Financial Funding of Immigrant Businesses

Kushnirovich, Nonna; Heilbrunn, Sibylle

doi:10.1142/s1084946708000910

Cited by 47 publications

(44 citation statements)

References 11 publications

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“…Although Kushnirovich and Heilbrunn (2008) emphasised access to own start-up capital, Basu (1998) found a strong relation between own savings (personal capital) plus the share of informal capital in the start-up, on one hand, and the success of the business, on the other hand. Cavalluzzo and Wolken (2005) suggested that personal wealth and credit history are possible explanations for the differences in receiving bank loans.…”

Section: Owner Characteristicsmentioning

confidence: 99%

The Determinants of Informal Capital in the Financing of Small Firms at Start-Up: An Ethnic Comparison of Small Firms in Sweden

Yazdanfar¹,

Abbasian

2013

IJEF

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This study explains empirically the differences in the use of informal financing between native-and immigrant-owned small businesses in terms of ethnicity and other relevant variables. A sample of 2814 nativeand immigrant-owned small businesses, consisting of a unique database gathered, was analysed and several univariate and multivariate methods employed. The results suggest that ethnicity is a significant explanatory variable and an important factor in informal capital access in the start-up stage in terms of loans from family members and friends. Moreover, the other independent variables, namely gender, age, experience of starting businesses, the amount of start capital, and firm size, affect loans from family members, whereas loans from friends are influenced by age, size, and industry affiliation. Since knowledge about informal capital determinants is limited, the results of this study add to our understanding of the variables that explain the financing behaviour of small businesses at start-up.

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Section: Owner Characteristicsmentioning

confidence: 99%

The Determinants of Informal Capital in the Financing of Small Firms at Start-Up: An Ethnic Comparison of Small Firms in Sweden

Yazdanfar¹,

Abbasian

2013

IJEF

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“…As they are not experimental audit studies, they are unable to create a random sample of observationally equivalent small business borrowers that differ only in their race. While not analyzing whether the entrepreneur was denied or granted credit, Marlow and Patton (2005) study female entrepreneurs in the United Kingdom, Kushnirovich and Heilbrunn (2008) study immigrants in Israel, Sepulveda et al (2011) study the "superdiverse" migrant enterprises within London, Haynes et al (2008) study the sources of financing for Mexican-American and Korean-American borrowers, and Aldrich and Zimmer (1986) argue for an evolutionary population perspective for successful entrepreneurship. Additionally, even after including the social capital and liability of newness measures 12 of Bewaji et al (2015), I still find evidence that African-American borrowers have a higher probability of their loan being rejected than equivalent risk white borrowers.…”

Section: B Empirical Studies Of Discriminationmentioning

confidence: 99%

Differential Access to Capital from Financial Institutions by Minority Entrepreneurs

Palia

2015

SSRN Journal

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This article examines whether minority small business borrowers have the same access to loans from financial institutions as similar white borrowers. Using matching methods, I find that African‐American borrowers are rejected at an approximately 30 percent higher probability than similar white borrowers. I also find that the impact of unobservable variables has to be greater than 85 percent the impact of observable variables to show no discrimination. This bound seems to be a high number given that I have controlled for a large number of borrower, firm, and lender characteristics. No such differential effect is found for Asian and other minority borrowers. I also find equal expected default losses between African‐American and white borrowers. These results are consistent with the information‐based, laissez faire, and group hoarding theories of discrimination, and against the taste‐based theory of discrimination.

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“…While immigrant entrepreneurs contribute significantly to job creation and innovation in the United States, they generally face greater challenges in acquiring financial capital than do their mainstream peers (Kushnirovich and Heilbrunn, ). The literature on sociology (Aldrich and Waldinger, ; Fisman, ; Nielsen, ) and entrepreneurship (Bates, ; Brüderl and Preisendörfer, ; Masurel et al, ) have long recognized the importance of the social network of co‐ethnics in funding new businesses.…”

Section: Introductionmentioning

confidence: 99%

Ethnic Enclave and Entrepreneurial Financing: Asian Venture Capitalists in Silicon Valley

Zhang

Wong

2016

Strategic Entrepreneurship

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Research summary: We examine the dilemma of ethnic investors in using ethnic network ties to invest by extending the 'ethnic enclave' concept to incorporate two dimensions: social network and social status. Our analysis of the first round of venture capital funding in Silicon Valley from 1976 to 2004 shows a higher likelihood of Asian venture capitalists (VCs) investing in Asian-led ventures than mainstream VCs. In addition, the valuation of their investments in mainstream ventures is higher than those by mainstream VCs in such ventures. In contrast, this premium effect is not observed when mainstream VCs invest in Asian ventures. These asymmetrical findings suggest the premium Asian VCs pay to compete in the mainstream venture market is due to their lower social status rather than their social network disadvantages. Managerial summary: Do ethnic minority investors behave differently from more mainstream investors? We examine this question by studying the venture capital industry in Silicon Valley over the period 1976 to 2004. We found that Asian venture capitalists (VCs) were more likely to invest in immigrant Asian entrepreneurs than mainstream VCs, and when they did invest in mainstream ventures, they paid higher valuations than mainstream VCs. In contrast, mainstream VCs did not pay higher average valuations compared to Asian VCs when they invested in Asian ventures. We show that two social factors-the ethnic minority VCs' social network ties and their lower social status-could have contributed to such behavioral differences.

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Financial Funding of Immigrant Businesses

Cited by 47 publications

References 11 publications

The Determinants of Informal Capital in the Financing of Small Firms at Start-Up: An Ethnic Comparison of Small Firms in Sweden

The Determinants of Informal Capital in the Financing of Small Firms at Start-Up: An Ethnic Comparison of Small Firms in Sweden

Differential Access to Capital from Financial Institutions by Minority Entrepreneurs

Ethnic Enclave and Entrepreneurial Financing: Asian Venture Capitalists in Silicon Valley

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