Does Social Influence Span Time and Space? Evidence from Indian Returnee Entrepreneurs

• Author: Saul Estrin,Fei Qin
• DOI: http://doi.org/10.1002/sej.1202
• Published date: 01 September 2015
• Date: 01 September 2015

DOES SOCIAL INFLUENCE SPAN TIME AND SPACE?

EVIDENCE FROM INDIAN RETURNEE

ENTREPRENEURS

FEI QIN* and SAUL ESTRIN

London School of Economics, London, United Kingdom

Research summary:We study returnee entrepreneurship through the lens of social influence.

Contrary to the conventional view that treats returnee entrepreneurship as discrete decisions

by individuals, we examine the transmission of entrepreneurship through important peer

networks—university dorm peers and ethnic association networks. Wepropose enduring effects

from peer influence funnelling entrepreneurship entry in distant locations by shaping career

aspirations and facilitating resource and information transfer. Using a unique dataset of

overseas alumni of a top Indian university, we find strong evidence of the impact of peer

influence on the likelihood of returnee entrepreneurship. However, the effect of university peer

influence does not extend beyond immediate peer groups in the same cohort.

Managerial summary:The repatriation of highly skilled migrants has been viewed as impor-

tant to the supply of entrepreneurial talent in emerging markets. Our study of the overseas

alumni of a top Indian university points to the importance of peer influence in determining

returnee entrepreneurship. We find that peer ties formed in the early years of university study

play a significant role in subsequent career choices and entrepreneurship entry in the home

country. We also find co-ethnic professional networks facilitate engagement in returnee entre-

preneurship. While policies to encourage returnee entrepreneurship have been geared largely

toward promoting formal institutions and economic incentives, our work demonstrates a strong

social amplification effect through networks and suggests that peer networks, especially those

connecting alumni and ethnic professionals, are important channels to induce returnee

entrepreneurship. Copyright © 2015 Strategic Management Society.

INTRODUCTION

Despite the importance of entrepreneurship in the

development process (Agarwal, Audretsch, and

Sarkar, 2007; Van Stel, Carre, and Thurik, 2005),

emerging markets face severe constraints on the

supply of entrepreneurial talent (Wennekers et al.,

2005). Wright et al. (2008) argue that this could be

partially offset by return migration, an idea that has

attracted increasing attention from scholars and

policy makers (Kapur, 2001; Martin, 2003;

Saxenian, 2006; Vertovec, 2006). For example, the

emigration of highly skilled personnel from India

and China is now being reversed (Li et al., 2012;

Qin, 2015), with returnees bringing with them new

business ideas, financial capital (Findlay, 2002), and

extensive ties with the business or technology com-

munities (Kerr, 2008; Saxenian, Motoyama, and

Quan, 2002). Returnees also often become actively

engaged in entrepreneurship (Kapur and McHale,

2005; Saxenian, 2006; Wadhwa et al., 2011).

Little is known about the factors and mechanisms

influencing migrants’ entrepreneurship entry to their

home countries. Recent studies attribute the high rate

of returnee entrepreneurship to alluring business

opportunities available in the home countries.

However, only a fraction of migrants in an arriving

Keywords: returnee entrepreneurship; social influence; school

peers; social capital; professional associations

*Correspondence to: Fei Qin, London School of Economics,

Houghton St., London WC2A 2AE, U.K. E-mail: f.qin1@

lse.ac.uk

bs_bs_banner

Strategic Entrepreneurship Journal

Strat. Entrepreneurship J., 9: 226–242 (2015)

Published online in Wiley Online Library (wileyonlinelibrary.com). DOI: 10.1002/sej.1202

Copyright © 2015 Strategic Management Society

cohort choose to return to their home countries to

start a new business. So why do some migrants

pursue returnee entrepreneurship while others do

not? The entrepreneurship literature places emphasis

on the role of social influence (though it has rarely

been considered in the context of returnee entrepre-

neurship) (Lerner and Malmendier, 2013; Nanda and

Sørensen, 2010); social connections are seen as

affecting the aspiration to become an entrepreneur,

as well as access to relevant information and

resources. In this study, we investigate what affects

migrants’ participation in entrepreneurial activities

when moving back to the home country. Particularly,

we identify elements of social influence that operate

over time in the transnational space to induce

returnee entrepreneurship.

Returnee entrepreneurs are people who move

back to their home countries to start a business after

spending a period of time studying or working

abroad. We treat returnee entrepreneurship as a

social process in which social ties help in shaping a

migrant’s aspirations, identifying the opportunities

in the home country, and providing support. Social

capital and social influence have been emphasized in

the fields of entrepreneurship (Davidsson and Honig,

2003; Fershtman, Murphy, and Weiss, 1996; Nanda

and Sørensen, 2010) and international migration

(Boyd, 1989; MacDonald and MacDonald, 1964;

Massey, 1990; Massey, Goldring, and Durand,

1994). However, applications mainly focus on situ-

ations that are geographically and temporally

confined—a limitation largely due to the contexts in

which the concept is examined. In most settings, it

has not been appropriate or feasible to test whether

social influence can extend beyond geographic

boundaries or be viable over time. Returnee entre-

preneurship represents a good setting to explore

unbounded social capital because social influence is

highly relevant, geographic factors can be distant,

and temporal elements are long. The emerging

market environment further strengthens these argu-

ments because local connections and knowledge rep-

resent a particularly significant challenge to returnee

entrepreneurs in contexts where factor markets and

formal institutions are underdeveloped (Batjargal

et al., 2013; Li and Atuahene-Gima, 2001, 2002; Li

et al., 2012; Peng and Luo, 2000; Xin and Pearce,

1996; Zhang and Li, 2010).

The high rate of returnees’ involvement in entre-

preneurship is usually associated with the accumu-

lation of human and financial capital overseas.

However, these attributes could be offset by a corre-

sponding loss of social capital; migrants are

uprooted from their domestic social contexts and,

hence, lacking access to information about home

country entrepreneurial opportunities: ‘out of sight,

out of mind’ (Wahba and Zenou, 2012: 891). These

countervailing forces are often seen to influence

returnee decisions and the subsequent performance

of returnee-founded ventures (Li et al., 2012).

However, the implicit focus on social connections

within a given local or regional environment is, at

best, incomplete because social space cuts across

geographic boundaries. Social influence pertaining

to returnee entrepreneurship may endure over long

distances and persist for decades. In particular,

migrants are exposed to important peer influence

within educational- and ethnicity-based networks

that may have a lasting impact over an individual’s

career. This may be prior to migration, in the case of

school peer connections, or after migration, in the

case of ethnic associations. Thus, we propose that

social capital is not necessarily localized or geo-

graphically confined.

We base our empirical examination on an alumni

survey of a top university in a major emerging

market—India. We use event history analysis to

examine the impact of time-varying factors such as

the change in various types of social influences on

returnee entrepreneurship over an individual’s life-

time. Our unique dataset covers the career and

migration history of the alumni of a leading Indian

Institute of Technology (IIT). The empirical strategy

generates a well-defined population, covers a long

time horizon, collects detailed social capital mea-

sures not available in existing datasets, and allows

systematic analysis of entrepreneurship entry and

return migration simultaneously. The IIT alumni

data are particularly suitable for examining our

research question because these graduates are among

the most active players engaging in both interna-

tional migration and business venturing. The setting

also enables us to study the actual behavior of

returnee entrepreneurship rather than intentions.

Moreover, IIT alumni, with similar human capital

characteristics, constitute a suitable population to

test the effect of social influence.

We make a number of contributions to the litera-

ture. First, we develop a model of returnee entrepre-

neurship in emerging markets that integrates

important elements of the literatures on entrepre-

neurship and return migration. Second, we analyze

the potentially enduring effects of social relations

and peer influence across locations, which we test on

Social Influence and Returnee Entrepreneurship 227

Copyright © 2015 Strategic Management Society Strat. Entrepreneurship J.,9: 226–242 (2015)

DOI: 10.1002/sej