After spending the better part of the past five years studying immigrant entrepreneurship, I finally became an immigrant myself. Doing so has offered me practical experience in my main theoretical and empirical field of interest. I'm happy to report my experience confirms my priors.
It's been consistently found in the literature that immigrants are more entrepreneurial than natives, and these results hold when studying a variety of different country contexts. Why is this? I could give you the theoretical academic answer backed with empirics, but after spending slightly more than a month living and working in a new country, I think my practical experience offers a more intuitive explanation. Besides, I've always been of the mind that if I can't explain a concept to an elementary school student, I don't really understand that concept.
To best explain why immigrants are more entrepreneurial than natives, it helps to break down the reasons into two broad categories. The first category of explanations for immigrant entrepreneurship has to do with characteristics immigrants have before they immigrate. The second category of explanations for immigrant entrepreneurship has to do with characteristics immigrants develop after they immigrate.
First, what characteristics do immigrants have before they immigrate that improves their probability of becoming an entrepreneur? Consider first the decision to become an entrepreneur. Entrepreneurship is an inherently risky business. To illustrate, Avik Roy at Forbes wrote a piece a few years back noting the real minimum wage is $0 - the wage one receives if they are unemployed. Roy is incorrect though, albeit in a very nuanced way. The actual minimum wage is negative - for entrepreneurs who start their own businesses, their ventures could result in a net loss of wealth. That's a scary prospect. Maybe that's why entrepreneurs represent a minority of the population. Not a lot of us are willing to make that bet. Now consider the decision to become an immigrant, something with which I have more personal experience now. That too is scary. Before I moved to Denmark, the only personal experience I had with the language, culture, and economics of Denmark was what I could find on YouTube and other places online. I had no personal connections there. I didn't even know basic day-to-day information, like the food I could expect to find or where I could find the cheap sunglasses. I just knew I wouldn't be able to go to Wal-Mart for everything anymore. The idea was so daunting to me, I wasn't going to do it. It took the encouragement of a good woman to finally convince me to take the leap, and even then I had my reservations. At the end of the day, I had to shove my fear of uncertainty in some deep pocket of my brain and just take the plunge. At the risk of sounding self-congratulating, not many people are willing to do that either, and I was only willing to do it after significant encouragement. Maybe that's why a minority of people migrate. It's a scary prospect.
All of that is just a long-winded way of saying the type of person it takes to risk it all to open a business is very similar to the type of person it takes to risk it all to migrate to a new country. I'm not alone in my recognition of this fact either - there's a great article I shared recently on Facebook in the Harvard Business Review on this idea.
Now let's talk about what characteristics immigrants develop after they immigrate that improves their probability of becoming an entrepreneur. Think briefly about what an immigrant must be capable of after they step off that plane or that boat into their new country of residence - they are forced to adapt and change to circumstances that are wildly different from the ones to which they are accustomed. It may be difficult to imagine, especially if you've never traveled outside the country before. Even then, if you've never actually moved to a different country, it's difficult to imagine what immigrants are forced to do after they immigrate. Since moving to Denmark, I've had to seriously think about things I previously took for granted. How do the laundromats work here? How do I use public transportation? What are the rules of the road? On a related note, my ability to effectively use context clues has become more important than ever. Is this bottle of liquid I'm holding laundry detergent or fabric softener? How do I use this washing machine? What does that error message mean? Is my oven preheating right now, or will I be eternally waiting for my frozen pizza to be cooked? I've had to figure all this out despite moving to a country that is relatively similar to the U.S. in most things besides language. Hell, I can even pass for a Dane before I open my mouth, and enough people in Copenhagen have responded to the question, "Do you speak English," with, "Well, of course," that it isn't very difficult to get around and figure things out if you're willing to ask. Imagine an immigrant from Pakistan or India moving to Denmark, though. The learning curve for them would be much greater, and their ability to adapt to their new environment would be much more important.
Now, consider everything I've written above and add the fact that in most countries, immigrants face regulations and barriers that are nonexistent for many natives. They need more paperwork to function legally, they have to jump through more bureaucratic hoops, and they often have to face discrimination from private citizens. I've heard enough customers tell my Indian-born father to "go back to his own country" after being caught stealing to appreciate that fact. So, immigrants are more entrepreneurial despite, or maybe even because of, disadvantages they experience in labor markets.
I knew all of this research before I moved to Denmark. Now I've received practical lessons. I know why the free migrant innovates. It's tough to be an immigrant, and the people who choose to take that road less traveled must have the courage to take a leap of faith and the ability to adapt after that leap in order to succeed. Governments and citizens in wealthy host countries to which these immigrants migrate make it tougher. So, be nice to the immigrant you see looking confused in the supermarket or crossing the street - he or she is having to solve problems most of us will never have to think about. Imagine what immigrants could do if they didn't need permission.
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