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DOI: 10.1177/0971355713513352
2014 23: 35 Journal of Entrepreneurship
Nahikari Irastorza and Iaki Pea
Earnings of Immigrants: Does Entrepreneurship Matter?

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Editors Introduction 35
Article
Earnings of Immigrants:
Does Entrepreneurship
Matter?
Nahikari Irastorza
Iaki Pea
Abstract
The economic integration of immigrants has become a challenging topic
in the European political agenda. This is especially true for countries
that are struggling to survive the economic recession which started in
2008. In this context, entrepreneurship emerges as an alternative to
unemployment. While the self-employment propensity of immigrants
is well documented, little is known about the performance of these
ventures. This article contributes to the literature by comparing and
explaining the differential earnings of self-employed versus salaried
immigrants in Spain. A binary logistic regression is applied to explore
data collected by the Global Entrepreneurship Monitor project for 2005
and 2006. Our findings show that self-employed immigrants income
exceeds that of salaried workers. Human capital and location-related
environmental variables were found to be the best predictors of both
self-employed and salaried immigrants earnings.
Keywords
immigrants, entrepreneurship, labour market, earnings
The intensification of migration flows and the emergence of a transna-
tional economy have led to a growth in immigrant business activity. As a
result, the entrepreneurial activity of immigrants is gaining the attention
The Journal of Entrepreneurship
23(1) 3556
2014 Entrepreneurship
Development Institute of India
SAGE Publications
Los Angeles, London,
New Delhi, Singapore,
Washington DC
DOI: 10.1177/0971355713513352
http://joe.sagepub.com
Nahikari Irastorza is Marie Curie research fellow at the MIM, Malm
University, Malm, Sweden.
Iaki Pea is Director, Entrepreneurship Department, Basque Institute of
Competitiveness, Donostia-San Sebastian, Spain.
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36 Nahikari Irastorza and Iaki Pea
The Journal of Entrepreneurship, 23, 1 (2014): 3556
of an increasing number of scholars. Recent findings show that immi-
grants are more prone to become entrepreneurs than natives
(Hammarstedt, 2001; Irastorza, 2010; Levie, 2007; Schuetze, 2005). The
greater entrepreneurial propensity of immigrants has been explained
from different perspectives. On the one hand, the immigrants decision to
create firms has been linked to their decision to migrate. In both cases,
individuals seek self-realisation while they face an uncertain future, and
they take risks by giving up their status in their country of origin or by
starting up a firm. Thus, immigrants as risk takers are expected to be
more prone to entrepreneurship than natives (Constant, Schachmurove
& Zimmermann, 2003). On the other hand, the disadvantage hypothesis
states that entrepreneurship emerges as an alternative to unemploy-
ment and a mechanism to overcome difficult labour market barriers for
many foreigners (Light, 1979). Furthermore, it has been argued that
entrepreneurial activities become an avenue for the socio-economic
advancement of the disadvantaged (Bauder, 2005; Constant et al., 2003).
While the self-employment propensity of immigrants is well
documented, little is known about what happens to ventures started up
by them. Are earnings derived from the new ventures large enough to
compensate for the opportunity cost of being self-employed? There
seems to be a consensus among scholars that opportunity cost of
becoming entrepreneurs is lower for immigrants than for natives due to
the barriers which prevent immigrants from accessing the local labour
market. Yet, the immigrant entrepreneurship literature is not conclusive
with regard to the potential greater earnings of self-employed immigrants.
While some researchers claim that earnings from self-employment
exceed salaries (Borjas, 1986; Light, 1984), others suggest the opposite
(Hammarstedt, 2001; Hjerm, 2004).
We aim to contribute to the extant debate by analysing the factors
explaining the earnings of self-employed versus salaried immigrants in
Spain. The socio-economic advancement hypothesis suggested by
Constant et al. (2003) will be tested by examining the effect of entrepre-
neurship on the earnings of immigrants. Constant et al. (2003) go beyond
the disadvantage hypothesis when they state that entrepreneurship can be
considered as an avenue for immigrants upward mobility in the host
country. Specifically, we address two research questions: (i) Is there any
significant difference between the earnings of self-employed and sala-
ried immigrants? (ii) Are the explanatory factors for earnings similar for
self-employed and salaried immigrants?
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Earnings of Immigrants: Does Entrepreneurship Matter? 37
The Journal of Entrepreneurship, 23, 1 (2014): 3556
We draw on human capital and spatial economic theories to provide
an overview of the literature on self-employment and the earnings of
immigrants. After describing the methodology and the research design
applied in the study, we discuss our key findings. Finally, we present our
main conclusions and some policy implications.
Self-employment and the Earnings of Immigrants
Entrepreneurship is often conceived as an alternative to overcome the
substantial labour market barriers faced by immigrants due to their lia-
bility of foreignness (that is, additional barriers, such as, poor language
skills, lack of work experience and human capital attributes required in
the host country, as well as discrimination). Nevertheless, the effective-
ness of self-employment as a means to facilitate immigrants economic
integration is controversial. Whereas some empirical studies show a
positive relationship between self-employment and the earnings of
immigrants, other authors remain skeptical. Studies carried out in
Germany and the US show that the earnings of self-employed immi-
grants are greater than those of salaried immigrants (Borjas, 1986;
Constant et al., 2003). In contrast, empirical studies carried out in
Sweden point to the opposite (Hammarstedt, 2001; Hjerm, 2004).
We believe that differences in the welfare state system and the attitude
towards discrimination across countries may influence the earnings of
self-employed and salaried immigrants. This study was conducted in
Spain, where salaried immigrants often work in worse conditions
than natives. The cited additional difficulties faced by immigrants
in a foreign country slow down their incorporation into the labour
market. Considering these trends, we expect self-employment to improve
immigrants earnings.
Furthermore, we believe that earning differences may depend on the
motivation of individuals to start up firms. Empirical studies suggest that
motivation influences business survival and growth, opportunity-
driven entrepreneurs being more likely to achieve business success
than necessity-driven entrepreneurs (Arias, Carvajal & Pea, 2004). This
is often explained by the greater opportunity cost usually faced by
opportunity-driven entrepreneurs who fetch greater earnings.
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38 Nahikari Irastorza and Iaki Pea
The Journal of Entrepreneurship, 23, 1 (2014): 3556
Hypothesis 1a: Self-employed immigrants are likely to earn more than
salaried immigrants.
Hypothesis 1b: Opportunity-driven immigrant entrepreneurs are likely
to earn more than their necessity-driven counterparts.
The literature on immigrant entrepreneurship has analysed human
capital, socio-demographic, cultural and industry sector related factors,
and environmental factors as predictors of entrepreneurial earnings. We
believe that these factors can be grouped according to the taxonomy
suggested by Bearse (1982) and Wagner and Sternberg (2004) to
analyse the determinants of firm creation. We thus differentiate two
major sets of factors to compare self-employed and salaried immigrants
earnings: individual-related and context-related factors. We consider
human capital endowment and socio-demographic characteristics as
individual-related factors, and industry sector and location variables
as context-related factors in the host society.
Individual-related Factors
Conventional wisdom suggests that human capital attributes influence
the economic performance of individuals. A high level of education,
work experience, the number of years in the host country and good host-
language proficiency are human capital factors that increase the odds of
high earnings for both self-employed and salaried immigrants. While
some authors found a positive relationship between high qualifications
and high earnings among entrepreneur and non-entrepreneur immi-
grants (Clark & Drinkwater, 1998; Dvila & Mora, 2004; Hjerm, 2004),
others did not find education to be significant (Constant et al., 2003;
Hammarstedt, 2004). Older individuals are expected to accumulate
knowledge, valuable experience and the financial means to launch new
ventures. The literature on entrepreneurship shows that older entrepre-
neurs perform better than their counterparts (Constant & Zimmerman,
2004; Cooper, Dunkelberg & Woo 1989; Stuart & Abetti, 1990). Both
self-employed and salaried immigrants are expected to obtain a higher
income level as they accumulate experience. With rare exceptions,
experience correlates positively with age.
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Earnings of Immigrants: Does Entrepreneurship Matter? 39
The Journal of Entrepreneurship, 23, 1 (2014): 3556
Socio-demographic factors, such as, gender, marital status and place
of birth, are also found to be predictors of earnings derived from entre-
preneurial activities and salaries of immigrants. The place of origin of
immigrants and the ethnicity of non-migrant ethnic groups have been
related to their earnings. As shown by Hammarstedt (2001), the profile
of immigrants coming from one specific country may differ depending
on the time period at which immigrants leave their country. Similarly, the
profile of immigrants varies across countries for the same period of
time. Moreover, several empirical studies show intergroup differences
between salaried immigrants earnings and immigrant entrepreneurs
(Borjas, 1986; Butler & Herring, 1991; Hammarstedt, 2001; Hjerm,
2004). Although no unique pattern explains the income distribution of
different ethnic groups, these studies suggest that immigrants from
socio-economically advanced countries earn more than those from socio-
economically less advanced countries. In this case, immigrants from
North America and Europe who have a satisfactory level of living
standard in their own countries are expected to maintain or improve on
their income levels when they move to Spain. Additionally, we believe
that North Americans and Europeans are both culturally and institution-
ally closer to one another than to Asians or Africans, and we expect that
these immigrants increased familiarity with the host system will also
translate into better economic performance.
Hypothesis 2a: Factors enriching the human capital of individuals (that
is, education and experience) are positively associated with immigrants
earnings.
Hypothesis 2b: Immigrants from socio-economically advanced regions
are likely to earn more than immigrants from less advanced countries.
Context-related Factors
Wages vary across industry sectors and regions in Spain. Similarly,
entrepreneurs earnings are expected to differ depending on the type of
business activity and the location of the venture. Hence, we must take
into account the effect of the context on the income level of both immi-
grant entrepreneurs and others. Context-related factors selected for our
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40 Nahikari Irastorza and Iaki Pea
The Journal of Entrepreneurship, 23, 1 (2014): 3556
analysis relate to the industry sector, the location of companies and the
macroeconomic characteristics of each Spanish region.
Constant and Zimmerman (2004) found that working in the construc-
tion and banking sectors has a positive effect on the income of both
immigrant entrepreneurs and salaried immigrants. Clark and Drinkwater
(1998) also found that operating in the construction sector increases the
income of the self-employed. In addition, the Salary-structure survey
carried out by the Spanish Statistical Institute reports that the mean
income for both native Spanish and immigrants in manufacturing is
greater than that in other industry sectors (Instituto Nacional de
Estadstica, 2002). Accordingly, we expect that industry sectors will
influence the earnings of immigrants, with those who work in manufac-
turing and construction (that is, transforming industries) being at an
advantage. Due to data limitations, this variable will be tested only for
self-employed immigrants.
Firm location may also influence the earnings of both self-employed
and salaried immigrants. Immigrant entrepreneurs often prefer to start
up their firms in metropolitan areas due to the high density of the
populationwhich should guarantee a greater demand for goods and
servicesand the agglomeration economies arising in a concentrated
location. The literature on immigrant entrepreneurship shows that
foreign-owned firms located in metropolitan areas perform better than
those located in rural areas (Hammarstedt, 2004; Razin, 1999). Razin
(1999) explains this state of affairs by arguing that immigrants concen-
trate in metropolitan areas, where the opportunity for the formation of
ethnic niches is greater. The self-employed who work in these niches,
where the demand for goods is greater, obtain greater earnings than do
co-ethnics outside the niche areas. Other empirical studies (Clark &
Drinkwater, 1998; Constant & Zimmerman, 2004) show that unemploy-
ment influences the income of both self-employed and salaried workers.
We believe that the regional GDP per capita may also work as a good
predictor of the earnings of self-employed and salaried immigrants: it is
reasonable to assume that immigrants who live in regions where the
GDP per capita is above average will be more likely to earn more, ceteris
paribus. In addition, we expect that living in urban areas will have a posi-
tive influence on the earnings of immigrants due to the greater demand
and the greater number of employment opportunities therein.
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Earnings of Immigrants: Does Entrepreneurship Matter? 41
The Journal of Entrepreneurship, 23, 1 (2014): 3556
Hypothesis 3a: Self-employed immigrants operating in transforming
industry sectors are likely to earn more than their counterparts.
Hypothesis 3b: Immigrants working in wealthier regions and in metro-
politan areas are likely to earn more than their counterparts.
Method
Regional data from the Global Entrepreneurship Monitor (GEM) project
were used to conduct the empirical tests. More than 40 countries cur-
rently participate in the GEM project. The data used in this study were
collected for 17 Spanish regions in 2005 and 2006. Of the 47,000 indi-
viduals interviewed in the survey, 2,100 were immigrants who lived in
Spain. Of the latter, 20 per cent were self-employed, 51 per cent were
salaried and the remainder were unemployed.
According to the Annual Immigration Report 2006 published by the
Spanish government, 8 per cent of foreigners are self-employed and 56 per
cent are salaried. While the proportion of salaried immigrants is similar to
that of the GEM project, the percentage of self-employed immigrants of
the GEM data is twice as large as that of the official Spanish data. Here we
have to bear in mind that the variable immigrant in GEM is built upon the
question In which country were you born?, and, thus, all the respondents
born abroad are codified as immigrants. In the official Spanish statistics, on
the other hand, the variable foreigner refers to nationality and distinguishes
between Spaniards and foreigners; hence, immigrants with Spanish
citizenship would be classified as Spaniards. Since the acquisition of
knowledge and experience necessary to start up a business requires time,
as does the acquisition of citizenship, it is likely that many self-employed
immigrants are already Spanish citizens and reported as Spaniards in the
government data. We believe that this could in part explain the discrepancy
between official Spanish data and data collected by GEM with regard to
self-employed immigrants. Leaving aside this observation, we believe that
we obtained a representative sample of immigrants living in Spain.
In order to compare the earnings of self-employed and salaried
immigrants, we use a dependent dummy variable, HighIncome, which
represents the distribution of the monthly earnings of immigrants. This
variable was created by recoding an initial variable, Monthly Rents, built
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42 Nahikari Irastorza and Iaki Pea
The Journal of Entrepreneurship, 23, 1 (2014): 3556
upon self-reported answers to a question on the monthly income level fall-
ing into one of the five categories (<600 ; 6001,200 ; 1,2001,800 ;
1,8002,400 ; and >2,400 ). The new variable distinguishes between
two income categories: a value of 0 is given to earnings situated between
0 and 1,200 (below average) and a value of 1 is given to earnings
greater than 1,200 (above average). We selected this cutting point
because, according to the latest Salary-structure survey carried out by
the Spanish Statistical Institute, the Spanish monthly net salary was
1,213.18 in 2006, when our data was collected (Instituto Nacional de
Estadstica, 2008). Thus, this dichotomic variable distinguishes between
immigrants with above-average and below-average earnings.
The independent variables used to predict the income distribution of
self-employed and salaried immigrants correspond to the theoretical
framework discussed in the literature and include both individual-related
and context-related factors. Some independent variables were coded as
binary: human capital and socio-economic variables of the individual,
such as, College (where a value of 1 is equal to a college education),
Gender (1 for male) and Self-employed (a value of 1 for self-employed)
as shown in Table 2.
Based on the GNI per capita, the World Bank classifies countries into
four groups: low-income, low-middle income, upper-middle income and
Table 1. Characteristics of the Sample
Descriptive Statistics
Self-employed
Immigrants Salaried Immigrants
Variable Mean
Standard
deviation Mean
Standard
deviation
Initial age 42.62 11.41 42.43 13.02
RegGDPcap04 12,252.31 1,786.29 12,834.52 1,938.86
Characteristics of the Sample
Self-employed
Immigrants Salaried Immigrants
Educational level N % N %
College level 203 48 486 45.2
Lower level 220 52 589 54.8
Total 423 100 1,075 100
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Earnings of Immigrants: Does Entrepreneurship Matter? 43
The Journal of Entrepreneurship, 23, 1 (2014): 3556
Gender N % N %
Male 208 49.2 485 45.1
Female 215 50.8 590 54.9
Total 423 100 1,075 100
Origin N % N %
African 26 6.1 56 5.2
Asian 18 4.3 20 1.9
European 111 26.2 285 26.5
North American 18 4.3 16 1.5
South American 250 59.1 698 64.9
Total 423 100 1,075 100
Strat-up motivation N % N %
Opportunity 96 84.5
Necessity 197 15.5
Total 233 100
Industry sector N % N %
Extractive 7 1.7
Transforming 55 13
Business services 48 11.3
Consumer oriented 92 21.7
Others 221 52.3
Total 423 100
Location N % N %
Rural 177 41.8 591 55
Urban 246 58.2 484 45
Total 423 100 1,075 100
Source: GEM Spain 2005 and 2006.
Characteristics of the Sample
Self-employed
Immigrants Salaried Immigrants
high-income countries. According to data for 2003, North America,
Europe (with the exception of a few Eastern countries which belong to
the lower-middle income) and Oceania belong to the latter two groups
(The World Bank Group, 2006). Due to data limitations, we selected the
variable continent to describe the origin of immigrants. Thus, the place
of origin of immigrants is described as follows: African, European,
North American and South American, for which a value of 1 is assigned
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44 Nahikari Irastorza and Iaki Pea
The Journal of Entrepreneurship, 23, 1 (2014): 3556
to people who were born in each of the respective world regions. Asian
immigrants are left as the base case. Since the Oceanian group is not
large enough to be introduced in the analysis, socio-economically
advanced countries of our database will be represented by the variables
North American and European. Finally, the quantitative variable age
stands for the exact age of respondents.
In our analysis context-related variables represent industry sectors
and location. Industry sectors are Extractive, Transforming, Business
and Consumer, for each of which 1 represents people working in the
cited industries. The variable Urban takes the value of 1 when respondents
live in areas with more than 5,000 inhabitants. Data on the 17 regions of
Spain were provided by the Spanish Statistical Institute: the variable
RegGDPcap04 represents the GDP per capita of each Spanish region in
2004 as shown in Table 2.
Table 1 shows the descriptive statistics and characteristics of the
two samples. The most significant differences among these groups are
the following: The percentage of female individuals and that with col-
lege education is higher among self-employed immigrants than among
the salaried. The presence of Asian and North American people is
more important among the self-employed, whereas salaried workers are
more abundant among South Americans. Finally, the self-employed
concentrate more in urban areas and in regions where the per capita rent
is slightly lower than the salaried do. The majority of immigrants start up
because they detect a good business opportunity and operate mainly in
consumer-oriented and business services.
Two statistical methods were applied to answer our research ques-
tions. First, we selected a sample involving the whole population of
immigrants and applied a Chi-square test in order to find whether being
self-employed is significantly correlated with immigrants income
(research question #1). A preliminary test showed that there were signifi-
cant differences between the earnings of self-employed versus salaried
immigrants. Second, we split the initial sample into two sub-samples
(self-employed and salaried immigrants), and ran a binary logistic
regression analysis on both in order to compare the earning-determinants
for self-employed and salaried immigrants (research question #2). The
binary logistic regression method estimates the probability of an event
happening, in this case, the probability of immigrant earnings being
above average. Correlation analyses are shown in Table 3.
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Earnings of Immigrants: Does Entrepreneurship Matter? 49
The Journal of Entrepreneurship, 23, 1 (2014): 3556
Findings
The Chi-square test indicates that there are significant differences in the
income distribution between entrepreneurial and salaried immigrants
(research question #1). The income distribution of self-employed and
salaried immigrants is shown in Table 4, where the percentage of self-
employed immigrants is slightly superior for the highest income levels
(that is, 30.7 per cent of self-employed immigrants earn more than
1,800 per month, while only 25.9 per cent of salaried immigrants do).
This finding confirms Hypothesis 1a and supports previous findings by
Borjas (1986), Butler and Herring (1991) and Constant et al. (2003).
Next, we aimed to identify and compare the factors influencing
the earnings of self-employed and salaried immigrants. The results of the
binomial logistic regression analysis show that the factors explaining
the earnings of self-employed and salaried immigrants are quite similar.
Nevertheless, a few differences pertaining to the location and the human
capital endowments of immigrants should be noted.
The effect of individual- and context-related factors on the probabil-
ity of greater immigrants earnings is tested in model 1, as shown in
Table 5. Having a college education was found to have a positive effect
on the earnings of self-employed and salaried immigrants, whereas age
was not a significant factor. Better educated individuals are supposed
to have more skills to run a business, which in turn should have a
positive influence on their incomes. This finding partially confirms
Hypothesis 2a for both self-employed and salaried immigrants and
Table 4. Chi-square Test for Self-employment by Income, All Immigrants
Work Type
Salaried Self-employed
M
o
n
t
h
l
y

i
n
c
o
m
e
< de 600 47 (5.8%) 26 (7.7%)
6001,200 269 (33.4%) 105 (31.0%)
1,2001,800 281 (34.9%) 104 (30.7%)
1,8002,400 109 (13.5%) 67 (19.8%)
> de 2,400 100 (12.4%) 37 (10.9%)
Total 806 (100%) 339 (100%)
x = 9.41 with p value = 0.05
Source: GEM Spain 2005 and 2006.
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50 Nahikari Irastorza and Iaki Pea
The Journal of Entrepreneurship, 23, 1 (2014): 3556
Table 5. Binomial Logistic Regression Analysis
Self-employed
Immigrants
Salaried
Immigrants
Model 1 Model 2 Model 3 Model 4 Model 1 Model 2
B B B B B B
Individual-
related
factors
Human capital
variables
College 1.53() 1.42 1.51() 1.48() 0.86() 0.22
Afr*College 3.20(**) 0.17
Eu*College 3.20() 0.74
NA*College 21.37 1.63
SA*College 3.30() 0.67
Age 0.02 0.03 0.03 0.02 0.00 0.02
Afr*Age 0.01 0.02
Eu*Age 0.02 0.02
NA*Age 0.01 0.01
SA*Age 0.01 0.02
Socio-
demographic
variables
Gender 0.58 0.61(*) 0.60(*) 0.24 0.00 1.63
Afr*Gender 19.99 1.08
Eu*Gender 0.42 1.68
NA*Gender 0.17 2.74
SA*Gender 0.33 1.69
African 0.23 0.44
European 1.03 0.57
NAmerican 0.46 0.20
SAmerican 0.65 0.41
Motivation
TEAmotive 1.36() 1.48() 1.39(**) 1.19(**)
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Earnings of Immigrants: Does Entrepreneurship Matter? 51
The Journal of Entrepreneurship, 23, 1 (2014): 3556
Self-employed
Immigrants
Salaried
Immigrants
Model 1 Model 2 Model 3 Model 4 Model 1 Model 2
B B B B B B
Context-
related
factors
Industry
sector-
related context
Extractive 0.43 0.40 0.48 0.39
Transforming 0.50 0.53 0.50 0.49
Business
services
0.07 0.07 0.05 0.01
Consumer
oriented
0.26 0.18 0.31 0.21
Environment-
related context
Urban 0.69(*) 0.78(**) 0.69(*) 0.64(*) 0.30(**) 0.31(**)
RegGDPcap04 0.00() 0.01() 0.01() 0.01() 0.00(**) 0.01(**)
Constant 5.35() 6.697 6.12() 5.41() 1.58(**) 1.15
N 188 188 188 188 806 806
Chi
2
38.67() 48.71() 38.78() 37.52() 48.54() 55.03()
R Nagelkerke 0.25 0.31 0.25 0.24 0.08 0.09
Source: GEM Spain 2005 and 2006.
Notes: () Significant at 0.01 level; (**) significant at 0.05 level; (*) significant at 0.1 level.
supports previous studies by Clark and Drinkwater (1998), Dvila and
Mora (2004) and Hjerm (2004). Socio-demographic variables related
to the origin of individuals were not significant predictors of self-
employed and salaried immigrants earnings, and, thus, Hypothesis 3a is
not supported for these subsamples.
A few variables related to industry sectors and the motivation to
start up was added to the base model for self-employed immigrants.
Unexpectedly, necessity-driven entrepreneurs were more likely to have
an above-average income than opportunity-driven entrepreneurs. The
high risk usually involved in opportunity-driven ventures may indeed
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52 Nahikari Irastorza and Iaki Pea
The Journal of Entrepreneurship, 23, 1 (2014): 3556
result in more business failures and, thus, explain this finding. Hence,
Hypothesis 1b is rejected for self-employed immigrants.
Environmental variables were found to be significant for both self-
employed and salaried immigrants. The earnings of self-employed and
salaried immigrants living in wealthier regions are more likely to be
above average than their counterparts. Nevertheless, whereas living in an
urban area increases the probability of greater income for salaried
immigrants, the opposite was found for self-employed immigrants. The
negative effect of living in urban areas on the income of the self-
employed may be explained by the high cost of urban commercial
premises that leave a smaller profit margin to entrepreneurs and by a
higher level of competition. In sum, Hypothesis 3b is completely
supported for salaried immigrants and only partially for the self-
employed. None of the industry-related variables are significant and
thus, Hypothesis 3a is not supported for immigrant entrepreneurs.
In short, self-employed immigrants who fill one of the following
conditions, namely, holding a college degree, being necessity-driven or
living either in rural areas or wealthier regions, are expected to reap
above-average earnings. On the other hand, the income of salaried
immigrants who have a college education or live either in urban areas or
in wealthier regions is likely to be greater than for other salaried
immigrants.
Additional models included interaction variables in order to capture
the joint effect of the origin of individuals and human capital variables.
Due to the modest number of observations for self-employed immigrant
individuals in our database, we ran three regression analyses to include
interaction variables combining educational level, age and gender with
the immigrants origin (models 2, 3 and 4). As shown in Table 5, the
effect of interaction variables was stronger for self-employed than for
salaried immigrants. On the one hand, we found that the earnings of
highly educated, self-employed Africans, Europeans and South
Americans were more likely to be above average than those of their
counterparts. On the other hand, our findings show that, while being
male increased the probability of above-average earnings from self-
employment in models 2 and 3, none of the interaction variables
combining the origin, age and gender of individuals were significant.
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Earnings of Immigrants: Does Entrepreneurship Matter? 53
The Journal of Entrepreneurship, 23, 1 (2014): 3556
Conclusion
In this article we examined the earnings of self-employed and salaried
immigrants in Spain. Based on human capital and spatial economic theo-
ries, we suggested a multidimensional theoretical framework which
involves individual- and context-related factors to analyse the effect of
self-employment on the earnings of immigrants. We found support for
the socio-economic advancement hypothesis proposed by Constant et al.
(2003) since earnings of immigrant entrepreneurs were slightly greater
than those of salaried immigrants.
Human capital variables, such as education levels, and environmental
variables related to the location of individuals and firms were found to be
the most significant predictors of both self-employed and salaried immi-
grants earnings. Unexpectedly, entrepreneurs earnings were greater in
rural than in urban areas. Future entrepreneurs should bear this in mind
when they seek the most appropriate location to start up firms. While
interaction variables, which combine educational level and origin of
individuals, influence entrepreneurial immigrants earnings, they do not
explain those of salaried immigrants.
The results reported in this article should be interpreted with caution.
Not only is the predictive power of our models limited, but also the sam-
ple size for the immigrant entrepreneurs group is modest. Due to the
absence of variables regarding, for example, the number of hours
worked, we could not assess the opportunity cost of self-employment.
Despite these caveats, we believe that our results are reliable enough to
shed some light on the factors explaining immigrants earnings.
Policy makers should be aware of the increasing significance of the
entrepreneurial activity of immigrants in Spain. This article provides
empirical evidence for slightly greater gains in immigrant earnings
derived from self-employment than from salaried employment. Various
factors may cause this gap. On the one hand, salaried immigrants may
face more obstacles in the labour market than native workers. Empirical
studies show that, other things being equal, and depending on the indus-
try sector, male immigrants earn between 7.2 per cent and 16.3 per cent
less than native men (Martn, 2006). On the other hand, apart from the
traditional low-skilled and labour-intensive activities referred to in the
immigrant entrepreneurship literature, immigrants may be creating
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54 Nahikari Irastorza and Iaki Pea
The Journal of Entrepreneurship, 23, 1 (2014): 3556
innovative and profitable businesses and, thus, earning more. We believe
that public institutions should offer tailored responses to improve the
economic integration of immigrants in Spain depending on the situations
described above. First, policy makers should analyse and combat the
discrimination salaried immigrants may suffer in the labour market.
Second, immigrants should seriously be taken into account as an
important target group for the promotion of entrepreneurship.
Further in-depth analysis of this topic requires more data, such as, the
innovation activities and the technological level of firms, growth
strategies and the initial financial capital of immigrant entrepreneurs.
The labour market situation and the earnings of immigrants may vary
according to the regulatory frameworks and the development of the
welfare state of various countries. A cross-country comparison would
allow an assessment of the effect of diverse social and institutional
environments on the economic integration of immigrants. Finally, the
application of qualitative techniques such as in-depth interviews would
allow the assessment of the efficiency of self-employment as a tool for a
better social integration in host societies.
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