Introduction
In an increasingly interconnected, technology-driven global economy, where new ideas and discoveries matter, attracting talented immigrant entrepreneurs is becoming a central part of economic policy discussions and scholarly interest in many countries in the world (Stangler and Wiens 2015; Ortmans 2018; Stangler and Konczal 2013; Economist 2012; Docquier and Rapoport 2012; Clemens 2011).
For developed countries marked by aging populations, immigrants represent an untapped source of human capital, value creation, and productive entrepreneurship—a solution to a growing demographic problem (Levesque and Minniti 2011; Acs et al. 2009; Caplan 2007; Audretsch and Feldman 1996). The highly skilled and educated immigrant entrepreneurs contribute to innovation output by generating new ideas and technologies meant toO. Nicoara (B)
Department of Business and Economics, Ursinus College, Collegeville, PA, USA e-mail: onicoara@ursinus.edu
© The Author(s) 2021 123
A. John and D. W. Thomas (eds.), Entrepreneurship and the Market
Process, Mercatus Studies in Political and Social Economy, https://doi.org/10.1007/978-3-030-42408-4_6
increase market value and opportunity in the countries of their destination (Simarasl and Williams 2016; No and Walsh 2010; Hart and Acs 2011; Murphy et al. 1991; Hunt and Gauthier-Loiselle 2010).
Empirical studies show that immigrant entrepreneurs surpass native entrepreneurs in ingenuity. For example, in the United States, immigrant entrepreneurs in high-tech sectors are shown to significantly outperform their American counterparts in most measures of innovativeness, including number of patents, researched recently (Brown et al. 2020), as well as in the previous century (Akcigit et al. 2017), not only in the U.S. but also elsewhere in Europe (Lissoni et al. 2014). They are also twice as likely to co-found high-tech enterprises (Stangler and Wiens 2015).
Other studies, focused on surveying and analyzing U.S.-based enterprises, have shown that at least 15%, and at most 26%, of the cofounders of enterprises with a high impact on technological innovation and job creation in the U.S., are foreign-born (Saxenian 1999; Anderson and Platzer 2006; Hart and Acs 2011; Wadhwa et al. 2007). These studies echo Joseph Schumpeter’s idea that entrepreneurship of the innovative, technological kind contributes more to modern economic growth (Schumpeter 1942) than entrepreneurship of the simple kind, which may involve buying low and selling high, without disrupting the existing technological combinations. Complex or “high tech-high impact” immigrant entrepreneurs, as opposed to the simple or “low-tech-low impact” enterprise creators, are thus portrayed as superior contributors to economic growth (Wadhwa et al. 2007; Hart and Acs 2011). While these studies document the role of the supply of innovative immigrant entrepreneurs as “engines of economic growth” (Minniti et al. 2006) in the country of destination, more research is needed to understand what determines the supply of immigrant entrepreneurs in the first place. Why do immigrant entrepreneurs choose to start high-growth businesses in country A and not in country B? More fundamentally, because the decision to start a business usually does not come until years after arrival and settling in the destination country, the underlying question is why do individuals choose to migrate to country A and not to country B? Is one’s initial decision to migrate linked to one’s later decision to start a business (or the likelihood to start a business)? Are there essential differences between an immigrant’s country of origin and her country of destination that can explain immigrant entrepreneurship in general and innovative immigrant entrepreneurship in particular? What determines the allocation of the global supply of innovative entrepreneurs?In this chapter, I argue that the direction of the observed flows of migrants may reveal cross-country institutional and socio-cultural differences that matter for entrepreneurship theor y in general, and for understanding the modern phenomenon of innovative immigrant entrepreneurship, in particular.
An immigrant entrepreneur’s decision to engage in productive and creative activities is shaped by a comparative-institutional context. From a comparative-institutional perspective, applied on a global scale, the conjecture in this chapter is that the global supply of creative entrepreneurs is allocated according to the cross-country institutional and cultural differences and the corresponding differences in payoffs. I propose a framework by which one should expect that the direction of the flows of innovative immigrant entrepreneurs goes from countries with lower institutional quality to countries with higher institutional quality, and from cultures with low praise or social honor for entrepreneurs to cultures with high praise or social honor accorded to entrepreneurs. The framework combines Deirdre McCloskey’s notions of the “Liberty” and “Dignity” factors explaining the innovation-based, modern growth (McCloskey 2011), with Israel Kirzner’s concept of an “element of entrepreneurial alertness” characterizing human cognitive processes and action (Kirzner 1978).The rest of the chapter is organized as follows: Section (“Institutions and Entrepreneurship: Context Matters”) discusses the relationship between institutions and entrepreneurship. Section (“Creative Immigrant Entrepreneurship and Institutions: Which Context Matters?”) presents the relationship between creative immigrant entrepreneurship and institutions. Section (“Why Might Innovative Immigrant Entrepreneurs Choose Developed Countries? A Comparative Liberty-Dignity Framework”) provides a Liberty-Dignity framework for understanding the determinants of innovative immigrant entrepreneurship. Section (“Empirical Illustrations of the Comparative Liberty-Dignity Framework”) illustrates the Liberty-Dignity framework with cross-countr y data. Section (“Conclusion”) concludes.