The influence of motivational factors and personal traits on entrepreneurial success of second-generation migrant entrepreneurs

The influence of motivational factors and

personal traits on entrepreneurial success

of second-generation migrant entrepreneurs

Master Thesis

Name: Emre Dönmez Student number: 10671676 Supervisor: R. van der Voort Study: MSc Busniess Administration Track: Entrepreneurship & Innovation Date: June 16th, 2016

Statement of originality

This document is written by student Emre Donmez 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.

Acknowledgement

My father, a first generation entrepreneur, has always been my example - even in such a degree that he inspired me to follow his example and start my own business. As a business administration student with chosen minors and electives in entrepreneurship, the topic of this thesis is the area I’m most interested in. Next to that, me being defined as a second-generation entrepreneur, this topic for my master thesis is the logical apotheoses of my journey as an academic.

Writing this thesis I had to apply every aspect I learned in all the years during my study. It was a mixture of rediscovering subjects from years ago and knowledge I recently gained writing this thesis.

I would like to take the opportunity and thank my lecturers who helped me prepare this thesis and my supervisor for guiding me through this process.

Emre Dönmez June 2016

Abstract

This research aims to provide insight in to what extent motivational factors of second-generation migrant entrepreneurs and their personality traits influence their business performance.

Since the arrival of the first generation Turkish migrants in The Netherlands a lot has changed. First generation migrant entrepreneurs chose to start a business because of the declining economy and often used informal networks of family and friends to survive. The second generation is mostly drawn to entrepreneurship by opportunities and targets not only their own informal network, but also the native population.As the first-generation migrant entrepreneurs mostly started their own businesses out of necessity, it’s interesting to find out what motivates the second-generation migrant entrepreneurs, whom have more opportunities and choices to start their businesses and how this motivation reflects back in their entrepreneurial success.

Table of contents

2.2.1 Definition of entrepreneurship for this research 9

2.3 Migrant entrepreneurship 9

2.3.1 Migration and Entrepreneurship 10

2.3.2 Conceptual theories of immigrant entrepreneurship 10

2.3.2.1 Ethnic enclave theory 11

2.3.2.2 Middleman minority theory 11

2.3.2.3 Labour disadvantage theory 12

2.3.2.4 Cultural Theory 13

2.3.2.5 Survival theories 14

2.3.2.6 Opportunity structure 14

2.3.3 Models for immigrant entrepreneurship. 15

2.3.3.1 Interactive model 15

2.3.3.2 The mixed embeddedness model 16

2.4 Migrant entrepreneurship in The Netherlands 17

2.5 Turkish entrepreneurship in The Netherlands 18

2.5.2 Motivational factors of migrant entrepreneurs 21

2.6 Motivational factors to start a business 21

2.6.1 Approaches on defining and explaining motivation 22

2.6.2 Personality traits associated with entrepreneurs 23

2.6.3 Push and pull factors 26

2.6.4 Motivational factors for migrant entrepreneurs 26

2.7 Business performance 27

2.7.1 Definition of business performance for this research 28

2.7.2 Factors influencing entrepreneurial success 29

2.7.3 Business performance and migrant entrepreneurs 30

3. DATA AND METHOD 31 3.1 Hypotheses 31 3.2 Variables 31 3.2.1. Personality traits 32 3.2.2. Motivation 32 3.2.3. Business performance 32 3.3 Data collection 33 3.4 Data processing 35

3.4.1 Likert items to Likert scale 35

3.4.2 Statistical tests 35

4. RESULTS 36

4.1 Results of the hypotheses 36

4.1.1 Hypothesis 1: Difference in traits between Push and Pull groups 36

4.1.2 Hypothesis 2: Difference in business performance between Push and Pull groups 37

4.2 Robustness Tests 38

4.2.1 Hypothesis 1 with the top 33% push motivated and the top 33% pull motivated 38

4.2.2 Hypothesis 2 with top 33% push motivated, top 33% pull motivated. 38

4.2.3 Regression 38 5. DISCUSSION 39 5.1 Limitations 40 5.2 Further research 40 6. CONCLUSIONS 40 7. REFERENCES 42 8. APPENDICES 51

1.

Introduction

In 2014 migrant entrepreneurs started one out of the six new companies in The Netherlands. Among them were over 45000 Turkish and almost 2800 Moroccan new entrepreneurs. Turks and Moroccans form the largest two non-native nationalities in The Netherlands (CBS, 2016). The first generation migrants of both these groups arrived in the 1960’s. Economy was rising and migrant workers were attracted to substitute low skill employees in the factories. The first oil crisis in 1973 ended this stimulation of work migration by the Dutch government. In the same period the first families of migrant workers arrived in The Netherlands for family reunification. Although most of these migrants did not have the intention to become an entrepreneur they were overtaken by the economical crisis in the early eighties. Research shows that 56% of the Turkish entrepreneurs did not have other options and therefore started a business (Tillaart & Reugsaet, 1988). Since then a significant proportion of the immigrant population in The Netherlands has established itself as self-employed entrepreneurs. A lot of research has been done on the first generation migrant entrepreneurs, mainly by social scientists (Rath & Kloosterman, 2000). More recent studies show that the offspring of the first generation (known as the second generation) approach entrepreneurship in a different manner (Roolvink, 2009)

1.1 Objective of this study

The primary goal of this study is to gain insight in the relationship between motivational factors of a specified group of entrepreneurs and the business performance of their respective companies. The subject of this thesis thus has two main parts. The first part consists of a study of motivational factors of second-generation migrant entrepreneurs. This study will research if the second second-generation migrant entrepreneurs consider becoming an entrepreneur because of pull factors, for example as a result of the economical situation, or whether they might have different motivations. The role personality traits play in their motivations will be taken into account in this research. The second part of this study will review the influence of motivational factors on their business, explained in terms of their business performance. To treat this topic properly, my study will compare (a) the motivation of second-generation migrant entrepreneurs to actually become an entrepreneur with

(b) the business performance of the second-generation migrant entrepreneurs. Furthermore, this study also researches (c) which personality traits influence motivational factors of becoming an entrepreneur.

This study aims to discover whether different motivational factors lead to different success for migrant entrepreneurs. This study aims to discover if this goes for migrant entrepreneurs as well or if their specific background influences the relationship between motivation and business performance. The results of this study can contribute to policy choices to stimulate second- generation migrants to start a new business.

The focus of this study will be on motivational factors of second-generation migrant entrepreneurs in order to explore the influence on their entrepreneurial behaviour, explained in terms of their business performance. The conceptual framework in this study presents a hypothesized relationship between personality traits and motivational factors of second-generation migrant entrepreneurs and their business performance.

1.2 Research question

This research has one main question, which will be addresses through four supporting sub-questions. The main question guiding the research is as follows:

What are the significant motivational factors to become an entrepreneur for second-generation migrant entrepreneurs and how do these influence their business performance?

The sub-questions are as follows:

1. What is migrant entrepreneurship and what are the significant differences in 1st _{and 2}nd _{generation migrant entrepreneurs?}

2. What are motivational factors to start up a business? What personality traits influence motivation to start up a business?

3. What are motivational factors for second-generation migrant entrepreneurs to start-up a business?

4. Do motivational factors in becoming an entrepreneur influence the business performance of second-generation migrant entrepreneurs? How do they influence the business performance?

Considering the fact that there are numerous migrants in the Netherlands from various origins, all with strong differences in cultures and social norms, this study will be limited to second-generation Turkish migrant entrepreneurs in the Netherlands.

1.3 Conceptual Model

Figure 1: The conceptual model for this research

1.4 Relevance

The relevance of this study can be supported by the observation that economical growth is supported by stimulating entrepreneurship in general (Praag, 2009). Given current topics and discussions about second generation migrants and their unemployment rates, the outcomes of this study can contribute to answering topical questions. Should the government stimulate unemployed second-generation migrants to start a business, even if their motivation will then consist of push factors? Or are these new businesses doomed to fail?

This research will thus provide useful information to policymakers and researchers in the field of migrant entrepreneurship in The Netherlands. Social policymakers will

Business Performance

Migrant entrepreneurship

Motivational Factors

Personality traits

gain a deeper understanding of the reasons why Turkish migrants in the Netherlands choose self-employment. The results can be used to determine whether the skilled second-generation migrants who are venturing into entrepreneurship are doing so because of lack of skilled jobs in the labour market or for other motivational reasons. The study will also provide empirical results on the factors motivating entrepreneurship among second generation Turkish migrants in The Netherlands and on their business performance.

Another consideration is the contribution to the body of literature that already exists. A lot of research has been done on the topic of 1st generation migrant entrepreneurs, but it is relevant to extend this research to the group of 2nd generation migrant entrepreneurs since they differ significantly from their parents. Most research on migrant entrepreneurs is out-dated, for example, the article “Mixed Embeddedness: (In)formal Economic Activities and Immigrant Businesses in the Netherland” by Kloosterman, Van Der Leun, and Rath dates from 1999, and “Differences between first-generation and second-generation ethnic start-ups: implications for a new support policy” by Enno Masurel and Peter Nijkamp was written in 2004.

Understanding and comparing motivational factors is essential for this study. Gaining information on this subject can help motivating second-generation migrants in the Netherlands to adapt to a changing economical environment, where steady labour contracts are becoming less customary and employees are expected to be more flexible or self-employed (CBS). Since this trend transcends the country’s boundaries, this study may have findings that could be relevant to other European countries.

1.5 Research approach

In order to research theories on migrant entrepreneurship, motivational factors and business performance an extensive literature research will be performed. Based on this research hypotheses will be formulated. Subsequently an empirical research will be performed by the means of a survey among a group of second-generation Turkish entrepreneurs. The results of this survey will then be analysed with Stata.

1.6 Overview of chapters

This thesis is divided in six chapters.

Chapter one provides the introduction to the study. It covers the description of the study and justifies its aim and proposition. It further encloses the conceptual model, the main research question and the sub questions that fulfil the study’s objectives. Chapter two presents the literature review on the migrant entrepreneurship, personality traits, motivational factors and business performance. It rationalizes the definitions of entrepreneurship and business performance chosen in this study and looks at the literature on migration. Moreover, it reviews the conceptual theories developed on migrant entrepreneurship and looks at earlier entrepreneurship motivation research.

Chapter three presents the research methodology adopted and the rationale behind it. The variables chosen and their measuring methods chosen are explained. The chapter elaborates on the data collection and the data analysis method used. The steps taken for performing the empirical research are explained in detail.

Chapter four presents the findings of the study.

Chapter five is the discussion chapter and contains an in-depth discussion of the findings from chapter four. The answers to the research questions are given and relevant reference to the literature is made. It includes the limitation of the study and areas for further research.

Chapter six summarizes the research question and sub-questions, approach, arguments, results and discussion.

2. Literature review

Migrant entrepreneurship worldwide has been researched for decades now. Studies as early as 1972 show research done in the USA on this topic (Light, 1972). A study about migrants in Europe followed in 1984 with the research of Ward and Jenkins (Ward & Jenkins, 1984). A study on Western Europe, United Kingdom and France

was conducted in 1993 (Simon, 1993) and then a study on migrant entrepreneurs followed in Israel (Razin, 1993). In those days migrant entrepreneurship was new and barely researched. Nowadays it is a developed and integrated phenomenon in the modern urban economy of the cities. Research of Dutch migrant entrepreneurship started with the pioneers Kloosterman & Rath (1998).

Before we can dive in the subject of migrant entrepreneurship, the term entrepreneurship deserves a closer look. Definitions of entrepreneurship differ widely (Van Praag, 1999). Schumpeter (1949) defined entrepreneurs as people who were able to change a new idea into successful innovative ventures. Gartner (1985) sees it as the creation of new businesses, while Kirzner (1979) defines it as people who are looking out for new opportunities. McCarthy and Nicholls-Nixon (2001) argued that researchers should clearly state the definition being used in their study. In the light of this statement, we will first seek a fitting definition for the term entrepreneur as to be used in this study.

2.2 Theories about entrepreneurship

The verb “entreprendre” came in use in the twelfth century. In the fifteenth century the corresponding noun developed (Long, 1983). However, some suggest that as a field of research, entrepreneurship is relatively new. It was not labelled as a field of study until the late 1980s when it was moving to establish itself as a field in its own right (Ireland, 1987)

The first formal theory of entrepreneurship dates from 1725 (Cantillon, 1964). Cantillon defined an entrepreneur as anyone who was self-employed and was not working for wages (Long, 1983). In the twentieth century, this definition was reviewed by two economists, Von Thunen and Joseph Schumpeter (DeVries, 2007). Their school of thought differentiated between entrepreneurship and business. Von Thunen developed a theory and introduced “risk‟ and “uncertainty‟ into the entrepreneur’s definition (DeVries, 2007). Schumpeter introduced the concept of innovation to his theories of entrepreneurship and stated that only extraordinary people possess the ability to be entrepreneurs and they bring about extraordinary events (DeVries, 2007). Later Knight saw entrepreneurs as people who were willing to take risks, and bear uncertainty to get a reward. In recent years, theories have focused on the

financial side of entrepreneurship. Kirzner saw entrepreneurs as people aware of opportunities that can generate profit (DeVries, 2007).

Kirkwood (2009) simplified the definition by defining entrepreneurs as “anyone who has founded his or her own business”.

The history of the definitions of entrepreneur from the economics perspectives is discussed in detail by Long (1983). Table 1 summarizes his findings.

Richard Cantillon (circa 1730) Entrepreneur defined as self employed person.

Jean- Baptiste Say (circa 1810) Managerial talents required to be a successful entrepreneur.

Alfred Marshall (circa 1980) The abilities of an entrepreneur are different yet complementary to the abilities of manager. Joseph Schumpeter (circa 1910) Entrepreneurship is the finding and promoting

of new combinations of productive factors.

Frank Knight (circa 1920) The essential aspect of entrepreneurship is the courage to bear uncertainty.

Edith Penrose (circa 1960) Entrepreneurial capacities and managerial capacities are distinguishable.

The essential aspect of entrepreneurship is identifying and exploiting opportunities to expand smaller enterprises.

Harvey Leibensten (circa 1970) Entrepreneurial activity is aimed at reducing organizational inefficiency and reversing organizational entropy.

Israel Kirzner (circa 1975)

The fundamental function of an entrepreneur is to identify market arbitrage opportunities.

Table 1: Definitions of entrepreneurship Source: Long (1983)

Long (1983) located three key themes in his analysis of definitional attributes. They are: risk/uncertainty, managerial capabilities and innovation. We will study these attributes in order to find a fitting definition for this study.

Risk-taking is often placed as a key concept when examining definitions of entrepreneurs (Long, 1983). However, Long states that Schumpeter (1934) argues that risk-taking is not necessarily entrepreneurship, as it is related to ownership rather than entrepreneurship. Risk-taking with respect to entrepreneurship is defined

as “taking the chance of incurring damage or loss of some kind (physical, psychological, or economics)” (Belcourt, 1987, in Long, p. 201). Knight (1921) suggested that risk relates to recurring situations that can be estimated. Alternatively, uncertainty as opposed to risk is immeasurable (Knight, 1921 in Long). Uncertainty relates to situations that have no precedent and no possibility of outcomes being estimated. Cantillon proposed that uncertainty was the factor that differentiated an entrepreneur from an employee (Long, 1983). Knight (1921) also found uncertainty a fundamental concept of entrepreneurship. Founding a new business appears to meet this definition of risk and uncertainty. In this view anyone who starts a business is an entrepreneur (Gartner W. B., 1985)

Long's (1983) second category of definitions of entrepreneurship relates to management capabilities. The capability of someone to become an entrepreneur and also be an employee of an organization is a debated topic in the literature. Early propositions by Knight (1921) and Penrose (1968) argue that a manager and an entrepreneur differ and that a manager cannot become an entrepreneur unless there is a liability of error on part of the manager (Long, 1983). Schumpeter (1934) was the first to discuss the difference between an entrepreneur and a manager, a discussion that gathered momentum with the beginning of the professionalization of middle management in the United States (Long, 1983). Kirzner (1979) also makes a distinction between an entrepreneur and a manager. He states that an entrepreneur's task is to find a profitable opportunity and once the awareness of the opportunity is gained, the task can be handed over to a professional manager (Long, 1983). Casson (1990) proposes an alternative view where an entrepreneur is someone who makes judgmental decisions and solves problems. With this definition, Casson makes no differentiation between a manager and an entrepreneur.

Long's (1983) third category is related to innovation. Innovation is defined as “the first commercial transaction involving a new product, process, system or device” (Freeman, 1982, p.7, in Long 1983). In this sense an invention is not an innovation until it is commercialized (Freeman, 1982; Schumpeter, 1934, both in Long, 1983). Schumpeter views an entrepreneur as different from a manager because they carry out new combinations of production forces. He noted five new combinations as: developing new products or services; new methods of production; identifying new markets; new sources of supply or a new organizational form. Since then, many other

researchers have embraced the idea that an entrepreneur engages in creative and innovative behaviour (Gartner, 1990; Drucker, 1985; both in Long 1983). The opposing view is that innovation need, is not included in the definition, as the entrepreneurial activity is innovative in itself (Shapero, 1983). All these three themes offer various ways of looking at entrepreneurship. The brief historical review of definitions presented here shows that the debate around what defines an entrepreneur continues.

2.2.1 Definition of entrepreneurship for this research

The definition of an entrepreneur for the purpose of this research has one necessary condition that must be met. This requirement is that the person must be a business founder. This is a common definition used in other entrepreneurship research. While the employment of others increases the degree of risk an entrepreneur must take, people who do not fulfil both conditions (the founding behaviour and employment of others) are still assumed to be entrepreneurs as defined here.

Summarising, for the purpose of this thesis, entrepreneurship and entrepreneur are defined as:

Entrepreneurship – The creation of a new business (for profit)

Entrepreneur – A person or a group of people who create a new business (for profit)

2.3 Migrant entrepreneurship

Millington (1994) states that migration is commonly attempted for one or more of these reasons: to increase lifetime earnings, to acquire better housing condition, to enjoy a better climate/environment, to have access to better school standards or to access better social networks. As mentioned in the introduction the first generation Turkish migrants arrived in The Netherlands for the first reason; they came to work in a blossoming economy. Migrant entrepreneurship may improve the economic position of immigrants from non-western countries and support the general integration of these immigrant groups in the Dutch and other societies. Policy measures that would improve the educational levels of immigrants, including their Dutch language skills, would also stimulate the rate of immigrant entrepreneurship (Jansen, 2003).

This chapter first researches literature written on migrant entrepreneurship in general, then addresses structures and models associated with migrant entrepreneurs. The chapter ends with an overview of studies done on our specific research group: second–generation Turkish entrepreneurs in The Netherlands.

2.3.1 Migration and Entrepreneurship

Originally migrants were viewed as workers and immigration was mainly seen as cheap low-skilled labour (Singh & Denoble, 2004). Some migrants find work in the general labour market or in the ethnic labour market. Another part turns to a life of government subsidy or turns to the underground economy. Others pursue self- employment and follow a path of entrepreneurship (Portes A. G., 2002). Watson, Keasey and Baker (2000) suggest that, by starting a business, these immigrants create their own job, which helps them avoid the barriers in looking for a job. These barriers could be a lack of education, insufficient access to relevant social networks or discrimination by local employers. Self-employment does not implicate that these barriers disappear; for example, banks may still discriminate against immigrants for business loans. But entrepreneurs are less vulnerable (Watson, Keasey, K, & Baker, M., 2000). Most immigrant entrepreneurs originally participated in the ethnic closed market, which is characterized by import and export of, or retail shops for, ethnic products (Butler & Greene, 1997). Research has shown that these businesses are smaller and produce lower levels of revenue (Butler & Greene, 1997).It is also highlighted that these entrepreneurial ventures are of less value than wage employment (Bates, 1999).In contrast, another study concluded that their reason starting a business was to improve their economic situation (Raijman & Tienda, 1996).

2.3.2 Conceptual theories of immigrant entrepreneurship

The following sections investigate how literature has contributed to the development of theoretical frameworks on migrant entrepreneurship. Firstly, the ethnic enclave theory and the middleman minority theory are discussed (Volery, 2007). Next, the thesis focuses on labour disadvantage theory, cultural theory and opportunity structure. Finally, two models for explaining migrant entrepreneurship will be explained.

2.3.2.1 Ethnic enclave theory

The ethnic enclave theory (Altinay, 2008) states that new immigrants can find opportunities in locations where businesses set up by the same ethnic group already exist. The term “ethnic enclave” refers to locations where immigrants are employed by business owners of the same ethnicity (Lee, 2003). Ethnic enclaves of entrepreneurs have three prerequisites: entrepreneurial skills, capital, and the supply of ethnic labour. Classic examples of an ethnic enclave are the Chinatowns found in major cities (Lee, 2003).

Wilson and Portes (1980) found that a large percentage of migrants went to work for migrants from the same group. They observed that these new migrants learned the tools of the trade working with the same ethnic employer and later set up their own businesses. Their study found that all the self-employed migrants from their study group, had been employed by a migrant from the same ethnic group before becoming self-employed.

Portes and Jensen (1992) found that the networks of small enterprises within an ethnic enclave offered employment comparable to the mainstream economy and also created opportunities for entrepreneurship that were absent elsewhere (Portes & Jensen, 1992).

2.3.2.2 Middleman minority theory

The middleman minority theory (Min, 2003)refers to the role a minority group has played in becoming a middleman between the immigrant market and suppliers of the dominant group. Most middleman minorities live in a society where distinct boundaries exist between people of different races and backgrounds.

The middleman minority theory is an important explanation for immigrant entrepreneurship (Volery, 2007)Immigrant businesses in this theory are associated with the expansion and growth of immigrant communities. Volery (2007) names travel agents, garment shops, fast foods and specialized grocery shops as examples for these businesses. According to the middleman theory two conditions have to be met to enable starting a business. Firstly, there must be enough customers for the products sold. If the immigrant community is too small to generate demand for the products the business is doomed to fail. Secondly, the immigrant entrepreneurs should have the intention to remain in the host country permanently. If money has to

be sent home to family and relatives a negative effect on start-up capital is expected. This phenomenon was discovered in the first decade of the last century in a study comparing Italian and Jewish immigrants in New York (Waldinger, Aldrich, H., & Ward, R., 1990). Italian immigrants were found to be lacking in new investments because they had families and relatives to support back in Italy.

2.3.2.3 Labour disadvantage theory

The labour disadvantage theory, also called blocked mobility theory, finds its starting point in the disadvantages that migrants face in primary labour markets, compared to the native-born people (Min, 2003)These disadvantages could be language barriers, racial discrimination, unrecognized educational credentials, exclusion from referral networks, undocumented status and little-to-no work experience. The labour disadvantage theory suggests that immigrants have significant disadvantages that also guide their behaviour (Valenzuela, 2000). Volery (2007) states that for some migrants there is no other option but to become self-employed for their economic survival. Consequently is not seen as a sign of success but simply an alternative to unemployment. This theory is similar to the push motivating factor as discussed earlier in the previous chapter but more focused towards immigrants. The push- motivating factor is that when a migrant becomes unemployed or fears unemployment self-employment becomes the only option. From this perspective, the theory supplies the answer to the question, “Why do immigrants turn to self-employment?” (Min, 2003).

De Raijman (1996) did a study on paths to entrepreneurship among immigrant groups through surveys and interviews. The study explored and tested the “blocked mobility” hypothesis. The results show that Korean and Middle Eastern/South Asian immigrants had chosen entrepreneurship to overcome labour market disadvantages such as lack of language proficiency and unrecognizable foreign degrees (Raijman & Tienda, 1996). Le and Miller (2000) found that labour market experience was an important factor for choosing self-employment. According to this study, immigrants who were proficient in the language of the host country and one other language had more chances of becoming self-employed. Second generation immigrants were also participants in this study, which may explain the positive effect of Dutch language proficiency by the second generation Turks in The Netherlands in choosing self-employment.

2.3.2.4 Cultural Theory

The cultural theory suggests that ethnic and immigrant groups have culturally determined features that encourage entrepreneurship (Volery, 2007). Examples of these features are commitment to hard work, accepting risk, accepting social value patterns and orientation towards self-employment (Masurel E. N., 2004). Jones, McEvoy and McGoldrick (2002) state that migrants only become aware of the advantages of their own culture after arriving in the new environment. Waldinger et al. (1990) argue that the differences in ethnic resources can explain the different rates of self-employment between equally disadvantaged ethnic groups. Rath & Kloosterman (2003) stated that cultural patterns from the home country influence the choice of being entrepreneurs. For example migrants from Turkey, Korea, Italy and Mexico are more likely to be entrepreneurs because apparently visibility in your own environment plays a big role in the choice of being an entrepreneur (Tillaart H. v., 2001).

Cultural aspects were popular for explaining the tendency of Asian people to become self-employed (Volery, 2007). The strong presence of Chinese people in the catering sector in the UK has led many to believe that certain traits of Chinese culture are an important factor determining their participation in specific economic sectors. Leung (2002) however, argued that these assumptions do not consider other critical aspects of this phenomenon, such as employment alternatives, immigration policies, market conditions and availability of capital. His study emphasized that cultural theory is not as useful as one might think in explaining immigrant entrepreneurship, because it only focuses on cultural aspects and ignores other political-economic factors (Leung, 2002). Okonta and Pandya (2007) showed that entrepreneurial attributes are not dependent on ethnicity, but on individuality and are influenced by conditions as the political and socioeconomic environment, and also resources and personal qualities, including character. Jones et al. (2002) state that the superior work ethics of some cultures are open for discussion, giving the example that the long working hours recorded by Asian business owners are because of an in-built work ethic. They point out that these ethics may just be a result of a result of the nature of those business sectors into which that ethnic group is clustered.

2.3.2.5 Survival theories

Dana and Morris (2007) have described a model with the most important factors that influence migrant entrepreneurship. According to them, the migrant as a person is important, since he or she is the potential entrepreneur. For this migrant the following factors influence whether he will choose to become an entrepreneur: his tendencies to hold on to values from his home country, push and pull motivational factors, gender and age.

Kloosterman et al. (1999) state that in order to survive in a market with much competition, a migrant entrepreneur should keep costs low by keeping the wages of their employees low. Waldinger (in Kloosterman et al., 1999) mentions the positive effects of an informal network for migrant entrepreneurs. By using this network transaction costs for starting and maintaining a business the costs can be lowered, which enlarges the chances of surviving. Another reason found in literature for survival of migrant businesses is the different values and preferences migrants have from natives. Most of them come from countries where longer working days and lower wages are more common. Therefore migrant entrepreneurs will be less inclined to give up on their business when profits are low and more inclined to work longer days. Through their informal network it might be easier to hire low-cost employees or ask friends and family to help out. Being dependent of their informal network on the other hand might also slow down innovation and growth (Dana, 2007) (Morris, 2007). Baycan-Levent et al (2007) introduced the term ‘break-out strategy’; migrant entrepreneurs focus less on their own ethnic group for demand of products and services, the raising of capital and for employees. This way an entrepreneur ends their internal orientation and start focusing more on external opportunities.

2.3.2.6 Opportunity structure

Because most of the foregoing theories do not distinguish between different immigrant groups in different situations, a synthetic thesis called an “opportunity structure” has been developed (Fernandez & Kim, 1998). Ethnic resources such as family members, relatives and friends can provide an opportunity structure for a new migrant. Resources like property, money to invest and human capital provide an opportunity structure for immigrant entrepreneurship (Fernandez & Kim, 1998) (Min, 2003). An opportunity structure is also made up of “market conditions, access to ownership, job market conditions, and legal and institutional framework” (Volery,

2007, p. 31). Kloosterman and Rath (2001) mention that immigrant entrepreneurs take advantage of their opportunity structure but can also create their own opportunities through innovative ideas that may not previously have existed.

2.3.3 Models for immigrant entrepreneurship.

This section will discuss two commonly used models for explaining the development of migrant entrepreneurship: the interactive model and the mixed embeddedness model (Volery, 2007)

2.3.3.1 Interactive model

The interactive model was conceptualized by Waldinger et al (1990). The model describes that the success of migrant entrepreneurships depends on the interaction between opportunity structures and group resources and cannot be traced back to particular characteristics said to be responsible for the entrepreneurial venture (Volery, 2007)

Figure 2: Interactive model of ethnic entrepreneurship development; adapted from Putz (2003) and Waldinger,

Aldrich and Ward (1990)

This model includes as opportunities: market conditions, access to ownership, job market conditions and legal and institutional frameworks. Group resources are resources shared by the immigrants and ethnic people of the same origin (Volery, 2007). Volery (2007) suggests that opportunities for new migrants develop from new ethnic communities. The ethnic community can have specific needs that can only be satisfied by people from the same community. The greater the differences between the ethnic group and the host country the greater the need (and market) for ethnic goods will be. However, the niche ethnic market can never be big enough, and the opportunities it offers will always be limited (Volery, 2007). Access to the open market

29

2.5 Models for immigrant entrepreneurship

The above theories have been integrated into models to explain the phenomenon of immigrant entrepreneurship. Two commonly used models will be discussed in this section (Volery, 2007): the interactive model and the mixed embeddedness model.

2.5.1 Interactive model

Waldinger et al. (1990) conceptualized the interactive model. The model suggests that the growth of ethnic business cannot be traced back to particular characteristics said to be responsible for the entrepreneurial venture. The ethnic business depends on the interaction between opportunity structures and group resources (Volery, 2007).

Figure 3. Interactive model of ethnic entrepreneurship development; adapted from Putz (2003) and Waldinger, Aldrich and Ward (1990)

OPPORTUNITY STRUCTURE _RESOURCES MARKET CONDITIONS Niche markets Open markets Cultural Tradition Ethnic Social Network Access to ownership Job market condition Legal Framework ETHNIC STRATEGIES

is important, but local entrepreneurs may typically occupy this market, which has high entry barriers of a financial, or knowledge nature. But not all industries have needed specific knowhow. Markets with low economies like the taxi industry may have opportunities that migrants can successfully undertake. Markets that are abandoned by the locals because of insufficient returns or demanding working conditions can also provide new opportunities for migrants (Volery, 2007).

Putz (2003) states that group resources are provided due to cultural traditions and social networks. This assumes that self-employment among migrants is partly the result of specific cultural traditions. Volery (2007) argues that the importance of cultural traditions should be considered carefully. The significance of the ethnic network and family is undisputed, and can play a critical role in the success of ethnic businesses, not to mention compensating for disadvantages faced by foreigners in a new environment (Volery, 2007)

It should be noted that various researchers have criticized the interactive model since its publication. Light and Rosenstein (1995) highlighted a number of methodological flaws and stated that attention was not given to gender issues. Bonacich (1993) and Rath (2002) disapproved of the approach to economic and regulatory factors, which they found to be “very narrow and static”, and insinuate that migrant entrepreneurs act differently to mainstream entrepreneurs.

2.3.3.2 The mixed embeddedness model

The mixed embeddedness model incorporates the characteristics of the supply of immigrant entrepreneurs, the opportunity structure and the institutions that mediate between aspiring entrepreneurs and openings to start a business (Kloosterman R. R., 2003). Volery (2007) states that the mixed embeddedness model is based on three assumptions:

1. High barriers of entry or regulations should not block opportunities

2. Opportunity must be recognized through the eyes of a prospective entrepreneur as one that will provide adequate return

3. The entrepreneur should be able to grasp the opportunity in a tangible way The mixed embeddedness model views the rise of immigrant entrepreneurship as an intersection of two frameworks; the socio-cultural framework and the institutional

framework (Kloosterman, Van der Leun, & Rath, 1999). Collins (2002) has stated that the model is still in its experimental phase and the phenomenon has only been validated in a few descriptive case studies. These include case studies on Islamic butchers in the Netherlands (Kloosterman, Van der Leun, & Rath, 1999) and on Chinese catering business in Germany (Leung, 2002).

2.4 Migrant entrepreneurship in The Netherlands

Since the early 1980s, self-employment has increased significantly among people of different migrant minority groups in the Netherlands. Second-generation migrant entrepreneurs set up one out of five new businesses in the Netherlands. The ambition and desire of migrant entrepreneurs to start their own businesses is much higher compared to the indigenous population of the Netherlands. Often they are too optimistic in this sense: 25% of all starting migrant enterprises go bankrupt within a year (for all starters this percentage accounts 14 per cent). On the other side three-quarter of the starters do have success and thus creates new employment, especially for migrant employees. This group mostly works in the service sector and delivers high-quality products. This group takes risk more easily, since their parents support them (Sahin, 2007).

On January 1st 2016, the population in The Netherlands (16,97 million inhabitants) counted 3,7 million migrants. (CBS, 2016)

Figure 3: Total population and migrants in The Netherlands

Among them were 190.621 first generation Turkish migrants and 206.850 second- generation Turkish migrants, making up a total of 397.471 Turkish migrants. (CBS, 2016) 36.000 is them are entrepreneurs, a percentage of 9 % of the total of Turkish migrants. (CBS, 2016) Unfortunately the Chamber of Commerce and the CBS do not provide numbers of Turkish entrepreneurs divided in first and second generation. In 2014 1,9% of new companies were started by Turkish migrants against 1,6% by native Dutch. (CBS) Migrant entrepreneurs in the Netherlands have some distinct features. First generation migrant enterprises are usually found at the bottom of the market, where less financial capital and specific knowledge is required and entree

barriers are thus relatively lower (Rath & Kloosterman, 2000). These markets are characterized by strong competition, mostly from co-migrants and based on price instead of quality, and the entrepreneurs often have to accept small profit margins, while relatively many are forced to close after a short time (Sahin, 2012). In the Netherlands, approximately 60% of all migrant entrepreneurs are found in the more traditional sectors such as wholesale, retail and catering industry (Tillaart H. v., 2001).

Furthermore, they make use of their social networks to acquire employees, informal credit and information, and also in their offer they are often primarily targeting the own migrant community (Tillaart H. v., 2001). In particular, family and migrant networks are deemed a crucial part of entrepreneurial success among migrants. While native entrepreneurs within the Netherlands usually loan their starting capital from the bank, migrant entrepreneurs usually get this starting capital from their family. Family members often invest in the business, therefore it also in the interest of the family to make the business a success. Also personal money from the entrepreneur itself is a widely used financial source. Migrant enterprises are less equally spread across the population in comparison with other enterprises (Sahin, 2007)).

2.5 Turkish entrepreneurship in The Netherlands

The Turkish people are the largest group among the ethnic entrepreneurs in The Netherlands, followed by the Surinamese, then Moroccan, Egyptian and Pakistani entrepreneurs. All together, they form the greater part of migrant entrepreneurs. (Sahin, Nijkamp, & Baycan-Levent, 2006)The Turkish entrepreneurs are mostly active in the ‘ready-made clothing-industry’, in the catering industry and in their own coffee shops and Italian restaurants and in Islamic butchers and in bakeries (Kloosterman, Van der Leun, & Rath, 1999). Studies from EIM show that the number of Turkish entrepreneurs has grown significantly in last years. 12,4 % of every thousand Turks of the working population is self-employed. That percentage is higher than that of native Dutch entrepreneurs (Engelen, 2011)and other ethnic minorities. Whereas many first-generation immigrants from Turkey already had an entrepreneurial background in their country of birth, migrants from Morocco showed considerable lower entrepreneurial rates. (Sahin, 2007)

2.5.1 First and second generation Turkish entrepreneurs

Like mentioned before, migrant minorities consist of two types of migrants. One is the first-generation group, consisting of traditional migrants who were directly recruited for employment reasons. This group is less educated, with most education being achieved in the country of origin. The second group is the second generation, consisting of young dependants born in the host countries, where their entire education has been attained (Sahin, 2007)The CBS defines the 1st generation migrant as a person who is born abroad and from which at least one parent is born abroad (www.cbs.nl). The 2nd generation migrant is defined as a person who is born in the Netherlands from which at least one parent is born abroad (www.cbs.nl). Next to that, there is a distinction made between western migrants and non-western migrants. Western migrants are defined as migrants from Europe (except Turkey), North-America, Australia, Indonesia or Japan (www.cbs.nl). Non-Western migrants are defined as migrants from Africa, Latin America, Asia (except Indonesia and Japan) and Turkey (www.cbs.nl).

First generation migrant entrepreneurs are characterized as not educated or if so, they were educated in their country of origin and were hired because of lack of employees in the host country (Sahin, 2012)The difference with the second generation migrant entrepreneurs is that most of them are born in the Netherlands and speak the language fluently, are educated in the host country and are more custom to the values and needs within the host country as most of them were born and raised in the host country (Sahin, 2012)The consequences of these changes on their motivation to start a business and their business performance will become clear with this study.

Roolvink (2009) states that second-generation entrepreneurs have a better starting point. This group masters the language of the host country better than the first generation does, and is relatively more qualified and acquainted with the local labour market. First generation migrant minorities have started their own small firms in reaction to their declining opportunities in the regular labour market, in sectors where the production is labour intensive, profit margin is low and little start-up capital is required. Their businesses rely mainly on family labour and the labour force of their own ethnic community. They have started their own shops, oriented mainly to the own migrant group. As a consequence of this start they serve the same

customers-group with the same products and service as their competitors without any distinguishing. This leads to enormous prize competition, a falling behind in entrepreneur’s income and a high fall out percentage amongst young migrant businesses. (Roolvink, 2009)

However, the group of second-generation entrepreneurs is generally found to be more ambitious and selective in choosing a job. Mostly first generation migrant entrepreneurs undertake their own business impulsively without first deciding a good-stock taking market. Sahin (2007) found that first generation migrants are far more entrepreneurial than the second-generation migrants. When looked at the migrants from Turkey and Morocco, the profit of the first generation entrepreneurs was much higher than the second generation.

Roolvink (2009) recounts the following differences between the generations:

1. The extent in which they are naturalized in Dutch society, among others through language proficiency. The second generation was raised with the Dutch language and with coping with cultural differences. Other research showed that the when a second generation Turkish entrepreneur was raised traditional Turkish, he/she will know less of the Dutch society. This makes it harder for him/her to start a business.

2. Education. The first generation was less highly skilled, because they were schooled in their home country where the level of education is lower (Sahin, 2007). The second generation was born in The Netherlands and went to school there.

3. There are differences between the generations when it comes to using formal and informal networks. Research by Sahin et. al, (2007) on the relationship between ethnic entrepreneurs and their own informal network distinguishes between internal and external orientation. The second generation is more external orientated and offers more services and products outside the traditional ethnic markets than the first generation did. This requires contact with the local population, high skills and access to government support. The second generation is active in non traditional markets such as quality services. These businesses have a higher survival rate. Moreover, they have a positive effect on the first generation entrepreneurs, who can now access high quality

services of whom the owners have the same nationality as they do.

2.5.2 Motivational factors of migrant entrepreneurs

The first-generation migrant entrepreneurs lean mostly on their own ethnic networks, whereas second-generation migrant entrepreneurs tend to maximize the advantages gained by their own ethnic networks and the natives (Roolvink, 2009). In the Turkish culture pride and standing on your own feet are important characteristics also integrated in their personal traits, which lean more to being an entrepreneur (Sahin, 2007). Boland (2007) therefore stated that migrant Turkish entrepreneurs don’t just choose for starting their own business when they have no alternatives left.

When comparing the motivation differences of the younger generation entrepreneurs with earlier generation we can see some differences. Masurel and Nijkamp (2004) investigated the motivational differences between first-generation and second-generation migrant entrepreneurs. It shows that the first-second-generation migrant entrepreneurs usually have chosen to become an entrepreneur because of discrimination on the work floor, problems with the transferability of diplomas and for obtaining status. The second-generation migrant entrepreneurs usually have chosen the profession of an entrepreneur, because of blocked promotion from previous jobs. When analysing these differences it can be said on a higher level that first-generation entrepreneurs are usually driven by push-factors. We can speak in this sense of ‘captive entrepreneurship’. The second-generation entrepreneurs choose for self-employment more voluntarily; they are more assertive and see entrepreneurship as a viable alternative to sticking in an unfavourable position in their former work experience (Sahin, 2007). Motivational factors will be elaborated on further in the next section.

2.6 Motivational factors to start a business

We will first research the definition of motivation and how researchers have tried to explain motivation for becoming an entrepreneur. Next, we will study personality traits associated with entrepreneurs and the theory of push and pull factors. Finally, we will take a closer look at motivational factors for migrant entrepreneurs.

2.6.1 Approaches on defining and explaining motivation

Motivation is derived from the Latin word ‘movere’ meaning movement (Steers, 2004). Motivation can simply be explained as ‘the reason to do something’. Motivation is defined differently by a lot of researchers with different expertise and backgrounds.

Vroom (1964) stated that the motivation to become an entrepreneur could be explained by process-oriented factors in his expectancy model. This model was supported by Shaver and Scott (1991) and basically explained entrepreneurial motivation with the two questions. Is entrepreneurship desirable to me; do I want to? This question answers if the entrepreneur thinks starting a company will result in the desired results they expect. The second question is: is entrepreneurship feasible for me; can I make a difference? This question answers whether the entrepreneur has the skills and mind to succeed with their business. This model implies an economical motive.

Baumol (1990) explained entrepreneurial motivation in a pure economic perspective and stated that the rewards in our economical system are the main motivation for entrepreneurs. This economic model was explained by three main factors influencing the motivation of becoming of an entrepreneur: usefulness, utility and desirability (Baumol, 1996). Praag and Cramer (2001) supported this perspective and stated that if the desired outcomes outweigh wages from employment, the desire to become an entrepreneur is higher.

Ajzen and Fishbein (1980) approached entrepreneurial motivation with theories of behaviour. Shane (2003) explains the influence to become an entrepreneur by motivational factors but also personality. Kirkwood (2009) discussed four key drivers in entrepreneurial motivation: independence, economical, work-related and family-related drivers. In a lot of literature challenge (McClelland, 1961) (Buttner & Moore, 1997) (Marlow, 1997) and opportunity (McGregor & Tweed, 2002) (Borooah, Collins. G., & MacNabb, 1997) are added as other essential drivers.

Independence is discussed and determined as one of the most influential drivers in becoming an entrepreneur in most literature (Alstete, 2003) (Wilson, Marlino, D., & Kickul, J., 2004). A desire for independence is primarily classed as a pull factor. Independence is having all responsibility for yourself. In entrepreneurial terms this

withholds recognizing opportunities and anticipating on opportunities, being fully responsible for the outcomes of (not) seizing them, both positively and negatively. This power and control to have more autonomy instead of following paths of others is what most entrepreneurs seek (Shane S. , 2003)This statement was supported by empirical research done by for example, Hisrich & Brush (1985) and Hornaday & Aboud (1971) who concluded in their surveys that the need for independence is significantly higher with entrepreneurs than with the general population.

Behavioural theories linking personality with motivation are essential to gain a good insight and significant results for the motivational factors and a lot of research has already been done in the psychological literature trying to explain motivation. The topic of motivation in the entrepreneurship literature has evolved along a path similar to that of the organizational psychology field. This will be examined in this research, through personality traits that is discussed in the organizational psychology.

2.6.2 Personality traits associated with entrepreneurs

Personality and motivation have an influence on the likelihood of exploiting entrepreneurial opportunity (Shane S. , 2003). People with certain personality traits tend to act differently in similar situations. Successful entrepreneurs have the ability to take risks; knowledge of the market; an innovative nature; marketing skills; business management skills; and the ability to co-operate (Shane S. , 2003). Every entrepreneurial decision needs risk tolerance. As the outcome of each investment is unpredictable, related decisions are risky. Douglas and Shepard (1999) stated that the more an individual is willing to take risks, the more likely it is this person becomes an entrepreneur. Economic models explaining motivation to become an entrepreneur state that the willingness to take risks is an essential ingredient in starting a business (Segal, Borgia, & Schoenfeld, 2005). While risk tolerance positively influences entrepreneurial entry the probability of entrepreneurial survival is not correlated with risk tolerance in a strictly positive way (Chell, Harworth, & Brearley, 1991) (Caliendo & Kritikos, 2008).

The research of Rauch and Frese (2007) discusses to what extent entrepreneurs are different from managers in those personality characteristics that are specifically matched to the tasks of entrepreneurship. They found that entrepreneurs score higher than managers with respect to the characteristics of innovativeness, stress

tolerance, proactive personality, and need for autonomy, and lower with respect to locus of control.

Khilstrom and Laffont (1979) stated that the more people are comfortable with uncertainty, the more likely it is they prefer entrepreneurship instead of being a wage employee. According to Gartner (1990) this person-centric approach is not a successful approach in defining entrepreneurs because entrepreneurial activity is episodic, which makes it unlikely to explain it by a single factor that influences all those people at the same way (Carroll & Mosakowski, 1987).

Frequently cited studies of entrepreneurship and personality are McClelland‟s (1961) “theory of the need to achieve” and Rotter‟s (1966) “locus of control theory”. We will discuss both theories below.

McClelland‟s (1961) “theory of the need to achieve”. McClelland (1961) suggested that personality traits explain engagement in entrepreneurship. His view was supported by research results to both broad traits as the Big Five and specific traits as the need for risk taking and achievement (McClelland, 1961). Schmitt – Rodermund (2004, 2007) showed that entrepreneurs are characterized as high in extraversion, conscientiousness and openness and low in agreeableness and neuroticism. She further suggested that early entrepreneurial competences as leadership and inventive and commercial activities might be revealed as early as during adolescence. Stimulation of these competences might channel individuals into entrepreneurship (Schmitt-Rodermund, 2007)Davidsson (2006) argued that human and social capital are among the most important proximal predictors of entrepreneurial activity. Entrepreneurial human capital refers, for instance, to a person’s business skills or entrepreneurial experience. Entrepreneurial social capital describes the provision of entrepreneurial resources by social networks. Such human and social capital in adulthood, in turn, may be the result of both growth in competence (Masten, 2010) (Spencer & Spencer, 1993)and the expression of personality traits (Baum R. &., 2004). According to McClelland’s theory, individuals with a high need to achieve are those who like to solve their own problems, set targets and meet those targets, and it is these who are going to be successful entrepreneurs. The theory states that individuals who have a strong need to achieve become entrepreneurs and succeed better than others.

Rotter’s “locus of control theory”. Locus of control (Rotter, 1966) measures expectations about internal and external control of reinforcement. People with an internal locus of control believe that they determine their future outcomes through their own actions. Persons with an external locus of control believe that their own future development is determined randomly or by the external environment, but not by their own actions. Several empirical research has shown that locus of control is a highly relevant personality characteristic for becoming a entrepreneur: Brockhaus (1980), Begley and Boyd (1987), Evans and Leighton (1989), Bonnet and Furnham (1991), Mueller and Thomas (2000), Hansemark (2003), and Oosterbeek et al. (2010) have all delivered evidence that there is a positive relationship between internal locus of control and entrepreneurial status.

The Big Five. The Big Five (Goldberg, 1990) is seen as the most comprehensive framework for personality. The model is also known as the Five Factor model and consist of five factors used to define human personality: openness to experience (O), conscientiousness (C), extraversion, agreeableness (A), and neuroticism (N); together often abbreviated to OCEAN. The model has been used as starting point for personality research and entrepreneurship. Meta-analytic studies

have shown correlations between the Big Five and

entrepreneurship (e.g., Brandstätter, 2011; Zhao & Seibert, 2006). According to Brandstätter (2011) the Big Five are relevant in predicting entrepreneurial intention (C+, O+, N−, E+) and entrepreneurs performance with their respective businesses (C+, O+, E+, N−).

Zhao & Seibert (2006) used the Big Five to examine the relationship of personality to outcomes associated with two different stages of the entrepreneurial process: entrepreneurial intentions and entrepreneurial performance. The results show that four of the Big Five personality dimensions were associated with both dependent variables, with agreeableness failing to be associated with either. This research included risk propensity as a separate, sixth dimension of personality. The results showed this factor was positively associated with entrepreneurial motivations but was not related to business performance. This confirms the earlier findings of entrepreneurial survival are not correlated with risk tolerance in a strictly positive way.

2.6.3 Push and pull factors

The motivation to start a business can be divided in push and pull factors introduced by Shapero & Sokol (1982). Push factors are explained by a friction between the current and desired condition and are commonly linked with dissatisfaction, for example necessary economic motives (Uhlaner & Thurik, 2007). Push factors are considered negative and are seen as necessity driven factors whereas pull factors (for example the desire to be self-employed) are seen as positive and are considered opportunity driven (Verheul, Thurik, R., Hessels, J., & Van der Zwan, P., 2010) (Williams, 2008).

Push factors are negative external factors that push persons to entrepreneurship, such as dissatisfaction with their current job, unemployment, inadequate income or a lack of flexibility (Gilad & Levine, 1988);(Shapero, 1983). Push factors are also called defensive motives (Tesfaye, 1997). Pull factors are associated with positive aspects like the drive for independence, freedom, prosperity and other desired goals. There are disadvantages in the push/pull and necessity/opportunity driven approaches because these can be interpreted differently per person. The qualification whether something is necessity or opportunity driven can only be made by the entrepreneur and cultural aspects can play a big role in this qualification (Williams, 2008). Various researches claim that pull motivation has a better influence on entrepreneurial satisfaction and success than push factors (Sahin, 2007; Shapero & Sokol, 1982, Kirkwood, 2009).

2.6.4 Motivational factors for migrant entrepreneurs

What motivational factors might influence a second-generation migrant to become a self-employed entrepreneur? Masurel and Nijkamp (2002) state that migrant entrepreneurs are motivated because of discrimination, transferability of diplomas from their home countries and the goal migrant entrepreneurs have to obtain status. Rath et. al (1999) state that the choice of becoming an entrepreneur for migrants depends on numerous factors like the state of the economy, social and cultural characteristics, and the possibilities to explore opportunities. The possibilities to discover and follow up on opportunities depend on the state of technology, costs of production, the market structure and the necessity of starting a business. This is supported by the events in 1997, when the economy was in a downfall and the rates

of unemployment were high in The Netherlands, mainly among Turks (31%) and Moroccans (24%) (Rath & Kloosterman, 2000).

Neighbourhoods with a lot of immigrant entrepreneurs were first to see migrants to start-up businesses. This suggests that the social networks based on proximity were essential (Rath & Kloosterman, 2000). The language barrier, educational limitations and lack of finance forced the first generation entrepreneurs to enter low barrier markets (Rath & Kloosterman, 2000). Low barrier markets are easy to entry, but difficult to survive because the competition is fierce. Although the profits were low, these companies survived because the migrants running them were used to working long hours for low payments. Rath, Kloosterman and Russel (2003) state that embeddedness in specific social networks reduces transaction costs, which possibly stimulates entrepreneurs.

2.7 Business performance

Entrepreneurs are judged on the basis of the performance of their businesses. The performance of entrepreneurs refers to their ability to contribute to employment and wealth creation (Carter & Jones-Evans, 2006). It is necessary to specify how business performance will be measured within this study. According to Murphy et al. (1996) accurate and appropriate measurement of performance is crucial. They examined different entrepreneurship studies using performance as the dependent variable. The most important selected dimensions were: efficiency, growth and profit. Profit is a commonly used objective measure of performance. Performance is also measured in terms of growth. Examples of growth measures include change in profit and sales. Other objective performance measures include indicators such as profit growth, cash flows, earnings, capital productivity, rate of return on investment etc.

Van Praag (2003) states that success in self-employment has no unique definition, and therefore has been measured differently in business, psychology, and sociology. Performance measures have been defined in terms of earnings, firm size, firm growth, and the probability of survival. McCartan-Quinn and Carson (2003) state that although there is no consensus for the definition of performance, measures used have included employment created, profits, turnover, or creation of financial assets.