Migrant entrepreneurship and economy

Currently there are more than 244 million international migrants who are widely contributing to both origin and recipient societies. Even though the impact of migrant entrepreneurship is still receiving limited attention, and therefore remains to be explored further, there are numerous indications of migrants’ contribution to economic growth and employment: by rejuvenating neglected crafts and trades, by creating demand for new goods and services, by connecting global markets and by creating employment for themselves, other migrants and the native population.  


A migrant entrepreneur can be defined as a business owner born in a country different from the one where he exercises entrepreneurial activity, seeking to generate value through the creation or expansion of economic activity. The entrepreneur can be self-employed and/or employ others.

Various surveys conducted in the USA and Europe show that migrants tend to be more entrepreneurial than natives. For example, in the UK migrants represent 8% of the population, but own around 12% of all UK SMEs (small and medium enterprises). In the USA, migrants represent 13% of the population and 16% of the labour force, but make up 18% of small business owners. Migrant entrepreneurs also increase social opportunities for other migrants, enhance social leadership, represent role models for the younger population, increase self-confidence and promote social cohesion.  


The contribution of migration to development is strongly linked to the effects of the international flow of diaspora and migrant remittances on the well-being of families in countries of origin. In the past decades, remittances have represented an important source of income in developing countries and have become an important source of income for poverty alleviation. Remittances enable people to participate in the global labour market and create resources for development and growth. According to the World Bank, in 2000 remittances amounted to 132 billion USD, and increased to 529 billion USD in 2012. However, most remittances still remain primarily for consumption purposes and are not channelled into investments to fuel sustainable economic growth.  


Entrepreneurs can play a crucial role in the economic development of a country and of a particular city, by contributing to job growth, innovation and the shaping of communities. Migrants are most often attracted to urban areas because of work opportunities and existing communities of other migrants. Such areas are also characterized by a heterogeneous society, which further encourages creativity and innovation. 


Generally, migrants are considered to be slightly more entrepreneurial than natives. Some base this argument on the presumption that migration is a risky activity that reflects a risk attitude important for entrepreneurship. According to the index of entrepreneurial activity, in most OECD countries, immigrants are more prone to engage in entrepreneurial activities than natives (12.7% compared to 12%). They also contribute to job creation. Even though approximately 50-75% of self-employed migrants employ only themselves, a self-employed migrant owning a small or medium firm generally creates between 1.4 and 2.1 additional jobs, while native entrepreneur creates 1.8 to 2.8 additional jobs. The contribution of migrant entrepreneurs to overall employment has increased over time in Spain, Italy, Austria, Germany, and the Netherlands. This contribution amounts to 1.5-3% of the total employed labour force in most OECD countries. In some countries, the contribution of migrant entrepreneurship to employment is significantly higher: Switzerland (9.4%), Luxembourg (8.5%) and Ireland (4.9%). Simultaneously, eastern European countries and Greece have a lower share of employment by migrant entrepreneurs.  


High-skilled migrants play a significant role to the host country economy by introducing new concepts and ideas. In the fields of science and engineering, through research, management and entrepreneurship, migrants contribute heavily to innovations that lead to economic development and technological progress. For instance, among members of the US National Academy of Science and the National Academy of Engineering, migrants make a majority of highly cited science and engineering authors, as well as founders of biotech companies. Furthermore, migrants make 24% of all international patent applications from the US. 


Even though migrant entrepreneurs tend to start more businesses than native entrepreneurs, the survival rate of their businesses is often lower than that of the native entrepreneurs. Reasons for this phenomenon can be found in specific barriers that migrants face in recipient countries while starting and developing their businesses, as well as difficulties in obtaining the needed human, social and financial capital for their business ventures. The most significant obstacles for successful migrant entrepreneurship remain the lack of financial resources, credit constraints, duration of residence in the recipient country, limited knowledge of the language, inadequate education or qualifications that are unrecognized in the recipient country and lack of relevant professional experience. Policies aimed to reduce obstacles to entrepreneurship and business creation as well as policies promoting the economic growth prospects of the country are equally crucial as migration and integration policies in encouraging and supporting migrant entrepreneurship. 

* This article represents an excerpt from the paper IMPACT OF MIGRANT ENTREPRENEURSHIP TO ECONOMIC GROWTH written by Sara Kekuš, Centre for Peace Studies for the publication [MIGRENT]