Business

Immigrants make good entrepreneurs. This study proves it

Tesfagebriel Abraha of Eritrea, 31, poses during his apprenticeship for a parquet recliner in Dortmund, Germany, August 31, 2015. Abraha was sent to Daniel Kok, owner of a small flooring business in the west German city of Dortmund, who had been searching for a suitable trainee for over a year when the local trades association asked if he would take on an asylum-seeker. After a successful two-week trial in late July, he is now doing an apprenticeship that lasts until 2018. Picture taken August 31, 2015. To match Analysis EUROPE-MIGRANTS/GERMANY-TRAININGREUTERS/Ina Fassbender - GF10000188790

The rise in immigrant-founded businesses reflects a growing foreign-born population. Image: REUTERS/Ina Fassbender

Johnny Wood
Writer, Forum Agenda
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Migration

Immigrants are good for business, according to research analyzing entrepreneur trends in the US.

Not only do immigrants to the US establish proportionally more businesses than native-born entrepreneurs, their companies are also more likely to succeed.

The Harvard Business School study compared the employment growth of new US enterprises over three- and six-year periods. The results show that companies founded by immigrants grew at a faster rate and were likely to survive longer than those started by entrepreneurs born in the US.

However, the study’s authors, Sari Pekkala Kerr and William R. Kerr, found that the businesses of immigrant entrepreneurs did not outperform native-born companies in terms of payroll growth. In fact, immigrant-founded enterprises were more likely to generate lower wage growth.

The authors said immigrants tend to be engaged in more volatile business ventures, with “up-or-out” growth prospects.

The changing structure of new entrepreneurs in the US (1996 - 2016)

Image: Statista

As the chart shows, the composition of new entrepreneurs in the US is changing. In the decade from 1996 to 2016, the proportion of native-born business founders fell, while that of immigrant entrepreneurs more than doubled.

The rise in immigrant-founded businesses reflects a growing foreign-born population, which United States Census Bureau data shows has been expanding both in numbers and as a proportion of the total population since 1970.

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Diversity drives innovation

As well as becoming successful entrepreneurs, immigrants can also bring a wealth of new ideas, attitudes and experiences to help established companies succeed.

Studies show that experience of different languages, cultures and business methods are valuable assets to employers, particularly those that operate internationally.

A survey of more 1,700 companies across eight countries found that those with diverse workforces produced better financial results than those staffed with people from similar backgrounds. Researchers found a positive link between diversity and innovation across all eight countries, with the most diverse staffing groups proving most innovative.

Businesses perform better when they have greater diversity.
Image: HBR.org

Maximizing the benefits of hiring a mix of cultures, backgrounds and experiences depends on each employee being made to feel included and part of the team. Writing in the Harvard Business Review, Nataly Kelly, Vice President of International Operations and Strategy at HubSpot, argues that immigrants know what it feels like to be an outsider and so are more inclined to help others assimilate into the culture of their company.

She adds that overcoming the challenges of leaving their homeland and settling into a new country can foster an “immigrant mindset” which can prove an asset to companies. As well as requiring adaptability, migrating to a new country involves hard work, confidence in one’s abilities and a tolerance for uncertainty, which are also traits associated with business growth and survival.

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