Skip to main content
SpringerLink
Log in

Ethnic Social Networks and Self-Employment of Immigrant Men in the US

  • Article
  • Published:
Eastern Economic Journal Aims and scope Submit manuscript

Abstract

This paper investigates empirically the importance of ethnic networks for self-employment decisions of immigrant men. The results confirm that ethnic networks, as conceptualized, are important. Consistent with a “pulled” effect framework, being surrounded by others from the same country of origin increases the probability of self-employment more so for individuals in groups with higher self-employment intensity than for individuals in groups with low self-employment intensity. Ethnic networks also work in other ways that are consistent with a “push” factor framework, enhancing the relative choice of self-employment for those with a presumably relative disadvantage in the labor market.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

Notes

  1. See www.kauffman.org/items.cfm?itemID=1036. The Kauffman Index of Entrepreneurial Activity is derived from the US Census Bureau's monthly Current Population Survey (CPS). Using detailed demographic information on race, education, region, age, and immigrant status, the Kauffman Index of Entrepreneurial Activity captures all adults aged 20–64 who initially start a business (in the business's first month), including those who own incorporated or unincorporated businesses and those who are employers and non-employers.

  2. In the sociology literature, see, for example, these studies [Light 1979; Wilson and Portes 1980; Aldrich et al. 1985; Granovetter 1985; Sanders and Nee 1996].

  3. A number of studies have documented ways ethnic social networks promote ethnic business creation by mobilizing monetary resources. For example, Van Auken and Neeley [1998] find that financial resources, raised through social networks are critical for immigrant business, especially during the formation stage of the business, where business owners tend to have greater liquidity constraints. Bond and Townsend [1996] find that Hispanic immigrant business owners in a Chicago neighborhood tend to seek financing in the informal sector (through social networks) instead of banks due to preference or cultural factors. Other studies find informal loan activities such as rotating credit associations through social networks are important in various ethnic business communities [Light 1972; Bonnett 1981; Min 1988]. Other studies that have discussed networks and funding opportunities include Sanders and Nee [1996], Bonacich and Modell [1980], Light [1972], Aldrich and Waldinger [1990].

  4. We identify the universe of the individual's ethnic enclave population from the question in the Census that asks people about their country of origin. So if, for example, a person is from Mexico, this person would be assigned an ethnic enclave number equal to all the people who respond that they were born in Mexico. This is a conservative measure of networks since clearly the person could have relationships that expand beyond country of origin identification. We chose not to use ancestry due to multiple entries.

  5. PUMAs are areas whose boundaries are defined by the US Census Bureau; each PUMA has a population of 100,000 or more.

  6. For convenience, Mexico is put in the Central America group, although only southern Mexico is typically considered part of Central America.

  7. The data do not identify whether the immigrants from “Korea” are from North or South “Korea,” but I infer that the group from “Korea” is from either or North or South Korea, as such I will refer to the group as (North and South) Korea.

  8. The language concentration of an individual is identified, based on the question on the Census, which asks respondents whether there is a language other than English spoken at home and if so, the identity of that language. The Census data list over 100 languages other than English spoken at home (and each country of origin group can have people speaking any of these languages. However there would be in most cases clear language dominance, such as Spanish among Mexicans and French Creole among Haitians). Thirty languages most frequently spoken at home, other than English, were identified. The speakers of these 30 languages represented over 90 percent of those reporting a foreign language spoken at home (they also cover not surprisingly all the country-origin groups that have already been identified, except Jamaicans and Canadians in the US, who have reported for the most part as speaking English). For each of these 30 languages, for the 297 Metropolitan Statistical areas that were identified previously, the percent of the MSA's population, whether native or foreign born, speaking that language was computed. This value constitutes the language-group concentration measure for each respondent, speaking that same language in the MSA of current residence. For all the other languages, the percent is assumed to be zero since the number of speakers who speak those languages is so low. If a respondent reports speaking only English, he is assigned the mean value of the language concentration value for the most common language spoken by other speakers in his birthplace group (e.g., there are several different languages spoken by people from India. But the most common language spoken is Hindi. This person would be assigned the mean value of the concentration ratio for Hindi language speakers from India).

  9. We also used a bivariate probit estimation technique, which allows us to estimate jointly an explicit location choice model and the self-employment decision [Greene 2003]. We found evidence of joint determination, based on observed characteristics. But this selection could not fully explain networks effects.

References

  • Alba, R.D. 1990. Ethnic Identity: The Transformation of White America. New Haven: Yale University Press.

    Google Scholar 

  • Aldrich, H.E., J. Carter, T. Jones, D. McEvoy, and P. Velleman . 1985. Ethnic Residential Concentration and the Protected Market Hypothesis. Social Forces, 63 (4): 996–1009.

    Article  Google Scholar 

  • Aldrich, H.E., and R. Waldinger . 1990. Ethnicity and Entrepreneurship. Annual Review of Sociology, 16 (August): 111–135.

    Article  Google Scholar 

  • Bartel, A. 1989. Where Do the New U.S. Immigrants Live? Journal of Labor Economics, 7 (4): 371–391.

    Article  Google Scholar 

  • Bates, T. 1990. Entrepreneur Human Capital Inputs and Small Business Longevity. Review of Economics and Statistics, 72 (4): 551–559.

    Article  Google Scholar 

  • Bates, T. 1996. Why are Firms Owned by Asian Immigrants Lagging Behind Black-Owned Business? National Journal of Sociology, 10 (2): 27–43.

    Google Scholar 

  • Bertrand, M., E. Luttmer, and S. Mullainathan . 2000. Network Effects and Welfare Cultures. Quarterly Journal of Economics, 115 (3): 1019–1055.

    Article  Google Scholar 

  • Blanchflower, D.G. 2004. Self-Employment May Not Be Better. Swedish Economic Policy Review, 11 (2): 15–74.

    Google Scholar 

  • Bonacich, E., and J. Modell . 1980. The Economic Basis of Ethnic Solidarity in the Japanese American Community. Berkeley, CA: University of California Press.

    Google Scholar 

  • Bond, P., and R. Townsend . 1996. Formal and Informal Financing in a Chicago Neighborhood. Economic Perspectives, 20 (4): 3–27.

    Google Scholar 

  • Bonnett, A.W. 1981. Structured Adaptation of Black Migrants from the Caribbean: An Examination of an Indigenous Banking System in Brooklyn. Phylon, 42 (4): 346–355.

    Article  Google Scholar 

  • Borjas, G.J. 1986. The Self-employment Experience of Immigrants. Journal of Human Resources, 21 (4): 485–506.

    Article  Google Scholar 

  • Borjas, G.J. 1995. Ethnicity, Neighborhoods, and Human Capital Externalities. American Economic Review, 85 (3): 365–390.

    Google Scholar 

  • Borjas, G.J. 1998. To Ghetto or Not to Ghetto: Ethnicity and Residential Segregation. Journal of Urban Economics, 44 (2): 228–253.

    Article  Google Scholar 

  • Card, D., and E.G. Lewis . 2005. The Diffusion of Mexican Immigrants During the 1990s: Explanations and Implications. NBER Working Paper 11552.

  • Case, A.C., and L.F. Katz . 1991. The Company You Keep: The Effects of Family and Neighborhood on Disadvantaged youths, National Bureau of Economic Research, Working Paper, No. 3705 (May).

  • Chiswick, B., and P. Miller . 2002. Do Enclaves Matter in Immigrant Adjustment? Institute for the Study of Labor, Discussion Paper, No. 449 (March).

  • Clark, K., and S. Drinkwater . 2000. Pushed out or Pulled in? Self-employment Among Ethnic Minorities in England and Wales. Labor Economics, 7 (5): 603–628.

    Article  Google Scholar 

  • Evans, D., and B. Jovanovic . 1989. An Estimated Model of Entrepreneurial Choice under Liquidity Constraints. Journal of Political Economy, 97 (4): 808–827.

    Article  Google Scholar 

  • Evans, M.D.R. 1989. Immigrant Entrepreneurship: Effects of Ethnic Market Size and Isolated Labor Pool. American Sociological Review, 54 (6): 950–962.

    Article  Google Scholar 

  • Fairlie, R.W., and B.D. Meyer . 1996. Ethnic and Racial Self-employment Differences and Possible Explanations. Journal of Human Resources, 31 (4): 757–793.

    Article  Google Scholar 

  • Fairlie, R.W., and C.M. Woodruff . 2006. Mexican-American Entrepreneurship, Hudson Institute Research Paper No. 06-03. Available at SSRN: http://ssrn.com/abstract=907681.

  • Fratoe, F. 1988. Social Capital of Black Business Owners. The Review of Black Political Economy, 16 (4): 33–50.

    Article  Google Scholar 

  • Glaeser, E., B. Sacerdote, and J. Scheinkman . 1996. Crime and Social Interactions. Quarterly Journal of Economics, 111 (2): 507–548.

    Article  Google Scholar 

  • Granovetter, M.S. 1985. Economic Action and Social Structure: The Problem of Embeddedness. American Journal of Sociology, 91: 481–510.

    Article  Google Scholar 

  • Greene, W.H. 2003. Econometric Analysis, 5th Edition, Prentice-Hall, New Jersey.

    Google Scholar 

  • Jencks, C., and S.E. Mayer . 1990. The Social Consequences of Growing up in a Poor Neighborhood. In: Lynn, L.E. Jr & McGeary, M.G.H (Eds) Inner-City Poverty in the United States. Washington, D.C.: National Academy.

    Google Scholar 

  • Lazear, E. 1999. Culture and Language. Journal of Political Economy, 107 (6, part 2): S95–S126.

    Article  Google Scholar 

  • Light, I. 1972. Ethnic Enterprise in America: Business and Welfare among Chinese, Japanese, and Blacks. Berkeley, CA: University of California Press.

    Google Scholar 

  • Light, I. 1979. Disadvantaged Minorities in Self-employment. International Journal of Comparative Sociology, 20 (1–2): 31–45.

    Google Scholar 

  • Light, I. 1984. Immigrant and Ethnic Enterprise in North America. Ethnic and Racial Studies, 7 (2): 195–216.

    Article  Google Scholar 

  • Lofstrom, M. 2002. Labor Market Assimilation and the Self-Employment Decision of Immigrant Entrepreneurs. Journal of Population Economics, 15 (1): 83–114.

    Article  Google Scholar 

  • Lucas, R.E. 1978. On the Size Distribution of Business Firms. Bell Journal of Economics, 9 (2): 508–523.

    Article  Google Scholar 

  • Manski, C.F. 1993. Identification of Endogenous Social Effects: The Reflection Problem. The Review of Economic Studies, 60 (3): 531–542.

    Article  Google Scholar 

  • Manski, C.F. 2000. Economic Analysis of Social Interactions. Journal of Economic Perspectives, XIV: 115–137.

    Article  Google Scholar 

  • McManus, W.S. 1990. Labor Market Effects of Ethnic Enclaves: Hispanic Men in the United States. Journal of Human Resources, 25 (2): 228–252.

    Article  Google Scholar 

  • Min, P.G. 1988. Ethnic Business Enterprise: Korean Small Business in Atlanta. New York: Center for Migration Studies.

    Google Scholar 

  • Mora, M.T., and A. Davila . 2005. Ethnic Group Size, Linguistic Isolation, and Immigrant Entrepreneurship in the U.S. Entrepreneurship and Regional Development, 17: 389–404.

    Article  Google Scholar 

  • Munshi, K. 2003. Networks in the Modern Economy: Mexican Migrants in the U.S. Labor Market. Quarterly Journal of Economics, 118 (2): 549–599.

    Article  Google Scholar 

  • Olson, P.D., V.S. Zuiker, and C.P. Montalto . 1996. Self-Employment: A Viable Economic Alternative for the California Hispanic Population. Consumer Interests Annual, 42: 49–55.

    Google Scholar 

  • Perez, L. 1986. Immigrant Economic Adjustment and Family Organization: The Cuban Success Story Reexamined. International Migration Review, January, 31 (1): 4–20.

    Article  Google Scholar 

  • Raijman, R. 2001. Determinants of Entrepreneurial Intentions: Mexican Immigrants in Chicago. Journal of Socio-Economics, 30 (5): 393–411.

    Article  Google Scholar 

  • Sanders, J.M., and V. Nee . 1996. Social Capital, Human Capital, and Immigrant Self-employment. American Sociological Review, 61 (2): 231–249.

    Article  Google Scholar 

  • Topa, G. 2001. Social Interactions, Local Spillovers, and Unemployment. Review of Economic Studies, 68 (2): 261–295.

    Article  Google Scholar 

  • Toussaint-Comeau, M., R. Newberger, J. Schmidt, A. Rolnick, and R. Feldman . 2003. Credit Availability in the Minneapolis-St. Paul Hmong Community, Seeds of Growth-Sustainable Community Development: What Works, What doesn’t and why. A Federal Reserve System Community Affairs Research Conference, Proceeding, March: 27–28.

  • Van Auken, H.E., and L. Neeley . 1998. Evidence of Bootstrap Financing Among Small Start-up Firms. Journal of Entrepreneurial and Small Business Finance, 5 (3): 235–249.

    Google Scholar 

  • Wilson, K.L., and A. Portes . 1980. Immigrant Enclaves: An Analysis of the Labor Market Experiences of Cubans in Miami. American Journal of Sociology, 86 (2): 295–319.

    Article  Google Scholar 

  • Wilson, W.J. 1987. The Truly Disadvantaged: The Inner City, the Underclass, and Public Policy. Chicago: The University of Chicago Press.

    Google Scholar 

  • Wong, B. 1987. The Role of Ethnicity in Enclave Enterprises: A Study of the Chinese Garment Factories in New York City. Human Organization, 46 (2): 120–130.

    Article  Google Scholar 

  • Yoon, I.-J. 1991. The Changing Significance of Ethnic and Class Resources in Immigrant Business. International Migration Review, 5 (2): 303–331.

    Article  Google Scholar 

Download references

Acknowledgements

The views expressed are the author's and do not necessarily express those of the Federal Reserve Bank of Chicago or the Board of Governors of the Federal Reserve System. I thank Phil Doctor for valuable research assistance. I thank the three anonymous referees for insightful comments and suggestions.

Author information

Authors and Affiliations

  1. Federal Reserve Bank of Chicago, 230 S. LaSalle, Chicago, 60646, IL, USA

    Maude Toussaint-Comeau

Authors
  1. Maude Toussaint-Comeau
    View author publications

    You can also search for this author in PubMed Google Scholar

Rights and permissions

Reprints and permissions

About this article

Cite this article

Toussaint-Comeau, M. Ethnic Social Networks and Self-Employment of Immigrant Men in the US. Eastern Econ J 38, 74–98 (2012). https://doi.org/10.1057/eej.2010.52

Download citation

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1057/eej.2010.52

Keywords

JEL Classifications

Search

Navigation