University of Groningen Faculty of Economics and Business
Msc. Business Administration: Small Business & Entrepreneurship
Master Thesis
WESTERN IMMIGRANT ENTREPRENEURSHIP IN THE NETHERLANDS
Name: Lina Masina
Student number: s1938258
Date: August 12, 2012
1st Supervisor: Dr. C. K. Streb
2nd Supervisor: D r. C.H.M. Lutz
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ABSTRACT
Immigrant entrepreneurship is considered to be an important socio-economic phenomenon. However, while non-western immigrants have been widely researched, there is a lack of studies examining western immigrant entrepreneurship. Therefore the aim of this study is to fill the gap by investigating social, human and financial capital as well as opportunity structure of western immigrant entrepreneurs. From this study can be concluded that western immigrant entrepreneurs have access to heterogeneous social capital in terms of formal and informal networks. Western immigrant entrepreneurs have access to high level of human capital in terms of education, relevant work experience and language skills. Additionally, while western immigrant entrepreneurs predominantly rely on self-finance, they are not limited to this source of finance. As regards to the markets, western immigrant entrepreneurs are predominantly opting for growing markets that require high level of human capital. To a lesser extent western immigrant entrepreneurs are concentrated in stagnating markets that also require high human capital and even less often they can be found in growing markets that require low level of human capital.
Keywords: Western immigrants, entrepreneurship, social capital, human capital, financial capital, mixed
embeddedness, opportunity structure, institutional framework
ACKNOWLIDGEMENTS
I would first like to thank my supervisor dr. C. K. Streb for the time he invested in my master thesis project by providing support and constructive feedback during this process . Furthermore I would to thank D r. C.H.M. Lutz for being my second supervisor.
Also, I would like to thank the entrepreneurs who participated in this study and provided me with valuable insights in their experiences.
Last but not least, I would like to thank my boyfriend, family and friends who provided me with
the great support throughout the year.
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TABLE OF CONTENTS
ABSTRACT... 2
ACKNOWLIDGEMENTS ... 3
1. INTRODUCTION ...6
2. IMMIGRANTS IN THE NETHERLANDS... 9
2.1. Historical background... 9
2.2. Current trends...10
2.3. Immigrant entrepreneurship... 12
2.4. Western immigrants ... 13
3. THEORETICAL FRAMEWORK ...16
3.1. Defining immigrant entrepreneurship... 16
3.2. Systematic literature review process... 17
3.3. Forms of capital ... 20
3.3.1. Social capital... 20
3.3.2. Human capital ... 22
3.3.3. Financial capital ... 25
3.4. Mixed embeddedness model...26
3.4.1. Mixed embeddedness, opportunity structure & social embeddeness...28
3.4.2. Institutional embeddedness of the opportunity structure ... 31
3.5. Conceptual model ... 33
4. METHODOLOGY ...36
4.1. Research design ... 36
4.2. Selection criteria ... 36
4.3. Data collection ...38
4.4. Data analysis ...39
4.5. Describing the research population...39
4.5.1. The entrepreneurs... 39
4.5.2. Their businesses ... 40
5. FINDINGS... 41
5.1. Social capital...41
5.2. Human capital ...43
5.3. Financial capital ... 46
5.4. Mixed embeddedness... 48
6. DISCUSSION...53
6.1. Social Capital...53
6.2. Human capital ...57
6.3. Financial capital ... 59
6.4. Mixed embeddedness... 60
6.5. Summary of findings... 64
7. CONCLUSION...67
8. LIMITATIONS AND FUTURE RESEARCH... 69
9. REFERENCES ...71
APPENDIX... 81
Appendix 1... 81
Appendix 2... 84
Appendix 3... 87
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1. INTRODUCTION
Entrepreneurship is increasingly recognized as an important driver of economic growth, productivity, innovation and employment, and it is widely accepted as a key aspect of economic dynamism: the birth and death of firms and their growth and downsizing (OECD, 2008).
Another important trend that has become a key feature of a modern society is international migration;
from a global perspective many people are on the move (Gorter, Nijkamp & Poot 1998). It is estimated that at present, there are about 160 million migrants worldwide (2 to 3% of the world population), supplemented by an estimated 10 million illegal migrants (UNHCR, 2003). It is further estimated that the annual net inflow of migrants into the EU 15 was about 1.7 million in 2002, with just fewer than 50%
coming from other European countries (Eurostat, 2004).
The most prominent impact of migration from a socio-economic perspective has been the increasing rate of self-employed immigrants in the labor market (Baycan-Leventa & Nijkamp, 2009). The entrepreneurial behavior of many migrant groups has led to the rise of new phenomenon that is called “immigrant entrepreneurship” (Chrysostome & Lin, 2010; Baycan-Leventa & Nijkamp, 2009).
This is not only the case in many high-immigration countries such as Australia, Canada and the USA (Collins & Low, 2010), but the increase in immigrant entrepreneurship is also a European-wide phenomenon (Baycan-Leventa & Nijkamp, 2009). Many European countries such as the UK, the Netherlands and Germany have experienced a growth in immigration in recent years. In these countries many minority immigrant groups manifest a higher rate of self-employment and entrepreneurship than their non-immigrant counterparts (Collins & Low, 2010).
In countries that are major destinations for immigrants, immigrant entrepreneurship plays a critical role in
economic development. Immigrants bring new skills to receiving countries, provide flexibility in the labor
markets and help address labor shortages. They contribute to the economy as employees but also as
entrepreneurs. By creating new firms and businesses they boost the local economy, increasing the quality
of life (OECD, 2010; Sahin et al., 2009). Moreover, immigrant and minority entrepreneurship are
believed to serve as a source for economic mobility (Shinnar et al., 2009). The influence of immigrant
entrepreneurship also includes important noneconomic effects such as the development of vibrant ethnic
communities, social integration and recognition of immigrants, a nurturing entrepreneurial spirit, and
providing role models for immigrants (Chrysostome & Lin, 2010). Moreover, entrepreneurship offers
new entrepreneurs the opportunity to acquire a position in society and thereby enhance their further bonding and commitment (Sahin et al., 2009).
It should also be noted that the main feature of economic restructuring over past four decades has been a marked shift from employment in large firms to self-employment in small firms in most western economies (Collins & Low, 2010; Baycan-Leventa & Nijkamp, 2009). This trend has been most the most pronounced among immigrants (Baycan-Leventa & Nijkamp, 2009).
Immigrant entrepreneurs are an important research topic from many perspectives, but it took some time for this view to become widespread. This interest was partly driven by the rise in immigrant entrepreneurship itself which was first observed in United States and somewhat later in the United Kingdom. The first publications appeared in North America in the early 1970s, closely followed by similar work in the United Kingdom. Soon after, researchers in Australia and Europe followed suit (Kloosterman & Rath, 2003).
Since the origin of this research topic, the scholars have been predominantly focusing on immigrant entrepreneurs from less developed regions such as Africa, Asia, Latin America and Caribbean doing business in North America and Western Europe (Waldinger et al., 1990; Kloosterman & Rath, 2003). In the United States, the “cradle” of immigrant entrepreneurship research, immigrants from the western world are not even considered to be ethnic or immigrant. For example, Northern European entrepreneurs are not described as immigrant entrepreneurs, however recent their arrival in the U.S. (Chaganti &
Greene, 2002). In contrast, the situation differs in the United Kingdom, Canada as well as in Australia.
For instance, studies have discussed Polish immigrant entrepreneurs in the United Kingdom, Italian, Greek, Dutch and German entrepreneurs in Western Australia as well as European immigrant entrepreneurs in Canada (Vershinina et al., 2011; Froschauer, 2001; Peters, 2002).
This study seeks to examine western immigrant entrepreneurship in the Netherlands which provides an
interesting case for investigating this socio-economic phenomenon due to a number of factors. Firstly, the
Netherlands has a high rate of immigration and currently immigrants account for 3.3 million people out of
16.5 million population. Official Dutch statistics draw a distinction between people with a western foreign
background (Europe excluding Turkey, North America, Oceania, Indonesia and Japan) and people with a
non-western foreign background (Africa, Latin America, Asia excluding Indonesia and Japan, and
Turkey) (Statistics Netherlands, 2010). According to this definition 1.5 million people have western
foreign background while the rest of 1.8 million are non-westerners (Statistics Netherlands, 2010).
8 Secondly, the composition of this immigration has been very heterogeneous in terms of countries of origin, causes of migration, in terms of endowment of human capital and also very different in socio- cultural orientation (Rath & Kloosterman, 2000). Although in the Netherlands the immigration has been very heterogeneous, the researchers have predominantly focused on immigrant entrepreneurs from less developed non-western countries such as Turkey, Morocco, Suriname and Antilles and no scientific publications can be found regarding immigrant entrepreneurs from the western world, for instance Europe, North America or Australia. Thirdly, in the Netherlands, the number of businesses owned by foreigners has tripled since 1986, a process which has caught the attention of researchers (Halkias et al., 2009; Rath & Kloosterman, 2000). In 2007 61% immigrants in the Netherlands were with western foreign origin, while the smallest part – 40% accounts for immigrants from non-western countries (EIM, 2011).
Fourthly, International migration outlook (OECD, 2006) highlights that in the Netherlands immigrant contribution to net job creation reaches 1.3 million. Fifthly, entrepreneurship is very important for the Dutch economy and the position of the Netherlands as an international competitor (Sahin et al., 2009).
Sixthly, SMEs in the Netherlands account for 99.7% of all enterprises which is especially pronounced trend among immigrants (Baycan-Leventa & Nijkamp, 2009).
Taking into account the significance of immigrant entrepreneurship as well as the fact that western immigrant entrepreneurs compose large part of immigrant entrepreneurs in the Netherlands while being under researched topic, this paper will attempt to fill in this research gap. Due to the fact that not much research can be found regarding western immigrants, this study will be exploratory in its nature.
This paper will start the section discussing historical development, current trends of immigration and immigrant entrepreneurship in the Netherlands. In the theoretical framework the author defines immigrant entrepreneurship which is followed by discussing systematic literature process. As a result of systematic literature process that indicates the most important concepts of immigrant entrepreneurship, the theoretical part will focus on discussing social, human and financial capital. Moreover, the concept of mixed embeddedness will be discussed in the theory part. Next, methodology section provides the explanations how research design, selection criteria, data selection and data analysis will be performed.
Methods part will be followed by results and discussion part and finally the conclusion as well as
limitations and future research will be discussed.
2. IMMIGRANTS IN THE NETHERLANDS
2.1. Historical background
Until recently, the Netherlands was considered a country of emigration rather than immigration. In the post-war reconstruction period of scarcity and the Cold war, the Netherlands was believed to be overpopulated which is the reason why the Dutch government launched programs to support anyone willing to leave (SCALES, 2003; Rath & Kloosterman, 2003). Among other countries the Dutch emigrated to the United States, Australia, Canada, New Zealand and to a lesser extent, Brazil and South Africa (Rusinovic, 2006). Between 1946 and 1969 nearly half a million Dutch citizens left the Netherlands (Engbersen et al., 2007). According to Rath & Kloosterman (2003) the idea that people would come to the Netherlands settle there was completely at odds with conventional wisdom at the time, let alone that they would make their mark on Dutch economy.
This changed in the 1960s, when the government started to stimulate immigration to overcome labor shortages (SCALES, 2003). Thus from 1960 onwards, the annual immigration to the Netherlands almost invariably exceeded the emigration figures, although a few years of economic decline – such as 1967, 1984 and, most recently, 2003 – did exhibit an emigration surplus (Rath, 2009). Larger groups of immigrants arrived from what was one the Dutch east Indies, the former colony now known as Indonesia (Moluccans, Eurasians), the Dutch territories in the Caribbean (Surinamese, Dutch Antilleans and Arubans), and increasingly from Mediterranean countries (initially Italy and other Southern European countries such as Spain, Portugal, Greece and former Yugoslavia, later mainly Turkey and Morocco) (Rath & Kloosterman, 2003; Vermeulen & Penninx, 2000).
Contrary to what was expected by the government, this immigration did not result in a considerable return
migration (Engbersen et al., 2007). More than that, the reverse happened; as guest workers decided to
stay, they started bringing their families over to the Netherlands. As a result, after 1973 the number of
Turks and Moroccans in the Netherlands grew mainly due to family reunification (Vermeulen & Penninx,
2000. However, the Dutch mindset, especially of Dutch politicians, was still not geared to become a
country of immigration rather than emigration. Only recently did the Dutch government officially
acknowledge that that the Netherlands is hosting a more or less continuous influx of immigrants seeking
permanent residence (Rath & Kloosterman, 2003).
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2.2. Current trendsToday, immigration continues despite the fact that the Netherlands has been pursuing a restricted immigration policy for several decades. On 1 January 2010, one out of five inhabitants in the Netherland has an immigrant background or has been born in a family in which one of the parents is an immigrant (Rath, 2009; Statistics Netherlands, 2010). The most important way of gaining access to the country is family reunification. In addition to this family reunification, there is immigration of football players, students and professionals, especially from EU countries, Japan and the USA. Third World immigrants have been coming to the Netherlands from such countries as Vietnam, Nigeria, Ghana, Iraq, Somalia and Ethiopia/Eritrea. Many entered the country as asylum seekers (Rath, 2009; Rath & Kloosterman, 2003).
Germans and Indonesians constitute the largest category (if first and second generation immigrants are counted), but in everyday life (and contrary to earlier periods in history) they are rarely if ever regarded as immigrants (Rath, 2009).
In 2010 3.3 million people in the Netherlands were considered to be “immigrant”. In Dutch statistics, the parents’ country of birth plays a central role in these definitions. Both parents of native Dutch people were born in the Netherlands, while people with a foreign background have at least one parent who was not born in the Netherlands. If people in the latter group were born abroad, they belong to the first generation, if they were born in the Netherlands they belong to the second generation. People with a foreign background are classified according to a specific ethnic origin. For the first generation, this is based on the country where they were born. For the second generation it is based on the country where their mother was born, or the country where their father was born if the mother was born in the Netherlands. Official Dutch statistics also draw a distinction between people with a western foreign background (Europe excluding Turkey, North America, Oceania, Indonesia and Japan) and people with a non-western foreign background (Africa, Latin America, Asia excluding Indonesia and Japan, and Turkey) (Statistics Netherlands, 2010).
According to this definition, 1.5 million people living in the Netherlands have western foreign
background which account for 9% of the population. About 60% of western immigrants come from one
of the countries of the European Union. The three neighboring countries are present in the top 10
immigrant groups: Belgium, Germany and the United Kingdom followed by Italy, Poland, France and
Spain (Focus Migrations, 2007). An increasing proportion of immigrants come from Eastern Europe,
especially Poland, Bulgaria and Romania. According to Statistics Netherlands (2012), since Poland joined
the EU in May 2004, most immigrants are Polish nationals. Nearly 19 000 arrived in the Netherlands in
2011. They constitute the largest group of immigrants born outside the Netherlands. Moreover, the
immigration from EU member states in Southern Europe is also growing. More than 3 000 Spanish and nearly 3 000 Italian immigrants came to the Netherlands, i.e. more than twice as many as in 2007 (Statistics Netherlands, 2012).
As regards to spatial distribution, many Western (as well as non-Western) immigrants are concentrated in Randstad (conurbation in the Netherlands which consists of the four largest Dutch cities - Amsterdam, Rotterdam, The Hague, Utrecht and the surrounding areas) due to presence of appropriate training and employment. Especially Amsterdam and The Hague have many Western immigrants, because there are located many multinational companies and international organizations (Focus Migration, 2007). A total of 29% of immigrants (or 39% of all non-Western immigrants) live in the four largest cities as compared to 13% of the Dutch population. In Amsterdam and Rotterdam, immigrants make up almost half of the population. While western immigrants are 1.5 of immigrant group, the remaining 1.8 million immigrants in the Netherlands have non-western foreign background (Statistics Netherlands, 2010). Table 1 gives an overview of the current immigrant population in the Netherlands.
Number of
persons Proportion ofpopulation
Increase since 1
January 2000 Proportion second generation
Average age
X 1 000 Per 1 000
residents X 1 000 % Years
Total
16 575 1000.0 711 4 10.0 39.6
Native Dutch
13 215 797.3 127 1 40.9
Western foreign background
of whom
1 501 90.6 135 10 57.1 41.5
Poles
77 4.7 48 164 25.5 31.4
Romanians
14 0.9 9 162 23.8 29.3
Bulgarians
15 0.9 13 593 11.3 28.7
Other westerners
1 395 84.2 65 5 59.7 42.4
Non-western foreign background
of whom
1 858 112.1 450 32 43.2 29.3
Turks
384 23.2 75 24 48.9 29.1
Moroccans
349 21.1 87 33 52.1 27.1
Surinamese
242 20.7 40 13 45.9 33.7
Antilleans/Arubans
138 8.4 31 29 41.4 29.4
Afghans
39 2.3 17 80 19.7 27.1
Iraqis
52 3.1 19 56 21.5 28.4
Iranians
32 1.9 9 38 20.4 33.0
Somalis
27 1.6 -2 -6 26.7 23.7
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Figure 1: Population and population growth, 1 January 2010 (Statistics Netherlands, 2010)2.3. Immigrant entrepreneurship
Since the early 1980s, self-employment has increased significantly among people of different migrant minority groups in the Netherlands. One out of five new businesses in the Netherlands is set up by a migrant entrepreneur (Nijkamp et al., 2009). As stated by Rath & Kloosterman (2000), immigrant entrepreneurship, although becoming more diverse, is still strongly oriented towards specific segments of the opportunity structure.
In the Netherlands from year 2000 to 2009 the proportion of first generation ethnic entrepreneurs has increased from 15 to 25%. This also shows higher proportion of ethnic entrepreneurs in the total population of entrepreneurs. In 2000 12% of all entrepreneurs in the Netherlands were with ethnic origin while in 2007 this number reached 14% (EIM, 2011). As noted before, the Dutch government distinguishes between non-western and western immigrants and this definition also refers to immigrant entrepreneurs (SCALES, 2003).
According to Monitor of Ethnic Entrepreneurship (EIM, 2011) in 2007 there were 40% non-western entrepreneurs of whom 33% were first generation while 7% were second generation. Furthermore, in 2007 there were 59% western foreign background immigrants in the Netherlands. This group consist of 23% first generation and 38% second generation immigrant entrepreneurs. Figure 2 gives an overview of the proportion of non-western and western immigrant entrepreneurs within a population of ethnic entrepreneurs in the Netherlands.
Non-westerners Westerners
Year
1
stgeneration 2
ndgeneration 1
stgeneration 2
ndgeneration
2000
30% 4% 24% 43%
2001
31% 5% 23% 41%
2002
32% 5% 23% 40%
2003
33% 5% 22% 40%
Other non-westerners
459 29.9 174 54 37.7 27.7
2004
33% 6% 22% 39%
2005
33% 6% 22% 39%
2006
33% 7% 23% 38%
2007
33% 7% 23% 36%
Figure 2: Proportion of non-western and western immigrant entrepreneurs within a population of ethnic entrepreneurs divided by generations, years 2000 – 2007 (EIM, 2011)
2.4. Western immigrants
As stated before, official Dutch statistics draw distinction between people with a western foreign background (Europe excluding Turkey, North America, Oceania, Indonesia and Japan) and people with a non-western foreign background
(Africa, Latin America, Asia excluding Indonesia and Japan, and Turkey)
(Statistics Netherlands, 2010). While this definition is useful, it is still rather broad and thus needs to be narrowed for the purpose of clearlydefining which immigrants will be considered western within the context of this study. Moreover, it is beyond the scope of this paper to focus on all immigrant groups that are referred as western according to the Dutch definition.
Traditionally the Western world is a term referring to the countries of Western Europe, the countries of the Americas, as well all countries of Northern and Central Europe, Australia and New Zealand (Thompson, 2005). Nevertheless, the exact scope of the Western world is somewhat subjective in nature, depending on whether cultural, economic, spiritual or political criteria are employed. Moreover, many anthropologists, sociologists and historians oppose "the West and the Rest" in a categorical manner (Ferguson, 2011). Taking into account the great heterogeneity of definitions that would refer to the county as western, it is beyond the scope of this paper to research all these groups of immigrants. Therefore the author of this paper will focus on countries of European Union and North America.
The reason to focus on EU citizens is made due to the fact that they form a significant part of immigrants
in the Netherlands (Focus Migration, 2007). Moreover, one of the cornerstones of the single market of
European Union is the free movement of people which contributes to the mobility of the people within the
union. Historically the largest groups of immigrants in the Netherlands have been Germans and Belgians,
nevertheless since the last enlargements of the European Union there exists a constant increase of
immigrants from new member states, especially Poland, Bulgaria and Romania. Moreover, in 2011 there
14 has been growth also of people from Southern Europe, namely Spain and Italy (Statistics Netherlands, 2012). While old EU member states such as Germany, Austria, Belgium, Luxembourg, France, Denmark, Finland, Sweden, United Kingdom, Ireland, Greece, Portugal, Spain, Italy traditionally have been considered as western, one may argue whether new EU members, namely Bulgaria, the Czech Republic, Cyprus, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Portugal, Romania, Slovakia, Slovenia are the same. However, taking into account that these countries have become part of European Union (EU) as well as North Atlantic Treaty Organization (NATO), it may be considered that they have proved that politically they are part of “the western world”.
Another large group of immigrants in the Netherlands come from North America, e.g. United States and Canada (see figure 3). As regards to these countries, they can be considered western due to its political, cultural and historical developments (Thompson, 2005). While citizens of EU can enjoy “four freedoms”, immigrants from US and Canada are in less favorable situation which makes them an interesting group to investigate. Americans and Canadians are geographically further away from their home countries as well as their stay and participation in labor market in the Netherlands is burdened by more rules and regulations due to the fact that they are not EU citizens.
To conclude, while these two groups of immigrants might and most likely will have certain differences and similarities, the author of this paper is convinced that they will reflect the essence of western immigrants in the Netherlands and thus will be included into the sample group. The figure 3 provides an overview of the dynamics of immigrants from European Union and North America from year 2006 to 2011.
Country Year
2006 2007 2008 2009 2010 2011
Belgium
3846 4062 4254 4533 5567 6038
Bulgaria
477 794 2598 4786 5687 5617
Canada
813 866 918 1026 1250 1352
Cyprus
31 40 37 38 44 34
Denmark
260 276 291 314 402 425
Germany
3626 3652 3669 3742 3998 3993
Estonia
32 32 28 34 55 75
Finland
124 125 135 152 216 246
France
1170 1225 1307 1466 1892 2020
Greece
1029 1056 1064 1089 1131 1169
Hungary
583 645 629 666 808 915
Ireland
337 358 374 413 505 512
Italy
1711 1767 1842 1920 2212 2350
Latvia
53 60 58 77 124 130
Lithuania
150 180 150 152 169 179
Luxemburg
57 61 69 71 101 107
Malta
21 20 27 30 29 29
Austria
540 574 612 616 735 781
Poland
5295 7811 7908 7969 7877 7908
Portugal
442 503 579 649 732 808
Romania
501 578 1115 1560 1918 2214
Slovenia
14 15 10 7 5 6
Slovakia
111 170 129 131 94 76
Spain
776 848 913 989 1237 1353
Czech Republic
28 32 22 12 14 14
USA
1855 1913 2053 2273 2846 3163
Great Britain
4075 4204 4363 4647 5417 5778
Sweden
553 550 562 572 677 679
Total 28510 32417 35716 39934 45742 47971
Figure 3: Immigrant entrepreneurs in the Netherlands, distinction based on the country of birth (Dutch Chamber of Commerce, 2011)
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3. THEORETICAL FRAMEWORK
3.1. Defining immigrant entrepreneurship
According to Organization for Economic Cooperation and Development (OECD) (2010) there is no one commonly-agreed definition of migrant entrepreneurs. Moreover, skimming the academic literature one easily gets the impression that a concept such as that of the “ethnic entrepreneur” is self-evident and does not need further discussion. However, closer examination of this matter reveals that this is too simplistic (Rath & Swagerman, 2011).
There is a large body of literature on what exactly entrepreneurs are and how they differ from other economically active individuals. Authors such as Schumpeter and Kirzner dedicated much of their work to this topic and so did their followers (Schumpeter, 1974; Kirzner, 1997). Entrepreneurship, then, has a more specialized meaning; identifying opportunities, building, innovating and risk-taking in pursuit of profit. Seen in this way, an entrepreneur is to be distinguished from the business person who is merely a shop manager (Rath & Swagerman, 2011). However, in the immigrant entrepreneurship literature this kind of distinction is not common and thus will be not applied in this study.
OECD in their “Open Business” migrant entrepreneurship report (2010) indicate that a general approach is to consider as entrepreneurs “those persons (business owners) who seek to generate value through the creation or expansion of economic activity, by identifying new products, processes or markets” (OECD, 2008a). According to OECD (2010) this definition can be expanded to include those individuals “who work in their own business, professional practice or farm for the purpose of earning a profit” (Eurostat, 2003). The latter category corresponds to the self-employed, whether or not they employ other persons (OECD, 2010). This definition is in line with Light and Rosenstein (1995) and Collins(2003) who adopt a very “loose” definition of entrepreneurship that simply includes all those who are in self-employment (including own account workers and employers). Such influential immigrant entrepreneurship researchers as Kloosterman & Rath (2003) use terms “self-employed” and “entrepreneurs” interchangeably to denote people who own and run their own businesses. Following these authors in this paper entrepreneurs are defined as people who own and run their own businesses, whether or not they employ other persons.
Other concepts that deserve attention include the “immigrant” and “ethnic” entrepreneurship. According
to Kloosterman & Rath (2010) OECD, the use of the term ethnic entrepreneurship can conjure up images
of something essentialist ethnic about these entrepreneurs while “ethnicity” is anything but fixed or taken
for granted. With this caveat in mind, following Kloosterman & Rath (2010) the term ethnic and
immigrant entrepreneurship will be used interchangeably and thereby refer to self-employment of persons who have recent roots – either themselves being born or (one of) their parents – abroad and, hence, tend to be seen as non-mainstream.
This is in line with the official definition on the Netherlands according to whom both parents of native Dutch people were born in the Netherlands, while people with a foreign background have at least one parent who was not born in the Netherlands (Statistics Netherlands, 2010). Moreover, in the Netherlands first-generation immigrants are defined as individuals living in the Netherlands who were born elsewhere while the second-generation immigrants are individuals who were born in the Netherlands with at least one parent born elsewhere (SCALES, 2003). These definitions will be used in order to identify immigrant entrepreneurs.
Finally, it is crucial to discuss the applicability of theories and frameworks of ethnic entrepreneurship to western foreign background immigrants in the Netherlands. In their book Ethnic Entrepreneurs:
Immigrant Business in Industrial Societies, Waldinger et al. (1990) consider only ethnic small business in the United States and Western Europe. Ethnic entrepreneurship is, according to their assumption and that of many others, limited to labor-intensive light industries such as garment manufacturing, or service industries like restaurants, petty retailing, taxis etc. run by family members or co-ethnics (Leung, 2001).
However, Leung (2001) in her study of Chinese IT businesses highlight the diversity among ethnic businesses and take a closer look at a high-tech sector - computer business which might range from family firms to companies providing hundreds of jobs to the local population. Furthermore, according to Chrysostome (2010), today there are many immigrant entrepreneurs who started their business not because of the usual obstacles faced by immigrants in the host country, but because they want to exploit a business opportunity and make money. Also Kloosterman (2010) notes that immigrant entrepreneurship is experiencing changes because of new opportunities which arise due to the post-industrial transformation of urban economies that has increased opportunities for small firms in general due to the shift to services, outsourcing, market fragmentation and the availability of cheap information and communication technology in the past two decades.
3.2. Systematic literature review process
In order to perform thorough primary literature review, the author will make use of systematic literature review process which is suggested by Brereton, Kitchenham, Budgen, Turner and Khalil (2007).
According to Kitchenham (2007), a systematic literature review is a means of identifying, evaluating and
18 interpreting all available research relevant to a particular research question, or topic area, or phenomenon of interest. EBSCOhost online research database service will be used as a tool to access as much relevant scientific publications as possible. It should be noted that EBSCOhost online research database is linked and retrieves publications from 28 different databases.
In order to find wide range of relevant studies three general search terms were used: “immigrant entrepreneurship” and “ethnic entrepreneurship”. The reason for searching particularly these terms is explained in the previous section. Additionally the term “migrant entrepreneurship” was used as it is sometimes used as a synonym for term “immigrant entrepreneurship”. Initially 552 unrefined results were retrieved using these search terms.
Furthermore, several limiters were used to filter out the most recent and relevant publications. Firstly, only articles from last 10 years were searched for. Secondly, only publications from (scholarly) peer reviewed journals were searched for. Thirdly, only academic journals were searched thus excluding reviews.
After refining parameters all three search terms returned 191 results. “Migrant entrepreneurship” returned
17 results, “immigrant entrepreneurship” returned 72 results and “ethnic entrepreneurship” also returned
102 results. However, during the manual check a number of articles were excluded because they were not
available in English. Moreover, all four samples indicated some overlap and were manually checked for
redundancy. Additionally, some of the articles were excluded due to the fact that they did not focus
entirely on immigrant entrepreneurship. Eventually, after this manual check the sample for “migrant
entrepreneurship” remained of 5 articles, “immigrant entrepreneurship” 16 articles and “ethnic
entrepreneurship” 16 articles. The graphical reflection of systematic literature review process is shown on
figure 4.
Figure 4: Systematic literature review process
In order to critically discuss the articles that were selected during the systematic literature review process and find what the most important and widely discussed concepts are in migrant literature, they were scanned for overlapping concepts and as a result these articles were divided in several clusters: social capital, human capital and financial capital, e.g. forms or capital (see table in appendix 1). Moreover, an overlapping concept of mixed embeddedness (Kloosterman et al., 1999) will be discussed at the end of this chapter. This concept was encountered many times during the systematic literature process; authors have referred to the mixed embeddedness as the most innovative concept that captures the essence of immigrant entrepreneurship (Ram & Jones, 2007). The rest of the topics, e.g. motivations, policies, transnationalism, economic performance, female entrepreneurship and niches, will not be studied in more
Literature search applyingEBSCOhost Search functions:
1. Identifying relevant research
2. Select primary studies 3. Assess quality
EBSCOhost database
37 publications 191 publications
552 publications
Execution of review applying manual coding coding process:
1. Extract data 2. Synthesize data 3. Document review
Refining parameters: “migrant entrepreneurship”, “immigrant entrepreneurship”, “ethnic entrepreneurship”
Refining parameters: excluding reviews, editorial materials etc.
Refining parameters: Manual check for redundancy
Redefining parameters: Manual check for focus
Refining parameters: Manual check for publications in other languages than English Refining parameters: excluding publications that are published before 2001
Refining parameters: excluding publications that are not from scholarly reviewed journals
20 detail due to the fact that these concepts have attracted less attention from the immigrant entrepreneurship scholars. Moreover, it would be beyond the scope of this paper to discuss every single concept encountered during the literature review process.
To sum up, the aim of this chapter is to discuss these concepts in more detail and develop a conceptual model as well as number of propositions.
3.3. Forms of capital
Social capital appears regularly as an explanation for ethnic entrepreneurship but it is only one pertinent form of capital (Vershinina et al., 2011). The forms of capital framework offered by Nee and Sanders (2001) propose that immigrants’ mode of economic incorporation (in employment or self-employment) of their receiving society is governed by three mix of Bourdieu’s (1986) forms of capital: social, human and financial. Ram et al. (2008) stresses that in itself, this injects a refreshing element of balance into an agenda previously over-preoccupied with the social capital vested in ethnic resources. Also Kloosterman (2010) agrees that to be able to start a particular business in a market where a demand seems to exist, an aspiring entrepreneur has to have the right kind of resources (financial, human and social capital). Below all three types of capital will be elaborated in more detail.
3.3.1. Social capital
Misztal (2000) makes a distinction between formal and informal contacts. According to this author informal contacts can be described as “informal, face-to-face, homogenous, communal and spontaneous types of relations” while formal contacts are defined as “formal, heterogeneous, rational, contract-based, calculative types of relations” (Misztal, 2000). According to Granovetter (1995) formal social networks are defined as business relations with formal institutions such as banks or governmental organizations.
Informal social networks, on the contrary, are defined as business relations with friends, family members
and/or informal institutions (Granovetter, 1995). Based on this difference between informal and formal
social networks, a distinction can also be made between formal social capital and informal social capital
(Rusinovic, 2006). It should be noted that social capital does not usually materialize as a concrete
resource in itself but as an enabler, unlocking access to scarce resources such as other forms of capital,
labor, markets, suppliers and so on (Ram et al., 2008).
It appears that in immigrant entrepreneurship literature, however, embeddedness in informal networks is considered to be the dominant explanation of success of immigrant entrepreneurship. Moreover, studies particularly emphasize the importance of informal social capital derived from embeddedness in family and co-ethnic community. For instance, Nee and Sanders (2001) go as far as simply define social capital of ethnic entrepreneurs as a form of capital that is spontaneously produced and reproduced within the institution of the family and extended family group, and through recurrent social exchanges within the immigrant community. It is often stated that immigrant entrepreneurs are able to set up their business by making use of family loans, and manage to survive because they can rely on low-paid or unpaid (family) labour (Kloosterman et al., 1999). Additionally, research reveals that strong ties within the family and informal networks provide bonding social capital, which is especially beneficial for early stage entrepreneurial development (Deakins et al., 2007; Masurel et al., 2002) as well as for the general management of the business (Raijaman & Tienda, 2010). The embeddedness in these informal social networks is in fact a key explanatory factor with regard to the survival and overrepresentation of certain immigrant groups in self-employment (Kloosterman et al., 1999).
On the other hand, one of the problems of immigrant entrepreneurs is that access to relevant formal networks outside their own immigrant group is missing (Gold 1995; Hagan et al., 1996; Portes, 1998).
Wolff & Rath (2000) notes that, for example, immigrant entrepreneur are less capable of finding their way in the bureaucratic web in order to get a bank loan, subsidy, office space or assistance with setting up their business, than native entrepreneurs.
While authors cited earlier have predominantly focused on non-westerners, little research has been done
to find out more about social capital of entrepreneurs originating from westerner countries. The author of
this paper assumes, however, because western immigrants are better educated than non-westerners
(UNESCO, 2012) and have excellent language skills, they have the right skills to be embedded in
informal networks outside their own immigrant group. Additionally, although there is no evidence yet, it
is assumed that western immigrant entrepreneurs are embedded also in informal network of local Dutch
people. It is also assumed that contrary traditional view that immigrant entrepreneurs lack formal social
capital, it is assumed that western immigrant entrepreneurs have the right skills to be embedded in formal
networks. The following propositions have been developed in order to find out whether these assumptions
regarding social capital of western immigrant entrepreneurs managers holds true:
22 Proposition 1a: Western immigrant entrepreneurs do not predominantly rely on informal social capital derived from relations with (extended) family and co-ethnics in order to access scarce resources such as other forms of capital, information, labor, markets, suppliers etc.
Proposition 1b: Western immigrant entrepreneurs have access and use informal social capital derived from relations with native Dutch persons in order to access scarce resources such as other forms of capital, information, labor, markets, suppliers etc.
Proposition 1c: Western immigrant entrepreneurs have access and use formal social capital derived from relations with
formal institutionsin order to access scarce resources such as other forms of capital, information, labor, markets, suppliers etc.
3.3.2. Human capital
Human capital refers to possession of education, skills, work experience and knowledge gained through formal education and work-place experience (Nee and Sanders, 2001). The human capital that immigrants bring with them, and continue to accumulate in their new country, can be important resources that open up employment opportunities in the social mainstream and in the ethnic community. Familiarity with the customs and language of the receiving society, its high- and middle-brow cultural forms, educational degrees and professional credentials that are fully transferable are examples of human capital that can yield profit in the majority society (Nee and Sanders, 2001).
According to Nee and Sanders (2001), the relationship between human capital and entrepreneurship tends to be negative, with the better educated and most acculturated individuals using this advantage to gain entry into high status professional and public sector careers. This chimes with recent British research suggesting that, as long-settled groups like UK-born Indians enhance their human capital stocks through acquiring high-level educational qualifications, so they shift increasingly from self-employment to professional/white collar employment, a far less onerous and insecure career option (Jones & Ram, 2003;
McEvoy & Hafeez, 2007).
According to Kloosterman (2010), new businesses that require only small initial outlays can differ
considerably in their needs with respect to human capital. For instance, for a hairdresser’s shop not much
is needed in terms of (formal at least) educational qualifications. This is very different in the case of many
producer services (e.g. consultancy) or highly innovative manufacturing, such as the famous start-ups in
Silicon Valley of the 1990s (Saxenian 1999, 2002, 2006).
Baycan-Levent et al. (2003) state that in general migrant entrepreneurs have less formal or enterprise- related education or prior work experience than natives, and they have less entrepreneurial or management experience than natives.
Relatively low levels of human capital may limit the ability of migrant entrepreneurs to successfully run their businesses (Sahin et al., 2009). Moreover, according to Vinogradov & Kolvereid (2007) even prior to the business establishment, people with higher human capital are in position to start larger and financially better-equipped businesses because of their higher earnings as employees. Through their broader employment experience such people are more likely to identify the most lucrative entrepreneurial opportunities. Finally, persons endowed with high human capital are rarely forced into self-employment by acute need for an income and, therefore, have more time to develop detailed business plans (Vinogradov & Kolvereid, 2007).
In their study of Asian immigrants in United States, Nee and Sanders (2001) found that for immigrants who lack the human capital to be competitive in the English-speaking sectors of the metropolitan labor market, less desirable jobs in the ethnic economy are preferable to unemployment. Furthermore, the study of Ram and Patton (2003) reveals that there is a serious problem of occupational mismatch and down- grading of immigrants. In United Kingdom, many professionally experienced Somalis are facing blockages in the way of finding commensurate job opportunities, with educational qualifications up to degree level not recognized because they were obtained abroad.
Finally, it should be emphasized that once again prior discussed studies have predominantly focused on
non-westerners, for instance Asians or Hispanics, and very little attention has been paid to western
immigrant entrepreneurs and their human capital. One such study reveals that for Europeans the formal
path of training entrepreneurs in production skills has a long tradition. The Netherlands, France, Scotland
and Germany have a long history of industrialization involving training schemes that prepare
entrepreneurs to run small-scale manufacturing and goods processing enterprises, such as cabinet-making
and winemaking (Froschauer, 2001). As regards to higher education, the following graph clearly shows
that tertiary (third level) education enrolment level in North America and Western Europe as well as
Central and Eastern Europe is significantly higher than in other regions (UNESCO, 2012). Moreover, it
can be seen that since 1998 Central and Eastern Europe is gradually catching up with North America and
Western Europe. Based on this data, it is assumed that western immigrant entrepreneurs have relatively
high level (bachelor or master degree) of education.
24
Figure 5: Regional average of enrolment ratios for tertiary education (UNESCO, 2012)Moreover, it is assumed that western immigrant entrepreneurs have gained work experience in the field they are running a business. Furthermore, although there is no evidence yet, it is assumed that western immigrant entrepreneurs have gained business experience in their home country. Finally, while there is no evidence, it is also assumed that western immigrant entrepreneurs are equipped with good skills of English (native speaker or advanced) and Dutch language. These assumptions are translated into the following propositions:
Proposition 2a: Western immigrant entrepreneurs have high level of education (bachelor’s or master’s degree)
Proposition 2b: Western immigrant entrepreneurs have relevant work experience in the field they are running their business
Proposition 2c: Western immigrant entrepreneurs have previous experience in managing business in their home country
Proposition 2d: Western immigrant entrepreneurs possess excellent English skills (native speakers or advanced level) and make use of them in a business context
24
Figure 5: Regional average of enrolment ratios for tertiary education (UNESCO, 2012)Moreover, it is assumed that western immigrant entrepreneurs have gained work experience in the field they are running a business. Furthermore, although there is no evidence yet, it is assumed that western immigrant entrepreneurs have gained business experience in their home country. Finally, while there is no evidence, it is also assumed that western immigrant entrepreneurs are equipped with good skills of English (native speaker or advanced) and Dutch language. These assumptions are translated into the following propositions:
Proposition 2a: Western immigrant entrepreneurs have high level of education (bachelor’s or master’s degree)
Proposition 2b: Western immigrant entrepreneurs have relevant work experience in the field they are running their business
Proposition 2c: Western immigrant entrepreneurs have previous experience in managing business in their home country
Proposition 2d: Western immigrant entrepreneurs possess excellent English skills (native speakers or advanced level) and make use of them in a business context
24
Figure 5: Regional average of enrolment ratios for tertiary education (UNESCO, 2012)Moreover, it is assumed that western immigrant entrepreneurs have gained work experience in the field they are running a business. Furthermore, although there is no evidence yet, it is assumed that western immigrant entrepreneurs have gained business experience in their home country. Finally, while there is no evidence, it is also assumed that western immigrant entrepreneurs are equipped with good skills of English (native speaker or advanced) and Dutch language. These assumptions are translated into the following propositions:
Proposition 2a: Western immigrant entrepreneurs have high level of education (bachelor’s or master’s degree)
Proposition 2b: Western immigrant entrepreneurs have relevant work experience in the field they are running their business
Proposition 2c: Western immigrant entrepreneurs have previous experience in managing business in their home country
Proposition 2d: Western immigrant entrepreneurs possess excellent English skills (native speakers or
advanced level) and make use of them in a business context
Proposition 2e: Western immigrant entrepreneurs possess good Dutch language skills and make use of them in a business context
3.3.3. Financial capital
Gathering the necessary capital to start a small business is indisputably one of the biggest challenges in the process of business creation. This is also true for immigrants who enter into entrepreneurial careers (Nee and Sander’s, 2001). However, most aspiring entrepreneurs tend to lack financial resources or do not have easy access to significant funds (Kloosterman, 2010).
Factors such as inner-city locations, highly competitive market sectors, the absence of a “track record”, language difficulties and discrimination, often comprise difficult conditions for a bank loan (Jones and Ram, 1998). This implies that, generally speaking, these aspiring entrepreneurs can only start a business that requires a relatively modest outlay of capital (Kloosterman, 2010). Still, ethnic businesses would not develop and prosper in such numbers if ethnic entrepreneurs were not capable of raising formal or informal equity. Contrary to conventional expectations that an ethnic business is usually a small corner shop with little capital need, the capital required to establish an enterprise can quickly surpass $300 000 in the case of a restaurant (Volery, 2007).
Several studies have shown that most ethnic entrepreneurs accumulate the bulk of their start-up capital through their own savings, some through arranged loans from relatives or within the ethnic community, whilst only a small number may acquire a bank loan (Basu & Goswami, 1999). Moreover, due to the fact that family members often invest in the business, it is also in the interests of the family to make the business into a success (Sahin et al., 2009).
Boissevain et al. (1990) notes that this is surprising since immigrants usually arrive with only a few savings and often earn their living with unskilled labor paying barely enough to survive. Enduring long working hours, spartan living and multiple employments for a few years are usually the only conceivable methods to amass necessary savings
Also this chapter has been discussed predominantly focusing on non-westerners due to the lack of studies
on westerners. However, the article of Froschauer (2001) reveals that similar to indigenous entrepreneurs
as well as non-western entrepreneurs, European entrepreneurs in Canada are relying either on their own
26 funds or those of their families or both. Generally, three sources of finance such as friends, family and funds are widely used when starting a business. According to Basu & Parker (2001), in most countries, the largest single source of funds is self-finance, provided by the entrepreneurs own savings or assets. Of external funds, bank loans tend to be the most important source by size, followed by loans from family members and friends. Although there is no evidence, it is assumed that similar to general immigrant population western immigrant entrepreneurs use their own savings. However, contrary to non-western immigrants those greatly rely in their co-ethnic community to finance their business; it is assumed that western immigrants don’t rely on their co-ethnic community. While many aspiring entrepreneurs face difficulties in obtaining bank finance in their own country, literature reveals that being an immigrant makes it even harder. For example, the study of Froschauer (2001) reveals that banks are reluctant to lend money to European entrepreneurs in Canada. Therefore it is assumed that also western immigrant entrepreneurs in the Netherlands have difficulties in obtaining bank loan. Following propositions are developed based on theory review and assumptions:
Proposition 3a: Western immigrant entrepreneurs use their own savings for investing in their business
Proposition 3b: Western immigrant entrepreneurs obtain finance from their family and friends for investing in their business
Proposition 3c: Western immigrant entrepreneurs do not obtain finance for investing in their business from their co-ethnic community
Proposition 3d: Absence of a “track record” comprise difficult conditions for western immigrant entrepreneurs to obtain a bank loan
3.4. Mixed embeddedness model
During the systematic literature process the concept of mixed embeddedness developed by Kloosterman et al. (1999) was encountered numerous times and therefore caught the eye of the author of this paper.
Large number of researchers agree that mixed-embeddedness' perspective holds greater promise than
frameworks used before as it allows for
understanding immigrant entrepreneurship as a phenomenon shaped within the political, economic, social and urban environment(Ram & Jones, 2007; Froschauer,
2001; Leung, 2001; Ram, Theodorokopoulos & Jones, 2008; Miera, 2008; Price & Chako, 2009; Collins,
2003,
Labrianidis & Panos Hatziprokopiou, 2010). Additionally, the mixed embeddedness model hasbeen accepted and widely used by OECD (OECD, 2010).
As stated by Peters (2002), the conceptual approaches that originated to explain immigrant entrepreneurship variously attributed the emergent differentials to a group’s culture, structural barriers, situational influences, ecological factors, global economic factors, the opportunity structure, the need to be upwardly mobile or combinations thereof. While such monocausal studies could readily isolate the importance of being able to call on family and kin for the requisite labour and capital needed to establish and sustain a business to the nascent entrepreneur, the research spawned fails to appreciate how the economy and host society’s institutions impact on immigrants’ self-employment patterns (Peters, 2002).
Waldinger’s et al. (1990) “interactive explanation” was the first explanatory model to move away from the monocausal explanations that have dominated the field since the early part of the twentieth century.
According to Waldinger et al. (1990) interactive model suggests that the development of an ethnic business cannot be traced back to a single characteristic that is responsible for the entrepreneurial success of an ethnic group. Instead, the success of an ethnic enterprise depends on a complex interaction between opportunity structures and group resources. In a nutshell: the kind of business an immigrant starts and its role in the immigrant’s process of incorporation are not just determined by the resources this aspiring entrepreneur can mobilize, but are also decided by the time-and-place specific opportunity structure (Waldinger et al. 1990; Light and Rosenstein 1995). According to Peters (2002), however, authors such as Light & Bhachu (1993) rightfully claim that the focus of the interactive model is too narrow as it ignores the influence the destination economy has on immigrants’ entrepreneurial activities.
Kloosterman et al. (1999) claims their “mixed embeddedness” hypothesis overcomes these shortcomings and promotes a better understanding of immigrant enterprise because it combines the micro-level of the individual entrepreneur (supply side) and his or her resources, with the meso-level of the local opportunity structure (demand side), and links the latter, in more loose way, to the macro-institutional framework. Doing this, the insights on the resources necessary for an (aspiring/nascent) entrepreneur are combined with the views on opportunity structures (Kloosterman, 2010).
Taking into account that large number scholars have approved mixed embeddeness model as the most innovative framework for analyzing immigrant entrepreneurship, it will be applied in this study.
Moreover, the model is in line and incorporates the concepts discussed earlier – social, human and
financial capital. In the following chapter mixed embeddeness model will be discussed in more detail,
28 particularly focusing on demand side that is formed by local opportunity structure which is affected by institutional framework (Kloosterman, 2010).
3.4.1. Mixed embeddedness, opportunity structure & social embeddeness
In 2010 Kloosterman published a study that proposed a new framework for analyzing (migrant) entrepreneurship from a mixed embeddedness perspective. In a simple typology he combines insights on the necessary resources of an (aspiring/nascent) entrepreneur with views on opportunity structures. In this typology the opportunity structure is presented which distinguishes between different kind of openings based, on the one hand, on differences in entry barriers (in terms of human capital), and, on the other, on their dynamics (vacancy-chain, growing or stagnating) (Kloosterman, 2010).
Openings for immigrant entrepreneurs, as Waldinger et al. (1990) has shown, do not only occur in markets that structurally expand, but also in markets that shrink on a long-term base. As long as the outflow of the indigenous and longer established immigrant entrepreneurs out of these sunset markets is larger than the rate of contraction, openings are being formed.
Kloosterman (2010) claims that the model of the opportunity structure aims at dealing with two significant changes in the supply side (i.e. more high-skilled migrants from non-OECD countries) and the demand side (new opportunities which arise due to the postindustrial transformation of urban economies that has increased opportunities for small firms in general due to the shift to services, outsourcing, market fragmentation and the availability of cheap information and communication technology (ICT)) in the past two decades. Model has been constructed to be able to deal with new forms of migrant entrepreneurship as well and it allows us to go beyond the “traditional migrant entrepreneur” with his business firmly stuck at the lower end of the market in either small-scale retailing or cheap restaurants (Haller, 2004;
Kloosterman, 2010).
Below, two crucial dimensions of the opportunity structure for new firms, access to human capital and
growth potential, are captured schematically in a matrix that distinguishes four kinds of markets (Figure
6). Financial capital dimension is kept constant and thus not included in this typology. Although social
capital dimension is not incorporated in this typology, its role within this framework will be elaborated
later. Below all four quadrants will be discussed more in detail.
Figure 6: A typology of the opportunity structure: markets split according to accessibility and growth potential
