Vitali G., Filippi M., Manello A., Working Paper Cnr-Ceris, N° 14/2012

theoretical and empirical literature is that the
probability of engage self employment could be
higher within ethnic minority than for native
population. According to the so called disadvantage
theory, immigrants use self-employment as an
instrument to escape from labor market
discriminations (Moore, 1983) that reduce the level
of wage and the probability of finding a job.
According to this consideration, the expected
earnings from self-employment are higher than the
value of wage from being employee (Blanchflower,
2004) and rational agents choose entrepreneurship to
maximize their revenues.
Another possible explanation relies on the
opportunity that immigrant firms find informal
financial resources and cheap labor force thanks to
their “cultural or ethnic networks”, a useful
instrument to increase social capital within a specific
local area (Portes, 1998).
More recently, Ibrahim and Galt, (2011) suggest an
alternative explanation derived from institutional
economics, underlining how the transaction costs
could be lower within ethnic minority due to the
transmission of non-market information that it is
easier for people sharing the same culture and
traditions. In this sense ethnic groups are seen as
“efficient, low cost, cultural transmission units”
(Landa, 1991). Given the importance of tradition and
culture, the presence of different ethnic groups and
their concentration across regions could change
drastically local entrepreneurial rates, and this
evidence
comes
from
different
previous
contributions. By analyzing a sample from Sweden,
Hammarstedt (2004) provides strong evidence on
different self-employment rates depending on
minority group origin. Clark and Drinkwater, (2010)
show estimates of the change in the self-employment
probability between 1991-2001 across ethnic groups
in UK and find significant differences which are
robust to the statistical control for individual
characteristics.
The specific ethnic characteristics, such as cultural
heritage, traditions and beliefs, increase per se the
propensity toward entrepreneurship as it was
6

documented by Light and Rosenstein, (1995). More
recent approaches try to develop a more quantitative
framework to analyze cultural difference among
groups. The so called GLOBE project (Javidan et al.,
2006) try, for example, to evaluate, using a scoring
system, nine aspects of different cultures,
underlining the different approach adopted by each
ethnic group. This method based on scales is
enlarged and enriched by Hayton, George and Zahra,
(2002) adding more aspects of human behavior,
while Chand and Ghorbani (2011) propose a
comparison of Chinese and Indian approach to
business and life using the GLOBE’s scale.
Of course, economic motivation could explain
different probability of engaging self-employment
for some minority groups, such as the different level
of economic development and trade opportunities of
their own country. It is very common that an ethnic
entrepreneur maintains better linkages with his
original country and if this country has a dynamic
economy it creates more exchange opportunities for
ethnic entrepreneurship (Coughlin and Wall, 2011).
Other studies concern the perceived reliability
regarding the components of some minority groups.
For example, Parker (2004) observes, for the UK
case, significant racial differences for the access to
formal financial sources, as banks are more willing
to give loans to certain ethnic groups than others.
The aspect of informal financial sources is also
strictly linked to the presence of the so called “ethnic
networks”, which makes easier the collection of
financial resources. Moreover, previous studies
suggest a positive effect of ethic networks on
sustaining the level of export and import, confirming
the usual pro-trade effect of ethnic firms (Duanmu
and Guney, 2012).
Parker (2004) suggests also that ethnic entrepreneurs
are concentrated in some traditional industrial
sectors, often characterized by lower growth, longer
working time and limited earning possibilities.
Province specialization in such sectors is an
important factor enhancing the presence of ethnic
entrepreneurs and increasing the entrepreneurial rate
among foreign individuals.