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Remittances, ethnic diversity, and entrepreneurship in developing countries

R. Isil Yavuz () and Berrak Bahadir ()
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R. Isil Yavuz: Bryant University
Berrak Bahadir: Florida International University

Small Business Economics, 2022, vol. 58, issue 4, No 10, 1952 pages

Abstract: Abstract This paper examines the moderating influence of home-country ethnic diversity in the relationship between migrant remittances and new business creation in developing countries. By employing the theories of transaction cost, social network, social identity, and trust, we argue that ethnic diversity is negatively associated with new business creation; nevertheless, it strengthens the positive association between migrant remittances and new business creation in developing countries. We test our hypotheses on 64 developing countries over an 11-year period (2006–2016). This paper contributes to entrepreneurship literature by emphasizing the importance of home-country ethnic diversity in channeling migrants’ remittances to new business creation in developing countries. Plain English Summary Ethnic diversity leads to a stronger positive link between remittances and new business creation in developing countries. We show that higher remittance-receiving countries create a higher number of new firms on average. Furthermore, this positive relationship is stronger in countries with ethnically diverse societies. Our results underline the importance of the ethnic structure of the country for entrepreneurship and economic development.

Keywords: Migrant remittances; New business creation; Ethnic diversity; Developing countries; F24; J15; L26; M13 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1007/s11187-021-00490-9

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