Forbes Magazine recently reported that first-generation American migrants were starting businesses at over twice the rate of natives. In addition, first-generation migrants create start-ups at twice the rate of second-generation migrants. There is a lot of data on this phenomenon. And the pattern is the same for many Western countries. But what is the explanation?
Migrants have ‘get-up-and-go’ flair. Whether they are more likely to be in that surprisingly small number of the ultra-successful or not is unclear. But you only have to look at various Rich Lists to see by name or photograph that all sorts of minorities seem to be over-represented.
This comes from a recent Harvard Business Review blog by a colleague: Half of the world's skilled migrants go to America and in the past 20 years created 25% of all American venture-backed companies. There are around 500 start-ups with French founders just in the San Francisco Bay area of California. There are over 50,000 Germans in Silicon Valley, where salaries for software engineers are much higher than in Europe.
It seems that when we look at business start-ups, particularly those that succeed, immigrants are unusually over-represented among the entrepreneurial and innovative. Some countries are so concerned about this that they offer “start-up visas” or “short-circuited passports” to those likely to bring prosperity, not only to themselves, but also to their family, community and adopted country. They are the ideal type of migrants: net ‘givers’.
That is why talent scouts go to top schools, universities and business schools in Asia to encourage the best students to come to their country. In this world, being less erudite and linguistically skilled does not matter.
These entrepreneurial immigrants are often most commonly found in the technology and engineering sector. Note maths, not languages: boy’s stuff. Here you only need raw fluid intelligence, not book learning. It is the inventive urge that often results from spending too much time with computers.
The question is why do migrants show this entrepreneurial flair?
1. The sort of people who migrate. There are lots of studies on migration and mental health. One of the interesting facts that they have thrown up is that those who choose to migrate tend to be different from those who don’t. They have a different pattern of motivation, abilities and adjustment. They are hungrier, more risk taking, more hardy.
Migration is difficult. There are many hurdles to cross including language, money and the law. You have to be very determined just to get there. The experience of hardship, rejection and setback toughens you up. These are life events that all entrepreneurs have to get used to.
2. Barriers experienced by some migrants. All migrants will tell you of the many and subtle barriers there are to some jobs, societies, etc. You could call it subtle racism or old boy networks. The wonderful domino effect from prep to public school, school to Ivy League is really not open to the migrant.
All this adds fuel to the immigration argument fire. On the one hand are those who note the number of immigrants in the scroungers line-up for public funds and services. Yet immigrants are also among those whose very considerable tax payments easily compensate.
This is the positive side of discrimination. Outsiders have to find another way. There are no well-trodden paths, no leg-ups, no cashing in on the family name.
3. Social support networks. Most migrants seek out their compatriots. This is very visible in big cities, where areas are colonised by people from a particular country. They have specialist shops, places of worship and general meeting, and of course restaurants. They provide places where you can call, count on and get help from people who share your culture and with much the same experience.
We know that social support - informational, emotional and, where necessary, financial support from others - can significantly ameliorate the impact of stress on people. And start-ups are very stressful.
Not all migrant groups provide good social support, but many do. They can be counted upon to provide reliable temporary workers and to support their own when it comes to buying products and services.
4. The privileged natives. It has been noted that, while the work ethic beliefs of a culture and country contribute to its economic growth, once this reaches a certain point, those beliefs and ideals seem to be abandoned. Young Germans have lost that desperate post-war energy that made the country what is today.
You only have to listen to entrepreneurs’ beliefs and parental practices to understand this. They know the privilege is the mother of complacency; that the best way to teach children about money is not to have any.
One additional observation provides yet more evidence of the above thesis. It is that, often, successful native entrepreneurs were themselves outsiders in some way. If you come from a minority religious group; have a family very different from all around you; if you look different, or are disabled in some regard, you can feel a stranger in your own country. This can be similar to the spur that so many migrants feel….and is part of the story of nearly every entrepreneur.