Immigrant Networks and Innovation

A paper in the fourth quarter issue of the Chicago Fed publication, Economic Perspectives has an article titled: Do ethnic enclaves and networks promote immigrant self-employment? From the introduction:

Immigrants have a high tendency to be self-employed. I estimate that in the United States, the number of immigrant businesses rose from 2.7 million in 1997 to 3.3 million in 2002—an annual increase of 4 percent (compared with 2 percent yearly growth for all U.S. frms). According to the Ewing Marion Kauffman Foundation, immigrants outpaced native-born Americans in new business start-ups: Immigrants had an entrepreneurial index activity rate that increased from 0.37 percent in 2006 to 0.46 percent in 2007, while that of the native born remained constant at 0.27 percent over the same period.

Immigrants’ businesses tend to be clustered in distinct neighborhoods, and they have become an integral and growing aspect of the vitality of metropolitan areas throughout the U.S. Scholars from various fields have studied the geographical concentration of immigrants in distinct locations across the U.S., as well as how this concentration affects immigrants’ integration and assimilation into American society (Bartel, 1989). In this article, I focus on the relation between ethnic geographical concentration and the propensity for self-employment among immigrants to the U.S. I ask whether ethnic enclaves (geographical concentrations of an ethnic group) and ethnic networks (social or business networks among people of the same ethnicity, not necessarily living in proximity to one another) influence the decision by immigrants to be self-employed.

The author finds that being part of an ethnic network increases the probability an immigrant chooses self-employment rather than wage labor. But there is no clear evidence that geography has an influence.