1.1 Introduction
Recent years have shown a growing interest in innovative and entrepreneurial behaviour as an engine for economic growth. The economic performance of business agents can be measured by indicators such as innovativeness, birth/death rates, or investments, while there are many underlying key factors, such as quality of labour, education, geographic accessibility, network usage, or urban orientation. This means that business firms in an urban economic system may essentially be conceived of as decision-making units (DMUs) of a multi-product nature, whose task it is to maximize their efficiency in a competitive urban environment.
Urban areas are becoming platforms of competition, especially for SMEs (Sassen 1991). Through their agglomeration advantages, cities offer the most competitive spatial constellations, and are thus a source of permanent vitality, despite the diseconomies of scale present in many cities (Glaeser et al. 2000). The success of cities usually depends on two essential assets, viz. knowledge and entrepreneurship (see, e.g., Acs et al. 2002;Glaeser 2011). The first asset, knowledge – in combination with scientific research and education –, is one of the driving forces for urban competitiveness and growth. The second factor, i.e. entrepreneurship, is equally important, as entrepreneurship forms the engine for innovation, and hence for the drastic economic and technological transformations that are necessary for vital and growing cities (see Audretsch et al. 2007;van Geenhuizen and Nijkamp 2012;Nijkamp 2003;Santarelli 2006).
Most large cities, in a globalized world, are increasingly the home of international migrants and centres of accelerated growth, in which SMEs and innovative entrepreneurship play a key role in inducing urban economic development. These cities house many migrant entrepreneurs who exert a big, but often unknown, influence on the urban economy. Migrants make up a significant part of urban dwellers, and their business is critical for a sustainable development of cities, especially because of their large share in SMEs.
1.2 Migrant entrepreneurship
According to Choenni (1997), migrant entrepreneurship refers to business activities undertaken by migrants with a specific socio-cultural and ethnic background or migrant origin, and it distinguishes itself from ‘normal’ entrepreneurship through its orientation on migrant products, on migrant market customers, or on indigenous migrant business strategies(see also Sahin et al. 2009, 2010). Migrant entrepreneurship generates many urban-economic returns through the use of suitable market niches, and helps to reinforce the SME sector as a complement to bigger mainstream companies. In addition, existing business can also benefit from the experience and knowledge of migrant businesses that emerge as a consequence of the rise of migrant communities, with their protected markets and networks of mutual support. As the migrant share grows and diversifies, the opportunities for related migrant suppliers and customers will also rise (Cormack and Niessen 2002). Nowadays, migrant entrepreneurship is often seen as a great chance for revitalizing urban economic life. The seminal work of Waldinger has been particularly instrumental in this context (see, e.g., Waldinger 19881996;Waldinger et al. 1990). In his view, migrant businesses find their origin in the interplay of opportunity structures, group characteristics, and strategies for adapting to the urban environment.
There has been an extensive discussion in the literature on the varying economic impact of migrants, especially at local and regional levels (see, e.g., Borjas 1991;de Graaff and de Groot 2004;Greenwood 1994;Longhi et al. 2007;Nijkamp et al. 2012). Despite the fact that foreign migrants do not, in general, have a demonstrable negative impact on the socio-economic conditions of native people, there is still much concern worldwide on the possible negative consequences of the international migration wave. Against this background, the phenomenon of migrant entrepreneurship has gained much popularity, as this type of self-employment has given a strong impetus to urban revitalization, while avoiding the negative impacts on the labour market that are often perceived (see, e.g., Bates 1997;Baycan-Levent et al. 2009;Cummings 1980or Razin and Light 1988). Migrant entrepreneurship is also frequently regarded as an important self-organizing activity through which migrant groups are able to improve their feeble socio-economic position (Baycan-Levent et al. 2003). Migrant entrepreneurship is thus frequently seen as a sign of hope for urban economies in decay.
1.3 Backgrounds of migrant entrepreneurship
In general, migrants seem to be more inclined towards risk-taking in self-employment than natives or those people who remain in the home country. They usually migrate with a strong desire for social advancement, and are thus more likely to take business risks and become self-employed. The difficulty of getting work has encouraged several migrants to set up their own business, especially in larger cities. Migrant minorities usually appear to be a highly motivated and qualified entrepreneurial group. Ethnic or migrant entrepreneurship in cities provides the opportunities for, and access to, economic growth, equal opportunities, and upward mobility for many of those who have traditionally been excluded from business, including migrant minorities (see Sahin 2012, for a broad overview).
There are several other reasons why migrants prefer entrepreneurship: to be independent or to be their own boss; earn extra income; gain some work experience; maintain family tradition; dissatisfaction with the previous job; need for flexibility; desire to make a career of to have a job in business; ideological reasons, or leadership qualities (Baycan-Levent et al. 2003Metcalf et al. 1996;Clark and Drinkwater 1998). In an early study, Jenkins (1984) has identified three basic explanatory models of ethnic involvement in business, viz. (i) the economic opportunity model; (ii) the culture model; and (iii) the reaction model. The economic opportunity model regards migrant minority businesses as relying on the market for their fortunes. The culture model assumes that some cultures predispose group members towards the successful pursuit of entrepreneurial goals. The reaction model assumes that self-employment amongst members of migrant minority groups is a reaction against racism and blocked avenues of social mobility, a means of surviving in the margins of a white-dominated society (see also Sahin 2012).
The scientific literature on ethnic (migrant, minority, coloured) entrepreneurship is vast. Starting in the USA, in the past few decades research on this issue has boomed. Migrant entrepreneurship studies focussed sometimes on specific ethnic groups (e.g., Chinese, Indians), sometimes on social bonds between migrant communities, sometimes on ethnic product markets, sometimes on urban-economic melting pot phenomena, and sometimes on migrant business strategies. In recent years, a real avalanche of literature has been published on migrant entrepreneurship, too much to be covered and reviewed in this present article. For some recent overviews, we refer to Kloosterman and Rath (2001), Oliveira and Rath (2008), Baycan-Levent et al. (2004), Dana (2006), Sahin et al. (2009) and Sahin (2012).
It should be noted that migrant entrepreneurship is clearly not a uniform phenomenon, as migrants may have totally different cultures, languages, habits, motives and ambitions. An underresearched issue in the migrant entrepreneurship literature is the disparity in economic performance among different groups of migrant entrepreneurs. Our study aims to fill this gap and to identify the extent and backgrounds of these differences in business performance. We will introduce this topic by providing a concise literature overview.
Kloosterman and Rath (2001) state that the distinctive traits of ethnic entrepreneurship when compared with traditional entrepreneurship are: the origins of the entrepreneurs; the management strategies; the products and services; and the personnel and customers, which in most cases are both of ethnic origin. Therefore, ethnic entrepreneurs often have no contact outside their own immigrant group; this is mainly caused by their lack of knowledge of the host country language and also of the preferences and needs of the locals (Rusinovic 2008). Therefore, the main issue related to ethnic entrepreneurship is the predominance of informal networks or mixed embeddedness, as Kloosterman et al. (1999) propose to call it, which, in many cases, they consider to have a positive effect on the survival rate of ethnic firms.
With the ongoing rise in urban migrants, the economic power of these groups has become a recognised fact that no urban policy can afford to ignore. According to Kloosterman and Rath (2001) ethnic entrepreneurs ‘can stretch or even challenge the conventional meaning of entrepreneurship’. It is also noteworthy that young people of ethnic origin – often belonging to the second generation – are progressing more than ever before in education and the workforce (Cormack and Niessen 2002). Therefore, although previously considered to lack financial and educational resources, nowadays many immigrants from less-developed countries present a different profile, being often highly-educated and skilled (Kloosterman and Rath 2001), and consequently more interested in offering innovative products.
Chaganti and Greene (2000) showed several significant differences between natives and migrants on variables relating to the entrepreneurs’ background characteristics, business-related goals, cultural values, business strategies, and business performance. A prominent characteristic of migrant entrepreneurship is the influence of family and co-ethnic labour on the business. Co-ethnic labour is an important source of competitive advantage for migrant business, since it is cheap and the problem of supervision is made easier (Mitter 1986). Surveys conducted in different European countries show that most migrant businesses have been established with the financial and human capital support of their families. Migrant entrepreneurs regularly do not have sufficient formal security to be able to obtain loans through banks, so they often resort to their own families or friends to finance their enterprises. They also often apply for relatively small loans, which are less interesting for banks, since the same largely similar fixed costs are attached to the provision of a small loan as to larger loans. In addition, many migrants do not seem to know how to approach financial institutions, and are not always familiar with the conditions for loan applications.
A consistent finding from previous research on traditional migrant minority businesses is their low inclination or willingness to use mainstream business support associations or agencies, often relying instead on self-help and informal sources of assistance (see Deakins et al. 1997;Ram and Jones-Evans 1998;Ram and Smallbone 2002;Carter and Jones-Evans 2006). The low interest of migrant entrepreneurs to use mainstream business support and public agencies is caused by demand- and supply-side circumstances. Demand-side issues are related to a low level of perceived need of (or a lack of interest in) receiving external assistance. Supply-side issues concern the inability to liaise with other firms, to inadequate information systems, and to the unsatisfactory scope of product-oriented approaches used by many support agencies. However, it was recently shown that second-generation entrepreneurs of different ethnic origins have less difficulty in approaching banks (Rusinovic 2006), and make less use of financial capital from their own group, because they have the abilities and skills to make use of official institutions for vocational guidance. Migrant entrepreneurs usually participate less in formal networks of native firms, such as retailer groups, trade associations, and franchise organizations.
1.4 Aims and scope
Not all individual entrepreneurs are equally successful in achieving their business goals and, therefore, due insight into the diverse reasons for these individual differences is needed. The focus of the present study is, in particular, on differences in business achievement indicators among various groups of ethnic (migrant) enterprises in an urban system. This focus is warranted, as migrant entrepreneurs – mainly SMEs – are predominantly found in large cities. The present study aims to identify contrasts in business performance of urban migrant entrepreneurs, from the viewpoint of ethnic, cultural, socio-economic and socio-psychological determinants. Our research addresses the relative efficiency of individual migrant entrepreneurs of distinct ethnic origins in a given urban economy, notably the city of Amsterdam. We employ an analytical tool from the organizational sciences, namely Data Envelopment Analysis (DEA), in order to compare the economic performance of distinct migrant entrepreneurs. Methodologically, we also present a new efficiency-improving projection model for a decision-making unit (DMU), so as to obtain a more appropriate movement towards the efficiency frontier of the production system of migrant entrepreneurs (see Section 4). Our efficiency analysis is based on a standard assumption in DEA that the DMU is essentially a multi-product firm with multiple production inputs (e.g., labour, socio-cultural network access) and multiple production outputs (e.g., profits, market share, socio-economic recognition, etc.), whose smart combination will ultimately be decisive for innovative business performance in a competitive urban environment.
The main proposition put forward in the present study is that migrant entrepreneurship is a very diversified phenomenon with distinct differences in business performance, depending on ethnic background, education, social networks, and the like. We therefore, aim to test the hypothesis that there are several important drivers (inputs) that may be different for distinct migrant entrepreneurs groups, and that may cause significant variations in the business performance of these firms (outputs).
Our study will investigate the entrepreneurial performance of migrants – with a focus on personal characteristics, socio-cultural bonds, and managerial skills – from a multicultural urban perspective in order to perform a quantitative assessment of critical success factors (CSFs), with the aim of assessing or improving their relative business performance. Due empirical insight into entrepreneurial motives and the achievements of migrants is also desirable for enhancing the socio-economic vitality of the city, in particular for developing a promising policy strategy in the modern urban melting pot of varied cultures. Our approach will be applied to an extensive data set on the motives, CSFs, and cultural backgrounds of a sample of migrant entrepreneurs in Amsterdam. The data have been collected from recent survey questionnaires distributed among three dominant groups of migrant entrepreneurs in this city, viz. Moroccans, Surinamese, and Turks. The remaining part of the paper is organized as follows. First, we briefly describe some of the main features of migrant entrepreneurs in the Netherlands, and in Amsterdam in particular. Then, we describe the fieldwork and our database (Section 3). A subsequent section outlines the essence of, and justification for, the use of the DEA model employed in our empirical application, while next in Section 5 a presentation and interpretation of the various results obtained will be offered. Finally, the last section provides some concluding lessons.