Financial constraints of ethnic entrepreneurship: evidence from Germany

Financial constraints of ethnic entrepreneurship: evidence from Germany Purpose – The theory of small business finance predicts that ethnic minority‐owned businesses are more likely to be credit constrained in the start‐up process than are native‐owned businesses. In Germany, empirical evidence for this issue is scarce because of missing data. This paper aims to address these issues. Design/methodology/approach – The paper reviews previous studies and uses data from a survey of ethnic and native entrepreneurs in Germany that include detailed information about start‐up financing. The hypotheses were tested for differences in financial constraints using univariate analyses and apply multivariate regression models to identify the causes of credit constraints in start‐up financing. Findings – The data provide evidence that entrepreneurs with an immigration background (“ethnic entrepreneurs”), defined as German residents who hold foreign citizenship or who were born outside Germany, are significantly more likely to be denied credit or to be awarded smaller loans than requested than are native entrepreneurs. However, the underlying reasons for this effect may be differences in risk factors and financial relationships, rather than ethnicity. Research limitations/implications – The dataset consists of 234 observations. The results refer to the sample and might not be representative of ethnic minority start‐ups in general. Practical implications – Apart from the risk factors observed in the study, communication problems and lack of information about possible sources of external financing may be relevant. Better communications between financial institutions and ethnic minority businesses may help to reduce the financing gap vis‐à‐vis native entrepreneurs. Originality/value – This is the first examination of the financial constraints of ethnic entrepreneurship in Germany using univariate and multivariate analyses. Previous evidence has been limited to observations about possible discrimination against ethnic minorities and has not tested the significance of observed differences in access to credit. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png International Journal of Entrepreneurial Behaviour & Research Emerald Publishing

Financial constraints of ethnic entrepreneurship: evidence from Germany

Loading next page...
 
/lp/emerald-publishing/financial-constraints-of-ethnic-entrepreneurship-evidence-from-germany-fvQUAPxYdd
Publisher
Emerald Publishing
Copyright
Copyright © 2011 Emerald Group Publishing Limited. All rights reserved.
ISSN
1355-2554
DOI
10.1108/13552551111130727
Publisher site
See Article on Publisher Site

Abstract

Purpose – The theory of small business finance predicts that ethnic minority‐owned businesses are more likely to be credit constrained in the start‐up process than are native‐owned businesses. In Germany, empirical evidence for this issue is scarce because of missing data. This paper aims to address these issues. Design/methodology/approach – The paper reviews previous studies and uses data from a survey of ethnic and native entrepreneurs in Germany that include detailed information about start‐up financing. The hypotheses were tested for differences in financial constraints using univariate analyses and apply multivariate regression models to identify the causes of credit constraints in start‐up financing. Findings – The data provide evidence that entrepreneurs with an immigration background (“ethnic entrepreneurs”), defined as German residents who hold foreign citizenship or who were born outside Germany, are significantly more likely to be denied credit or to be awarded smaller loans than requested than are native entrepreneurs. However, the underlying reasons for this effect may be differences in risk factors and financial relationships, rather than ethnicity. Research limitations/implications – The dataset consists of 234 observations. The results refer to the sample and might not be representative of ethnic minority start‐ups in general. Practical implications – Apart from the risk factors observed in the study, communication problems and lack of information about possible sources of external financing may be relevant. Better communications between financial institutions and ethnic minority businesses may help to reduce the financing gap vis‐à‐vis native entrepreneurs. Originality/value – This is the first examination of the financial constraints of ethnic entrepreneurship in Germany using univariate and multivariate analyses. Previous evidence has been limited to observations about possible discrimination against ethnic minorities and has not tested the significance of observed differences in access to credit.

Journal

International Journal of Entrepreneurial Behaviour & ResearchEmerald Publishing

Published: May 10, 2011

Keywords: Credit; Small enterprises; Discrimination; Entrepreneurs; Loans; Germany

References

  • The economic embeddedness of immigrant enterprise in Britain
    Barrett, G.; Jones, T.; McEvoy, D.; McGoldrick, C.
  • Bootstrapping and the financial condition of small firms
    Ebben, J.D.
  • Nascent entrepreneurial activity within female ethnic minority groups
    Kwong, C.C.Y.; Thompson, P.; Jones‐Evans, D.; Brooksbank, D.
  • Funding gap, what funding gap? Financial bootstrapping: supply, demand and creation of entrepreneurial finance
    Lam, W.
  • From four‐course Peking duck to take‐away Singapore rice – an inquiry into the dynamics of the ethnic Chinese catering business in Germany
    Leung, M.W.H.
  • The capital structure puzzle
    Myers, S.C.
  • Turkish immigrant entrepreneurs in the European Union: a political‐institutional approach
    Panayiotopoulos, P.I.

You’re reading a free preview. Subscribe to read the entire article.


DeepDyve is your
personal research library

It’s your single place to instantly
discover and read the research
that matters to you.

Enjoy affordable access to
over 18 million articles from more than
15,000 peer-reviewed journals.

All for just $49/month

Explore the DeepDyve Library

Search

Query the DeepDyve database, plus search all of PubMed and Google Scholar seamlessly

Organize

Save any article or search result from DeepDyve, PubMed, and Google Scholar... all in one place.

Access

Get unlimited, online access to over 18 million full-text articles from more than 15,000 scientific journals.

Your journals are on DeepDyve

Read from thousands of the leading scholarly journals from SpringerNature, Elsevier, Wiley-Blackwell, Oxford University Press and more.

All the latest content is available, no embargo periods.

See the journals in your area

DeepDyve

Freelancer

DeepDyve

Pro

Price

FREE

$49/month
$360/year

Save searches from
Google Scholar,
PubMed

Create folders to
organize your research

Export folders, citations

Read DeepDyve articles

Abstract access only

Unlimited access to over
18 million full-text articles

Print

20 pages / month

PDF Discount

20% off