New Framework for Immigrant-Owned Business Development

April 5, 2010

As cities continue to see important changes in their demographics, city officials and business development professionals find it challenging to support and expand immigrant-owned businesses in their cities. Immigrant-owned businesses play a critical role in the economy of American cities and towns. They are also a unique source of fresh and innovative ideas that can help promote economic recovery and prosperity across the country.

A recent study conducted by Butler University Professors Roberto Curci and Robert Mackoy confirms these statements. Their report, featured in the March/April 2010 issue of the Thunderbird International Business Review business journal, evaluates the integration of immigrant-owned businesses into local economies.

The study used a sample of Hispanic immigrant-owned enterprises in the greater Indianapolis area to conceptualize and test a classification framework that may be used by other cities to facilitate the integration of immigrant-owned business into local communities.

The authors suggest that there is a growing body of literature addressing the important issue of immigrant entrepreneurship. However, extant research has mainly focused on the forces that contribute to or inhibit immigrant-owned business start-ups. There is limited research evaluating the immigrant-owned business development process, as businesses progress from being largely ethnocentric to well-integrated into a host’s city business community.

Studies show, immigrant-owned businesses make significant contributions to the economy and generate employment, competition, and wealth. Therefore, city governments and business development organizations alike are continuously planning how to be efficient and effective in facilitating the development of immigrant businesses.

Curci and Mackoy’s Immigrant Business Enterprise Development Framework classifies immigrant-owned businesses into categories associated with different levels of integration into a host city’s business community. The framework first determines whether a business’ customers are primarily ethnic or non-ethnic and whether or not its products or services are mainly associated with an ethnic culture or immigrant community. Then, the framework classifies immigrant-owned businesses into four categories: (1) highly-segmented, (2) product-integrated, (3) market-integrated and (4) highly-integrated.

Research Findings

The study reports the results of structured face-to-face interviews with 199 Hispanic Business Enterprises in Indianapolis. The authors found Hispanic immigrant-owned businesses to have different characteristics, depending upon the category in which they are classified.

For instance, the level of education of Hispanic entrepreneurs in category 4 (highly-integrated) is significantly higher than that in categories 1 (highly-segmented), 2 (product-integrated), and 3 (market-integrated). The level of English language proficiency of Hispanic entrepreneurs in category 4 (highly-integrated) is significantly higher than those in categories 1 (highly-segmented) and 2 (product-integrated). Therefore, Hispanic entrepreneurs are likely to face different opportunities and challenges as they seek to develop their businesses when operating in various framework categories.

The authors suggest city governments and business development organizations should identify and address category-specific challenges, opportunities and needs rather than considering immigrant-owned businesses as a homogeneous group. For example, training offerings for Hispanic-owned businesses in category 2 (product-integrated) might emphasize sourcing strategies, while training for businesses in category 3 (market-integrated) might emphasize marketing strategies.

The framework allows cities to understand the immigrant business’ developmental needs from start-up through complete integration with a host city’s business community, which helps cities define business development priorities across integration categories.

Conclusions

Hispanic immigrant-owned businesses classified in category 1 (highly-segmented) were associated with the lowest level of integration into mainstream markets in Indianapolis, and those in category 4 (highly-integrated) were associated with the highest level of integration. Hispanic-owned businesses classified in categories 2 (product-integrated) or 3 (market-integrated) were deemed to have a middle level of integration into mainstream markets in Indianapolis.

The authors suggest immigrant-owned businesses have the potential to be successful by growing within a category. However, businesses with a higher category level are more highly integrated into mainstream markets.

The authors point out that future research entails applying the framework in different contexts. Specifically, there is a need to understand the characteristics and the development patterns of different immigrant-owned business communities within a city. Similarly, the framework may be used to understand business development patterns of businesses from the same immigrant community across cities.