Advertisement

Small Business Economics

, Volume 52, Issue 1, pp 303–317 | Cite as

The financing of immigrant-owned firms in Canada

  • Yuri OstrovskyEmail author
  • Garnett Picot
  • Danny Leung
Article
  • 108 Downloads

Abstract

Using recent survey data, this paper examines access to financing by immigrant business owners. We hypothesize that immigrant and Canadian-born owners finance their businesses in significantly different ways and that immigrant-owned small and medium enterprises (SMEs) have more difficulty accessing financial capital. The results suggest that, after adjusting for firm and owner characteristics, financing sources for growth financing tend to be similar for the two groups. Although immigrant owners—notably those in Canada for more than 20 years—were less likely than Canadian-born owners to seek financing from any source, their applications were as likely to be approved. Both immigrant and Canadian-born owners reported that, among seven potential obstacles to firm growth presented in the survey, “access to financing” was the least important. The study finds only weak evidence to support the hypothesis that access to financial capital is a more serious issue among immigrant-owned SMEs than among SMEs with Canadian-born owners.

Keywords

Business ownership Immigrant entrepreneurs Business financing Financial capital 

JEL classification

G32 L26 M21 M13 

Supplementary material

11187_2018_20_MOESM1_ESM.pdf (135 kb)
ESM 1 (PDF 135 kb)

References

  1. Astebro, T., & Bernhardt, I. (2003). Start-up financing, owner characteristics and survival. Journal of Economics and Business, 55, 303–319.CrossRefGoogle Scholar
  2. Bates, T. (1997). Financing small business creation: the case of Chinese and Korean immigrant entrepreneurs. Journal of Business Venturing, 12(2), 109–124.CrossRefGoogle Scholar
  3. Bates, T., & Robb, A. (2013). Greater access to capital is needed to unleash the economic development potential of minority owned businesses. Economic Development Quarterly, 27(3), 250–259.CrossRefGoogle Scholar
  4. Blackwell, M., Iacus, S., King, G., & Porro, G. (2009). CEM: coarsened exact matching in Stata. The Stata Journal, 9(4), 524–546.CrossRefGoogle Scholar
  5. Blanchflower, D. G., & Oswald, A. J. (1998). What makes an entrepreneur? Journal of Labor Economics, 16(1), 26–60.CrossRefGoogle Scholar
  6. Blanchflower, D. G., Levine, P. B., & Zimmerman, D. J. (2003). Discrimination in the small-business credit market. The Review of Economics and Statistics, 85(4), 930–943.CrossRefGoogle Scholar
  7. Bonikowska, A., Hou, F., & Picot, G. (2011). A Canada-US comparison of labour market outcomes among highly educated immigrants. Canadian Public Policy, 37(1), 25–48.CrossRefGoogle Scholar
  8. Bruder, J., Neuberger, D., & Räthke-Döppner, S. (2011). Financial constraints of ethnic entrepreneurship: evidence from Germany. International Journal of Entrepreneurial Behavior & Research, 17(3), 296–313.CrossRefGoogle Scholar
  9. Cole, R. and T. Sokolyk. 2017. Debt financing, survival, and growth of start-up firms. Journal of Corporate Finance, forthcoming ( https://doi.org/10.1016/j.jcorpfin.2017.10.013).
  10. Crepon, B. & Duguet, E. (2003). Bank loans, start-up subsidies and survival of the new firms: an econometric analysis at the entrepreneur level. University of Paris I Working Paper no. 2003.77.Google Scholar
  11. Evans, D., & Jovanovic, B. (1989). An estimated model of entrepreneurial choice under liquidity constraints. Journal of Political Economy, 97(4), 808–827.CrossRefGoogle Scholar
  12. Fairlie, R.W. (2012). Immigrant entrepreneurs and small business owners, and their access to financial capital. Small Business Administration, 1–46.Google Scholar
  13. Fairlie, R. W., & Krashinsky, H. A. (2008). Liquidity constraints, household wealth, and entrepreneurship revisited. Review of Income and Wealth, 58(2), 279–306.CrossRefGoogle Scholar
  14. Fairlie, R.W. & Lofstrom, M. (2013). Immigration and entrepreneurship. IZA working paper no. 7669. Bonn, Germany.Google Scholar
  15. Gai, Y. & Minniti, M. (2010). Minority business start-up, survival and financing in the U.S. Babson Faculty Research Fund Working Papers, no. 66. Babson Park, Massachusetts: Babson College.Google Scholar
  16. Green, D., Liu, H., Ostrovsky, Y., Picot, G. (2016). Immigration, business ownership and employment in Canada. Analytical Studies Branch Research Paper Series, no. 375. Statistics Canada Catalogue no. 11F0019M. Ottawa: Statistics Canada.Google Scholar
  17. Haight, M., Quan-Haase, A., & Corbett, B. A. (2014). Revisiting the digital divide in Canada: the impact of demographic factors on access to the internet, level of online activity, and social networking site usage. Information, Communication & Society, 17(4), 503–519.CrossRefGoogle Scholar
  18. Ho, D. E., Imai, K., King, G., & Stuart, E. A. (2007). Matching as nonparametric preprocessing for reducing model dependence in parametric causal interference. Political Analysis, 15(3), 199–236.CrossRefGoogle Scholar
  19. Iacus, S. M., King, G., & Porro, G. (2012). Causal inference without balance checking: coarsened exact matching. Political Analysis, 20, 1–24.CrossRefGoogle Scholar
  20. Imbens G., and D. Rubin. 2015. Causal inference for statistics, social, and biomedical sciences: an introduction. Cambridge University Press.Google Scholar
  21. Kushnirovich, N., & Heilbrunn, S. (2008). Financial funding of immigrant businesses. Journal of Developmental Entrepreneurship, 13(2), 167–184.CrossRefGoogle Scholar
  22. Lofstrom, M., & Bates, T. (2009). Latina entrepreneurship. Small Business Economics, 33(4), 427–439.CrossRefGoogle Scholar
  23. Myers, S., & Majluf, N. (1984). Corporate financing and investment decisions when firms have information that investors do not have. Journal of Financial Economics, 13, 187–221.CrossRefGoogle Scholar
  24. Organisation for Economic Cooperation and Development (OECD) (2010). Open for business: migrant entrepreneurship in OECD countries. Improving Credit for Migrant Enterprises, chapter 15. Paris, France.Google Scholar
  25. Pearce, S. (2005). Today’s immigrant woman entrepreneur. The Diversity Factor, 13(3), 23–29.Google Scholar
  26. Picot, G., & Hou, F. (2013). Why immigrant background matters for university participation: a comparison of Switzerland and Canada. International Migration Review, 47(3), 612–642.CrossRefGoogle Scholar
  27. Robb, A. M., & Fairlie, R. W. (2009). Determinants of business success: an examination of Asian-owned businesses in the USA. Journal of Population Economics, 22(4), 827–858.CrossRefGoogle Scholar
  28. Rosenbaum, P. R., & Rubin, D. (1983). The central role of the propensity score in observational studies on causal interference. Biometrica, 70, 41–55.CrossRefGoogle Scholar
  29. Smallbone, D., Ram, M., Deakins, D., & Baldock, R. (2003). Access to finance by ethnic minority in the UK. International Small Business Journal, 21(3), 291–315.CrossRefGoogle Scholar
  30. Toussaint-Comeau M. (2005). Self-employed immigrants: an analysis of recent data. Chicago Fed Letter no. 213, Federal Reserve Bank of Chicago.Google Scholar
  31. Tseng, Y. F. (1997). Ethnic resources as forms of social capital: a study on Chinese immigrant entrepreneurship in Los Angeles. Taiwanese Sociological Research, 1(3), 169–205.Google Scholar

Copyright information

© Crown 2018

Authors and Affiliations

  1. 1.Statistics CanadaOttawaCanada
  2. 2.Immigration, Refugees and Citizenship CanadaOttawaCanada
  3. 3.Statistics CanadaOttawaCanada

Personalised recommendations