Immigrant Entrepreneurship: Does the Liability of Foreignness Matter?

Abstract

The liability of foreignness is a phenomenon scarcely studied in the entrepreneurship literature. While immigrants seem to be prone to create new firms, they face different sorts of barriers to launch new businesses. We apply a binomial logistic regression on Global Entrepreneurship Monitor data to compare immigrants' and natives' entrepreneurial intentions to the actual self-employment activity of each group, and the factors affecting potential differences. We found that immigrants are more likely to have self-employment plans than natives but less likely to end up becoming self-employed. We explain this gap by the liability of foreignness hypothesis, i.e. additional difficulties faced by immigrants when entering the job market or starting up a business in a new country such as poor language skills, the lack of labour experience, the lack of human and social capital endowments specific to that country, and institutional restrictions including discrimination.

Overcoming the Liability of Foreignness: A Typology and Model of Immigrant Entrepreneurs

“…Extending the network‐based Uppsala model to immigrant entrepreneurship, we suggest that ‘problems and opportunities in international business are becoming less a matter of country‐specificity and more one of relationship and network‐specificity’ (Johanson and Vahlne, 2009, p. 1426). The literature (Fang et al ., 2014; Irastorza and Peña, 2014) suggests that the main elements required to overcome this challenge is a proper level and use of individual/organisational resources to get integrated into the relevant networks that structure the global market.…”

“…Liability of foreignness (LOF) is a major barrier experienced by immigrants (Fang et al, 2014;Irastorza and Peña, 2014). Extant studies (Irastorza, 2006(Irastorza, , 2010Brekke and Mastekaasa, 2008;Millar and Choi, 2008;Constant et al, 2009) indicate that, in comparison with locals, immigrants face additional difficulties when entering the job market or starting up a business, largely due to poor language skills, discrimination, and the lack of relevant labour experience, resources or social embeddedness.…”

“…Despite these challenges, immigrants are often more likely to become self‐employed than locals (Levie, 2007; Desiderio and Salt, 2010; Contreras‐Sweet, 2015). Due to their disadvantaged status in the labour market (Light, 2004; Parker, 2006), immigrants may use entrepreneurship as a survival option (Levie and Smallbone, 2006; Chrysostome, 2010); however, this only partially explains their entrepreneurial propensity and success, since LOF can significantly limit their access to business resources or customers (Nestorowicz, 2012; Irastorza and Peña, 2014).…”

Entrepreneurial Activities in Europe - Sustaining Inclusive Entrepreneurship

“…While macroeconomic conditions, industry cycles and discrimination in the market can be factors (Irastorza and Pena, 2014;Schoof, 2006;OECD, 2008;Kautonen, 2013), the most frequently identified factors are the following:…”

Disadvantage Entrepreneurship: Decoding a New Area of Research

“…Corresponding within the tradition of the ‘European School of Entrepreneurship’ (Gartner, 2013) ‐, there is a call to ‘give voice’ to ‘other’ entrepreneurs, the less privileged, those at the margins of society, those who do not ‘belong’ (Ahl, 2004; Essers and Benschop, 2007; Pio, 2007; Ram et al ., 2008). Hence disadvantaged entrepreneurship as a topic has rapidly gained preeminence, also since it addresses the ‘other’ entrepreneurs and accounts for economic, cultural, social and societal conditions (Hughes et al, 2012; Maâlaoui et al, 2013; Bullough et al, 2014; Irastorza and Pena, 2014; Carter et al, 2015; Brännback and Carsrud, 2019; Maalaoui, 2019). Disadvantaged entrepreneurs are embedded in environments and communities based on nested structures of social interactions and social discourses (Ferreira et al, 2017), these environments are as heterogenous as are the disadvantaged entrepreneurs themselves.…”