NEW RESEARCH | How highly educated immigrants succeed in entrepreneurship

Social ties play an important role in helping immigrant higher education graduates start and develop businesses. Researchers at Stockholm University have studied the strategies used by this group of entrepreneurs to succeed in entrepreneurship.

There is a lot of research on immigrants who are so-called ‘necessity entrepreneurs’, who face such major obstacles in the Swedish labor market that the only way to make a living is to start a business. Most are active in labor-intensive and low-productivity sectors such as trade, services and distribution. Less is known about highly skilled non-European immigrant entrepreneurs in knowledge-intensive sectors. In her doctoral thesis, Reema Akhtar studied the group, which includes companies in energy and environment, information and communication, finance and insurance, education systems, health care, social services and civil authorities.

– I have looked in particular at how the business idea came about, and the importance of social ties, education and previous work experience in the process,” says Reema Akhtar, that recently defended her doctoral thesis at Stockholm University.

The role of social ties

The relationships we have with family, friends and individuals from the same country of origin are known as strong social ties. Relationships of a more professional nature, such as people entrepreneurs meet in work-related contexts, are referred to as weak social ties. The study shows that both ties are important for the entrepreneurship process, especially for bridging social distances.

– Initially, to learn more about Sweden and establish themselves in the start-up world, immigrant entrepreneurs mainly use weak ties. They acquire knowledge and resources through experts, mentors or potential customers,” says Reema Akhtar.

Not involving the family in business

Well-educated immigrant entrepreneurs in knowledge-intensive industries avoid involving the strong ties in business matters. They do not want to risk losing control of the business and destroying important relationships. However, strong ties are important for emotional support and motivation.

– Parents, partners and friends have encouraged individuals to invest in their business idea and helped shape it. And they have been an important part of the decision to start a business.

But running businesses in contexts with people from the same country of origin limits the potential for growth, according to Reema Akhtar’s thesis. The context keeps the entrepreneurs in a bubble, avoiding too close contact with the group.

– They are keen to meet different ethnicities, learn more about their host country and gain different perspectives,” says Reema Akhtar.

Human capital affects entrepreneurship

Social ties are thus an important source of new knowledge and business. But the study also shows that ties are affected by previous work and education.

– Human capital plays a major role in determining which customers and business partners you acquire. And well-educated immigrant entrepreneurs have no problem reaching out to weak social ties. They are strategic about the people they contact and spend time with.

– All three factors thus play a role in how they evaluate the legitimacy, credibility and feasibility of the business idea. But also helps them to believe in their own abilities and to make informed judgments and investments,” says Reema Akhtar.

Based on the results of your research, what messages do you have for actors in the entrepreneurial ecosystem?

– Incubators, start-up events and coworking spaces can be made more inclusive to meet the needs of this group of entrepreneurs. This is likely to not only attract more people to start businesses, but also ensure that they do not stop.

– But it is also important that actors in smaller municipalities invest in highly skilled immigrant entrepreneurs in knowledge-intensive sectors, so they start innovative businesses instead of ending up in labor-intensive sectors that do not contribute to the economy of these regions,” says Reema Akhtar.

Contact r.akhtar26@gmail.com

More about the thesis
Reema Akhtar recently defended her dissertation at Stockholm University with the thesis What if your world is outside the oyster?: How highly educated and skilled first-generation immigrant entrepreneurs develop opportunities in knowledge-intensive sectors?.

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