Why Immigrants Make Great Entrepreneurs

They’ve often overcome a lot of hardships. A business setback is nothing.

Immigrants being interviewed at New York’s Ellis Island, circa 1940. PHOTO: GENERAL PHOTOGRAPHIC AGENCY/GETTY IMAGEs

Source: https://goo.gl/ExpqLJ

By Adrian FurnhamNov. 26, 2017 10:11 p.m. ET

Outsiders face a tough struggle fitting into a new culture. They must figure out how to deal with, and overcome, frustration, loneliness and a steep learning curve.

And that’s why immigrants make such great entrepreneurs—they’re once again outsiders facing many of the same kinds of obstacles. Been there, done that.

I’ve been studying immigrants for over a decade, trying to figure out what makes so many of them go into business for themselves in the West—at higher rates than natives do—and succeed, too. The Kauffman Foundation’s annual Index of Startup Activity shows that immigrants were almost twice as likely as native-born to start new businesses in the U.S. in 2016. Almost 30% of all new entrepreneurs were immigrants, Kauffman says. A report from the Partnership for a New American Economy found that in 2016, 40.2% of Fortune 500 firms had “at least one founder who either immigrated to the United States or was the child of immigrants.”

I’m not surprised. What I’ve found is that immigrants not only have the qualities that help any entrepreneurs succeed—including aggressiveness and creative thinking—but they get a big boost because many of the skills they picked up coping with a new world are transferable to the entrepreneurial world.

My research is based largely on many conversations with entrepreneurs. In addition, I teach at a university that attracts vast numbers of overseas students. And finally, I bring my own perspective to the research: I am a migrant who grew up in Africa.

One caveat: These are broad stereotypes. Obviously, not all immigrants are entrepreneurial role models. And clearly, plenty of natives are. But there are reasons why so many immigrants forge an entrepreneurial path. It is worth identifying the likely factors—both to help understand the immigrant experience and what they can bring to their new economies, as well as to better identify what makes anybody thrive as an entrepreneur.

Lands of opportunity: The vast majority of migrants (as opposed to refugees) move to improve the economic and educational status of themselves and their families. When they arrive, they are aggressive about taking advantage of the stable economic system and respect for law and order, things they often can’t count on back home. Natives are more likely to take those for granted and not push to make the most of opportunities.

I met three immigrant entrepreneurs recently who had become friends through business. They all said the same thing: They were amazed by the quality of free education, by the benefits of the infrastructure and most of all the lack of awareness by the natives of how lucky they were. As one said, “As long as you are prepared to work hard and take some risks, it is easy to succeed in this country.”

Rolling with punches: All entrepreneurs experience failure and rejection, but outsiders are often better prepared to not be devastated by hard times, because they have already faced harder times than most people can imagine. They’ve left behind friends, family and support networks. Then they enter an unfamiliar nation full of complex bureaucracy, discrimination and other hurdles. Having already faced hardship, immigrants look at business setbacks as less traumatic, leaving them less likely to buckle and break in the face of adversity.

I have met a few entrepreneurs, for instance, who were thrown out of Uganda by Idi Amin. They arrived in cold, indifferent Britain with what they could carry—and used the strength they gained from that disruption to persist in hard times. Coping with difficulties made me, says one of those immigrants, now in charge of a successful business.

They had no capital, and no experience of British law and customs. One, who ran a number of bakeries in Africa, said he had to get a menial job in a local bakery to learn British tastes and preferences. The locals didn’t like bread and cakes as sweet as he expected, and freshness was all important. But he was fine with the setback. He adapted his recipes, started a small bakery and now owns a large chain.

Watching social cues. Because outsiders fear making a faux pas in a new world, they become adept at picking up cues that signal mistrust and misunderstanding. Similarly, they become good at reading people, and noticing the relationships between groups they do business with. That potentially makes them more shrewd and more perceptive in situations such as negotiations or sales pitches.

One entrepreneur told me that he was astonished that everything in markets and shops was openly priced. He came from a culture where everything was negotiated—in his words, the difference between the mall and the bazaar, where people must learn to haggle, charm and persuade. People in his home country needed to observe customers closely to figure out how rich they were, whether they were serious, and whether they knew how to play the game. He believed that skill had served him well when negotiating deals in his adopted country.

A different network: In some sense, immigrants don’t have the array of local networks that natives do. But they often can substitute that broad network with a much deeper network: co-nationals. These earlier migrants are in many ways more supportive of their entrepreneurial successors than the networks that are available to native entrepreneurs. The earlier migrants offer financial support—including loans and discounts on products and services—as well as insights about local practices and people. Networking with this support group gives new immigrants a relatively safe environment to build interpersonal skills as well as learn crucial skills they need.

It also offers them a way to simply survive difficult times, giving them breathing room to become entrepreneurs. Often a whole family shares a large, run down, cold and damp house with three other large families in the same position. They share everything and learn from one another.

Seeing with fresh eyes: Because immigrants learn about their new home culture, and its rules of language and etiquette, from the outside, they often have perspectives that natives don’t have. They see possibilities and opportunities that natives don’t see, and find new ways to be creative. They bring new flavors, musical sounds, cultural tastes to their new land. They also bring new ideas about selling, managing, customer service, technology and more. Confronting a problem with a fresh perspective is a huge advantage. Immigrants come by that naturally.

Dr. Furnham is a professor of psychology at University College London. Email reports@wsj.com.

Appeared in the November 27, 2017, print edition as 'Why Immigrants Make Such Good Entrepreneurs.'