Small Business Economics

, Volume 49, Issue 3, pp 533–557 | Cite as

“Misfits,” “stars,” and immigrant entrepreneurship

  • Shulamit Kahn
  • Giulia La Mattina
  • Megan J. MacGarvie
Article
  • 479 Downloads

Abstract

Prior research has shown that immigrants are more likely than natives to become entrepreneurs, and that entrepreneurs are disproportionately drawn from the extremes of the ability distribution. Using a large panel of US residents with bachelors’ degrees in scientific fields, we ask whether higher rates of entrepreneurship among immigrants can be explained by their position on the ability spectrum and establish four new facts about science-based and immigrant entrepreneurship. First, in this sample, an immigrant entrepreneurship premium exists only in science-based entrepreneurship. Second, this premium persists after controlling for ability (measured by paid employment wage residuals.) Third, a U-shaped relationship between ability and entrepreneurship exists only in non-science entrepreneurship; for science entrepreneurship, the relationship is increasing. Finally, the immigrant premium in science entrepreneurship is largest among immigrants with non-US degrees and those from non-English-speaking or culturally dissimilar countries. Stated preferences for self-employment do not explain the immigrant premium. The results suggest that immigrants may on average have higher levels of unobservable skills related to entrepreneurship.

Keywords

Immigration High-skilled immigrants Entrepreneurship Science entrepreneurship 

JEL codes

J24 J61 J82 

Notes

Acknowledgements

This project was funded by National Science Foundation Grant SBE-0738371. We thank Donna Ginther who gave invaluable assistance with the dataset construction and the definition of entrepreneurship. We also thank Meg Blume-Kohout, TszKin Julian Chan, Jed DeVaro, Robert Fairlie, Dilip Mookherjee, Daniele Paserman, Claudia Olivetti, conference participants at the 2011 Southern Economic Association Annual meeting, and the participants and attendees at the 2012 SOLE session “The Economics of Science” for their helpful comments. A previous version of this paper was part of Giulia La Mattina’s Ph.D. dissertation at Boston University.

References

  1. Akee, R.K., Jaeger, D.A. & Tatsiramos, K. (2013). The persistence of self-employment across borders: New evidence on legal immigrants to the united states. Economics Bulletin, 33(1), 126–137.Google Scholar
  2. Anderson, S., & Platzer, M. (2006) American Made: The Impact of Immigrant Entrepreneurs and Professionals on U.S. Competitiveness, National Venture Capital Associate Report.Google Scholar
  3. Astebro, T., & Thompson, P. (2011). Entrepreneurs: Jacks of all trades or hobos? Research Policy, 40(5), 637–649.CrossRefGoogle Scholar
  4. Astebro, T., Chen, J., & Thompson, P. (2011). Stars and misfits: self-employment and labor market frictions. Management Science, 57(11), 1999–2017.CrossRefGoogle Scholar
  5. Bleakly, H., & Chin, A. (2004). Language skills and earnings: evidence from childhood immigrants. Review of Economics and Statistics, 86(2), 481–496.CrossRefGoogle Scholar
  6. Borjas, G. S. (1986). The self-employment experience of immigrants. Journal of Human Resources, 21(4), 485–506.CrossRefGoogle Scholar
  7. Borjas, G. J., & Bronars, S. G. (1989). Consumer discrimination and self-employment. Journal of Political Economy, 97(3), 581–605.CrossRefGoogle Scholar
  8. Braguinsky, S., Klepper, S., & Ohyama, S. (2012). High-tech entrepreneurship. Journal of Law and Economics, 55(4), 869–900.CrossRefGoogle Scholar
  9. Carnahan, S., Agarwal, R., & Campbell, B. A. (2012). Heterogeneity in turnover: the effect of relative compensation dispersion of firms on the mobility and entrepreneurship of extreme performers. Strategic Management Journal, 33(12), 1411–1430.CrossRefGoogle Scholar
  10. Chung, W., & Kalnins, A. (2006). Social capital, geography, and survival: Gujarati immigrant entrepreneurs in the U.S. lodging industry. Management Science, 52(2), 233–247.CrossRefGoogle Scholar
  11. D’este, P., & Perkmann, M. (2011). Why do academics engage with industry? The entrepreneurial university and individual motivations. The Journal of Technology Transfer, 36(3), 316–339.CrossRefGoogle Scholar
  12. Elfenbein, D. W., Hamilton, B. H., & Zenger, T. R. (2010). The small firm effect and the entrepreneurial spawning of scientists and engineers. Management Science, 56(4), 659–681.CrossRefGoogle Scholar
  13. Fairlie, R. (2008). Estimating the contribution of immigrant business owners to the U.S. economy. U.S. Small Business Administration Report (November).Google Scholar
  14. Fairlie, R., & Lofstrom, M. (2015). Immigration and Entrepreneurship. In B. Chiswick and Miller, P.W. (Eds.), Handbook of the economics of international migration Vol.1B Chapter 17. Amsterdam: North Holland.Google Scholar
  15. Ferrer, A., & Riddell, W. C. (2008). Education, credentials, and immigrant earnings. Canadian Journal of Economics, 41(1), 186–216.CrossRefGoogle Scholar
  16. Gort, M., & Lee, S.H. (2007). The rewards to entrepreneurship. Working paper, SUNY Buffalo. Available at papers.ssrn.com.
  17. Hamilton, B. H. (2000). Does entrepreneurship pay? An empirical analysis of the returns to self-employment. Journal of Political Economy, 108(3), 604–631.CrossRefGoogle Scholar
  18. Hart, D. M., & Acs, Z. J. (2011). High-tech immigrant entrepreneurship in the United States. Economic Development Quarterly (May), 25(2), 116–129.CrossRefGoogle Scholar
  19. Hayek, F. A. (1945). The use of knowledge in society. American Economic Review, 25(4), 519–530.Google Scholar
  20. Hipple, S. (2004). Self-employment in the United States: an update. Monthly Labor Review, 127(7), 13–23.Google Scholar
  21. Hunt, J. (2011). Which immigrants are most innovative and entrepreneurial? Distinctions by entry visa. Journal of Labor Economics, 29(3), 417–457.CrossRefGoogle Scholar
  22. Hunt, J., & Gauthier-Loiselle, M. (2010). How much does immigration boost innovation? American Economic Journal: Macroeconomics, 2(2), 31–56.Google Scholar
  23. Jaeger, D.A., Dohmen, T., Falk, A., Huffman, D., Sunde, U., Bonin H. (2010). Direct evidence on risk attitudes and migration. Review of Economics and Statistics, 92(3), 684–689.Google Scholar
  24. Jovanovic, B. (1994). Firm formation with heterogeneous management and labor skills. Small Business Economics, 6, 185–191.CrossRefGoogle Scholar
  25. Kerr, W.R. (2013). U.S. high-skilled immigration, innovation, and entrepreneurship: empirical approaches and evidence. NBER Working Paper No. 19377.Google Scholar
  26. Kerr, S., & Kerr, W.R. (2016). Immigrant entrepreneurship. NBER Working Paper 22385.Google Scholar
  27. Kerr, W.R., & Mandorff, M. (2016). Social networks, ethnicity, and entrepreneurship. Harvard Business School Working Paper 16–042. Google Scholar
  28. Kirzner, I. (1972). Competition and entrepreneurship. Chicago: University of Chicago Press.Google Scholar
  29. Kirzner, I. (1979). Perception, opportunity and profit; studies in the theory of entrepreneurship. Chicago: University of Chicago Press.Google Scholar
  30. Kirzner, I. (1999). Creativity and/or alertness: a reconsideration of the Schumpeterian entrepreneur. Review of Austrian Economics, 11, 5–17.CrossRefGoogle Scholar
  31. Lazear, E. P. (2004). Balanced skills and entrepreneurship. American Economic Review, 94(2), 208–211.CrossRefGoogle Scholar
  32. Lazear, E. P. (2005). Entrepreneurship. Journal of Labor Economics, 23(4), 649–680.CrossRefGoogle Scholar
  33. Moller, K. (2010). Sense-making and agenda construction in emerging business networks—how to direct radical innovation. Industrial Marketing Management, 39(3), 361–371.CrossRefGoogle Scholar
  34. Murphy, K. M., Shleifer, A., & Vishny, R. W. (1991). The allocation of talent: implications for growth. Quarterly Journal of Economics, 106(2), 503–530.CrossRefGoogle Scholar
  35. Murray, F. (2004). The role of academic inventors in entrepreneurial firms: sharing the laboratory life. Research Policy, 33(4), 643–659.CrossRefGoogle Scholar
  36. Nathan, M. (2014). The wider economic impacts of high-skilled migrants: a survey of the literature for receiving countries. IZA Journal of Migration, 3(4), 1–20.Google Scholar
  37. Ohyama, A. (2007). Entrepreneurship and advanced technical knowledge. Working Paper, Ewing Marion Kauffman Foundation. Available at http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.362.7099&rep=rep1&type=pdf.
  38. Poschke, M. (2013). Who becomes an entrepreneur? Labor market prospects and occupational choice. Journal of Economic Dynamics and Control, 37(3), 693–710.CrossRefGoogle Scholar
  39. Rider, C. I., Thompson, P., Kacperczyk, A., & Tåg, J. (2013). Experience and entrepreneurship. Research Institute of Industrial Economics Working Paper No.970. Available at http://www.ifn.se/wfiles/wp/wp970.pdf.
  40. Roach, M., & Sauermann, H. (2015). Founder or joiner? The role of preferences and context in shaping different entrepreneurial interests. Management Science, 61(9), 2160–2184.CrossRefGoogle Scholar
  41. Shane, S. (2000). Prior knowledge and the discovery of entrepreneurial opportunities. Organization Science, 11(4), 448–469.CrossRefGoogle Scholar
  42. Stuart, T. E., & Ding, W. W. (2006). When do scientists become entrepreneurs? The social structural antecedents of commercial activity in the academic life sciences. American Journal of Sociology, 112(1), 97–144.CrossRefGoogle Scholar
  43. Tang, J., Kacmar, K. M. M., & Busenitz, L. (2012). Entrepreneurial alertness in the pursuit of new opportunities. Journal of Business Venturing, 27(1), 77–94.CrossRefGoogle Scholar
  44. Venkataraman, S. (1997). The distinctive domain of entrepreneurship research. Advances in entrepreneurship, firm emergence and growth, 3(1), 119–138.Google Scholar
  45. Wadhwa, V., Rissing B., Saxenian, A.L., & Gereffi, G. (2007). Education, entrepreneurship and immigration: America’s new immigrant entrepreneurs, Part II. The Ewing Marion Kaufman Foundation. Available online at http://www.soc.duke.edu/globalengineering/papers_educationentrepreneurship.html.
  46. Yuengert, A.M. (1995). Testing hypotheses of immigrant self-employment. The Journal of Human Resources, 30(1), 194.Google Scholar
  47. Zucker, L. G., Darby, M. R., & Brewer, M. B. (1998). Intellectual human capital and the birth of US biotechnology enterprises. The American Economic Review, 88(1), 290.Google Scholar
  48. Zucker, L. G., Darby, M. R., & Armstrong, J. S. (2002). Commercializing knowledge: university science, knowledge capture, and firm performance in biotechnology. Management Science, 48(1), 138–153.CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media New York 2017

Authors and Affiliations

  • Shulamit Kahn
    • 1
  • Giulia La Mattina
    • 2
  • Megan J. MacGarvie
    • 3
  1. 1.Boston University Questrom School of BusinessBostonUSA
  2. 2.University of South Florida Department of EconomicsTampaUSA
  3. 3.Boston University Questrom School of Business and the NBERBostonUSA

Personalised recommendations