Metropolitan Characteristics and Immigrant Entrepreneurship. Eric Fong, Junmin Jeong, Julie Jo. University of Toronto

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1 Metropolitan Characteristics and Immigrant Entrepreneurship Eric Fong, Junmin Jeong, Julie Jo University of Toronto October, 2012

2 It has become more common to find immigrant entrepreneurs not only in immigrant gateway metropolitan areas with large populations, but also in smaller and medium-sized metropolitan areas. As these locational patterns of immigrant businesses emerge, it is more pressing to understand how immigrant entrepreneurship is related to metropolitan characteristics. It is an important issue, as Schumpeter identified long ago that entrepreneurship is deeply embedded in social and economic contexts. Most research on determinants of immigrant entrepreneurship has focused on individual human capital resources and social networks (Light and Gold 2000; Sanders and Nee 1996). Studies typically focus on immigrant entrepreneurs in one city, comparing the likelihood of entrepreneurship among different racial and ethnic groups in relation to human capital resources and social networks. They have shown that having more of these resources is positively related to immigrants being entrepreneurs (Bates, Jackson, and Johnson 2007; Sanders and Nee 1996). Another line of study explores the mixed embedded context of entrepreneurship (Kloosterman and Rath 2001). This approach emphasizes the institutions that mediate the likelihood of entrepreneurship. The focus is on institutional rather than city characteristics. Thus, most research using this approach does not examine locational patterns of immigrant entrepreneurs in different countries, but tends to be based on in-depth case studies. In this paper, we extend the study of immigrant entrepreneurship by examining its relationship to individual and city characteristics simultaneously. We focus on city characteristics in order to explain variations among metropolitan areas. Drawing from existing discussions on ethnic community and immigrant business, we develop a few testable hypotheses on metropolitan characteristics and the likelihood of entrepreneurship. Like most literature on immigrant entrepreneurship, our approach takes individual immigrants as our unit of analysis. However, we concentrate on the relationship with city characteristics. Our study is based on 2006 Canadian Public Use Microdata File. We employ a mixed model, as individuals in our sample are nested in various cities.

3 Our study begins by examining how much the likelihood of individual immigrant entrepreneurship is related to differences in metropolitan characteristics. We decompose the variance of likelihood of entrepreneurship into between metropolitan areas and within metropolitan area. The information will help us determine to what extent individual likelihood of entrepreneurship is related to between metropolitan area characteristics. We also know very little about how various metropolitan characteristics contribute to the likelihood of individuals being entrepreneurs. Thus, we run models to explore the effects of city characteristics. Finally, we explore how metropolitan characteristics and individual characteristics together are related to the likelihood of individual entrepreneurship. Our aim is to provide a more comprehensive understanding of how individual and metropolitan characteristics are related to the likelihood of individuals being entrepreneurs. Findings Our analysis is based on the 2.7 percent sample Census Public Use Microdata File (PUMF) from the 2006 Census of Canada. The file includes information about the demographic, social and economic characteristics of Canadians at the individual level. Our population of interest is immigrants in Canada in all 23 census metropolitan areas (CMAs) who are between the ages of 18 and 64 and thus of labor force age. We included only those who were participating in the labor force. We include individual socioeconomic factors (such as marital status, language ability, educational level) and demographic factors (such as age, duration in the country) to understand their relationship to entrepreneurship. For metropolitan characteristics, we include proportion of racial group, and proportion of major industrial sectors in the metropolitan area. Findings Table 1 reports the percentage of entrepreneurs in major Canadian metropolitan areas. The results show there are considerable variations, ranging from 7% to 16% of immigrants being entrepreneurs

4 in these areas. Table 2 shows the descriptive statistics of variables included in the analysis. Table 3 displays the results of mixed models that include both individual level and metropolitan characteristics. Conclusion The results clearly demonstrate the importance of including metropolitan characteristics in understanding immigrant entrepreneurship. Our full paper will provide a detailed analysis of the relationship.

5 Table 1. Descriptive Table for Paid Workers vs. Entrepreneurs among Immigrants by Metropolitan areas, 2006 City Paid Worker (%) Entrepreneurs (%) Total Frequency Halifax Moncton Quebec Montreal ,342 Sherbrook Ottawa ,289 Oshawa Toronto ,468 Hamilton ,354 St. Catherin s Kitchener ,710 London ,261 Windsor Brantford ,001 Kingston Sudbury Winnipeg ,911 Regina Calgary ,478 Edmonton ,288 Vancouver ,326 Victoria Kelowna Total ,168

6 Table 2. Descriptive Statistics for Independent Variables Variables Workers Entrepreneurs Total Female (%) Not Knowing English or French (%) Completed High School (%) Living as One Family (%) Asian (%) Middle Eastern (%) Black (%) Holding Professional Jobs (%) Average Years of Age (11.80) (10.17) (12.23) Average Years Since Immigration (13.19) (13.76) (13.61) Average Proportion of Asian in CMAs (0.158) (0.161) (0.161) Average Proportion of Middle Eastern in CMAs (0.031) (0.031) (0.031) Average Proportion of Black in CMAs Average Proportion of Professionals in CMAs (0.039) (0.027) (0.041) (0.026) (0.040) (0.027)

7 Table 3. Binomial Logistic Regression Predicting Entrepreneurship Fixed-Effects Odds Ratio S.E. P-value Age *** Age-squared *** Female *** Completed Highschool *** Not Knowing English or French Years Since Immigration *** Living as One Family *** Race Asian Middle Eastern Black *** 0.005** 0.000*** Holding Professional Jobs *** Random-Effects Estimates S.E. Proportion of Asians Proportion of Middle Eastern Proportion of Blacks Proportion of Professionals Constant Log-Likelihood N (Individuals) 76,769 N (Groups) 23

8 References Bates, Timothy, William E. Jackson, III, and James H. Johnson, Jr "Advancing Research on Minority Entrepreneurship." The Annals of the American Academy of Political and Social Science 613: Kloosterman, Robert and Jan Rath "Immigrant Entrepreneurs in Advanced Economies: Mixed Embeddedness Further Explored " Journal of Ethnic and Migration Studies 27: Light, Ivan Hubert and Steven J. Gold Ethnic economies. San Diego: Academic Press. Sanders, Jimy M. and Victor Nee "Immigrant self-employment: the family as social capital and the value of human capital." American Sociological Review 61: