Name: Karel Hoenderdos Student number: 10831185 MSc Program: Entrepreneurship Thesis supervisor: Mw. Dr. Nazlihan Ugur
Application date: June 29th, 2017
Assessing legislative effectiveness:
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Preface and acknowledgements
This document is written by Karel Hoenderdos who declares to take full responsibility for the contents of this document.
I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in creating it. The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents. The copyright rests with the author. The author is solely responsible for the content of the thesis, including mistakes. The university cannot be held liable for the content of the author´s thesis.
I would like to express my greatest appreciation to my thesis supervisor Nazlihan Ugur, whose continuous help and advice greatly contributed to the quality of my thesis. Without her guidance and encouragement, it would have been impossible to joyfully write this study. Karel Hoenderdos
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Abstract
This study assesses the effectiveness of the legislative change on January 1st, 2015. The purpose of this policy change was to relieve entry restrictions for immigrant entrepreneurs originating from countries which require a residence permit to start a business in the Netherlands. The conditions to obtain a residence permit for this group have been greatly simplified, as policy makers intend to attract more foreign entrepreneurial talent to the Netherlands. The literature on entrepreneurship generally argues for its positive effects on economic growth and job creation. Hence, many developed nations have yet engaged in policy formulation attracting and favouring immigrant entrepreneurs, as does the Netherlands. This study conducts a before-after study design through a natural experiment. Using data obtained from the Dutch Chamber of Commerce this study tests, using statistical analysis, whether the numbers of business emergence by immigrant entrepreneurs before and after the legislative change significantly differ from each other. The research question is: Was the legislative change at January 1st, 2015 successful in attracting more immigrant entrepreneurs to the Netherlands? First, it is hypothesised, that the legislative change had a significant effect on the number of immigrant entrepreneurs, and second, that this effect is positive (e.g. led to an increase in immigrant entrepreneurs in the Netherlands). The analysis provides evidence for both the hypotheses. There has been a significant increase in the number of immigrant entrepreneurs in the Netherlands because of the legislative change. The study does not find a significant increase in the same years for the entire entrepreneurial population. In 2016, almost 12% of the total number of new-businesses were founded by entrepreneurs originating from countries that formally need a residence permit. In comparison to entrepreneurs originating from countries that do not need a residence permit, excluding Dutch entrepreneurs, immigrant entrepreneurs amount to 58%. Furthermore, the study controls for possible factors with a disproportional impact on the result, such as the increase in immigrants due to the Arab Spring. The results are still significant after removing this group from the immigrant entrepreneur sample.
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Table of content
Preface and acknowledgements ... 2
Abstract ... 3
Table of content ... 4
1. Introduction ... 5
2. Literature Review ... 9
2.1 Entrepreneurship and National Economic Growth ... 9
2.2 The Netherlands in Entrepreneurial Comparison ... 11
2.3 Attracting Skilled Individuals and Entrepreneurs in the Netherlands ... 14
2.4 The January 1st, 2015 Legislative Change ... 15
2.5 Critique on the Legislation ... 17
2.6 Assessing the Point-System – Example of Canada ... 18
3. Methodology ... 19
3.1 Research Approach ... 19
3.2 Hypotheses ... 20
3.3 Research Design ... 21
3.4 Data & Sampling ... 23
4. Empirical findings ... 24 4.1 Summary Statistics ... 25 4.2 In-Depth Analysis ... 28 5. Discussion ... 32 6. Conclusion ... 34 6.1 Conclusion ... 34 6.2 Limitations ... 36
6.3 Future Research Avenues ... 36
7. Policy Implications ... 37
8. Bibliography ... 39
9. Appendix ... 44
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1. Introduction
Entrepreneurship is considered a necessary condition for national economic development, growth, and job creation. The topic has been much debated in the literature in past decades, for instance in early work by Schumpeter (1934). Schumpeter argues that entrepreneurs are individuals whom create value by placing new ideas, products, and services in the market economy, and by doing so contribute to a process that is called creative destruction (Schumpeter, 1942). Creative destruction is a process in which newly established businesses cause job growth outcompeting less productive companies, consequentially resulting in structural increase in industry productiveness and job creation.
Contemporary studies, too, have found a positive effect of entrepreneurship on economic development, growth, and job creation. Wong et al. (2005) and Audretch and Keilbach (2004) argue for the positive effects of high-growth entrepreneurship on national economic growth and job creation in developed countries. The argument is strengthened by Fritsch and Mueller (2008). They argue that regional development is mainly driven by entrepreneurship, and found that regions with high levels of entrepreneurship often economically outperform their neighbours. According to Braunerhjelm et al. (2010), this is due to the spill-over of knowledge, claiming that entrepreneurs are the missing link between knowledge and economic progress.
As a result, many developed countries engaged in increased political dialogue to stimulate entrepreneurship (Thurik, 2009). The Netherlands, the United Kingdom, and Germany, among many other countries, attempt to formulate favourable public policy to promote entrepreneurship among its inhabitants, but also through attracting immigrant entrepreneurs, expecting to increase national economic growth. The new approach would turn out to be successful, because the downward entrepreneurial trend which recently prevailed in developed countries has reversed over the past decade (Thurik et al., 2013).
The political agenda of Organization for Economic Cooperation and Development (OECD) countries have been concerned with migrant entrepreneurship since the turn of the new millennium (Desiderio, 2014). Countries with traditionally high-entrepreneurship rates such as the United Kingdom, the United States, Canada, and Australia have been among the first
6 to recognize the potential of migrant entrepreneurship on economic competitiveness and innovation, and were quickly followed by their European counterparts.
Traditionally, many immigrant entrepreneurs would engage in ethnic business creation (small shops serving local communities), but increasingly do immigrant entrepreneurs engage in high-value added and innovative industries (Wadhwa et al., 2012). In the United States, for instance, 24.3% of engineering and technology companies were founded by at least one foreign-born, whereas this rate raises to 43.9% in Silicon Valley. Besides the economic benefits of high-value added companies, they also create jobs (Li, 2010), and enhance trade-relations between the country of origin and the host-country (Hatzigeorgiou, 2010). As immigrant entrepreneurs have superior knowledge about business culture, politics, and language in their former home country, this group is particularly adept to stimulate trade between their country of origin and the host-country.
The Netherlands has been actively engaged in formulating policy and legislation to promote the entrance of immigrant entrepreneurs. The law ´Vreemdelingenbesluit 2000´ is especially relevant in the debate on policy formulation, as this is the law that specifies which individuals are entitled to a residence permit. Obtaining a residence permit has proven to be the most difficult condition for immigrant entrepreneurs, but after several policy adaptations the entry requirements for immigrant entrepreneurs became less complicated. The improvements are especially due to a legislative change enacted at January 1st, 20151. This legislative change significantly simplified the process of obtaining a residence permit for immigrant entrepreneurs. The effectiveness of this legislative change will be the focus of this study. This study attempts to investigate the effects of the legislative change at January 1st, 2015 on the number of immigrant entrepreneurs establishing a business in the Netherlands. Before we can effectively describe the topic of this study, however, some initial remarks on the importance of origin of entrepreneurs needs to be clarified. Entrepreneurs may migrate to the Netherlands from all regions over the world, but this study focuses particularly on immigrant entrepreneurs whom need a residence permit to establish a business in the Netherlands. If entrepreneurs would be arriving from countries within the European Union, or from countries with which the Netherlands holds special treaties, there is no difficulty in obtaining a
7 residence permit. Therefore, the following distinctions have been made, which will be prevalent throughout the study.
1. Non-visa Immigrant Entrepreneur
a. Entrepreneurs originating from a country within the European Union (all 28 members except for the Netherlands)
b. Entrepreneurs originating from a country with which the Netherlands holds a special treaty (Australia, Canada, Japan, Monaco, New-Zealand, Vatican City, the United States, South-Korea, Switzerland, and Turkey)
2. Immigrant Entrepreneur
a. Entrepreneurs from all countries excepts those referred to in 1. 3. Arab Spring
a. The countries include: Libya, Tunisia, Egypt, Yemen, Syria, Algeria, Iraq, Lebanon, and Afghanistan (the latter is included because of the many refugees originating from Afghanistan, 1.025 Afghan refugees in the Netherlands in 2016 (Asylum Trends, 2016))
The main difference between group 1 and 2 is that Non-Visa Immigrant Entrepreneurs do not need a residence permit to establish a business in the Netherlands. That means that this group of entrepreneurs could have chosen to start a business in the Netherlands regardless of the legislative change. As this research specifically focusses on the legislative change regarding the simplification of obtaining a residence permit for foreign entrepreneurs, this study focuses on the second group, Immigrant Entrepreneurs.
The current state of the literature focuses on immigrant entrepreneurship in the Netherlands in general (Beckers and Blumberg, 2013), in comparison to other European countries (Stam, 2013), or specifically on the legislation (de Lange, 2016). No research yet, however, has focused on the effectiveness in terms of the change in the number of immigrant entrepreneurs in the Netherlands because of legislative change. The topic of this study is to empirically investigate the effects of the legislative change at January 1st, 2015 on the number of immigrant entrepreneurs establishing a business in the Netherlands. It is hypothesised first, that the legislative change had a significant effect on the number of immigrant entrepreneurs, and second, that this effect is positive (e.g. led to an increase in immigrant entrepreneurs).
8 The research question is: Was the legislative change at January 1st, 2015 successful in
attracting more immigrant entrepreneurs to the Netherlands? To test the research question, this study conducts a before-after study design through a natural experiment. Using data obtained from the Dutch Chamber of Commerce (Kamer van Koophandel) this study tests whether the numbers before and after the legislative change significantly differ from each other. The answer to the research question is of theoretical relevance as it is the most recent research that targets the effectiveness of the specific legislative change, able to assess a two-year period after implementation. If the hypotheses are found to be true, practically we would say that the Netherlands has been successful in its policy formulation. Theoretically, it provides direction for future research in terms of disentangling those effects. The empirical findings may serve as preliminary results which allow other researchers to investigate factors surrounding the phenomenon, or make initial steps in measuring economic growth due to immigrant entrepreneurship and disentangle which forms of entrepreneurship are most beneficial to the economy.
The study is structured as follows: Section 2.) Literature Review will expand on theories and concepts regarding the role of entrepreneurship in national economic development, growth, and job creation. Furthermore, it will put the Netherlands in entrepreneurial perspective compared to other countries, and explain policy on immigrant entrepreneurs in general and specifically, the January 1st, 2015 legislative change. Section 3.) Methodology introduces the research approach and design, and elaborates on the natural experiments including its advantages and disadvantages. Also, this section contributes information on the process of data collection and selection, besides introducing the two hypotheses. Section 4.) Results presents the statistical analysis which contributes to either the acceptance or rejection of the hypothesis, followed by a discussion, conclusions, research limitations, avenues for future research, and policy implications.
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2. Literature Review
2.1 Entrepreneurship and National Economic Growth
The definition of entrepreneurship has sparked debate in the literature in the past decades. Schumpeter (1965) defined entrepreneurs as ´individuals who exploit market opportunity through technical and/or organizational innovation´. Knight (1921) and Drucker (1970) emphasized the aspect of risk when engaging with entrepreneurship, and Thomas and Mueller (2000) in a more recent work debate the importance of international market opportunities and characteristics to highlight globalizing aspects of entrepreneurship. While these authors are all correct for their own specific purpose, the preferred working definition for this study is more general. This paper uses the definition from the work of Bhide (2000) and Hayton et al. (2002): Entrepreneurship includes new-venture creation that is growth oriented and generates employment, as well as small businesses and micro-enterprises that may provide self-employment but not much employment growth. This definition suits this study as it makes no distinction between various kinds of business-emergence.
Since the early 20th century, an increasing amount of literature has been devoted to research the impact of entrepreneurship on economic prosperity and growth, starting with an exemplary study by Schumpeter (1942) on innovation and growth. More research in the previous century recognized that (industrial) innovation and entrepreneurship are important contributors to the welfare of a country (Schmookler, 1966; David, 1975). Technological advances such as the steam engine spurred economic growth in 18th and 19th century, as did the electric motor decades later (Bresnahan and Trajtenberg, 1995). These mechanisms increased the pace of production, and decreased the need for manual labour. Consequentially, (human) resources could be allocated to alternative goals.
Whereas these authors focused on the effect of technological progress, other types of entrepreneurship can positively affect economic growth too through for instance patents. Research indicates that the number of filed patents per country is positively correlated with superior economic growth rates (Hasan and Tucci, 2010). The more patents are filed, the more competitive the host company becomes. In terms of national economic growth rates, this is a self-reinforcing loop, as it has been demonstrated that start-ups with patents grow faster than their non-patent counterparts (Farre-Mensa, 2017). Of course, it needs to be
10 recognized that not all innovations are patentable, nor are all patents directly related to economic growth. The degree to which patents are protected has a positive effect on entrepreneurship as regulation function as an incentive for R&D expenses (Acs and Sanders, 2012). As such, governmental regulations affect entrepreneurship in knowledge-creation. Asheim and Gertler (2005) point at the positive relation between national institutional frameworks and regional entrepreneurship, as well as the positive relation between local and global knowledge flows and entrepreneurship. Research confirms that the likelihood of regions to be more entrepreneurial than others is not coincidental. The government plays a central role in the promotion of entrepreneurialism (Thurik and Wennekers, 2004), and institutional frameworks are responsible for regions to outperform their neighbours (Klapper et al., 2006). Typically, developed countries have adapted their policy to promote entrepreneurship2. This is discussed in more detail in the following sections.
2 Regulation (EC) no. COM(2012) 795 (communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions)
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2.2 The Netherlands in Entrepreneurial Comparison
Since the era of the Dutch East India Company, the Dutch have been regarded an entrepreneurial nation for centuries. Numerous bodies of research have been written on the number of entrepreneurs in the Netherlands and in relation to other European countries. Data by COMPENDIA (2000) suggests that entrepreneurial population as a percentage of the labour force in the Netherlands declined from 10.0% in 1972 to 8.1% in 1984. Research on the decade thereafter, indicates that since the mid-1980s there has been a significant rise in start-ups in the Netherlands due to economic stagflation and high unemployment. The proportion of business ownership rose from 8% in 1985 to almost 11% in 2000 (Wennekers and Thurik, 1999; Wennekers, 1999), outcompeting the United States. More recently, however, a report by the OECD (2016) compiled data on entrepreneurship in European Union countries in the period 2009-2013 and indicated that the Netherlands is again among the highest growing in terms of entrepreneurship in the region.
The reason for the renewed growth may be found in the evaluation of entrepreneurial characteristics per country, performed by two leading institutions. First, the Global Entrepreneurship Monitor (GEM) ranks countries on 12 indictors related to entrepreneurship including regulatory, economic, social, and educational characteristics. Figure 1 (GEM, 2017) shows a graphical representation of the experts rating of the entrepreneurial eco-system in the Netherlands. The
Netherlands scores better than European averages on all twelve parameters. From the figure, we can also see how the Netherlands scored compared to other countries as listed after the received grade. Only two parameters (government policies: taxes and bureaucracy and internal market dynamics) ranked outside top-10, whereas 9 out of 12 ranked top-5.
12 Second, the Global Entrepreneurship and Development Institute (GEDI) ´collects data on the entrepreneurial attitudes, abilities and aspirations of the local population and then weights these against the prevailing social and economic ‘infrastructure’ – this includes aspects such as broadband connectivity and the transport links to external markets (Ács et al., 2017).´ Whereas GEM provides scores per indicator but does not supply an overall score comparable to other countries, the GEDI globally ranks the Netherlands 10th in its most recent report (Ács et al., 2017).
Another parameter worth noting is the rank in the World Economic Forum Global Competitiveness Rating. In its most recent 2016/2017 report the Netherlands ranks 4th, compared to a 5th place the year before(Schwab, 2016). The report defines competitiveness ´as the set of institutions, policies, and factors that determine the level of productivity of an economy, which in turn sets the level of prosperity that the country can achieve (Schwab, 2016, p. 4).´ Also in terms of innovativeness, the Netherlands ranked among the top five countries in Europe for the first time in 2016 (Hollanders et al., 2016). The top, consisting out of Denmark, Germany, Finland, Sweden, and the Netherlands, all scored at least twenty percent better than European averages on 25 innovation indicators. In short, the Netherlands has a supportive environment for entrepreneurs due to the high-quality physical infrastructure, a first place in entrepreneurship education, and superior internal market burdens or entry regulation than comparable countries.
The three rankings suggest that the Netherlands is among the top performing countries in the world in terms of entrepreneurialism, but the Netherlands also offers a high standard of living for immigrants in general. The Netherlands has a long history with immigrants, starting in the 1960s when many migrant workers came to the Netherlands. Mainly Moroccans and Turks, but also individuals from former colonies such as Suriname came in great numbers. According to numbers provided by the Central Statistics Agency (CBS, 2016) the immigrant population in the Netherlands currently amounts to just over 22%. The notion of multiculturalism that prevails due to a long history with immigrants, and the access to basic services such as health care and education are among the reasons why immigrants choose to migrate.
13 Since the turn of the millennium, the percentage of immigrant entrepreneurs in the Netherlands has proportionally increased more than native new-business founders. The OECD constructed an index which measures the increase of new-business founders relative to the size of the active entrepreneurial population in the Netherlands (OECD, 2010). This measure points out that in 2000, new immigrant entrepreneurs accounted for an increase of 0.59% for the entire active entrepreneurial population of the Netherlands, whereas this percentage rose to 0.80% in 2008. The study adds that between 1998 and 2008, entry into self-employment by immigrant entrepreneurs accounted for 12.1% against 11.0% entry of natives, but immigrant entrepreneurs had lower survival rates than their native counterparts (9.5% against 6.4%).
Other traditionally high-achieving country, such as Germany, are in some respects equally attractive and formulated stimulating policy to attract immigrant entrepreneurs. This is reflected in the number of foreign entrepreneurs starting a business in Germany. According to a report by the Economic Affairs Ministry3, ´the number of independent businesses-owners with an immigration background jumped by 30 percent in the decade between 2005 and 2015 - up by 171,000 to 737,000´. Immigrants are playing an ever more important role in starting new businesses in Germany. In 2003, 56,000 businesses were founded by immigrant entrepreneurs, compared to 369,000 started by Germans. Last year, however, 100,000 businesses were started by people with immigrant backgrounds, compared to 127,000 founded by people with German roots. Proportionally, that means new businesses founded by immigrants rose from 13 percent in 2003 to 44 percent in 2015.
Besides Germany, also France, Switzerland, and the United Kingdom (Business Roundtable, 2015) have designed favourable policy to attract immigrant entrepreneurs (Sumption, 2012). It was observed that immigrants tend to set up businesses more often than do natives, but found more obstacles to do so (Desiderio, 2014). As large bodies of literature suggest that entrepreneurship is favourable to economic growth, this resulted in policy shifts in the host countries through capital, network, and mentor initiatives. Different policy per country allows immigrant entrepreneurs to differentiate, and select the most favourable country to set up a business so it is important that the right incentives are granted by the host-country.
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2.3 Attracting Skilled Individuals and Entrepreneurs in the Netherlands
Aldrich and Waldinger (1990) pointed out that varying ethnicities have access to different resources, such as knowledge, innovation, network, or tangible assets, which are of benefit to the host-country. This resulted in policy designs to attract skilled individuals such as entrepreneurs, but also knowledge immigrants. As a phenomenon, this is not new, companies also acknowledge the benefits of skilled immigrants. Ethnic diversification has been on the agenda of many multinationals. In the words of Sundar Pichai, CEO of Google: “A diverse mix of voices leads to better discussions, decisions, and outcomes for everyone4.”
Attracting talented immigrants is not a new phenomenon. Minister of Economic Affair, Henk Kamp confirms that enhancing the knowledge economy is one of his priorities, and states that innovation will be the engine of competitiveness and economic growth in the years to come. It translated into favourable policies the Netherlands has formulated and implemented, mainly by adapting the law ´Vreemdelingenbesluit´ 20005 and the law ´Modern Migratiebeleid´ 2004. After implementation, the latter caused a 400% increase6 in highly-schooled immigrant academia starting a career in the Netherlands. However, as the law concerning the entry-requirements for knowledge immigrants has been simplified (in 2009, 2013, 20177), policy concerning immigrant entrepreneurs remained relatively unchanged until recently.
The Secretary of State informed the Tweede Kamer (House of Representatives) about new legislation regarding the admission of innovative, immigrant entrepreneurs in a letter on March 18th, 20148. According to his statement, start-ups potentially contribute to economic growth, competitiveness, and job creation, which makes them a desired group confronted with troublesome legislation. This was due to the difficulty to receive a residence permit, high bureaucracy increasing waiting time, and limited guidance by setting up their business. It was added that other countries such as the United States, France, and Canada have a leaner
4 https://www.google.com/diversity/
5 https://www.rijksoverheid.nl/actueel/nieuws/2016/07/14/nederland-voor-het-eerst-geen-innovatievolger-maar-innovatieleider
6 http://www.payforpeople.nl/kennismigranten/ 7 Staatsblad Koninkrijk der Nederlanden 134 8 TK 2013-2014, 31 311, nr. 105, p. 1-3
15 policy regarding start-ups, of which Canada mostly served as an example to implement similar policy in the Netherlands.
The first regulatory step to attract immigrant entrepreneurs was taken on August 1st, 20139. The change in policy was designed to relax constraints, primarily regarding a residence permit, for immigrant entrepreneurs. Specifically, the law was intended to relieve the creative, IT, and medical sector from under-employment. The reason behind the shift is the contribution of immigrant entrepreneurs to the economy with knowledge, job creation, and economic growth. Especially during the time of the financial crisis, the need to foster economic growth was urgent. January 1st, 2015, however, was the implementation date of a legislative change that enabled immigrant entrepreneurs regardless their sector or industry to receive a residence permit.
2.4 The January 1st, 2015 Legislative Change
The law Vreemdelingenwet 2000 specifies the entry-requirements and conditions for non-EU residents to enter the Netherlands. The Vreemdelingenwet 2000 was initiated on April 1st, 2001 as the successor of Vreemdelingenwet 1965, which was revised in 1994. Specifically, it assesses under which circumstances (temporary) residence permits are granted for non-EU residents and their families. The law targets all non-EU residents, excluding those whom have resided in EU-territory for longer than five years or those originating from countries with which the Netherlands holds special treaties. The law is designed to limit the influx immigrants disregarding the reason of application (excluding asylum applications).
The Vreemdelingenwet 2000, however, did not specify alternative management of the diversified groups and generalizations resulted in the refusal of many highly skilled individuals (Van der Heijden, 2016). The realization that the strictness of the procedures might serve as an impedes for economic growth caused policy makers to change the legislation in favour of immigrant entrepreneurs. This legislative change is the focal point of this study. The Vreemdelingenwet 2000 was changed on three points on January 1st, 2015.
9 https://www.rijksoverheid.nl/actueel/nieuws/2013/07/31/buitenlandse-ondernemers-makkelijker-aan-de-slag-in-nederland
16 First, the most noticeable change in the policy is that immigrant entrepreneurs receive a one-year residence permit to start their business and find funding10. In this period, they do not need to possess seed money, as was previously required. They can use the first year to adapt to the Dutch entrepreneurial environment and work on their business idea. It is, however, expected that the entrepreneur can provide his own income (at least 70% of Dutch minimum wage) and the entrepreneur is not entitled to any form of governmental financial assistance11. Second, the immigrant entrepreneur must be assisted by a facilitator to qualify. The facilitator is a business guide whose aid is used to transform a good idea into a business. The conditions to assist as a facilitator is experience in the guidance of start-ups (for at least two years) and financial stability. The expertise of the facilitator is tested by the Netherlands Enterprise Agency (Rijksdienst voor Ondernemend Nederland, RVO). When the facilitator is approved, the immigrant entrepreneur may register the business at the Chamber of Commerce (KvK). Third, a point-system was invented to measure the degree to which the entrepreneur is beneficial to the economy. Every application was assessed using this system, but most importantly, the non-EU entrepreneur must contribute to a Wezenlijk Nederlands Belang (de Lange, 2016). In short, this entails making a significant contribution to the Netherlands in general. The point-system assesses three main criteria: (1) personal experience, (2) the business plan, and (3) added value for the Dutch economy12. Out of 300 points obtainable, only 90 are needed to meet the requirement.
10 Article 3.58(1) Vb 2000 11 Article 3.20b(2-5) Vb 2000
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2.5 Critique on the Legislation
The existing literature on the topic is nascent, but a few critiques have been written on the legislation. Whereas most of the reaction on the legislative change are positive, the changes are recent and some problems need addressing. The identification of those problems was, among others, instigated by Sarah Lindeboom (2015). She argues that one year is an unrealistic timeframe to set up a profitable business. As the entrepreneurs are expected to sustain their own livelihood, this is challenging for entrepreneurs originating from impoverished countries.
Second, Lindeboom mentions the obligations attached to the track record and financial situation of the facilitator. She points at the contradiction between risk-taking and development of new markets on the one hand, and the list of requirements for facilitators on the other. Moreover, in the case that a facilitator decides to quit during the first year, it is expected of the immigrant entrepreneur to have a second facilitator available to continue its duties.
Third, an argument is made for the financial situation of the entrepreneur, whom in absence of investment of the facilitator or other entities relies on (frequently non-existing) own financial means. Lindeboom proposes to solve this dilemma by granting access to the same financial arrangements as students are entitled to, in the form of loans. Also, Tesseltje de Lange (2016) did extensive research on the point-system and pointed out its flaws. Her research showed that between July 2013 and July 2015 only 21% of the applications were granted a residence permit. These data are both before and after the legislative change, therefore it is not possible to differentiate between the situation before and after. The section policy implications will expand on possible solutions to those problems.
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2.6 Assessing the Point-System – Example of Canada
Exemplifying the new Dutch model, the Canadian government implemented an approximately similar system in the late 1980s. They formulated distinct policy to attract more immigrant entrepreneurs for instrumental-economic objectives. Canada formulated a point-system which simplified the entry of immigrant entrepreneurs which resulted in a large influx of immigrant entrepreneurs. Research by Statistics Canada (2014) shows that between 2012 and 2014, immigrant entrepreneurs in Canada were more likely to use debt-financing for R&D investment compared to native counterparts (7.6% versus 5.0%), and were also more likely to innovate (46.5% versus 40.2%). The policy proved successful in attracting larger numbers of skilled and ambitious immigrant to found a new business in Canada (Hiebert, 2008).
Due to these shifts in policy in the Netherlands, it is expected by the government that a larger share of new-business owners will be foreign in the years after the change. Simplifying the entry-requirements for immigrant entrepreneurs, and considering the favourable entrepreneurial environment in the Netherlands, it is suspected that proportionally the immigrant entrepreneurial community will increase compared to the non-visa immigrant entrepreneurial community. Considering the Canadian example, the history with large numbers of immigrant in the Netherlands in general, and the highly developed entrepreneurial ecosystem in the Netherlands, this study expects a similar outcome.
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3. Methodology
This study aims to empirically investigate the effects of the legislative change implemented on January 1st, 2015, regarding the simplification of entry requirements for immigrant entrepreneurs in the Netherlands, specifically concerning a residence permit. By doing so this study attempts to show whether the legislative change resulted in an increase of immigrant entrepreneurs in the Netherlands. It is hypothesised that the legislative change indeed increased the immigrant entrepreneurial community in the Netherlands. The growing political interest in the promotion of more ethnical backgrounds in the entrepreneurial sphere is strengthened by the mounting evidence on its stimulating effect on national economic growth and job creation. To test the hypothesis, this paper employs a natural experiment to study the real effects of the legislative change.
3.1 Research Approach
The literature review of this study focused on finding the relevant literature and theories on entrepreneurship, both in general and regarding immigrant entrepreneurs. The conceptual framework learned that (immigrant) entrepreneurship is beneficial for national economic growth and job creation. Typically, developed countries have yet engaged in simplification of legislation to attract immigrant entrepreneurs. This study will contribute to the current literature with an analysis whether the Netherlands has had success with the policy change. This study employs deductive reasoning to measure the effects of the legislative change. According to Saunders et al. (2009, p. 125) this approach uses variables to explain a relationship, and is not focused on the development of novel theories, but rather attempts to justify an existing theory in a given situation (Robinson, 1979). Deductive reasoning is appropriate here because the study sets out to test the hypothesis by using existing data/observations. Theoretically, we would say that when it is easier to obtain a residence permit as immigrant entrepreneur, this results in a greater number of immigrant entrepreneurs´ entry.
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3.2 Hypotheses
The current state of the literature on legislative effectiveness stimulating immigrant entrepreneurship in the Netherlands is nascent. Hence, the hypotheses are formulated to quantify initial steps on the topic and to find evidence for the increase in numbers of immigrant entrepreneurs in the Netherlands after the legislative change at January 1st, 2015. The first hypothesis attempts to find evidence for a change in the number of immigrant entrepreneurs, without attaching any direction to the hypothesised change. The number may either increase or decrease. The second hypothesis attempts to find evidence for a significant positive change in the number of immigrant entrepreneurs. The number in this hypothesis is thus hypothesised to increase.
_________________________________________________________________________ H0: The legislative change on January 1st, 2015 had no significant change affecting the number of immigrant entrepreneurs in the Netherlands.
H1: The legislative change on January 1st, 2015 had a significant change affecting the number of immigrant entrepreneurs in the Netherlands.
_________________________________________________________________________ H0: The legislative change on January 1st, 2015 had no significant positive change affecting the number of immigrant entrepreneurs in the Netherlands.
H2: The legislative change on January 1st, 2015 had a significant positive change affecting the number of immigrant entrepreneurs in the Netherlands.
_________________________________________________________________________ We can observe the amount of immigrant entrepreneurs whom have started a business in the Netherlands. Using those numbers, we can conduct a before-after analysis using statistical methods to test the hypothesis. The deductive approach is most suitable in this study as it uses quantitative methods to derive conclusions from the data.
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3.3 Research Design
The choice for a research design is dependent on the aim of the study, as it accounts for the process of data collection and method of research in line with the purpose of the study (Saunders et al., 2009). This study will employ a descriptive research design to study the relationship between the legislative change and the number of immigrant entrepreneurs in the Netherlands. In short, this study will employ a quasi-experimental before-after design. To test the hypothesis, considering the numerous variables influencing the phenomenon, the most suitable method to achieve this is by means of a natural experiment (Rosenbaum, 2002). Natural experiments empirically investigate a phenomenon in which the dependent and independent variables are not manipulated by the researcher. Rather, exogenous factors outside the control of the researcher are observed and allowed to influence the phenomenon. The decision to employ a natural experiment is due to the large number of variables that the research cannot control for. Factors such as the weather, regional political problems, or family-related issues may all affect the choice of an immigrant entrepreneur to start a business in the Netherlands. One of the key strengths of this kind of research is that the unaltered nature of the observed perfectly reflects a real-life phenomenon. Participants are unaware of the study, and will have therefore not behaved differently (McLeod, 2002). On the other hand, the natural experiment has its shortcomings. Complex variables surrounding the hypothesis flourish, with the result that the observation never unequivocally proves a causal relationship. This is because immigrant entrepreneurs from different nationalities are subject to contrasting environments. This may apply to the political, economic, and natural environment, and with the consequence that that the groups are not randomly assigned. An immigrant entrepreneur that started a business in the Netherlands before the legislative change was affected differently than an immigrant entrepreneur starting after, resulting in problems with the internal validity of the study. While this is true, it is highly unlikely to quantify all factors concerning the phenomenon and effectively study their effects, hence the natural experiment is the most fitting for this study. Other methods of study have been considered, but none qualified better than the natural experiment because of the numerous attributable variables. Moreover, it may also be argued that similar factors were
22 influential prior to the legislative change in the Netherlands, decreasing the importance of measuring its impact.
In this study, the dependent variable is the number of immigrant entrepreneurs that start a business in the Netherlands. This number is hypothesised to increase after the legislative change. The typical approach for a before-after study design is to treat the number before and after the legislative change as dependent samples and to compare the samples by using a paired-samples t-test (Smith, 2002). The results will point out if there is a significant change before and after January 1st, 2015, but due to the nature of the research do not exclusively attribute the expected significant relationship to the legislative change. Additional reasons and evidence will be presented in the descriptive analysis section.
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3.4 Data & Sampling
The literature review summarized the relevant literature for this study using secondary data. The secondary data consists of peer-reviewed scientific articles, books, and reports by institutions found online. The use of secondary data gives an overview of important concepts and ideas by academics in the current literature, synthesized for this study (Saunders et al., 2009). The literature review goes from the general to specific, spanning multiple time-frames to chronologically present important ideas. The original source of concepts and ideas has always been pursued.
The natural experiment will be conducted using data obtained from the Dutch Kamer van Koophandel13 (English: Chamber of Commerce). This institution is responsible for the registration of new businesses in the Netherlands. The Kamer van Koophandel has provided numbers on the amount of businesses started in the Netherlands in the years 2012 up till and including 2016. Also, the data provides the distribution of new-business owners per nationality for the same years. This type of data is called panel data, and refers to the measurement over time for the same entity. The entity in this report are the number of immigrant entrepreneurs and their countries of origin in the Netherlands, which are documented annually. The data consists of 270 countries, which are included in Appendix 3. For the data to suit the purpose of this study, it has been divided into several sub-groups, such as immigrant entrepreneurs, non-visa immigrant entrepreneurs, and aggregate entrepreneurs. Also, a group is constructed with countries that have been affected by the Arab Spring, which will be used for other purposes in the section Results.
13 Data obtained by email on 16-4-2017 from Johan de Jong, Adviseur Ondernemingsondersteuning Kamer
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4. Empirical findings
The information available in the data set allows to report and contrast the development in size of the several groups of entrepreneurs in the Netherlands. Specifically, it is expected that the proportional increase of immigrant entrepreneurs exceeds that of non-visa immigrant entrepreneurs and Dutch entrepreneurs. Section 4.1 will summarize the data and provides concise tables and graphs to report initial findings. Section 4.2 will provide an in-depth statistical analysis of the data using parametric paired-samples t-tests to test the mean difference between sequential years, as well as an interpretation of the results. The sub-groups are introduced again below.
1. Non-visa Immigrant Entrepreneur
a. Entrepreneurs originating from a country within the European Union (all 28 members except for the Netherlands)
b. Entrepreneurs originating from a country with which the Netherlands holds a special treaty (Australia, Canada, Japan, Monaco, New-Zealand, Vatican City, the United States, South-Korea, Switzerland, and Turkey) 2. Immigrant Entrepreneur
a. Entrepreneurs from all countries excepts those referred to in 1 3. Arab Spring
a. The countries include: Libya, Tunisia, Egypt, Yemen, Syria, Algeria, Iraq, Lebanon, and Afghanistan (the latter is included because of the many refugees originating from Afghanistan (1.025 Afghan refugees in the Netherlands in 2016 (Asylum Trends, 2016))
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4.1 Summary Statistics
The data from the Chamber of Commerce allows to report and contrast initial findings on the total number of entrepreneurs, the number of non-visa immigrant entrepreneurs, and the number of immigrant entrepreneurs in the Netherlands. Table 1 shows the data for the available years.
Table 1
Number of entrepreneurs for selected groups in the Netherlands 2012-2016
2012 2013 2014 2015 2016
Aggregate Entrepreneurs 141568 167090 164153 165268 165513 Immigrant Entrepreneurs 15622 18597 17894 18146 19690
Non-Visa Immigrant Entrepreneurs 10787 12802 12104 12937 13990
Overall, we can see a gradual increase in business emergence in the Netherlands in all the groups, but one inconsistency stands out. The year 2013 witnessed a large increase in entrepreneurs in all columns, as is visible in Figure 2. According to a report by the
Dutch Chamber of
Commerce14, this is largely due to the global financial crisis which started in 2008. The financial crisis caused a surge in individual business emergence as alternative labour. The report claims that many companies went bankrupt in 2013 and lay-offs have troubled many regular employees. For instance, the bankruptcy of a construction company caused a large portion of its employees to enter the labour market as an independent entity. Moreover, a 14 https://www.kvk.nl/download/startersprofiel%202013_tcm109-384499.pdf 10000 11000 12000 13000 14000 15000 16000 17000 18000 2012 2013 2014 2015 2016
Increase Entrepreneurs in the
Netherlands between 2012-2016
Non-Visa Immigrant Entrepreneur Immigrant Entrepreneur
26 significant rise in retail also contributed to the increase of entrepreneurs. This can be attributed to an increase of e-commerce, food-related retail due to cooking shows on TV, and market- and street-sales because of interest in cheap products. This implies that entrepreneurship does not only arise because of opportunity abundance, but also of opportunity shortage on the labour market.
Tables 2 and 3 show the origin of the ten most entrepreneurial nationalities in the Netherlands for both non-visa immigrant entrepreneur and immigrant entrepreneurs. Entrepreneurs from Turkey lead the non-visa immigrant entrepreneur group, followed closely by Poland. Suriname and Morocco have the highest immigrant entrepreneurial rates in the Netherlands. Second, after the surge in entrepreneurship in 2013, the Dutch entrepreneurial community is decreasing, whereas entrepreneurs originating from most other nationalities have increased. Table 2
Top 10 Country of Origin for Non-Visa Immigrant Entrepreneurs in the Netherlands 2012-2016 2012 2013 2014 2015 2016 The Netherlands 114976 135506 133859 133810 131433 Turkey 3023 3401 3293 2948 3117 Poland 1881 2182 2293 2684 2877 Bulgaria 1329 1391 1090 1141 1225 Germany 860 1028 1001 949 1117 Netherlands Antilles 903 1166 995 1026 1109 United Kingdom 747 835 771 875 885 Romania 770 896 734 718 834 Belgium 603 685 767 747 742
27 Table 3
Top 10 Country of Origin for Immigrant Entrepreneurs in the Netherlands 2012-2016 Country of Origin 2012 2013 2014 2015 2016 Suriname 2284 2496 2083 2046 2146 Morocco 1503 1722 1677 1678 2008 Russia 863 899 991 1028 998 Afghanistan 609 845 803 797 1105 China 566 865 913 932 840 Iraq 564 681 697 834 984 Iran 557 661 639 712 758 Serbia 552 627 674 715 699 Indonesia 472 589 521 458 472 Egypt 248 297 313 316 336
Comparing relative increase between the several groups is interesting to consider as it offers first evidence to support the hypothesis. Whereas the total entrepreneurial community in the Netherlands, e.g. all groups together, accounted for 15,29%, -1,86%, 0,63%, and 0,13% for the years 2013-2016, the immigrant entrepreneurs increased 19,04%, -3,78%, 1,41%, and 8,51% in the same years. Generally, the number of immigrant entrepreneurs fluctuated more. The data, however, is affected by the decrease in Dutch entrepreneurs, whom represent a large portion of the aggregate. When looking at the percentage increase of non-visa immigrant entrepreneurs, we see much less diversity in growth. The annual growth rates are summarized in Table 4. While these results are based on simple percentage increase, section 4.2 will offer more conclusive evidence.
Table 4
Annual Growth Rates for selected groups 2013-2016
2013 2014 2015 2016
Aggregate Entrepreneur 15,3% -1,9% 0,6% 0,1%
Immigrant Entrepreneur 19,0% -3,8% 1,4% 8,5% Non-visa Immigrant Entrepreneur 18,7% -5,5% 6,9% 8,1%
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4.2 In-Depth Analysis
The means of the years 2012-2016 will be compared to find evidence that the legislative change indeed caused an increase in immigrant entrepreneurs in the Netherlands. This study will conduct several paired-samples t-tests (Swinscow and Campbell, 2002; Field, 2013) to determine whether there is a significant mean difference between the years before and after January 1st, 2015. The before-after statistics are relevant to analyse for all the different sub-groups to draw comparisons and exclude the possibility of attributing a significant increase in immigrant entrepreneurs falsely because the entire population significantly increased. This may provide more detailed insight in different ethnic contributions to the immigrant entrepreneurial community, and allows to draw conclusions.
The previous Section 4.1 Summary statistics explained why 2013 was a special year in terms of the number of entrepreneurs among all sub-groups. This inconsistency is important to consider in the statistical analysis, as this major increase is a singular event in the data and does not signify a trend. Therefore, the paired-samples t-test will be conducted threefold for the several categories regarding the pre-legislative change period. This pre-legislative period is divided in pairs: Pair 1: 2014 – 2015, Pair 2: 2012/2013/2014 – 2015/2016, and Pair 3: 2013/2014 – 2015/2016. Having these alternative measures will help to analyse the true effects of the legislative change, as the measures impose different weights on the inconsistency of year 2013.
In all tests, the number of entrepreneurs in the years 2015 and 2016 are combined and the mean of the two years is used to provide a broader picture on the two-year effects of the legislative change. It is chosen to do so for two reasons: 1) because the data is limited and there is no data after 2016, and 2) because we want to provide results which resemble the average of the longest period possible. The p-value will be reported for every sub-group for every Pair, accompanied by the descriptive statistics including mean, standard deviation, and t-statistic reported. For this study, a significance level of α=0.05 is used.
29 The SPSS output confirms that there is a significant change in the amount of immigrant entrepreneurs in the Netherlands before and after 2015. Pair 1 (p-value: .007), Pair 2 (p-value: .021), and Pair 3 (p-value: .001) indicate p < 0.05 hence it confirms H1: The legislative change at January 1st, 2015 had a significant change affecting the number of immigrant entrepreneurs in the Netherlands, and rejects H0. This suggests that, with all exogenous factors observed and allowed to influence the phenomenon as is typical for the natural experiment, that the legislative change at January 1st, 2015 has had a significant effect on the amount of immigrant entrepreneurs in the Netherlands. It could be expected that due to the inconsistency of 2013 Pair 3 would be insignificant, as 50% of the emphasis of the pre-legislation period is on year 2013, but the output shows otherwise.
The SPSS output also confirms H2: The legislative change at January 1st, 2015 had a significant positive change affecting the number of immigrant entrepreneurs in the Netherlands, which measures the same phenomenon but expects a positive (one-tailed) change in the amount of immigrant entrepreneurs. To transform the above output into a one-tailed paired-samples t-test, we simply divide the significance level 0.05 by two. This means that the p-value will be significant at a significance level of 0.025. We see that the p-value of Pair 1, Pair 2, and Pair 3 are all p < .025. Therefore, we can conclude with 95% confidence that H2 is confirmed.
30 A second paired-samples t-test was conducted on the aggregate data, e.g. all nationalities of entrepreneurs in the Netherlands including the Dutch, to see whether the Pairs also significantly change/increase on aggregate before and after 2015. If this would be the case, then the SPSS output on the immigrant entrepreneurs would not provide very strong evidence to accept H1 and H2. The SPSS output, however, provides no significant p-value in the aggregate data (Pair 1 p-value: .089, Pair 2 p-value: .098, and Pair 3 p-value: .865) indicating that overall, there has not been a significant change in the number of entrepreneurs before and after 2015.
The data on the non-visa immigrant entrepreneurs was also analysed, to measure whether immigrant entrepreneurs whom do not require to obtain a residence permit would have also significantly increased after January 1st, 2015. For the analysis, it is chosen to exclude the Netherlands. The results show no significant change for all the observed pairs (Pair 1 p-value: .401, Pair 2 p-value: .076, and Pair 3 p-value: .307). This signals that the legislative change has had a large effect on the entrance of immigrant entrepreneurs whom require a residence permit to start a business in the Netherlands.
31 The natural experiment observes exogenous factors and allows them to influence the measured phenomenon. There are, however, factors that could have had a disproportional effect on the output. These are, for instance, the Arab Spring, which resulted in numerous refugees whom departed to Europe.The output below shows the results for a paired-samples t-test when countries affected by the Arab Spring are left out. From the output, however, we can conclude that leaving the nine countries with high numbers of refugees out did not have a significant effect on Pair 1 (p-value: .017) and Pair 2 (p-value: .007). Both still confirm both H1 and H2. Pair 3 (p-value: .138) was affected but this may be also due to the inconsistency of 2013.
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5. Discussion
The objective of this study was to find evidence for the positive effect of the legislative enacted on January 1st, 2015. It was hypothesised that the legislative change would result in a larger number of immigrant entrepreneurs in the Netherlands. This study used numbers provided by the Chamber of Commerce to see if indeed there were more immigrant entrepreneurs after the legislative change compared to before, and if this rise was significant. The results pointed out that the number of entrepreneurs has significantly increased in the Netherlands in between the years 2012 and 2016.
This was mainly due to the many foreign entrepreneurs from regions all over the world whom have chosen to start a business in the Netherlands. The number of Dutch entrepreneurs did increase only in 2013 which was a troublesome year to effectively measure statistical significance. It is believed that the increase in this year is mainly due to the aftermath of the financial crisis. After the large increase in 2013, which did not only affect Dutch but also foreign entrepreneurs, the number of Dutch entrepreneurs remained relatively stable. The increase in entrepreneurs in the Netherlands is thus due to the influx of foreign, both immigrant entrepreneurs as non-visa immigrant entrepreneurs.
The countries representing the largest number of non-visa immigrant entrepreneurs are Turkey, Poland, and Bulgaria, and countries representing the largest number of immigrant entrepreneurs are Suriname, Morocco, and Russia. Especially immigrants from Turkey, Morocco, and Suriname have a long history in the Dutch entrepreneurial community (Beckers and Blumberg, 2013). The number of newly founded businesses from entrepreneurs originating from these countries keeps increasing. This may be due to several reasons. First, in the Netherlands several generations of immigrants have lived here yet, hence this group may already have family living in the Netherlands, which makes it easier to migrate (Beveridge, 2008). Second, after a turbulent political year in 2014 in Turkey due to the presidential elections, a larger stream of immigrant may have arrived in the Netherlands.
33 This study, however, focused on the effects of the legislative change which was enacted on January 1st, 2015. The results of the statistical analysis showed that the number of immigrant entrepreneurs significantly increased in the years after the change compared to those before. The findings showed that, comparing multiple pairs of years to test inconsistencies in the data, all compared years showed a significant increase in immigrant entrepreneurs. The nature of the conducted research, a natural experiment, is to observe exogenous factors and allow those to influence the measured phenomenon. This type of experiment fits the research perfectly and contributes to its conciseness as there are too many (un)observed variables impossible to research. From the data, however, we can still analyse a few events that may have impacted the results.
As an alternative reason for the significance of the test results, it could be argued that immigration due to the Arab Spring could have had a disproportional impact on the results. To test this, the study excluded nine countries that were heavily affected by turmoil, but still found significant test results. This assures that the findings are not externally influenced by political unrest in the Middle-East. Another measure taken to avoid coincidences in the results is to check whether entrepreneurs on aggregate have significantly increased after the legislative change on January 1st, 2015. If the total number of entrepreneurs regardless of their origin also proved to have significantly increased, then the results confirming H1 and H2 would not have been very strong. The data, however, indicated that there were no statistically significant increases in the several tested pairs of aggregate entrepreneurs, which supports that the results found were an effect of the legislative change.
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6. Conclusion
6.1 ConclusionThis study uses a dataset obtained from the Dutch Chamber of Commerce (Kamer van Koophandel) to develop insight in the role of the legislative change on January 1st, 2015 and its effects on the number of immigrant entrepreneurs in the Netherlands. The primary objective of this legislative change was to relieve the restrictions when applying for a residence permit for immigrant entrepreneurs. In contrast to other studies, this study is a macro-level analysis on the effectiveness of a legislative change regarding the entry of immigrant entrepreneurs and it contributes to the current literature with knowledge on immigrant entrepreneurship in the Netherlands and the effectiveness of this legislative change in several ways.
This study documents on the positive effects of entrepreneurship on national economic growth and job creation. Increased numbers of immigrant entrepreneurs positively contribute to economic development in the Netherlands, and are therefore desirable to attract. Formulating the right policy helps in doing so, which is recognized by many developed countries over the world. The Netherlands is advanced in entrepreneurialism, but may need to reconsider some aspects of its policy, as was also pointed out by Lindeboom (2015) and de Lange (2016).
Two hypotheses were formulated regarding the strength and direction of the increase of immigrant entrepreneurs. First, it was hypothesised that the legislative change would significantly change the number of immigrant entrepreneurs in the Netherlands, which was found to be true. Second, the direction of this change was hypothesised to be positive, which is also supported in the analysis. To check whether these results were simply the result of a general increasing trend in entrepreneurs in the Netherlands, this study analysed similar years for separate groups.
Fist, non-visa immigrant entrepreneurs, whom originate from countries that do not require a residence permit, did not significantly change in the same period. Second, the study accounted for the potential larger increase of immigrants due to the Arab Spring which started late 2010. When removing countries affected by the Arab Spring from the data set and
35 performing the same statistical analysis, the results were still significant. Therefore, the hypotheses are both supported. The research question: Was the legislative change at January 1st, 2015 successful in attracting more immigrant entrepreneurs to the
Netherlands, has a positive outcome. The legislative change at January 1st, 2015 did indeed change the number of immigrant entrepreneurs entering the Netherlands, and did so positively.
The theoretical implications are supportive to the theory that formulating progressive and inviting policy for immigrant entrepreneurs leads to an increase in new-business formation by this group. The Netherlands must continue doing so if the objective is to attract more immigrant entrepreneurs. In terms of practical contributions, the policy implications will provide additional knowledge on ways to improve the current policy. From the perspective of an immigrant entrepreneur considering several countries, the Netherlands is an inviting country with a profitable perspective and the appropriate infrastructure for a future business to thrive.
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6.2 Limitations
The largest limitation of this research is the research design itself, which was also mentioned in Section 3.3 Research Design. Whereas a natural experiment provides many advantages to the researcher, and allows for a concise and systematic analysis of a phenomenon, exogenous factors are allowed to influence the phenomenon. This may cause important variables to be overlooked which impact the study and threaten the validity of the research. A second limitation is the scope of this study, which is limited to reporting only on increase in numbers in immigrant entrepreneurs. The true effects, whether this group indeed significantly contributes to economic growth and job creation, remains unstudied.
6.3 Future Research Avenues
Future research can be directed to disentangle various factors that contribute to increased numbers of immigrant entrepreneurs. As this research has left aside exogenous factors and instead focused on the phenomenon on a macro-level, it might be interesting to see whether policy can be more effectively formulated on a micro-level. For instance, does granting a residence permit for a longer period, or does additional guidance provided by the government or business facilitators contribute to increased numbers of immigrant entrepreneurs. Future research may also be directed to cross-country comparison to study policy effectiveness abroad, and using it to reflect on and improve Dutch policy. Another research avenue may be to investigate the sectoral differences between immigrant entrepreneurs, and measuring respective effectiveness. Some ethnicities or selected groups may be more specialised in certain industries. Providing policy to support specialised immigrant entrepreneurship may be beneficial to economic growth. Last, further research on the legislation itself may find whether granting a one-year residence permit is sufficient to build a sustainable business. Hopefully, the results of this study will further progress in the field.
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7. Policy Implications
The results of the empirical analysis confirm that the legislative change enacted on January 1st, 2015 resulted in a significant increase in immigrant entrepreneurs in the Netherlands. Future research must need to find out, however, to what extend immigrant entrepreneurs contribute to economic growth and job creation. If the potential of an immigrant entrepreneur is recognized in the early stages of entry, policy formulation on additional assistance for high-potentials may result in increased national economic growth and job creation.
First, immigrant entrepreneurs may originate from countries with inferior economic circumstance than their non-visa immigrant entrepreneur counterparts. This gives reason to believe that the reason to start a business in the Netherlands is necessity based. Necessity-based entrepreneurship has often been mentioned as a negative factor in terms of economic development and growth (Allen et al., 2006; Reynolds et al., 2002). Therefore, policy may be directed to disentangle the reasons for starting a business by immigrant entrepreneurs and formulate policy accordingly to achieve optimal economic growth.
Second, the increase in immigrant entrepreneurs is related to the willingness of individuals to come to the Netherlands. Arguably, it is easier for non-visa immigrant entrepreneurs to come to the Netherlands due to familiar Western circumstances and the proximity of the home country. That is why it is surprising to find more immigrant entrepreneurs in the Netherlands. To accommodate and assist immigrant entrepreneurs in the large step to come to the Netherlands it is important to provide the right guidance both (1) personally by facilitating accommodation through social projects for high-potential entrepreneurs and (2) professionally by participation of incubators and hubs.
Whereas the Netherlands is on the right track by relieving restriction on the entry of immigrant entrepreneurs, neighbouring countries engage in similar policy formulation. France, the United Kingdom, Germany, and several Scandinavian countries have adopted similar policy in a race for global entrepreneurial talent. The Netherlands is highly successful in many aspects of comfortable living such as infrastructure, health care, and education, therefore with the right policy it should be simple to attract high potentials.
38 In some respects, the current legislation is effective in its execution. It can effectively reject entrepreneurship which does not contribute to economic growth and job creation, the most important pillars to serve a Wezenlijk Nederlands Belang. Policy must, however, be cautious that it gives sufficient room and stimulation for entrepreneurs that indeed contribute to economic growth and job creation. The policy implication is to effectively distinguish between necessity-based and high-potential business emergence by immigrant entrepreneurs, and provide more time in terms of residence permit granted, and guidance by the government and the industry to fulfil the full potential of the high-potential group.
