Immigrants are much more likely than native born Americans to take the chance at entrepreneurship. As anyone who has tried before knows, starting a business is very challenging, requires tremendous work and is risky. In fact most new businesses fail. Even considering the risk and challenges involved, immigrants are stepping up the the plate, putting in the time and effort, and are in fact having incredible success as the Fortune 500 founders show.
While the odds are always against anyone who starts a business, the fact is that immigrants time and time again take that chance. Some studies show that immigrants are anywhere from 50% to 100% more likely to start a business than native born Americans. They start small, medium, or even large businesses as well. In fact, immigrants were “founders” of about 40% of the Fortune 500 companies, even though immigrants only make up 10 to 15% of the population. That stat is really astounding.
There are multiple surveys as well as data points out there on this topic (some of which are a few years old), but no matter which one is used they all show the same thing. Immigrants, as well 2nd or 3rd generation children, are more likely to be entrepreneurs. It does not matter where they have come from. Immigrants from Asia, Africa, the Middle East, Europe, Mexico, or anywhere; they are all much more entrepreneurial than Native born Americans.
Immigrants start small and Fortune 500 businesses
The Center for American Entrepreneurship reported in 2016 that 40% of Fortune 500 companies were founded by immigrants. That is an incredible statistic, especially when considering that anywhere from 10 to 15% of the population at any one time is foreign born/immigrants. It therefore means that immigrants, who only make up say 10 to 15% of the population, are disproportionately represented in the Fortune 500. They are three to four times as likely to have founded a Fortune 500 company.
A report from the Kaufman Foundation shows that 30% of new businesses started in 2016 were founded by immigrants. Once again, if you factor in the percent of population that is due to immigration (10 to 15%), this means immigrants are around 2 to 3 times as likely to start a business as “native” Americans. The St. Louis Mosaic project shows immigrants about 60% more likely to start a business. No matter what stat or study is used, it can’t be debated that immigrants are stepping up the plate and have that entrepreneurial spirit. Maybe that spirit, drive, and business is part of the American Dream? (as we look for feedback on that topic.)
What accounts for immigrants being much more entrepreneurial? Now of course there is no conclusive data that shows the root cause of why immigrants are more likely to be entrepreneurs, as there are numerous driving factors and each story may be different. But there are many theories out there reflected in these studies, including some of the following.
- Being new to the country, maybe they struggle to find a decent paying job due to discrimination, employer bias, skills do not exactly “transfer” to some ill-defined American job, etc…..The struggle is not for lack of skills or wok ethic from immigrants. They then take the chance and start a business as they think “they have nothing to lose”. Two older reports from Researchgate as well as Harvard Business (October 2016) review allude to discrimination in the workplace being a major incentive to starting a company and working for themselves.
- Work ethic. Many people think they just work much harder, are more focused and committed. The immigrant thinks if they work hard, take things into their own hands (entrepreneurship) they can provide for their family.
- Pursuit of financial goals. Due to systemic discrimination and other barriers, they think the best way to hit their financial goals, provide for their family, etc. is to get away from others who discriminate against them and take things into their own hands.
- Harvard Business Review reported in 2017 that cross cultural experiences are very beneficial. In other words, immigrants leverage their ideas and creativity from different cultures, countries, experiences etc. to come up with solutions to a problem, which can often lead to a successful business…solving an unmet meet.
- They want to learn. Immigrants often try to take advantage of every opportunity America offers them. Whether learning about businesses entities such as LLC, finances, how to be successful, or anything, the American culture, immigrants are both more entrepreneurial and want to learn. Even learn about deciding between LLC, corporations, and sole proprietorships.
- On a personal note, I think they refuse to take “no” for an answer and refuse to put their hopes and dreams into “blind luck” or depending on others in America. They instead forge ahead and make things happen. They make their luck.
We are sure there are countless other reasons immigrants are entrepreneurs. Regardless, immigrants who take the risky plunge into starting their own business are setting the example for the rest of America in their drive, work ethic, creativity and determination…as entrepreneurship is not easy to do at all.
By Jon McNamara
