What makes migrants more entrepreneurial? Investigating the role of cultural distance and human capital

Migrant entrepreneurship is seen as an important way to foster economic prosperity as migrants often come with greater entrepreneurial potential than their native counter parts. However, migrant populations are to a wide extent heterogenous and there are significant differences across migrant groups in terms of their entrepreneurial activity. This study is guided by the question of how culture and more precisely cultural distance affects the entrepreneurial activity of migrants. To understand the implications of cultural distance for migrant entrepreneurial activity we use Ardichvili et al.’s model of opportunity identification and development and hypothesize a negative relationship between cultural distance and entrepreneurial activity. To empirically investigate our hypotheses, we analyse cultural distance and self-employment rates of 39 migrant groups in Germany, a country that hosts the second-largest migrant stock in the world. We combine individual-level census data from the German Federal Statistical Office with country-level data on national culture from the GLOBE study and the World Values Survey and run multivariate regressions analyses. We find that cultural distance has a significant and negative effect on migrant’s self-employment. This effect is however positively moderated by the prevalence of human capital across migrant groups. Our findings highlight the importance of education-based migration and entrepreneurship policies targeted towards migrant groups with high cultural distance. We derive implications for research and policy.