There is lack of consensus on the exact definition of the concept of the immigrant or ethnic entrepreneur. On reviewing the variety of studies that have addressed this topic, it can be seen that the expression of immigrant or ethnic entrepreneur crops up reasonably frequently, although it should be underlined that its use is somewhat disparate. The term often overlaps with or is substituted by other terms that refer to the condition of being an immigrant, to the condition of being an entrepreneur, or the condition of belonging to a minority group within the economic space under analysis. According to Chaganti and Greene (2002), the reasons that explain this overlapping of terms lies in the theoretical framework used as a reference, which conceives immigrant entrepreneurs as a group of minority business owners for reasons of race, ethnic background (Rinder, 1958). As Chaganti and Greene (2002) state, immigrant entrepreneurs are not always characterized by ethnic attributes, and not all ethnic minority entrepreneurs are immigrants, as in the case of second or third generations.

The term immigrant or ethnic entrepreneur is regarded from a broad perspective and has been used in the majority of studies on the topic (Cavalcanti, 2007), referring both to the immigrant population that create a new firm and to those that belong to ethnic minorities even when they are not immigrants, thus combining the different terms used in the literature. We use the term ethnic entrepreneur with the meaning given by Waldinger et al. (1990) or Ma Mung (1992), and adhere to the ideas of Chaganti and Greene (2002) on this collective, who highlight the importance of the entrepreneur’s involvement with their ethnic community with regard to identifying their ethnicity and the lesser relevance of their place of birth or nationality in this sense.

Role / Status of immigrant entrepreneurs

Immigrant entrepreneurship is an important socio-economic phenomenon of the century. The main destinations of immigrants in the country like the United States, Canada, Australia, and New Zealand, migrant entrepreneurs play an important role in economic development. For instance, entrepreneurship is critical to sustaining America’s economic power. Immigrant entrepreneurs, like their predecessors, play a key role. Immigrants are credited with 24 percent of patents and founded or cofounded over 25 percent of engineering and technology companies in the U.S. between 1995 and 2005.

Economic impact of migrants in the host country operators is aware, but its influence is not limited to economic aspects alone. It involves important non-economic effects such as the development of ethnic community spirit, social integration and recognition of immigrants, a spirit of entrepreneurship preserving, and providing a role model for immigrants (Chrysostome & Lin, 2010), especially for unskilled workers resulting in increased entry of foreign labor.

Contribution of migrant entrepreneurs of the country of destination cannot be denied. Ayda et. al (2010) concluded that the producers of these migrants contribute to the growth of various products and services, not only because they are skilled and competent, but because of social relations with local communities. In a study of Turkish immigrant entrepreneurs in Switzerland, Baycan-Levent & Kundak (2009) found that the movement of a foreign employee to an entrepreneur is very common and easily among Turkish immigrants. Socio-cultural norms of factors, government policies and the educational system in the host country Switzerland to make people less inclined to become entrepreneurs. Mustafa & Chen (2010) studied on how five entrepreneurs- can be the internationalization of business and the role of transnational family network. The results showed that the producers of these migrants have access to resources and using the relationship between transnational borders is through family and kinship networks that allow them to simultaneously engage in social and business activities in both countries.

The socio-cultural profile of the entrepreneur and firm creation

Understanding the reasons that explain why particular individuals, groups, and less directly, regions and countries are more entrepreneurial than others has been one of the principal objectives of researchers in the field of firm creation, which has been shifted to the more specific area of ethnic entrepreneurship. In recent years, the increase in firms created by this collective, as well as differences shown by diverse ethnic groups within the same target society has once again placed the spotlight on cultural aspects that differentiate certain communities from others (Basu and Werbner, 2001). Culture is considered to be an ethnic resource whose use on the part of the entrepreneur endows the firms created, the process followed for their creation and the strategies adopted for their development with specific traits. Culture is associated with a set of values, beliefs, and norms shared by a group or community (Hofstede, 1991); manifested as a way of thinking, feeling or reacting (Kluckhohn, 1951) through which members of a particular group differentiate themselves from those that belong to others. Therefore, culture exists within the context of a social group or unit, and the cultural differences can reflect variations related to the country or region of origin, ethnic background, social class, religion, gender, or language.

Within the cultural elements, values have been one of the factors that the literature has studied most (McGrath et al., 1992a, b). Rokeach (1972) explained that “having values” means maintaining a permanent belief in preferring one specific type of behaviour over, or a final state of existence in relation to others. Schwartz (1992) characterizes values as concepts or beliefs that are applied to final desired states or behaviours. For Hofstede (2001), values are learnt predispositions, in other words, learnt mechanisms that are used in actions or behaviours with a view to obtaining positive consequences and/or avoiding negative ones. In this sense, it should be stated that values can be held by individuals and by groups, and also by collectives (Kilby, 1993; Kluckhohn, 1951), although it is only on a collective level that values can become components of a culture.

More specifically, in the field of firm creation, some researchers have demonstrated the existence of associations between business and certain values that form a part of a given culture upheld by individualism, achievement, independence, or masculinity (Hofstede, 1980; Lipset, 2000). Equally, certain cultures have less consistent value systems in which business activity is included, especially in cases in which the activity implies risk, innovation, growth, and reinvestment of profits (Light, 1972). In this sense, what is common to all studies carried out on this topic is that not all ethnic groups have neither the same entrepreneurial capacity nor show the same entrepreneurial behaviour. Thus, for example, according to the Office for National Statistics (2001) in the UK, the ratio of firm creation by west Europeans is 12 percent, as opposed to 15 percent among Indians, 18 percent amongst the Chinese population and 19 percent of Pakistanis. In the same vein, Asian and East African entrepreneurs have a long tradition in business, in many cases related to the restaurant sector (Basu and Altinay, 2002). Corkill (2001) states that African immigrants tendto concentrate on the building industry in Portugal and on agriculture in Spain, whilst Latin Americans and Asian women tend to work in domestic services and Polish, Lithuanian, and Rumanian immigrants tend towards the construction industry in Spain. Curran and Burrows (1988) point out that those from Southern Asia look more to the restaurant, general food trading, and clothing industries. The Chinese are to be found principally in retailing (Song, 1997), and Afro-Caribbeans in the construction sector (Curran and Blackburn, 1993).

Relationship between immigrant entrepreneurs and the local market and international market

The success of their own business is also assisted by the local people. The locals who are willing to partner with them and hire shops for foreign migrants somehow give them opportunities to start a business. Thanks to the efforts of this migrant entrepreneurs, eventually some of them can establish their own companies, whether small or large scale. There are also foreign workers who have managed to become entrepreneurs took the opportunity to improve their lives doing wrong in the law of this country. Companies may be owned by locals but foreign operators who manage most of the way companies operation and their employees who are employed are foreign workers. In addition, people normally choose foreign operators because the price offered is far cheaper than the local operators do. Many Chinese entrepreneurs are operating fresh food or fast food companies in US, Australia or New Zealand etc. They have achieved many success in a result of advantage of low price.

According to Amit and Muller (1995), based on their motivation to engage in entrepreneurial activity, there are two types of entrepreneurs, namely, “Push” and “Pull” entrepreneurs. The former includes those who are pushed to start a business as they are dissatisfied with their current position in the labour market in terms of unemployment or underemployment. The latter are those who are attracted by their new venture idea and initiate venture activity. Amit and Muller (1995) also conclude that “Pull”entrepreneurs are more successful than the “Push”ones.

Chavan and Agrawal (2002) found from their study, examining the changing role of ethnic small business in Australia by studying three generations over a period of time, that the first generation of ethnic entrepreneurs were associated with “Push” motivations and the second and third generations of entrepreneurs were associated with “Pull” motivations. As scholars (Basu, 2004; Chavan & Agrawal, 2002) have found, immigrants are motivated to engage in entrepreneurial activity either derived from “Push”or “Pull”factors, or from both, as immigrant entrepreneurs can also be classified as either. There are a number of theories that appear to be relevant for immigrant entrepreneurship and the following paragraphs will examine them.

Discussion & Analysis

Challenges of immigrant entrepreneurs

According to Waldinger et al. (1990), immigrant entrepreneurs face various challenges in adapting to the host culture and establishing their own businesses. The main problems that ethnic business owners commonly face include: protecting themselves from political attacks; dealing with surviving competition; managing relations with customers and suppliers; obtaining financial and human resources; acquiring needed information and appropriate training and skills. These social and economic handicaps coupled with the disadvantages drive many immigrant entrepreneurs into small businesses.

Indeed, immigrant entrepreneurship can pave the way to upward social mobility (Kloosterman, 2003). Nevertheless, business researchers have documented that the businesses many immigrants engage in are small businesses which are characterised by low entry cost, high levels of competition, limited profit margins, high rate of failure, and labour intensity (Fernandez & Kim, 1998; Phizacklea & Ram, 1995; Waldinger, 1989; Waldinger et al., 1990). The reasons for this situation can be best explained using opportunity structure theory.

Opportunity Structure and Risk-taking Theories

The opportunity structure theory states that ethnic entrepreneurs can only move into those niches that are underserved or abandoned by native entrepreneurs. These opportunities are mainly found in the industries where the risks of failure are high. They are characterised by low status, low rewards, heavy labour, high running costs, and limited profit margins (Waldinger, 1989; Kupferberg, 2003). Due to the evolution of the global economic system, the structure of opportunities is continually changing in modern business society. In addition, political factors might frequently hinder the working of business markets. Immigrant business owners have therefore found themselves facing various market conditions (Aldrich &Waldinger, 1990). Waldinger et al. (1990) point out that demand for services provided is essential for a business to prosper. The primary market for immigrant entrepreneurs can be the members of their own ethnic community in which there are no language barriers. Within the same community, people intimately know each other’s needs and preferences. In this sense, ethnic entrepreneurs can develop niche customer bases. Kloosterman (2003) sees this as the pull factor on the demand side that creates the opportunities for immigrants to set up a shop within their own ethnic community. Immigrant businesses then do this to meet new comers’needs and facilitate them in solving their special problems caused by the strains of settlement and assimilation. Some businesses provide cultural products, such as newspapers, books, magazines, food and clothes. Others offer special services, for instance, law firms and accountants (Waldinger et al., 1990). Ethnic entrepreneurs thus enjoy an advantage over potential competitors outside the community since they can tap into the buying preferences of consumers in these groups (Hammarstedt, 2001).

Massey (2005) claims that enterprise is a risky business as only a proportion of the businesses will survive. Entrepreneurs have to take a number of risks such as financial, emotional and social. This is because they put themselves on the line and thus, their social identities can suffer as well. Barbosa, Kickul and Liao-Troth (2007) claim that risk has always been at the centre of the definition of entrepreneur. Risk perception has been conceived as a determinant of risk behaviour and entrepreneurial decision making.

One interprets the environment based on one’s perceptions which include analysis, judgment, and intuition. In this sense, whether a situation is deemed of moderate or high risk depends on the perceivers. Different people can draw different conclusions. As Stearns and Hills (1996) note, successful entrepreneurs are good risk managers but not wild-eyed risk takers. They are able to calculate risks and whether the potential rewards are appropriate. Das and Teng (1997) also suggest that a successful entrepreneur is a professional risk-taker because one of the most distinctive features of entrepreneurial behaviour is risk taking. Indeed, risk-taking behaviour has been associated with entrepreneurship and entrepreneurs have been described as self-employed individuals who adjust themselves to risk (Gilmore et al., 2004). Entrepreneurs introduce new products or processes and they adjust themselves to risk where the return is uncertain (Palich & Bagby, 1995). Starting a small business is seen to be a particularly risky undertaking (Gilmore, Carson & O’Donnell, 2004). The risk that entrepreneurs face can be both financial and psychological since new actions and activities may put their self-images at risk. Failure may lead to the loss of their capital and of their self-image. Therefore, Das & Teng (1997) assert that the entrepreneurs are inherently risk takers. They often underrate their chances of failure and they need to be aware of the risks involved and make appropriate financial decisions (Pinfold, 2005).

Similarly, immigrants are also risk takers by nature because the process of leaving one’s home to take up life in a new new country means accepting great changes (Waldinger et al., 1990). As Delores (1997) contends, immigrants face a number of emotional and cognitive adjustments to the reality of life in the host society. They experience the stresses of adapting to a new country and being upset by the loss of their own culture. Therefore, Waldinger et al. (1990) claim that people who enter the immigration stream tend to be able, better prepared and more inclined toward risk. There is no doubt that immigrant entrepreneurs must be prepared to take risks. According to Kupferberg (2003), the risk-taking theory emphasises that immigrants are prepared to take on a low status business when they perceive that there is a future in that business. These immigrant entrepreneurs will have strong motives to prove themselves and thus they tend to enter the business differently from a member of the native community. Aldrich and Waldinger (1990) claim that in almost all markets, small businesses continue to attract immigrants and many newcomers have set up small business enterprises. There are two possible explanations for this situation. One could be the low status and low rewards in running such businesses. The other might be that small businesses have a high rate of failure. These two factors may reduce the pool of native-born entrepreneurs. Immigrant entrepreneurs therefore can step in as vacancies arise (Waldinger, 1989). Since the structure and allocation of opportunities open to potential ethnic owners have high rates of failure and low status, immigrant entrepreneurs must have the ability to take risks in order to survive. In addition, they are able to quickly respond to the results that the business produces. Immigrant entrepreneurs will abandon those businesses that have limited prospects and stick to those businesses that bring good profits, regardless of whether the businesses might be risky. Based on this theory, immigrant entrepreneurs are seen to have great sensitivity to the market and this market-adapted behaviour enables them to seize any opportunities and attempt all types of businesses.

Conclusions

The process of globalization and the internationalization of economies and markets is provoking increasingly sizeable and intense international migration (Wauters and Lambrecht, 2007). Our study has analyzed the influence of demographic profile on the ethnic entrepreneur with regard to business activity, the main motivation for creating a new firm and the process followed in creating the firm. We have gone a step further than analyzing who has or has not created the firm and have focused on those that have been involved in firm creation. From the results of the research, the conclusions indicate the difficulty inherent in generalizing on the influence of all the factors of the dimensions analyzed. The area of origin of the entrepreneur is the only demographic factor that shows a significant relationship with the majority of the factors that make up the dimensions analyzed, and thus, this factor is the one that mainly influences the elements that characterize business activity, the motivation for starting up a business and the process followed in doing so.