November 22, 2014

People from Entrepreneurial Places

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Are people from some countries more entrepreneurial than those from other nations? It’s an intriguing question and one that many academics have pondered.

It’s also important to public policy. If people from some countries are more entrepreneurial than those from other places, then we could restock our pool of business founders by encouraging immigration from the “entrepreneurial countries.”

Whether people from certain places are particularly entrepreneurial is difficult to measure. You can’t just claim that those who live in countries with higher rates of entrepreneurship are more entrepreneurial because the differences in rates of business creation might have nothing to do with the people themselves but merely reflect the political and economic environment in which they live.

For instance, the availability of capital, stage of economic development, and industry composition might account the high rates of entrepreneurship in some countries and not others. If that’s the case, then we won’t be able to restock our entrepreneurial talent by encouraging immigration from entrepreneurial places. When people from countries with high rates of entrepreneurship get to the U.S., they won’t be any more likely to start companies than people from countries with low rates of business creation.

One way to measure the “entrepreneurialness” of people from certain places is to look at the correlation between a country’s self-employment rate and the rate at which its immigrants to the United States work for themselves. If something about people from certain countries makes them more entrepreneurial, then their higher rates of entrepreneurship should persist when they move to another economic and political context. If, however, no correlation exists between a country’s self-employment rate and the rate at which its immigrants to the United States work for themselves, then the culture or attitudes of the people aren’t likely to be responsible for their high rate of entrepreneurship.

To see how highly immigrants’ rates of entrepreneruship correlate with entrepreneurship rates in their home countries, I looked at 63 countries for which the U.S. Census collects data on immigrant self-employment rates and the International Labor Organization gathers information on the percentage of the labor force working on its own account.

The correlation between these two sets of numbers was 0.02. That is, there was essentially no relationship between the self-employment rate of immigrants to the United States and the rate of entrepreneurship in the immigrants’ home country.

I also looked at the correlation between the the U.S. Census numbers and self-employment rates reported by the Organization of Economic Cooperation and Development (OECD) for the 29 countries on which it has data. The correlation between the two rates was only 0.18.

In short, there is little evidence that the residents of some nations are more entrepreneurial than those from other countries. At least when measured by their tendency to become entrepreneurs in more than one place.

If the rate at which immigrants to the U.S. start businesses isn’t just a simple function of how entrepreneurial a nation’s residents are, then what accounts for such different rates of self-employment among immigrant groups?

Maybe people from different countries experience very different job markets when they come to the United States. People from some countries might be more likely than those from other nations to become self-employed because they find it more difficult to get a job.

Alternatively, some immigrant groups might have high rates of self-employment in the U.S., but not back at home, because they tend to work in industries in which self-employment is very common in the U.S. but not in their home countries. Taxi drivers, for instance, might not be self-employed in other countries to the extent that they are in the U.S.

While the data don’t tell us why immigrants from some countries have high rates of self-employment in the U.S., but not in their home countries, they do tell us that restocking our pool of entrepreneurial talent can’t be done by simply favoring immigration of people from places with high rates of entrepreneurship.

5 Comments ▼

Scott Shane


Scott Shane Scott Shane is A. Malachi Mixon III, Professor of Entrepreneurial Studies at Case Western Reserve University. He is the author of nine books, including Fool's Gold: The Truth Behind Angel Investing in America ; Illusions of Entrepreneurship: and The Costly Myths that Entrepreneurs, Investors, and Policy Makers Live By.

5 Reactions

  1. Scott, would there be any data available that would allow you to look at whether or not entrepreneurs are in the family? My experience has been that entrepreneurship is down to children and grandchildren through families since the education system doesn’t encourage entrepreneurship.

  2. While the methodology for determining a country’s “entrepreneurial spirit” needs closer examination, I’m a little surprised that immigrants aren’t more apt to become entrepreneurial once they arrive in the U.S. I would guess that immigrants would tend to self-select to be more entrepreneurial if the U.S. were their destination. The American Dream, etc, etc.

  3. Interesting that an article about people from entrepreneurial places doesn’t mention the Marwaris of India. Probably the most entrepreneurial culture in the world.

    The BBC did a great documentary on them: http://www.bbc.co.uk/worldservice/documentaries/2008/09/080905_desert_capitalists_one.shtml

  4. Great information.
    I have been looking for something like this for a while now.
    Thanks.
    Roberto Justus

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