Staking a Claim

A new study shows that immigrants start new businesses at a higher rate

Ten hours a day, nearly every day, Ly Soung assists customers streaming into his Big L Market on Tucson's southside. "I go home to shower," he says, watching another car roll up. "But this is where I live."

Many would call that a grind. To Soung, however, it's nothing short of a dream. The Cambodian refugee bought this convenience store four years ago, stocking it with everything from peanuts to detergent. And though it's not exactly Wal-Mart, it is far more than he could have hoped for back home.

According to Soung, that's exactly why more than half of Tucson's 24 Cambodian families own businesses, ranging from doughnut shops and nail salons to stores like the Big L. "Everybody knows that America is a land of opportunity," he says, "a place where people can do their best."

If that sounds straight from a Capra movie, maybe it is. Or at least it should be, according to a groundbreaking study showing immigrants like Soung far outpacing their native-born counterparts in new business startups. The entrepreneur-oriented Ewing Marion Kauffman Foundation reports that in each month of 2005, 350 out of 100,000 adult immigrants created their own businesses. That contrasts with only 280 of every 100,000 native-born Americans starting businesses over the same period.

These are crucial findings, since many economists consider small startups--from mom-and-pop groceries to professional firms--key business bellwethers. "Where you find entrepreneurship, you find business growth," says Rob Fairlie, an economics professor at the University of California at Santa Cruz, and the report's author.

Fairlie's assessment is echoed by Kauffman Foundation President Carl Schramm. In a press release, Schramm called the findings "a strong indication that the entrepreneurial sector, with its flexibility and capacity to adapt quickly, is poised to become an even more important factor in our nation's economic growth."

Data for the Kauffman study came from monthly surveys by the U.S. Bureau of the Census and the Bureau of Labor Statistics. Since his study is based on individual, house-to-house questionnaires, Fairlie says it reveals immigrant entrepreneurship that sometimes flies under the official radar. "All the study is trying to do is come up with the first estimate of entrepreneurship at the individual level. It wasn't trying to come up with some official government measure where you have to be a registered business owner, because there are a lot of immigrants--and a lot of nonimmigrants--who don't register their businesses."

Instead, in this case "the Census Bureau goes to someone's house and says, 'What is your main job? Do you work for someone else, or do you own a business?' So there's no incentive to lie. In that sense, the (study) captured more activity than other measures would."

While the results "aren't a real surprise," Fairlie says such numbers have never been well-documented "in terms of establishing a measure of business creation by owners at an individual level."

The research dovetails with an earlier study he conducted for the U.S. Small Business Administration. That data shows self-employment rates among immigrants growing to 1.8 million in 2003, up a remarkable 27 percent from just three years earlier. During that same period, overall self-employment nationally grew by only 6 percent.

Roughly 10 percent of Americans are business owners, government studies show. But immigrants are responsible for up to 18 percent of those. And every month, 85,000 of them begin new businesses, compared to 379,000 startups by native-born Americans.

Bustling entrepreneurship among immigrants doesn't surprise many in the business community. Most took "huge risks to come to the United States, and I'm talking just about legal immigrants," says Jack Camper, president of the Tucson Metropolitan Chamber of Commerce. "These people are risk-takers. They're not afraid to do things, and that's really cool, if you think about it. It's a true entrepreneurial spirit."

His assessment is echoed by Judith Gans, chief immigration researcher at the UA's Udall Center for Studies in Public Policy. Immigrants "have already done the 'leaving home' part," Gans says. "Now they're ready to just rock 'n' roll, and go where the opportunity takes them."

That's certainly true for Soung. In Cambodia, corruption was rampant, "and you never knew what the rules for a business were," he says. The situation only worsened under the brutal Khmer Rouge communist regime, which ruled Cambodia from 1975 to 1979, and "forced you work all the time."

Such stories reveal why many newcomers march to a different business beat, says Paula Stuht, the Tucson Chamber's vice president for economic development. "My perception is that immigrants are more realistic about how much risk is involved."

Stuht recalls working with two clear-eyed entrepreneurs from South Africa. They were hoping to start an engineering firm. And unlike many, "they already had put a serious business plan together," she says, "with financial backing pulled together in 18 different ways. Then they cut their business plan back as far as they could, so they'd have enough backing to get started without 'Oh, and then a miracle happened!' kind of stuff."

Stuht says immigrants also share another critical element: pure grit. "When someone honest-to-God knows what the worst is--and living in some of these countries that they come from, they know what the worst is--they can honestly say, 'I'm willing to go that far, to work that many hours" necessary for success.

Native-born Americans "are also willing to take risks," she says. "But we're probably not willing to run at it as hard as the immigrants are. Sure, many of us nonimmigrant types can talk about working an 18-hour day, and we've probably done it once or twice in our lives. But on a regular, seven-days-a-week basis? Probably not."

That drive, reflected by the Kauffman Foundation study, also taps into a deep cultural ethos. It's built around images of immigrants--from 19th century Chinese arrivals to later waves of Europeans and Latin Americans--as remarkably industrious. "I think that (tradition) is still alive and well today," says Judith Gans. "It's certainly not an unfamiliar story. People come; they work hard, and they become Americans, each in their own unique way."

Over time, that integration also prompts profound shifts in perception, she says. "One hundred years ago, people were saying the same things about Italians and Eastern Europeans that are now being said about Mexicans. And today, people are complaining that Judge (Samuel) Alito is one more white guy on the Supreme Court."

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