Immigrant Entrepreneur ship:A Critical Engine for Urban EconomicDevelopment                            Garfield Foundation...
 Immigrant integration and  entrepreneurship (the big  picture) Transnational entrepreneurship  (keeping feet in both wo...
 Immigrant integration and  entrepreneurship (the big  picture) Transnational entrepreneurship  (keeping feet in both wo...
The three “MentalFrames” about                        The “Emma Lazarus Frame”immigration andimmigrants thatshape public  ...
The “Emma Lazarus Frame”                      "Give me your tired, your poor, your huddled masses                      yea...
 Immigrants are represented in low-skilled occupations as well as  among scientists, doctors, engineers, accountants, nur...
The “Melting Pot Frame”                   “We shall … assimilate and digest what we have into pure                   Ameri...
 Marcelo M. Suárez-Orozco points out that in the global era, the                    tenets of unilineal assimilation are ...
The “Mr. Roger’s                Neighborhood Frame”                   “Rub-a-dub-dub … And who do you think they be? The  ...
 The literature on ethnic entrepreneurship and enclaves                    assumes that these entrepreneurs conduct busin...
 Immigrant integration and  entrepreneurship (the big  picture) Transnational entrepreneurship  (keeping feet in both wo...
A new frame “Keeping Feet in                Both Worlds”                “…the many social connections and organizations th...
 Transnational entrepreneurs are a heterogeneous group coming from many  countries, crossing ethnic, immigrant, and minor...
 Preliminary research suggests 4 distinct types of immigrant transnational  enterprises (Landolt et. al. 1999):         ...
Transnational entrepreneurs do better economically than their waged co-ethnicsand pure local immigrant entrepreneurs (Port...
Some Implications of                            Transnational                            Entrepreneurship: Transnational ...
 Immigrant integration and  entrepreneurship (the big  picture) Transnational entrepreneurship  (keeping feet in both wo...
Framing business development (not all are created equal)   Domestic &           Self-                               Small ...
Framing business development (not all are created equal)                Wage Labor                 Self-                  ...
Framing business development (not all are created equal)                                            0               2     ...
Framing business development (not all are created equal)                                 Self-employment, Small Businesses...
 Immigrant integration and  entrepreneurship (the big  picture) Transnational entrepreneurship  (keeping feet in both wo...
Moving the field forward (what field?)   Unfortunately, the business development “field” remains fragmented,    undiscipl...
 Traditionally, philanthropy has behaved more like banking than venture capital  investing Foundations have to move from...
This situation is in sharp contrast to the robust innovation infrastructure that hasbeen developed to support process, pro...
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Immigrant Entrepreneurship: A Critical Engine for Urban Economic Development

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A new framework to understand immigrant entrepreneurship

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  • I would like to start by sharing with you an enterprise development framework. In the process I will make some general points and present some examples regarding this process in Boston’s inner city. This framework can be understood as both an evolutionary process or we can think of it as a series of entry points in this process. Lets start here (first step)… Domestic and wage labor. Suppose we have a family unit in which some of its members work at home performing some domestic duties and others work outside the household as wage laborers... They complement the family income with their in kind (cooking, for example) and monetary incomes (from cooking in a restaurant, for example). Suppose now that they decide to open their own home-based cooking business… They are transitioning to a “self employment mode of production.” The general point here is that for every transition from one social form of production to the other there are enabling factors, benefits, and challenges. Enabling factors are here understood as “business environment factors” - external factors such as taxation, capital availability, technical support systems, training, etc. - and “operational factors” - internal factors such as technical skills, business skills, equity capital, etc.
  • Immigrant Entrepreneurship: A Critical Engine for Urban Economic Development

    1. 1. Immigrant Entrepreneur ship:A Critical Engine for Urban EconomicDevelopment Garfield Foundation Alvaro Lima, May 2011
    2. 2.  Immigrant integration and entrepreneurship (the big picture) Transnational entrepreneurship (keeping feet in both worlds) Framing business development (not all are created equal) Moving the field forward (what field?)
    3. 3.  Immigrant integration and entrepreneurship (the big picture) Transnational entrepreneurship (keeping feet in both worlds) Framing business development (not all are created equal) Moving the field forward (what field?)
    4. 4. The three “MentalFrames” about The “Emma Lazarus Frame”immigration andimmigrants thatshape public The “Melting Pot Frame”perceptions andpolicies: The “Mr. Roger’s Neighborhood Frame”
    5. 5. The “Emma Lazarus Frame” "Give me your tired, your poor, your huddled masses yearning to breathe free, the wretched refuse of your teeming shore. Send these, the homeless, tempest-tossed to me, I lift my lamp beside the golden door!" There is a widespread belief that migration is an autonomous process driven by poverty, economic stagnation, and overpopulation in the countries of origin unrelated to receiving countries’ foreign policies, economic needs and broader international economic conditions; Contrary to this widespread perception, neither the poorest of the poverty poor migrate nor do they come from the poorest Stagnation countries; Overpopulation Contemporary immigration etc… is driven by structural factors: scarcity of labor, low fertility, population aging, market penetration, etc...
    6. 6.  Immigrants are represented in low-skilled occupations as well as among scientists, doctors, engineers, accountants, nurses: Roughly a third of all Nobel Prize winners in the U.S. have been immigrants. In 1999, all U.S. winners of the Nobel Prize were immigrants (Marcelo M. Suarez- Orozco, 2002).  own 25% of all U.S. public venture-backed companies; They are also penetrating  47% of all private ventured-backed companies, and the world of commerce:  more than half of all Silicon Valley startups
    7. 7. The “Melting Pot Frame” “We shall … assimilate and digest what we have into pure Americans, with American aspirations, and thoroughly familiar with the love of American institutions” (Senator Ellison DuRant Smith of South Carolina 1920s). Over time, immigrants are expected to “assimilate” into the dominant society’s socio-cultural and economic systems while simultaneously shedding their “old” cultural practices and political loyalties (Alba, 1985); At the turn of the 20th Century, “assimilation” clearly meant conformity to Anglo-Saxon ways - a problem today given the diversity of American society and that of the immigrant groups arriving in the country (Gordon, 1964);
    8. 8.  Marcelo M. Suárez-Orozco points out that in the global era, the tenets of unilineal assimilation are no longer relevant. Today there are clear advantages to being able to operate in multiple cultural codes … to traverse cultural spaces (Marcelo M. Suarez- Orozco, 2002);  Despite the assimilation rhetoric, immigrant integration policies (education, training, placement, ESOL, health care, entrepreneurship, citizenship, etc..) are skeletal, ad hoc, and under-funded; Faced with this situation and labor market discrimination, immigrants create self- labor market employment opportunities; language acquisition Immigrant entrepreneurs entrepreneurship have been found to do better economically than their education waged co-ethnics even when etc… controlling for human capital characteristics (Portes and Zhou 1999)
    9. 9. The “Mr. Roger’s Neighborhood Frame” “Rub-a-dub-dub … And who do you think they be? The butcher, the baker, and the candlestick-maker…” (English language nursery rhyme). Immigrant entrepreneurship conjures up images of small, informal, and family- owned businesses even though contemporary entrepreneurial activities among immigrants are increasingly heterogeneous in scale, range, and levels of formality (Portes, Hailer, & Guarnizo, 2002; Wadhwa, Saxenian, Rissing, & Gereffi, 2007); The focus on neighborhood-based and local economic local, development creates neighborhood, ethnic enclave barriers for immigrants economies to join the circles of global trade and leverage their networks across national borders.
    10. 10.  The literature on ethnic entrepreneurship and enclaves assumes that these entrepreneurs conduct businesses, hire workers and have customers all based on their ethnic backgrounds;  Ethnic pathways are only one of the many pathways of incorporation migrants establish (Werbner, 1999); The ethnic focus, a result of the demands of the Civil Rights Movement, shifts the analytical attention to racial and ethnic relations. And in the process, what is distinctive about immigrants was lost: “immigrants experienced another life in another country where they maintain a whole host of social and economic resources, while they will live out a whole host of experiences in the new society (Portes et. al. 2001).
    11. 11.  Immigrant integration and entrepreneurship (the big picture) Transnational entrepreneurship (keeping feet in both worlds) Framing business development (not all are created equal) Moving the field forward (what field?)
    12. 12. A new frame “Keeping Feet in Both Worlds” “…the many social connections and organizations that tie migrants and non-migrants to one another create a border- spanning arena that enables migrants, if they choose, to remain active in both worlds…” Immigrant transnationalism refers to the regular engagement in economic, political and socio-cultural activities spanning national borders; Transnational entrepreneurs have played an important role in facilitating international trade, investment, and “diaspora tourism;” There is a remarkable disparity between the dynamism of transnational enterprises and governmental misunderstanding or ignorance of the phenomenon;
    13. 13.  Transnational entrepreneurs are a heterogeneous group coming from many countries, crossing ethnic, immigrant, and minority boundaries, and possessing different motivations and experiences:  The current market capitalization of publicly traded immigrant-founded venture- backed companies in the United States exceeds $500 billion, adding significant value to the American economy.  About 50% of Indian and Chinese entrepreneurs in Silicon Valley “have set up subsidiaries, joint ventures, subcontracting, or other operations in their native countries” (Saxenian, Mtoyama, & Quan, 2002:37);  For instance, 39% of the 289 companies located at the Hsinchu science-based industrial park near Taipei were started by U.S.-educated Taiwanese engineers with professional experience in Silicon Valley. Seventy of the firms maintain offices in Silicon Valley to obtain workers, technology, capital, and business opportunities;  Likewise, India’s technology-oriented diaspora stand behind much of the FDI in the country’s emerging technology hubs of Bangalore and Hyderabad;  About 60% of Hispanic immigrant entrepreneurs in the U.S. are transnational (Portes, Haller, & Guarnizo, 2002); Migrant-founded venture-backed public companies today employ an estimated 220,000 people in the United States and over 400,000 people globally.
    14. 14.  Preliminary research suggests 4 distinct types of immigrant transnational enterprises (Landolt et. al. 1999):  Circuit firms - involved in the transfer of goods and remittances across countries ranging from an array of informal international couriers to large formal firms;  Cultural enterprises - rely on their daily contacts with the home country and depend on the desire of immigrants to acquire and consume cultural goods from their country such as shows, CDs, newspapers, videos, etc.;  Ethnic Enterprises - are small retail firms catering to the immigrant community which depend on a steady supply of imported goods, such as foodstuffs and clothing from the home country;  Return migrant enterprises - are firms established by returnees that rely on their contacts in the United States. They include restaurants, video stores, auto sales and repairs, office supplies, etc.;
    15. 15. Transnational entrepreneurs do better economically than their waged co-ethnicsand pure local immigrant entrepreneurs (Portes and Zhou 1999; Logan, Alba, andMcNulty 1994; Wilson and Martin 1982): Activities Linking Immigrants to Their Home Countries by Type of Economic Adaptation Employee/ Ethnic Transnational Wage Worker Activity Entrepreneur Entrepreneur % % % Imports Goods from Abroad 8.2 9.9 31.9 Exports Goods 6.5 8.9 18.1 Invests in Business in Home Country 5.9 11.7 26.4 Invests in Real Estate in Home Country 20.7 28.2 41.9 Has Been an International Courier 10.1 8.3 23.6 Hires at Least One Employee in Home Country 0 30.8 42.2 Frequency of Business Travel Abroad: At least twice per year 7.1 17.3 28.4 Six times or more per year 0.9 6.1 14.6 Source: CIEP, 1998 Ethnic Transnational Entrepreneur (% ) Entrepreneur (% ) Source: The Comparative Immigrant Entrepreneurship Project (CIEP); Center for Migration and Development (CMD); Princeton University.
    16. 16. Some Implications of Transnational Entrepreneurship: Transnational entrepreneurship is a promising form of integration;Transnational integration and transnational entrepreneurship are highly relevant to modern workings of global and gateway cities;Transnational integrations and transnational entrepreneurship provide opportunities for business, social entrepreneurs, and governments;Transnationalism has broad implications for notions of community, and economic development;To take advantages of the transnational phenomenon, concepts such as “local development,” “local community” and “social capital” must be redefined as space of flows (relationships) instead of just geographic places;Finally, the model presented can be generalized to include ethnic and non-ethnic forms of social settlement and connections spanning multiple borders.
    17. 17.  Immigrant integration and entrepreneurship (the big picture) Transnational entrepreneurship (keeping feet in both worlds) Framing business development (not all are created equal) Moving the field forward (what field?)
    18. 18. Framing business development (not all are created equal) Domestic & Self- Small Growth Wage Labor employed Employer Business progressionentry points BENEFITS • Independence • Limited liability ENABLERS (easy to exit) • Easy to start • Ability to gain – easy to reach BENEFITS more than wage ENABLERS • Improved stability customers • Build reputation – little skill • Higher profit CHALLENGES/ and steady client • Improved customer training LIMITATIONS base – low capital reach • Volatility/high • More capital - requirements ENABLERS BENEFITS failure rate fixed costs CHALLENGES/ • Lower failure rate • Fast breakeven • Expand client • Limitations to • Get licenses/ LIMITATIONS base • Steady profit profit permits • Increased • Further customer • Expand org. • Limited capacity competitive threat structure reach • More difficult to • Get mgmt. • Scale economies exit training • Higher managerial • Get loans CHALLENGES/ involvement needs LIMITATIONS • Limited capacity • Management delegation • Attracting skilled managers variable costs fixed costs • Growing IT/ computer needs technical skills managerial skills income target return on capital
    19. 19. Framing business development (not all are created equal) Wage Labor Self- Small Growth (Employee) Employed Employer BusinessTRANSPORTATION • Taxi/Limo driver • Taxi/Limo driver • 1-3 limos • Multiple cars (3+) • Delivery (food, • Delivery (food, • Multiple (leased) • Multiple services other) other) medallions (delivery services, • 1-3 delivery cars or limo services)BEAUTY/GROOMING • Manicurist • Leased seat in hair • Nail Salon • Chain of • Hair Stylist salon • Beauty Salon nail/beauty salons • House calls • Multiple servicesCLEANING SERVICES • Janitor • Solo operator • Local contractor • Regional • Cleaning person or (janitor, cleaning • Dry-cleaning contractors House cleaner person) storefront (commercial, • Maid/hospitality • Solo franchise • Small cleaning residential) business • Multiple servicesEATING PLACES • Cook • Restaurant (with • Multiple • Waiter • Take-out stand eat-in, take-out, restaurants • Caterer • Burrito cart delivery) • Multiple services • Small catering (catering, delivery) service • Food servicesRETAIL • Cashier • Door-to-door sales • Small franchise • Retail chain • Salesperson • Third-party • Small store • Stock manager marketing franchise • Third-party mktg.
    20. 20. Framing business development (not all are created equal) 0 2 4 6 8 10 12 14 Your Limo 1 4.5 0.5 Years Transportation First Choice Limo 7 Brighton Limo 4 9 Primetime Express 4 Majestic Cleaning 4 6 Banshee 3 8 Maintenance Mass Paint & Cleaning 9 Building Nartoone Security 5 New restaurant Bob the Chefs 7 3 City Fresh Foods 5.5 Restaurants/ Merengue 5 Catering Tacos El Charro 2 8 Self-Employed Small Employer Growth Business(1) from business inception until 1999Source: ICIC Boston & BCG
    21. 21. Framing business development (not all are created equal) Self-employment, Small Businesses, and Growth Businesses – How do they differ?  Ownership Structure 1. Single owner or not incorporated 2. Independently or family owned 3. Limited liability & more complex legal structure  Employment & Revenue Size & Capital Structure 1. 1-2 people & < 10K & < $100K 2. < 500 people & < $20M … 3. > 500 people …  Financial Structure & Ability to Leverage 1. Simple cash flow & no ability to leverage 2. Bank financing 3. External financing, investors, VC, investment banks  Management Structure 1. Hands-on worker & control everything 2. Management across all functions 3. Professional management, board, investors  Skill Sets 1. Finding & servicing customers 2. Detailed understanding of industry 3. Financial and organizational skills  Employment Size & Structure  Technology, Production & Markets 1. Low to no technology 2. Single technology, production & markets 3. Multiple products, technology & markets  Success • Make enough individual income & control lifestyle • Salary & Profits & Value of Company • IPO/share price
    22. 22.  Immigrant integration and entrepreneurship (the big picture) Transnational entrepreneurship (keeping feet in both worlds) Framing business development (not all are created equal) Moving the field forward (what field?)
    23. 23. Moving the field forward (what field?) Unfortunately, the business development “field” remains fragmented, undisciplined, slow, and financially inefficient (a collection of programs sometimes working against each other) Foster communities of practice (learning networks) among individuals and organizations that can voluntarily develop, adopt and rapidly spread new tools and practices. (Think LEED green building standards) The “field’s” aversion to failure creates barriers to innovation, performance improvements, financial sustainability, and scalability Build a culture of rapid learning from failure, and reward social entrepreneurs who make the hard decision to stop investing in one idea and move on to another The “field” confuses money with the skills needed to innovate at scale (more money is better than less) Innovators benefit from “smart money.” That is, investment capital that comes with other useful resources, such as management expertise; sector experience; access to management talent; networks into customers and suppliers; and connections with other investors;
    24. 24.  Traditionally, philanthropy has behaved more like banking than venture capital investing Foundations have to move from “grant-making” to “innovation investing” which requires a combination of high tolerance for risk; strong business discipline; high levels of flexibility in the “means” as opposed to the “ends;”; comfort with conflict and ambiguity; and a willingness to be deeply involved in the selection of the management team and the program design Research, guided by theory and practice, is needed to better understand diverse business forms and how to support them so that they can:  innovate  accelerate entrepreneurship  grow  create employment  spark economic development  provide an important strategy for self-employment  create a vital entry point in the economy for immigrants and low income populations  maintain of existing physical infrastructure create “social capital” in communities that need to build “strong ties,” particularly among immigrant communities supply needed goods and services
    25. 25. This situation is in sharp contrast to the robust innovation infrastructure that hasbeen developed to support process, product, and business design innovation inthe private sector:  The system for identifying, screening, developing, prototyping and launching (commercializing) private market innovations is well developed and well financed  Rewards for success are competitive and the field attracts some of the best human talent in the market place  Systems for due diligence and screening have been well honed over many years of trial and error  Commercialization enterprises have relationships with many different sources of capital to match the stages of development of an innovation  A robust set of different business designs for innovation commercialization is constantly evolving

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