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Entrepreneurship Inclusion

By Jan Rath, Professor of Urban Sociology, Department of Sociology, University of Amsterdam

 
Jan Rath
Professor of Urban Sociology, Department of Sociology, University of Amsterdam

Entrepreneurship as a Key Component of Economic Inclusion

The immigrant population in advanced economies has become more and more diverse in terms of ethnic or national origin, but also in terms of length of stay, educational achievement, and socioeconomic position. As for the latter, a substantial number of immigrants have set up businesses and become ‘ethnic entrepreneurs’. The governments in many countries and cities expect or hope that this ‘ethnic entrepreneurship’ will contribute significantly to the integration of immigrants, their upward mobility, and the economic development of the city of residence.

Immigrant entrepreneurs can be important for various reasons: they create their own jobs; can create jobs for others; can develop different social networks than immigrant workers; and, last but not least, shape their own destinies rather than collecting welfare benefits and waiting for cues to become active. Also, they can provide a different range of goods and services; they can enhance the vitality of particular streets or neighbourhoods in cities or of specific economic sectors; they can give an added value to the appearance of the city. And of course they can play their part in the ‘natural’ process of succession and renewal of the total corpus of entrepreneurs.

Given the enormous variety of entrepreneurial trajectories, it is inappropriate to portray them one-dimensionally. Yet, in policy and academic speak this happens all the time. The ethnic character of the entrepreneur or the businesses is often taken for granted and highlighted without further discussion as one such all-explaining characteristic. However, the very fact that large and diverse groups of people engage in entrepreneurship and that they do so in different locations and different sectors makes it improbable ‘that entrepreneurship can be explained solely by reference to a characteristic of certain people independent of the situation in which they find themselves’. Structural conditions are to be taken into account, including the policies and interventions that explicitly target ethnic entrepreneurs. In this essay, we draw attention to a host of governmental and non-governmental rules, regulations, measures, programs, schemes and policy actions that shape self-employment trajectories in general and those of immigrants in particular. Do they help to promote the development of immigrant entrepreneurship?

Although there have been notably successful immigrant entrepreneurs, many seem to gravitate towards markets at the lower end. Lacking—often, but not always—access to significant funds of (financial) capital or appropriate educational qualifications, most fledgling immigrant entrepreneurs are active in markets with low barriers of entry in terms of capital outlays and required educational qualifications. In these markets, production is mainly small-scale, low in added value, and usually very labour intensive. Consequently, earnings are typically relatively low and days are long and hard. There are interesting indications, though, which entrepreneurs from the second generation of immigrants, who are often better educated than their parents, are able to position themselves in more profitable markets. However, the opportunities most (first-generation) immigrant entrepreneurs find in lower-end retailing, wholesaling, and restaurants and catering are closely linked to the vacancy chains where the most recent entrepreneurs replace earlier ones (ethnic and mainstream alike). Unfortunately, with relatively low entry barriers, these vacancy-chain markets are easily saturated. These conditions serve to squeeze profit margins and foster informal practices. Immigrant entrepreneurs, especially those who are risking unemployment or unattractive wage labor conditions, are pushed rather than pulled to these less-promising market segments.

But there is increasingly another kind of immigrant entrepreneur: this type tends to be highly educated and connected to different (more resourceful) social networks, and is better qualified to operate in post-industrial growth markets such as ICT, finance, insurance, real estate, media, tourism and entertainment. Entrepreneurs of this kind are pulled rather than pushed to these markets and, because of their higher levels of human and social capital, they seem to fit better the requirements of today’s post-industrial economy.

This too illustrates that different markets offer different opportunities, put up different barriers, require different skills, competencies and resources (in terms of financial capital, social network, educational requirements and so on), lead to different forms and levels of success (however defined), and eventually a different division of entrepreneurial labour. Any attempt to promote immigrant entrepreneurship or, more generally, any interference in the market needs to take account of this dynamic multifacetedness.

This multifacetedness is not just the product of changing demographic or economic conditions, but also of regulation. Entrepreneurs are active in a market economy, and market economies—including the more liberal ones—are always regulated, albeit the form and level of regulation may vary. Regulation is contingent on prevailing economic citizenship regimes. These regimes might be contradictory and incomplete, and they stipulate under which conditions market exchange and price regulation take place. They also stipulate which goods and services and which actors are legitimate. Regulation encompasses both legislative and non-legislative forms and is, therefore, more than just state regulation. Indeed, a multitude of state and non-state agents play a role in regulation processes, such as local, national and international governmental agents, unions, quangos, non-profit organizations, voluntary associations, and individuals and their social networks. Regulation in the forms of repression, constraining or enabling is dynamic and subject to political influences. Deregulation or non-actions, to be sure, are also forms of regulation.

A study carried out under the aegis of the CLIP Network (Cities for Local Integration Policy), found first of all that promoting immigrant entrepreneurship is far from self-evident. In most cases, immigrant entrepreneurship did not play a major role in the overall strategy supporting the integration of immigrants. In fact, we found a marked tendency to stay away from economic issues. And for as far as immigrant entrepreneurship was actually promoted, it rarely if ever formed part of a bigger economic agenda.

Most interventions aimed at strengthening the professionalization of the entrepreneurs by providing training and coaching, providing business accommodation or making soft loans available. Some aimed at removing regulatory barriers for small businesses (such as lowering license requirements). The study also showed, interestingly enough, that immigrant entrepreneurs tended to be reluctant to ask for support or apply for outside help. Also, it seemed that many were not aware of the availability of support schemes. At the same time, governmental and non-governmental agencies offering support services often found it hard to reach out to them. This discrepancy pointed to a serious lack of communication and raised questions as to the efficiency of the support services.

We found a number of interesting patterns. First, there was rarely if ever a ‘natural problem owner’ in this policy field. This study found that in some cases local authorities initiated interventions, in other cases, the national government took the lead, and in yet other cases governmental agencies or combinations of agencies at different scalar levels were the primary actors. Governments and civic society institutions operated at different, but interconnected scalar levels, and at face value one may conclude that this indicates complementarity. The absence of a ‘guardian angel’, however, does not seem to be favourable for immigrant entrepreneurs.

Secondly, since many countries had been witnessing a multicultural backlash, the topic of immigrant entrepreneurship had become politically even more sensitive. While the absence of group-specific policies was sometimes interpreted as ignorant, assimilationist or even racist, the presence of such measures was sometimes argued away as being biased towards soft multiculturalism. It is a fact that immigrant entrepreneurs—being first of all entrepreneurs—are affected by general policies too. But do immigrant entrepreneurs—or entrepreneurs from other disadvantaged social groups—really benefit from ‘colour-blind’ measures? Perhaps. But in many cases, this was assumed rather than proved.

Thirdly, and related to the previous point, policy makers were facing the question whether they should aim at the entrepreneurs themselves or at their opportunity structure. Do (fledgling) entrepreneurs have deficiencies (like language fluency) that need to be compensated for by a variety of programs that aim at strengthening their entrepreneurial qualities? Or is the emergence or growth of businesses thwarted by an unfavourable opportunity structure, and should entrepreneurship then be promoted by removing barriers or by offering new economic opportunities? Most cities, for as far as they were addressed ethnic entrepreneurship, opted for measures that supposedly targeted barriers to immigrant entrepreneurial success.

How things turn out in practice depended on a number of factors, varying from the number of immigrants, their migration history and national assumptions about the process of integration to national welfare-state models and concomitant trajectories of economic incorporation, the bureaucratic culture, the political landscape and so on.

Among the conditions that contributed to differences were, first of all, the particular immigration history of the cities and countries involved. Most north-western European countries had experienced massive immigration in the period immediately after World War II and developed legal frameworks or welfare arrangements earlier than elsewhere in Europe. Southern European countries were countries of emigration in the early post-war period, and many of these emigrants moved as guest workers to north-western Europe. These countries had only recently experienced large-scale immigration themselves. In addition, they did not tend to have the same welfare systems or social policies as some of the north-western European countries. This held even more for most of the central and eastern European countries, which had only very recently become the destination of immigrants.

In some cases, the size of the immigrant population influenced the existence or absence of special policies promoting immigrant entrepreneurship; in New York, immigrant businesses are seen as the backbone of the urban economy. Few or no measures were found in countries with historically small immigrant populations; whereas countries with new and emerging immigrant populations like Finland are more proactive.  In other instances, countries were more concerned with national or historical minorities than with freshly arrived immigrants. This was the case in some eastern and central European countries, where many recent immigrants were refugees.

A third condition pertained to the make-up of the welfare state and the concomitant employment and entrepreneurial trajectories in general and the economic citizenship regimes in particular. Whether or not self-employment is a ‘natural’ way to enjoy economic citizenship rights and whether or not the (local) state is to play a leading role is contingent on the type of welfare regime—liberal, corporatist, socio-democratic, familial and so on (Kloosterman, 2000).

As has been said, despite the fact that we hit upon all kinds of measures and interventions, the most striking finding was that active and explicit promotion of immigrant entrepreneurship was not commonplace. Especially group-specific interventions appeared to be thin on the ground. Whether this pointed to a lack of confidence in ethnic minorities’ capability to become successful business persons or the opposite, namely that ethnic minorities are considered as being fully capable of joining the tiers of successful business persons without any support, is a matter of further exploration.

Notes

[1]           Rath, J. & A. Swagerman (2015) ‘Promoting Ethnic Entrepreneurship in European Cities: Sometimes Ambitious, Mostly Absent, Rarely Addressing Structural Features’, International Migration, 54 (1), February: 152–166.

 

The Author

Jan Rath is holding a Chair in Urban Sociology at the University of Amsterdam, and is Associated with the Center for Urban Studies (CUS) and the Institute for Migration and Ethnic Studies (IMES) in the same university, www.janrath.com.

 

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