THE CREATIVE URBAN DIASPORA ECONOMY: A DISPARITY

ANALYSIS AMONG MIGRANT ENTREPRENEURS

Karima Kourtit and Peter Nijkamp

ANTECHNOLOGY

Purpose of our empirical research

To explore and trace the opportunities and

barriers for migrant entrepreneurs, and the

critical success conditions of the highest

performing migrant entrepreneurs (‘business

champions’) in the innovative and creative sector

To analyse the differences in performance of

second-generation migrant entrepreneurs from

Moroccan origin in Dutch cities

To test the usefulness of DEA and SOM tools

Transition in the profile of migrant entrepreneurs, especially those

belonging to the 2nd generation of migrants

Migrant entrepreneurship oriented towards creative industries in urban

areas in the Netherlands (breaking-out approach)

Clear drastic transformation and re-positioning of migrant

entrepreneurship

TRENDS ENTREPRENEURSHIP

NEW TRENDS IN ETHNIC ENTREPRENEURSHIP

4 Migrant entrepreneurship business growth strategies

Source: Ansoff Matrix (1957), adjusted by authors

• Systematic strategic framework of migrant entrepreneurship that is helpful for mapping out new

business growth strategies and opportunities of migrant firms derived from the Ansoff (1957)

Model

STEP TOWARDS MIGRANT ENTREPRENEURSHIP:

SURVIVAL VS. SUCCESS

‘A Theory of Human Motivation’ (A. Maslow 1943 ) The Achievement Motive (Maslow 1943 ;

McClelland, 1953)

• Tradition motives (e.g, social exclusion, weak position in the labour market) are replaced by

entrepreneurial motives (e.g., profit-making, ambitious, social esteem)

Migrant Entrepreneurship: Motives

Business activities undertaken by migrants of a specific socio-cultural and ethnic

background or country of origin

In the past, self-employment: a source of economic survival

lifeboat economies (Garrett Hardin's Lifeboat Ethics ,1974)

Start-up business within the ethnic community (traditional markets):

A possible solution to their unemployment situation

A response to specific needs and demands for ethnic products and

services by their own ethnic groups

NEW ENTREPRENEURSHIP Migrant entrepreneurs become a source of new

economic opportunities for regions and cities:

Contribute to new job creation

Introduce new products and processes in the market (their diversity

leads more to new and innovative combinations)

Contribute to ‘citymarketing’ ‘creative city’ to attract visitors,

talent, innovative companies and new residents than ever before to

creative areas

Strengthen the urban social economy

Provide a major challenge (serious competitors) to established firms

and encourage them to improve their product quality and service

or to reduce prices

Research Approach 1ST RESEARCH QUESTION:

What are the critical success conditions for migrant entrepreneurs?

Step 1: Structured interviews with higher-educated young Moroccan

entrepreneurs in high-tech and innovative sectors in the Netherlands

Step 2: Statistical indicators to identify the critical success conditions and failures

2ND RESEARCH QUESTION:

Are there differences in economic performance of various migrant entrepreneurs?

Step 3: ‘Power Performance Pentagon model’ (Triple-P model)

Step 4: Tools:

- Data Envelopment Analysis (DEA), to judge the

comparative achievement of migrant entrepreneurs and to obtain insight

into the relative efficiency of a firm performance, as compared with others

- Self-Organizing Maps (SOMs), (algorithm) visualization of the

relative differences in the performance of migrant entrepreneurs

in four Dutch cities, namely Amsterdam, Rotterdam, The Hague and

Utrecht

Step 5: Lessons

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Personal and Business Characteristics • Need for Achievement (Maslow 1943 ; McClelland, 1953)

• Locus of Control (Rotter, 1966)

• Risk-taking Propensity (Brockhaus, 1980)

Motivation and Driving Forces • Experience, Innovation, Personnel, Funding & Business Strategy (Basu,

1998)

Participation and Social Support Networks • Formal Networks

• Informal Networks

Composition of Employees and Clients

Strategic Business Performance • Financial and non-financial results

Theoretical Framework

9

1ST RESEARCH QUESTION:

What are the critical success conditions for migrant entrepreneurs?

Step 1: Structured interviews with

young Moroccan entrepreneurs in the

creative sectors in the Netherlands

Step 2: Statistical indicators to identify

the critical success conditions

and failures

Summary 1st results Business Characteristics (BC) • Majority of the Moroccan businesses is small-sized (< 5 employees (71%)) • Entrepreneurs are active in the ICT, and Consultancy and Research sectors • Moroccan businesses are relatively young (54% of the entrepreneurs started after 2006); 8% are older than 2001

Personal Characteristics (PC)

• Majority of the entrepreneurs falls between the age of 25-39 (83%)

• Majority of the entrepreneurs was born in Morocco and more than 50% of them came between 1971

and 1980 to the Netherlands (< 12 years)

• Most of them achieved their highest level of education in the Netherlands (92%): higher vocational

education, University and Post-doc (79%); and speak Dutch fluently

Motivation and Driving Forces (MDF) • Majority of the entrepreneurs wasstudent (67%) and active part-time as an entrepreneur in their previous position and in the same sector (83%) • The main reasons to become an entrepreneur were to be independent and own boss (80%) in the same sector (attractive and growing market opportunities • Previous position and experience in the same sector create a pull affect on self-employment • Most of them used their own savings (67%) to set-up a business, no detailed financial plan and no support from formal institutions, obtained information from their own experience and family and friends Factors such as capital and information sources show that the new generation Moroccan entrepreneurs are quite independent of their family, friends and others

Summary 1st results Composition of Employees & Clients (CEC)

Majority of the firms serves Dutch clients; they are not dependent on customers and labor source from their own ethnic group (84%)

Participation and Support Social Capital (PSSC)

The majority of the firms (84%) participates in social networks and have received support and additional information from their social networks (e.g. family & friends)

However, almost 60% of the firms have not obtained financial, managerial (84%) or operational (63%) support from family

Family and social networks contribute to the independence of Moroccan entrepreneurs, while supporting their personal and human development

Summary 1st results

13

Strategic Business Performance (SBP)

Most of the migrant entrepreneurs have experienced a positive development in last years business

performance

Financial advantages:

Majority of the entrepreneurs has experienced an increase in sales (71%) and profit (67%)

Non-financial advantages:

- Majority of the entrepreneurs (63%) is more innovative and offers high quality products at a

competitive price (better quality of the organization)

- Most of the entrepreneurs (79 % ) has established a good strategic marketing/promotion

Success Variables facing Moroccan Entrepreneurs

Strong motivation, enthusiasm and persistence

Strong reputation of the business firm as a quality-based and honest firm with personality and expertise

Higher result orientation consists of variables, which have to do with improving the quality of management and internal business processes on achieving higher business results

Problem Variables facing Moroccan Entrepreneurs

Common problems similar to Dutch firms: overregulation, concrete their strategies and formulate

related strategic objectives, business administration, attract loyal and well-skilled employees, strong competition/financial crisis, reduce the overall costs

2ND RESEARCH QUESTION: IN SEARCH OF BUSINESS CHAMPION

Are there differences in economic performance of various migrant

entrepreneurs? Step 3: ‘Power Performance Pentagon model’ (Triple-P model).

Step 4: Tools:

- Data Envelopment Analysis (DEA), to judge the

comparative achievement of these ethnic firms and to obtain insight into the relative efficiency of a firm performance, as compared with

others

- Self-Organizing Maps (SOMs), an algorithmic tool, visualization of

the relative differences in the performance of migrant entrepreneurs

in four Dutch cities, namely Amsterdam, Rotterdam, The Hague

and Utrecht

‘Power Performance Pentagon model’ (Triple-P model of the complex force field

of business performance)

MAIN CATEGORIES INDICATOR GROUP NR INDICATORS

OUTPUTS

Financial business performance (FBP1&2)

1

2

Sales

Profit

Non-financial business performance (NF-BP3) 3

4

Higher orientation

Higher quality

INPUTS

Human Capital (HC) 5

6

7

8

9

10

11

Age

Education level

Education place

Educational level

Language ability (e.g. Dutch, English, French)

Country birth

Arrival years in the Netherlands

Reasons to start up a business

Social Capital (SC) 12

13

Network participation

Support from social network

Entrepreneurship Capital (EC) 14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Starting situation firm

Problems startup

Sector choice

Situation sector

Present situation sector

Market competition in sector,

Attractive market

Diversity in clientele

Number of clientele

Strategic segmentation

Marketing strategies and efforts

Managerial support

Operational support

Vision and business strategies

Professionalization and market expansion

Creative Capital & Knowledge Capital (CC&KC) 29

30

31

32

33

34

35

Foundation year of enterprise

Position before start-up

Previous experiences

Business plans for start-up

Informal and formal information sources

Diversity in employees

Number of employees

Financial Capital (FC) 36

37

Formal capital sources

Informal capital resources

GEOGRAPHIC LOCATION Four largest Dutch cities (G4) 38

39

40

41

Amsterdam

Rotterdam

The Hague

Utrecht

List of input and output indicators of Moroccan entrepreneurs

Illustration of a set of CSFs and conditions 5 INPUTS:

1. Human Capital: e.g., education level, education country, language Dutch,

language English, country birth, arrival year, reasons to start up a business

2. Social Capital: e.g., network participation, support from the social network

3. Creative Capital and Knowledge Capital: e.g., foundation firm, previous

postition, previous experience, plans for start, info sources, diversity employees

4. Entrepreneurial Capital: e.g., starting situation firm, problems start up, sector

choice, situation sector, present situation sector, attractive market, diversity

custom, focus group, marketing efforts, mangerial and operational support,

vision, strategies

5. Financial Capital: e.g., capital source, finanial support

OUTPUTS: Business Performance:

Financial Outputs: e.g., development sales, profit, reduction costs lastyear

Non-financial Outputs : e.g., higher quality, more innovativeness, higher pro-

activity

Self-Organizing Map (SOM):

• Data-reduction technique (based on neural network analysis)

• Visualization of differences through the detection of particular patterns that would

otherwise remain hidden

Data Envelopment Analysis (DEA):

• Comparative analysis of efficiency of firms (benchmarking) through a study of

outputs in relation to inputs (CCR-I focus on the inputs (standard model))

• Identification of efficient firms in a standard DEA model (all efficient firms get the

score 1)

Super – efficient DEA

• Are all firms equal when their efficiency rate = 1? Can efficient firms be ranked?

Need for refined analysis

SUPER-EFFICIENCY

To discriminate between efficient migrant entrepreneurs, in order to arrive at a ranking

– or even numerical rating – of these efficient firms, without affecting the results for the

non-efficiency (see Andersen & Petersen,1993; Tone, 2001, 2002)

(I) number of doctors

(I) number of nurses

O

Hospital A

C

B

D

E

Hospital Doctors Nurses

A 1 3

B 3 1

C 4 5

D 2 5

E 5 2

Efficiency frontier

ILLUSTRATION

0.0

0.5

1.0

1.5

2.0

2.5

3.0

Firm

1

Firm

2

Firm

3

Firm

4

Firm

5

Firm

6

Firm

7

Firm

8

Firm

9

Firm

10

Firm

11

Firm

12

Firm

13

Firm

14

Firm

15

Firm

16

Firm

17

Firm

18

Firm

19

Firm

20

Firm

21

Firm

22

Firm

23

Firm

24

Super-Efficiency Score CCR Score

Efficiency scores for super-efficiency and CCR-I

• The rankings of the super-efficiency values for 19 of the

24 Firms were identified on the basis of their high Super-

Efficiency score.

• “Firm 15” is the ‘Exceptional Firm’ based on the Super-

Efficiency model.

A new Super-Efficiency DEA based on a

Distance Friction Minimization (DFM)

for inefficient firms

In this approach, a generalized distance friction is

employed to assist a firm to improve its efficiency

by a movement towards the efficiency frontier

surface.

The direction of efficiency improvement depends,

of course, on the input/output characteristics of

the firm.

Efficiency-improving projection based on SE and

SE-DFM (Distance Friction Minimization) models

DMU Score DMU Score

Difference % Difference % Difference % Difference %

d iox*

-s-**

d iox*

-s-**

d roy*

+s+**

d roy*

+s+**

Firm 7 0.750 Firm 18 0.889

(I)HC 3.000 -0.8 -25.0% -0.7 -31.7% (I)HC 3.000 -0.4 -14.8% 0.0 0.0%

(I)SC 5.000 -2.0 -40.0% -1.6 -52.4% (I)SC 3.000 -0.3 -11.1% 0.0 0.0%

(I)CCandKC 4.000 -2.0 -50.0% -1.7 -85.7% (I)CCandKC 2.000 -0.2 -11.1% 0.0 0.0%

(I)EC 4.000 -1.0 -25.0% -0.6 -19.0% (I)EC 4.000 -0.4 -11.1% -0.2 -6.6%

(I)FC 4.000 -3.0 -75.0% -2.9 -285.7% (I)FC 3.000 -1.2 -40.7% 0.0 0.0%

(O)sales 4.000 0.0 0.0% 0.6 14.3% (O)sales 4.000 0.0 0.0% 1.0 25.5%

(O)profit 4.000 0.0 0.0% 0.6 14.3% (O)profit 2.000 1.6 80.6% 0.0 0.0%

(O)HR and Q 5.000 0.0 0.0% 0.7 14.3% (O)HR and Q 5.000 0.0 0.0% 0.0 0.0%

Firm 8 0.750 Firm 22 0.765

(I)HC 3.000 -0.8 -25.0% -0.7 -31.7% (I)HC 4.000 -1.1 -27.9% 0.0 0.0%

(I)SC 5.000 -2.0 -40.0% -1.6 -52.4% (I)SC 5.000 -1.2 -23.5% 0.0 0.0%

(I)CCandKC 3.000 -1.0 -33.3% -0.7 -35.7% (I)CCandKC 2.000 -0.5 -23.5% 0.0 0.0%

(I)EC 4.000 -1.0 -25.0% -0.6 -19.0% (I)EC 4.000 -0.9 -23.5% -0.5 -17.4%

(I)FC 3.000 -2.0 -66.7% -2.9 -285.7% (I)FC 5.000 -2.2 -44.7% 0.0 0.0%

(O)sales 4.000 0.0 0.0% 0.6 14.3% (O)sales 1.000 2.2 217.7% 3.6 114.0%

(O)profit 4.000 0.0 0.0% 0.6 14.3% (O)profit 1.000 2.5 252.9% 0.0 0.0%

(O)HR and Q 1.000 3.0 300.0% 4.7 117.9% (O)HR and Q 5.000 0.0 0.0% 0.0 0.0%

Firm 17 0.818

(I)HC 5.000 -2.5 -50.9% -2.3 -93.7%

(I)SC 3.000 -0.5 -18.2% 0.0 0.0%

(I)CCandKC 3.000 -0.5 -18.2% -0.6 -24.4%

(I)EC 4.000 -0.7 -18.2% -0.4 -12.2%

(I)FC 4.000 -2.5 -61.4% -2.2 -142.4%

(O)sales 4.000 0.0 0.0% 0.8 20.0%

(O)profit 4.000 0.0 0.0% 0.2 5.0%

(O)HR and Q 1.000 3.3 327.3% 3.8 88.9%

SE model SE-DFM model

Score(θ**) Score(θ**)

I/O Data

1.000

1.000

1.000

1.000

1.000

1.000

1.000

1.000

1.000

1.000

SE model SE-DFM model

Score(θ**) Score(θ**)

I/O Data

Results The SE projection shows that, for instance, Firm18 – in order to achieve a super-efficiency state

should reduce its input volumes SC, CC&C and EC by 11.1 per cent, and HC by 14.8 per cent,

and FC by 40.7% and increase in the profit of 80.6 per cent in order to become efficient.

On the other hand, the SE-DFM (Distance Friction Minimization) projection results show that a

reduction in the EC of 6.6 per cent and an increase in the sales of 25.5 per cent is required to

become efficient.

A comparison of the projection results of Firm18 . This result clearly shows that a different –

and more efficient and effective – solution is available than the SE projection to reach the

efficiency frontier.

(I)HC (I)SC (I)CCandKC (I)EC (I)FC (O)sales (O)profit(O)HR and

Q

SE Projection -14.8% -11.1% -11.1% -11.1% -40.7% 0.0% 80.6% 0.0%

SE-DFM Projection 0.0% 0.0% 0.0% -6.6% 0.0% 25.5% 0.0% 0.0%

-60.0%

-40.0%

-20.0%

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

SOM RESULTS: Statistical analysis of the disparities among

migrant firms

Main objective of this mapping is to identify

possible interesting profiles and patterns in the

performance that emerge among the

observations of migrant entrepreneurs

SOM RESULTS: Topological virtual map obtained from a SOM network

Distribution of migrant firms across statistical space with a focus on topological similarities and

dissimilarities

• Figure 4(a) shows that the distribution of migrant firms across the input and the global score

SOMs is better spread across the networks suggesting larger degree of diversity

between the observations as well as more particular and unique combinations of characteristics

• Figures 4(b) show two clear large clusters of migrant firms, suggesting that these are similar

groups of the observed migrant firms

Large clusters

SOM RESULTS: geographical location in the Netherlands relates to their performance

• Figure does not show clear patterns, neither in the geographical location scores nor in the

efficiency score

•

SOM RESULTS: • Additional tool Component Planes to better understand the location patterns of

migrant firms

• Component planes for each of the specific performance variables in which the values

are displayed on a gradient from white (lowest levels of that factor of performance)

to dark blue (always implying a better performance)

have very high scores

Lessons What are the critical success conditions for migrant

entrepreneurs? The younger generation of Moroccan entrepreneurs is very well

educated, and integrated in the Dutch community; and through their human capital and motivation and driving forces they have the ability to be involved in all areas of business activities; they are more open and look for new opportunities outside the ethnic group

Are there differences in economic performance of various migrant entrepreneurs?

These results offer a meaningful contribution to decision support and planning for the efficiency improvement of strategic firm. And therefore, tools may become a policy vehicle that may have great added value for operational decision making and planning in firms. Clearly, firm have the possibility to increase their potential. This improvement potential differs for each firm, but our results offer operational guidelines on a case-by-case firm basis

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GENERAL CONCLUSION

MIGRANT ENTREPRENEURS ARE

CHARACTERIZED BY A HIGH DEGREE OF

HETEROGENEITY

IT IS THEIR CAPACITIES AND RESOURCES AND

NOT THEIR ETHNICITY THAT INFLUENCE

BUSINESS PERFORMANCE AND SUCCESS!

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Thank you!