Immigrant Entrepreneurship: Does the Liability of Foreignness Matter?

Nahikari Irastorza and Inaki Pena

Business and Management Research, 2014, vol. 3, issue 1, 1-17

Abstract: The liability of foreignness is a phenomenon scarcely studied in the entrepreneurship literature. While immigrants seem to be prone to create new firms, they face different sorts of barriers to launch new businesses. We apply a binomial logistic regression on Global Entrepreneurship Monitor data to compare immigrants¡¯ and natives¡¯ entrepreneurial intentions to the actual self-employment activity of each group, and the factors affecting potential differences. We found that immigrants are more likely to have self-employment plans than natives but less likely to end up becoming self-employed. We explain this gap by the liability of foreignness hypothesis, i.e. additional difficulties faced by immigrants when entering the job market or starting up a business in a new country such as poor language skills, the lack of labour experience, the lack of human and social capital endowments specific to that country, and institutional restrictions including discrimination.

Date: 2014
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