Impact of embeddedness in ethnic networks on business growth : evidence from Chinese immigrant entrepreneurs in Australia

Immigrant entrepreneurship, or, self-employment by immigrants (Light & Bonacich, 1988), has been of growing interest to researchers (Hosler, 1996). This is due in part to major immigrant receiving countries, such as Australia, the United States, Canada, the United Kingdom and Western Europe, experiencing a high growth rate in their immigrant populations, leading to a more visible presence of immigrant business in major cities (Woon, 2008). By starting their own businesses, immigrant entrepreneurs may circumvent some of the barriers and disadvantages encountered in looking for a job (Sequeira & Rasheed, 2006). Successful immigrant entrepreneurs will integrate into the economy by creating jobs, providing products and services for members of their own ethnic community and society, as well as introducing new products and services that expand consumers’ choices (Rath & Kloosterman, 2000). Immigrant entrepreneurs tend to start business within their ethnic enclave, as it is an integral part of their social and cultural context and the location where ethnic resources reside (Logan et al., 2002). An ethnic enclave is an interdependent network of social and business relationships that are geographically concentrated with its co-ethnic people (Portes & Bach, 1985).

The role of the ethnic enclave in facilitating immigrant business performance and social integration

Chinese immigrant entrepreneurs, known the world over for their successful business practices (Kee, 1994), tend to start businesses within their ethnic enclave. But in a move away from multiculturalism, host countries increasingly fear that immigration and asylum pose a threat to social integration resulting in a lack of social cohesion and a plethora of government programs (Cheong, Edwards, Goulbourne & Solomos, 2007). For many immigrant entrepreneurs, the EE is an integral part of their social and cultural context and the location where ethnic resources reside (Logan, Alba & Stults, 2003). Immigrant entrepreneurs can harness the networks for labor and customers through various ties in their EE (Portes and Zhou, 1996). Yang, Ho and Chang (2010) illustrate in their paper that the Chinese immigrant entrepreneurs (IE) were able to utilize ethnic network resources as their social capital in order to reduce transaction costs and thus enhance business performance. Tilly (1990) explains that immigrants’ reliance on such networks for business or other information minimizes the socioeconomic hardships they would experience in host countries (Raijman & Tienda, 2000). Acquiring jobs in ethnic businesses and establishing businesses within an EE may facilitate migrants’ social integration into the host country (Tian & Shan, 1999). Although an EE has distinct economic advantages for immigrant entrepreneurs, Sequeira and Rasheed (2006: 367) argue that ‘Exclusive reliance on strong ties within the immigrant enclave has a negative effect on growth outside the enclave community.’ Similarly, Drori, Honig and Ginsberg (2010: 20) also propose that ‘The greater the reliance of transnational entrepreneurs on ethnic (versus societal) embedded resources and network structure, the narrower their possibilities of expanding the scope of their business.’ This research asks, ‘What is the role of the ethnic enclave in facilitating immigrant business growth and social integration? This project has the following important aims: A1 To better understand the role of IE, in particular Chinese IE in the Australian economy A2 To investigate the role of the EE in facilitating or inhibiting immigrant business performance A3 To understand how locating their firm inside or outside of the EE will affect the IE’s embeddedness in co-ethnic and nonco-ethnic networks and social integration A4 To understand how an IE’s social network affects business performance and social integration