Formal sources of finance boost innovation: Do immigrants benefit as much as natives?

Abstract

Objective: The article investigates the relative benefit of formality/informality of finance sources for innovation and compares this benefit amongst immigrant and native entrepreneurs. The authors investigate whether formal finance (here, bank loan) benefit innovation more than informal sources (personal savings and friend/family loan). Then, they explore whether an entrepreneur‘s status strengthens or weakens the benefit finance sources for innovation.

Research Design & Methods: This study applies a quantitative approach to conduct the research. The data of 15,850 entrepreneurs surveyed by Global Entrepreneurship Monitor in 2015 were analysed using the hierarchical linear modelling (HLM) technique.

Findings: Results indicated that formal finance benefits innovation more than informal sources, and this advantage is the same for both immigrant and native entrepreneurs.

Implications & Recommendations: Despite the prevalence of some stereotypes regarding the simplistic and repetitive nature of immigrants ‘ businesses, the study recommends that financial institutions and policymakers plan to enhance entrepreneurs ‘ access to formal financial resources irrespective of their migrant status. Policymakers also can plan to increase the immigrant entrepreneurs ‘ access to the formal sources of finance by tailored educations to boost innovation.

Contribution & Value Added: The results highlight that immigrant entrepreneurs benefit from formal finance towards innovation similarly to their native counterparts. Such a clarification informs the studies on the liability of foreignness and innovation finance that immigration status cannot be a barrier to innovation as portrayed and conceptualized by some studies.

Keywords

immigrant entrepreneurs, native entrepreneurs, entrepreneurial financing, innovation, liability of foreignness

Author Biography

Shayegheh Ashourizadeh

Assistant Professor at Wageningen University and Research (Netherlands). Her research interests include nascent entrepreneurship and institutions.

Mehrzad Saeedikiya

HDR Scholar at the Centre for Future Enterprise, Queensland University of Technology, Australia. His research interests include entrepreneurship and innovation using an institutional perspective.

Zeynab Aeeni

Assistant Professor at University of Kurdistan. Her research interests include entrepreneurship and innovation using an institutional perspective.

Serdar Temiz

Associate Professor at Uppsala University. His research interests include entrepreneurship and open innovation.

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