The Expat Gap: Are Local‐Born Entrepreneurs in Developing Countries at a Disadvantage When Seeking Grant Funding?

• Author: Abigayle Davidson,Li‐Wei Chen,Saurabh A. Lall
• DOI: http://doi.org/10.1111/puar.13076
• Published date: 01 November 2019
• Date: 01 November 2019

880 Public Administration Review • Novem ber | Dece mber 2 019

Public Administration Review,

Vol. 79, Iss. 6, pp. 880–894. © 2019 by

The American Society for Public Administration.

DOI: 10.1111/puar.13076.

Abstract: Donor agencies and foundations use grants to stimulate entrepreneurial growth in developing countries.

However, some practitioners have asked whether these grants tend to flow to expatriate entrepreneurs with ties to

developed countries (where most grants originate), rather than to local entrepreneurs. This article tackles this question

using a data set of 3,434 nascent ventures from 92 developing countries. The authors find that ventures with ties to

a developed country are significantly more likely to raise grant financing and in more substantial amounts. Ventures

with a founder born in a developed country are the most likely to receive grants, with a weaker effect when considering

prior work experience in a developed country. This “expat gap” cannot be explained by differences in education level,

prior experience, or ties to other developing countries. Donors seeking to support local entrepreneurs in developing

countries should consider ways to make their recruitment and selection processes more equitable.

Evidence for Practice

• In developing countries, grant financing is significantly more likely to flow (and in larger amounts) to

ventures founded by expatriate entrepreneurs (from developed countries). We propose three suggestions for

donors to reduce these inequities.

• Donors should examine the pipeline of entrepreneurs who apply to these opportunities to ensure that their

outreach efforts reach local entrepreneurs and that grant applications are sufficiently accessible (in terms of

language, administrative effort, etc.).

• Donors should also carefully assess their screening and selection criteria for sources of bias and ensure that

local staff are actively involved in these processes.

• Entrepreneurs who have previously participated in a business accelerator are more likely to secure grant

funding. Donors should therefore partner with accelerator programs to identify potential grantees and train

local entrepreneurs in grant writing and administrative capacity building.

Entrepreneurship has been long regarded

as a critical mechanism for socioeconomic

development (Naudé 2010). Over 75 percent

of the formal workforce in low-income countries is

employed by small and medium-sized enterprises

(Ayyagari, Demirgüç-Kunt, and Maksimovic 2011),

making entrepreneurship an essential component of

the United Nations’ Sustainable Development Goals

of “no poverty” and “decent work and economic

growth” (United Nations 2019). Additionally,

social enterprises go beyond employment effects by

providing essential goods and services to underserved

populations and tackling specific socioeconomic

challenges such as improved energy access (Cieslik

2016) and agricultural productivity (Venot 2016).1

Therefore, entrepreneurial development is a topic

of great interest in public policy and administration

(Carpenter and Loveridge 2018; Mauldin 2012;

Stokan, Thompson, and Mahu 2015; Terjesen,

Bosma, and Stam 2016).

In advanced economies such as the United

States, entrepreneurial development programs

have focused on underrepresented entrepreneurs

(Carpenter and Loveridge 2018; Mauldin 2012) and

marginalized regions (Mauldin 2012) where access to

entrepreneurial support, financial capital, and human

capital is limited. Governments and donors have

provided grants, tax incentives, and direct technical

assistance to entrepreneurs (Hall 2010; Mauldin

2012). In developing countries,2 the barriers faced

by nascent entrepreneurs are even more pronounced,

as capital is scarce, infrastructure is often weak, and

market ties may be lacking (Beck and Demirgüç-Kunt

2006; Rogerson et al. 2014).

In response to these barriers, aid agencies have

developed programs to support entrepreneurship

in developing countries, such as the World Bank’s

Development Marketplace (Hoyos and Angel-

Urdinola 2017), the U.S. Agency for International

The Expat Gap: Are Local-Born Entrepreneurs in Developing

Countries at a Disadvantage When Seeking Grant Funding?

Saurabh A. Lall

University of Oregon

Li-Wei Chen

Old Dominion University

Abigayle Davidson

Aspen Institute

Abigayle Davidson is a senior

research analyst with the Aspen Network

of Development Entrepreneurs, a policy

program of the Aspen Institute. Her work

focuses on how research and practice

can come together to improve support

structures for entrepreneurs, with an

emphasis on the role of business accelerator

programs in developing countries.

Email: abigayle.davidson@aspeninstitute.org

Li-Wei Chen is assistant professor

of management and entrepreneurship

in the Strome College of Business, Old

Dominion University. His research lies at

the intersection of organization theory and

entrepreneurship. In particular, his work

focuses on the impact of founders’ career

histories on the subsequent organizational

outcomes. He was data director for the

Entrepreneurship Database Program and

developed the system structure for the

program.

Email: L3CHEN@ODU.EDU

Research Article

Saurabh A. Lall is assistant professor

in the School of Planning, Public Policy

and Management, University of Oregon.

His research lies at the intersection of

entrepreneurship and society, with an

emphasis on entrepreneurial ecosystems,

social enterprise, and economic development

policies and programs. He cofounded the

Global Accelerator Learning Initiative, an

international effort to study the impact of

accelerators on entrepreneurial growth.

Email: slall@uoregon.edu