Ethnic entrepreneurship opportunities in the European City: a comparative policy study *.

• Author: van Delft, Hadewijch
• Position: Report

Abstract

The rapidly rising inflow of foreign migrants confronts policymakers with many socio-economic problems. Negative externalities of uncontrolled immigration are well known and often hard to cope with. In recent years we have seen many policy initiatives burden on self-reliance principles for ethnic groups. Against this background ethnic entrepreneurship has become a popular strategy, as it stimulates and encourages migrants to look after themselves with limited government support. An emphasis on ethnic entrepreneurship exploits the economic potential and opportunities instead of focusing on the problems minorities encounter when entering the labour market. In ethnic entrepreneurship, this potential can be utilised in a creative way, especially if well-organised projects and initiatives are developed.

In this paper, various assistance programmes and urban policies in several European cities aiming at favouring ethnic entrepreneurship will be systematically compared drawing lessons for effective labour market policies. The methodological approach will employ a systematic information base concerning self-employment strategies in the cities under investigation. A newly developed comparative statistical method for categorical information,--rough set analysis, will be used to identify critical success factors. The results suggest that utilisation of social networks is most helpful in enhancing self -employment among ethnic minorities. Finally, the paper offers some lessons for the establishment of socio-cultural and ethnic networks, strategies for improving training, and education, and improvement of access to facilities and financial resources.

ETHNIC ENTREPRENEURSHIP IN A MULTICULTURAL SOCIETY

Modern societies are moving away from a stable social and established structure toward a state of fluidity in which mobility of people (commuters, migrants) tends to become a visual landmark. The action radius of spatial mobility is steadily increasing from the local or regional scale to national and global levels (Sassen, 1991; Scott, 1990). The current globalisation trend, which has only recently started, will mean an even more diffuse pattern of community life, in which complex network configurations seem to play a dominant role. It seems also plausible that uniformity in society will increasingly be replaced by diversity, so that future societies will be characterised by a 'multi-colour' composition with a great cultural, social, ethnic and religious variety (cf. Cross, 1992; Esping-Andersen, 1993; Massey and Denton 1993; Storper, 1997).

The above mentioned dynamics manifests itself in cross-border migration (see Nijkamp and Spiess, 1994; Gorter, et., al 1998). It should be recognised however, that international migration is not a new phenomenon. In the past, we have witnessed huge trans-border migration flows as a result of natural disasters, wars, famine and poor socio-economic conditions. Most of these movements were of a forced nature and caused mainly a temporary disturbance. With the beginning of the colonial period also the phenomenon of economic migration between countries started, sometimes forcefully supported by slavery (see e.g., Sowell, 1975). Also the subsequent period of the Industrial Revolution meant a further stimulus to international linkages and movements. The end of the colonial period did not imply a return to a stable society with a uniform community life. The mobility trend, once commenced, did not come to a standstill, but became more pervasive. This is clearly illustrated by the phenomenon of guest workers in Europe, which did not mean a temporary population flow aiming to restore serious imbalances on the labour market in host countries, but heralded a period of increasingly stronger international ties between all countrie s of our world (Pugliese, 1993). The structural rapid rise in international passenger aviation movements symbolises the drive to international mobility.

Clearly, uncontrolled and unexpected inflows of foreign people caused a series of disturbances on loc al housing and labour markets. The phenomena are well known: ghetto formation in cities, rising criminality rates, extremely high unemployment, a lost generation, sharpening local conflicts, and destruction of traditional community life in cities (cf. Borjas, 1990; Burgers and Engbersen, 1996; Kloosterman, 1994, 1996; Pahl, 1984; Piore and Sabel, 1984; Pinch, 1993; Wilson, 1988). Many countries have edicted in the mean time restraint policies in order to cope with the rising tide of foreign immigrants. In European countries, these political restraints have been much stronger than in North America (see e.g. Blaschke, et. al., 1990).

Some figures for the Netherlands illustrate the problem (see CBS, 1998). In the year 1997, the officially registered unemploye d in the active age of 16-64 years in the Netherlands was 4% for indigenous Dutch people. The unemployment rate of officially registered ethnic people turned out to be 16%, with outliers of 31% for the Turks and 24% for the Moroccans. Most of the problem cases are concentrated in Amsterdam, The Hague, Rotterdam, and Utrecht. The distribution of the four main ethnic groups over these cities is skewed, so that each of the four big cities shares the same problem, but to a different degree and of a different nature (Musterd, et. al., 1998).

Nevertheless, a tight policy may be helpful to reduce official immigration growth, but it is questionable whether it is able to cope with illegal immigration and with second-order (derived) immigration as a result of family formation and so forth.

It goes without saying that urban policy-makers are faced with many problems in this age of mass migration. Immigration's negative externalities have to be coped with in an effective manner, as otherwise the local support of the citizens for foreign immigrants will fade. But at the same time, a policy which would mainly imply financial assistance and thus bring new immigrants under the regime of the social security system, will likely not become very popular among policy-makers and the public at large, and certainly not in a period with tightening government budgets (Hill, 1994). Consequently, it seems wise policy to look for alternative policies. A popular idea is to create a system of self-reliance, where new immigrants are held more responsible for their own economic well-being. Rather than being treated as passive problem cases to be taken care of by the public sector, it makes more sense to regard them as mature citizens who are able and encouraged to look after themselves with a fine-tuned but limited support of the public sector (cf. Light and Rosenstein, 1995; Waldinger, 1996).

The previous considerations and observations would then imply a societal attitude and policy in which foreign migrants are not to be seen as guaranteed sources of evil, but as promising sources of new opportunities for the socio-economic life--and even revitalisation--of cities (Ward and Jenkins, 1984). Consequently, apart from providing educational facilities--skills training, language courses etc. and socio-cultural participation programmes in order to encourage a better entrance to the labour market and the host society at large, in particular self-employment would have to be propagated and implemented as a necessary policy strategy for assisting foreign immigrants on the urban labour market. This is once more a promising endeavour, as the size of ethnic groups in many cities has reached a sufficiently large critical mass so as to stimulate ethnic entrepreneurship (1). Ethnic entrepreneurship refers to business activities, mainly of a small or medium size, executed by foreign migrants with the main aim to cover the socio-economic needs of immigrants of various ethnic or socio-cultural classes. It is mainly based on self-employment in rather low segments of the labour market (cf. Barrett, et. al., 1996; Waldinger, et. al., 1990). In this way, ethnic entrepreneurship leads to an increase in the aggregate supply of jobs, and hiring of immigrant workers without crowding out the indigenous work force (see also e.g., Light and Bonacich, 1988). This job creating function for immigrants through hiring from the co-ethnic group can be further enlarged, when highly entrepreneurial groups begin to hire among workers of non-co-ethnic fellow immigrants--so-called immigrant economies (see for recent evidence of this phenomenon in the US, Light, et. al., 1999).

In the past decades, ethnic entrepreneurship appears to become more prominent in several European countries. For example, the recent Dutch development in the period 1986-1997 shows that the relative share of ethnic businesses has more than doubled from 3% to 7.4% of the labour force and in absolute numbers, its size has even tripled (see Ministry of Economic Affairs, 1998). However, like in other countries, ethnic minority participation in entrepreneurship varies significantly among groups in the Netherlands (see also MEA, 1998): interestingly, ethnic groups with low participation rates in 1986 have experienced the highest growth rate during 1986-1995 (for example, the Turkish entrepreneurial group has almost tripled its size).

In this paper, we focus on opportunities for ethnic entrepreneurship in urban areas. In particular, the critical success factors of policy initiatives taken to increase ethnic business take-up in several urban cities throughout Europe will be addressed from a comparative perspective. To this end, we first highlight the potential development of ethnic enterprises in urban areas and its role in the informal economy in the subsequent two sections.

ECONOMIC OPPORTUNITIES FOR ETHNIC MINORITIES

The study of ethnic enterprises started preponderantly in the USA (see, e.g., the pioneering study of Light 1972, and also Light and Bonacich 1988), while later studies on this topic also emerged across Western Europe (see e.g., Ward and...