Barriers to Immigrant Entrepreneurship

By: Dr. Kumar Gurung (Ph.D.,MS.,MCEC.,LLB.)

One of the fundamental phenomena of the second decade of the 21st century (and one that becomes of great international interest) is immigrant entrepreneurship (Igboamazu, 2016; March-Chorda, 2021). Immigrant entrepreneurs are growing in the host countries, including in the U.S. (Awotoye, & Singh, 2018). They have started the business in the cities where they have relocated to (Lilius, & Hewidy, 2019); however, their firms are more likely to fade away and fail due to the demands of immigration (Pung et al., 2017). The Demands (Problems) of Immigration (DI) comprises six correlated, reliable, valid scales determined by Brady et al. (2021). They are language barriers, sense of loss, not feeling at home, perceived discrimination, novelty, and occupation (Pung et al., 2017). Furthermore, it impacts immigrant entrepreneurs’ intentions to engage in three specific entrepreneurial behaviors: venture formation, growth, and abandonment (Awotoye & Singh, 2018).

Vedula & Kim (2019) demonstrated that immigrant entrepreneurial ventures fail or fade away because of the lower quality of the entrepreneurial ecosystem. Further, Igboamazu’s (2016) and Northwood & Sherrie (2018) research uncover financial limitation as to the first worry for immigrants. They face difficulty acquiring startup loans from the banks because they lack the banks’ requisite collateral (Khosa & Kalitanyi, 2015). They have to work several jobs for startup funds since they have no inherited wealth (Igboamazu, 2016).

If the problem continues, the firms created by immigrants will have higher exit rates (Mata, & Alves, 2018); due to the demands of immigration (Ding, 2011), general barriers. Such barriers will
reduce immigrant entrepreneurs’ intentions to grow their firms and increase the intentions to abandon them (Awotoye & Singh, 2018). The immigrants who arrived between 1987 and 1996
exceed natives in personal income and homeownership (Kerwin, 2018). According to Vedula & Kim (2019), higher quality of entrepreneurial ecosystems shelters entrepreneur ventures, while ventures in weaker ecosystems are more likely to fade away and fail. For serial entrepreneurs, ecosystem quality has a much smaller impact on venture survival (Vedula, & Kim, 2019).
Immigrants have higher business ownership rates than native-born citizens (Fairlie & Lofstrom, 2015; Dutta et al., 2021).

Across the world, immigrants in general and immigrant entrepreneurs face immense challenges because they often lack an adequate understanding of the business environment of their host countries (Deschamps, 2020). Moreover, while both male and female immigrants tend to be affected, women tend to be more affected for different reasons (Brieger & Gielnik, 2021). To
understand these disproportionate effects on women, one has to appreciate that women more than men are likely to migrate across the world, not necessarily out of choice but because of events beyond their control, such as conflicts, natural disasters, and poverty (Brieger & Gielnik, 2021). In addition, family, labor, and marriage also tend to make it more likely that women will migrate more frequently than men (Brady et al., 2021). For instance, data released by the World Migration Report in 2019 indicated that women made up 48% of all international migrants in that year,
leading to over 130 million migrant women. However, it is also a fact that women tend to be grossly underrepresented in entrepreneurship both in their home countries and abroad (where they have migrated) (Praetorius et al., 2016; Dutta et al., 2021). The main challenge in this regard is that even though it is widely accepted that migration has become feminized, the effects of the feminization of migration are not well known (Brady et al., 2021).

Therefore, the lack of an interdisciplinary and intersectional approach and inherent biases have led to the diminished understanding of the role those migrant women play as entrepreneurs and contributors to global business (Brieger & Gielnik, 2021). Today, the concept of female entrepreneurship capacity and the framing of highly skilled migrant women remains underexamined even though the entrepreneurial capacity building is one of the widely debated topics in the literature (Van Kooy, 2016; March-Chorda, 2021). Therefore, addressing these gaps in knowledge (by understanding the entrepreneurial experiences of highly skilled female migrants) is critical in understanding whether the quality entrepreneurial ecosystem would subdue the demands of immigration and other general barriers of the immigrant entrepreneurs in the U.S. (Aman et al., 2021).

From the outset, it is worth noting that immigrant entrepreneurs usually start or expand businesses in the cities they have relocated with the hope of advancing their entrepreneurial skills of simply earning a living (Awotoye & Singh, 2018; Pung et al., 2017). However, businesses belonging to immigrant entrepreneurs face many challenges, some of which are insurmountable. This explains the high risk of business collapse experienced among businesses owned by immigrant
entrepreneurs relative to those owned by native entrepreneurs. Regardless of whether the businesses set up by immigrant entrepreneurs fade away, fail, or exit, different reasons account for this; and the most notable include language barriers, sense of loss, not feeling at home, perceived discrimination (Pung et al., 2017). These barriers are best articulated and measured by the
Demands of Immigration (DI) scale, comprised of six correlated, reliable, and valid scales (Brady et al., 2021). The scale addresses language barriers, sense of loss, not feeling at home, perceived
discrimination, novelty, and occupation (Pung et al., 2017). When taken together, these barriers effectively make up the challenges that impact immigrant entrepreneurs’ intentions to engage in
three specific entrepreneurial behaviors: venture formation, growth, and abandonment (Awotoye & Singh, 2018).

According to Vedula and Kim (2019), immigrant entrepreneurial ventures are more likely to fail or fade away due to the comparatively lower-quality entrepreneurial ecosystem these ventures operate in or are exposed to Igboamazu (2016) and March-Chorda, 2021) shared this view in part, who argues that financial limitations are among the major causes of problems and even failure or fading way of businesses set up by immigrants. Thus, it is his view that financial constraints are significant factors impeding immigrants’ business success. The same line of argumentation is upheld by Khosa and Kalitanyi (2015) and Northwood & Sherrie (2018), who contend that immigrant entrepreneurs face difficulties acquiring startup loans from the banks because they lack the banks’ requisite collateral. Therefore, these immigrants are often forced to work several jobs to save enough startup capital since they have lacked any inherited wealth (Igboamazu, 2016).

Yet, it remains a reality that immigrant entrepreneurs make essential contributions to the economic growth and development of the U.S. (Kerr & Kerr, 2018), a fact that makes it ever so important to confirm that the many challenges they face are addressed or at least limited. In this regard, the entrepreneurial ecosystem helps produce entrepreneurship in a geographic area, among individuals, organizations, and institutions (Brown & Mason, 2017). The entrepreneurial ecosystem is often descriptive rather than theoretical and does not emphasize the linkages between ecosystem forces and entrepreneurial activities (Stam & Spigel, 2016). Subsequently, whatever obstacles immigrant entrepreneurs face are likely to lower their intentions to grow their firms while increasing their intentions to quit (Awotoye & Singh, 2018).