October 31, 2014

Immigrants Refresh the Supply of Small Businesses

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Michelle Cramer at the Small Business Buzz Blog notes that 55 out of the 500 business owners listed on the Inc. 500 list are immigrants to the United States. The Inc 500 list covers America’s fastest growing privately owned businesses.

In other words, more than 10% of the fastest-growing businesses are created by immigrants:

Why are immigrants more likely to start their own business? There are a number of reasons. Consider the risk it takes to pick up everything and move to a country where the majority of people don’t even speak your language. Immigrants deal with a high rate of uncertainty in that alone, so starting their own business would comparatively seem but a moderate risk.

There is also the factor that many immigrants face numerous struggles and frustrations in the large business work force, as they are often paid unfairly and required to work uncommon hours. This often leads immigrants to seek other options, which typically includes starting their own business, as they recognize that they can offer a variety of products and services that many other entrepreneurs cannot.

It is often stereotyped that immigrant businesses are usually small “mom-and-pop” restaurants or dry-cleaners, but the options for many immigrants has vastly expanded in the past few decades. Those who moved to the US to obtain a higher education, rather than flee oppression, account for a number of the successful immigrant entrepreneurs in our country. It is estimated that up to 25% of Silicon Valley firms were established by immigrants.

Immigrant communities also tend to provide a strong degree of support for each other. First generation immigrants, who made their living with the “mom-and-pop” businesses, tend to push their children to explore other professions, such as legal or medical professions. Others may take new immigrants in under their wing, providing apprenticeships so that the newcomers can either take over the business or start successfully on their own.

The Inc 500 list is in line with research by the Marion Ewing Kaufman Foundation. That research found that in 2005, immigrants to the United States started businesses at a rate higher than that of native-born Americans. The “rate of entrepreneurial activity for immigrants in 2005 was 0.35% (or 350 out of 100,000) compared to 0.28% (or 280 out of 100,000) for native-born Americans.”

It even dovetails nicely with the conclusions in a book that came out about ten years ago called, “The Millionaire Next Door.” That book suggests that immigrants and first-generation Americans are well represented in the ranks of millionaires, because they tend to come from cultures or family backgrounds with an entrepreneurial tradition and have not yet developed the high-consumption lifestyle that tends to dissipate wealth instead of accumulate it:

“What about the number of years that an average member of an ancestry group has been in America? The longer the time here, the less likely it will produce a disproportionately large percentage of millionaires. Why is this the case? Because we are a consumption-based society. In general, the longer the average member of an ancestry group has been in America, the more likely he or she will become fully socialized to our high-consumption lifestyle. There is another reason. First-generation Americans tend to be self-employed. Self-employment is a major positive correlate of wealth.”

Immigrants like the ones profiled in the above studies and lists, who come to this country and start businesses and contribute to the economy, are a positive force. I never hear anyone complain specifically about self-employed entrepreneurial immigrants who arrive legally in the country and create businesses. It is the illegal immigrants who place stress on our hospital emergency rooms and on other social services, or who potentially pose security risks, that get all the negative attention.

However, the tendency is that in the midst of heated (in some parts of the country) debate about immigration, some people will fail to distinguish the positive forces of immigration and paint the issue with one broad brush. Let’s keep reminding ourselves that there are immigrants … and then there are immigrants.

Full disclosure: I myself am only one- and two-generations away from being an immigrant to this country, from the last great wave of immigration in the 20th century.

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Anita Campbell - CEO


Anita Campbell Anita Campbell is the Founder and Publisher of Small Business Trends and has been following trends in small businesses since 2003. She is the owner of BizSugar, a social media site for small businesses, and also serves as CEO of TweakYourBiz.com.

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