Academic journal article New England Journal of Entrepreneurship

To Be or Not to Be an Ethnic Firm: An Analysis of Identity Strategies in Immigrant-Owned Organizations

Academic journal article New England Journal of Entrepreneurship

To Be or Not to Be an Ethnic Firm: An Analysis of Identity Strategies in Immigrant-Owned Organizations

Article excerpt

Immigration, which influences the demographics, economies, and politics of countries, has emerged as a key issue in the world. In 2013, 13% of the U.S. population was from another country, consisting of approximately 25% firstor second-generation immigrants (Migration Policy Institute, 2015). Between 1993 and 2014, the immigrant population in UK more than doubled, from 3.8 million in 1993 to 8.3 million in 2014 (The Migrant Observatory, 2015). In spite of the ubiquity of immigration, even highly skilled immigrants face immense obstacles obtaining employment in new environments (Wald, 2004). Many immigrants often resort to self-employment or entrepreneurial activities to overcome the hurdles of gaining employment. In fact, immigrants have been an important driving force behind the growth of American cities (Light, 2002). They have also been overrepresented in the entrepreneurial sector in Australia (Collins, 2003) and Europe (Rath & Kloosterman, 2000), often seen as "a powerful economic force" (Baycan-Levent & Nijkamp, 2009). Despite the high rates of entrepreneurship among immigrant groups, firms started by immigrants also experience specific hurdles in the host country (Bates, 1997).

While most startups suffer from the liabilities of smallness and of newness (Stinchcombe, 1965), firms founded by immigrant entrepreneurs encounter additional challenges that emerge from the founders' newness to the country in which they operate. These challenges include the competitive disadvantage due to additional costs of operating in a foreign market (Hymer 1976; Kindleberger, 1969). We use the definition of immigrant entrepreneurship developed by Chaganti and coauthors, which is "selfemployment efforts by individuals that voluntarily migrate to a different country and engage in business ownership" (Chaganti et al., 2007). The challenges faced by immigrant firms are similar to the disadvantages faced by foreign-owned firms due to their foreignness relative to domestic firms (Hymer, 1976; Kindleberger, 1969; Vernon, 1977; Zaheer, 1995). Zaheer (1995, p. 342) referred to this phenomenon as the "liability of foreignness," defining it as "the additional costs of doing business abroad that results in a competitive disadvantage for an MNE (multinational enterprise) subunit."These disadvantages can hinder the performance, and even the survival, of immigrant entrepreneurs' ventures, leading to their mortality. The literature has also shown that immigrant entrepreneurs undertake different strategies, which may affect firm performance (Ndofor & Priem, 2011); yet, we do not have a nuanced understanding of how social identity may influence the strategies of these ventures.

We use the lens of social identity theory (SIT) to explore how immigrant entrepreneurial firms deal with their foreign identities. For example, migrant firms may emphasize their ethnic identity (enclave businesses) or shed their ethnic identity the way Silicon Valley migrant ventures did (Zhou, 2004). Specifically, we seek to answer the questions of how foreign founders either emphasize or underplay their foreignness, and how that may relate to their chances of survival. We argue that immigrant firms use different identity strategies to overcome the liability of foreignness, aiming to increase their chances of persevering. Fauchart and Gruber (2011) have shown how founders' identities are crucial for determining the actions and behaviors of the firms, especially at the initial stages of the lifecycle of the firm. We argue, however, that this context for entrepreneurial action and entrepreneurial identity is extremely different when the founder is an immigrant. Therefore, we explore the various ways that this immigrant identity of entrepreneurs unfolds in their firms. Nonetheless, we understand that not all immigrant entrepreneurs have the same experiences or are received in similar ways in the host country (Turner, et al., 1987). The industry they operate in, as well as the networks they have in the home and host countries, could be some of the many factors that can impact the experiences of immigrant entrepreneurs' and the way they negotiate their foreign identities. …

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