May 27, 2015
By Ruth Simon
Immigrants and Latinos helped drive an uptick in new business creation, according to a measure of 2014 U.S. startup activity to be released Thursday.
Immigrant entrepreneurs launched 28.5% of the new businesses in 2014, up from 25.9% a year earlier and just 13.3% in 1996, according to an annual startup index by the Ewing Marion Kauffman Foundation, a Kansas City, Mo., nonprofit.
Kauffman-funded researchers found that immigrants started new companies or became self-employed at nearly twice the rate of native-born Americans, creating an average of 520 businesses a month per 100,000 people last year. Immigrants accounted for 12.9% of the U.S. population in 2012, the most recent data available, up from 9.3% in 1996, according to the U.S. Census Bureau.
The share of new Latino business owners also climbed, to 22.1% in 2014 from 20.4% in 2013 and just 10% in 1996, Kauffman said. Latinos comprised 17.1% of the U.S. population in 2013, according to the most recent census count, up from 10.6% in 1996.
The increase in startups could reflect greater opportunities for Hispanic entrepreneurs as well as the possible struggle for them to find salaried employment because of language barriers and other obstacles, said Alberto Dávila, chairman of the economics and finance department at the University of Texas-Pan American in Edinburg, Texas.
He added that immigrant Latino entrepreneurs often start “small mom and pop shops” rather than the fast-growing firms that account for a disproportionate share of U.S. job growth. “If you dig into the numbers, it’s really Mexican self-employment that is carrying this growth” in Latino business-creation, he said, citing data from the census and the Bureau of Labor Statistics.
The number of high-skilled immigrant business owners has risen in recent years as more immigrants with advanced degrees have opted to start their own firms, added Magnus Lofstrom, a senior research fellow at the nonpartisan Public Policy Institute of California in San Francisco who also analyzed census data.
Yet, he said, many self-employed immigrants have a high-school education, or less, and their ventures may be less likely to result in high earnings.
In 31 of the 50 largest U.S. metro areas, immigrants accounted for all of the net growth in owners of “Main Street” businesses such as restaurants, retailers, dry-cleaning services and beauty salons from 2010 to 2013, according to the nonpartisan Fiscal Policy Institute and the Americas Society/Council of the Americas, which released a separate analysis of Census Bureau data earlier this year. Because they come from different backgrounds, some immigrants may be able to identify gaps in the marketplace for products or services that could benefit their local communities, said David Kallick, a senior fellow at the institute.
For instance, Laura Gomez, 35 years old, last year launched Atipica Inc., a four-employee software startup that helps companies find and recruit more diverse workforces. “Two years ago, I wouldn’t have started a company,” said Ms. Gomez, who was born in Mexico. But today, it’s easier to get customers, she said, in part because “people are talking a lot more about the business need for diversity” not only in the technology sector but also in other industries.
More than 93% of self-employed Latino immigrants had fewer than 10 employees, compared with 88.9% of self-employed non-Hispanic whites, according to a separate analysis of the 2014 Current Population Survey by Marie Mora, a University of Texas-Pan American economist.
Adriana Perez of Norwalk, Conn., came to the U.S. from Colombia in 1985. She was working for a global marketing company when she was laid off in 2014. The 51-year-old started a marketing company to work with Hispanic business owners and to help U.S. business owners connect with the Hispanic market. Her young firm has no staff employees, though she uses independent contract workers.
Latino businesses are more likely than non-Latino businesses to be family-owned and less likely to secure outside funding, according to Remy Arteaga, whose nonprofit Stanford Latino Entrepreneurship Initiative is building a database of Latino-owned firms in the U.S. in collaboration with Stanford University.
Many Latino entrepreneurs struggle to “scale”—or rapidly expand—their businesses, Mr. Arteaga said, adding that roughly 25% of Latino firms get most of their sales from non-Latino customers, a figure that is about the same for young and older firms.
Overall, U.S. entrepreneurs started an average of 534,000 businesses a month in 2014, representing the first meaningful increase since 2009, according to Kauffman. In addition, more people left jobs in 2014 and seized the opportunity to create a new business or become self-employed rather than starting businesses because they were out of work, it said.
Source: The Wall Street Journal