Networks and self-employed migrants

Abstract

This paper examines the immigrant’s decision to become self-employed. Personal characteristics and attitudes are crucial to this decision, but recent literature also highlights the importance of social networks as providers of information and financial support. To date, empirical research dealing with the network effect has considered self-employed migrants as a homogeneous group. In contrast, our paper examines the impact of the size and the composition of geographic concentration of co-nationals on the propensity to be self-employed among the foreign-born workers taking into account two possible choices: own-account workers and entrepreneurs. Using micro-level data of migrant workers in Spain over the period 2000–2009, the results show that networks affect positively the probability of becoming self-employed. However, they do not affect the likelihood of becoming an entrepreneur, which is determined by individual characteristics such as education and number of years of residence. Thus, our results suggest policies that enable immigrant assimilation can play a significant role in generating entrepreneurial activity.