Do refugee inflows contribute to the host countries’ entrepreneurial rates? A dynamic panel data analysis, 2000–2019

Abstract

Purpose This study aims to estimate the impact of refugee inflows on host countries’ entrepreneurial rates. The refugee crisis led to an increased scientific and public policy interest in the impact of refugee inflows on host countries. One important perspective of such an impact, which is still underexplored, is the impact of refugee inflows on host countries entrepreneurial rates. Given the high number of refugees that flow to some countries, it would be valuable to assess the extent to which such countries are likely to reap the benefits from increasing refugee inflows in terms of (native and non-native) entrepreneurial talent enhancement. Design/methodology/approach Resorting to dynamic (two-step system generalized method of moments) panel data estimations, based on 186 countries over the period between 2000 and 2019, this study estimates the impact of refugee inflows on host countries’ entrepreneurial rates, measured by the total early-stage entrepreneurial activity (TEA) rate and the self-employment rate. Findings In general, higher refugee inflows are associated with lower host countries’ TEA rates. However, refugee inflows significantly foster self-employment rates of “medium-high” and “high” income host countries and host countries located in Africa. These results suggest that refugee inflows tend to enhance “necessity” related new ventures and/ or new ventures (from native and non-native population) operating in low value-added, low profit sectors. Originality/value This study constitutes a novel empirical contribution by providing a macroeconomic, quantitative assessment of the impact of refugee from distinct nationalities on a diverse set of host countries' entrepreneurship rates in the past two decades resorting to dynamic panel data models, which enable to address the heterogeneity of the countries and deal with the endogeneity of the variables of the model.

Drivers and obstacles on refugee entrepreneurship. The host country perspective

“…Education, as a general measure of human capital (Kazlou & Wennberg, 2023;Noorbakhsh & Teixeira, 2023), significantly shapes the career paths of refugees (Lazarczyk-Bilal & Glinka, 2021) and plays a key role in the success of entrepreneurship (Kazlou & Wennberg, 2023). Some refugees encounter difficulties in having their professions recognized in the host country, whether due to lack of national-level requirements, discrimination, or a lack of local network.…”

“…Entrepreneurs relying on skills and qualifications from their home country must assess whether they can be effectively applied and transferred in the host country . It is essential to recognize that stocks of human capital are not immediately transferable to the host economy (Noorbakhsh & Teixeira, 2023). Furthermore, higher levels of education, skills, and experience aid in better assimilating the host country's culture (Kariv et al, 2010).…”

“…Therefore, social capital can compensate for the lack of certain human capital in various contexts (Luseno & Kolade, 2023). However, due to the negative circumstances under which refugees flee their home countries, they may sometimes experience low social capital as family networks become fragmented (Noorbakhsh & Teixeira, 2023).…”

“…Legislative and administrative challenges refer to issues related to the refugee-state relationship, including bureaucratic processes, unclear legislation, and a lack of government support (Yeshi et al, 2022). Such complex administrative procedures related with starting a business could discourage potential entrepreneurs from starting their own firm (Noorbakhsh & Teixeira, 2023). All of this is exacerbated when refugees themselves have an uncertain legal status, since without legal status they cannot officially start businesses (Zighan, 2020).…”

“…Market challenges encompass issues such as a lack of qualified human resources, the influence of the black market, stakeholder discrimination, market ambiguity and instability, limited revenues, and unfamiliarity with the local market environment (Meister & Mauer, 2018). Financial challenges (Noorbakhsh & Teixeira, 2023) affect business growth due to limited access to financial resources such as credit, rigid bank processes, high fees, restrictions on capital movements, and limited payment facilities. Few banks are willing to assist refugees (Alrawadieh et al, 2019), partly due to the instability of residence permits and temporary status (Nijhoff, 2021;Schmich & Mitra, 2023) and the lack of collaterals required for loans (Zighan, 2020).…”