Demographics and Entrepreneurship: Evidence from Germany and India
7.2 Demographics and Entrepreneurship .1 Migration
At the outset, it is imperative that we clarify the definition of migration. The term migration is used to denote movement of human beings from one geographical locality to another. The locality could be local region, state or nation. In-migration is migration into the region whereas out-migration is migration out of the region.
Transitory migration is migration of people for short term and not with the intention of settling in the new region.Table 7.1below summarizes this.
Table 7.1 Types of migration
Migration State
Transit In-migration Out migration Non-transit In-migration
Out migration National
Transit In-migration Out migration Non-transit In-migration
Out migration International
Transit In-migration Out migration Non-transit In-migration
Out migration
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Migration has long been associated with entrepreneurship by scholars studying the entrepreneurship phenomenon. Numerous studies have been done to explore the relationship between migration and entrepreneurship (Gershon, 2000; Light and Bhachu, 1993). Modern nations like America, Australia, Canada, Israel and many others were built as a result of the efforts of migrant population. This is largely true for Germany and India as well. Migrants in these two nations have created organi- zations and generated wealth. In India, the city of Kolkata blossomed because of the merchant community of Marwaris, who migrated from the state of Rajasthan and in the recent years, due to the influx of Bangladeshi migrants. In the city of Delhi, the economic activities were undertaken by migrants from west Punjab, now a part of Pakistan. This is also true for Jew migrants in Germany before the Second World War. Another example of such a success is that of the Punjabis in U.K. (Frederk- ing, 2004). Hence, if entrepreneurship is defined in terms of business activity, then in-migration has been one of the strong co-relates of entrepreneurship.
However, if we look around the world, there have been quite a few exceptions to the positive relationship between in-migration and entrepreneurship. Not all migrant groups have shown entrepreneurial drive in the same capacities. For example, African Americans have not been that successful in carrying out the entrepreneurial activities (Bates, 1996). The conclusion that could be drawn from these studies is that mere migrant status is not enough for a person to become an entrepreneur.
There are other factors that influence entrepreneurial activities of the migrants like the strength of migrant network, knowledge sharing among the migrant network, size of network, etc.
Migrant population, especially when it is in minority, is in a disadvantageous position and hence the normal routes of mobility are blocked to this population (Hagen et al., 1962). The migrant population usually has poor education, poor linguistic skills, and lack of understanding of cultural ethos and local knowledge (Barrett and Jones, 1996). Entrepreneurs try to compensate for disadvantages by working hard and long hours leading to the creation of enterprize. Because of the disadvantageous position, the members in the migrant population also develop stronger ties with each other. The ties help in accessing and exploiting the social capital available from the migrant population (Aldrich and Waldinger, 1990). The country of origin provides the migrant population a platform for mutual trust and enforcement of norms. The ties are not only advantageous for identification of opportunities but also for developing opportunities for entrepreneurship. These ties are important source of ideas, opportunities, finance and human resources (Honig, 1998). Hence, the blocked mobility and social capital available are important concepts in the context of migrant entrepreneurship. Organization creation to generate self employment is one of the various ways of mobility available to migrants to establish themselves in the new locality. Given this literature, we test in this chapter, in the context of both Germany and India, the relationship between in-migration and entrepreneurial activity. Hence, we propose:
Hypothesis 1: Keeping other things constant, higher in-migration would lead to higher entrepreneurial activity in various states of the two countries.
7 Demographics and Entrepreneurship 103 As soon as the migrants arrive in a new region, they face blocked mobility and in some cases even hostilities, in the new regions. However, this push usually is not adequate to start entrepreneurial activity which needs knowledge of local conditions.
The knowledge could be of market forces, government regulations, demographic structure, customer preferences, culture, etc. Besides familiarity with the local con- ditions, familiarity with migrant network also takes time, before the migrant network could be exploited for starting a venture. In other words, there is a time lag between the time migrant arrives in a new locality and the time migrant understands the local conditions and migrant network. However, this analysis could not be done because of lack of data.
7.2.2 Education
Education is the institutional way of providing human capabilities. Education helps people in building competencies that could be harnessed for creating successful new ventures. Higher education has special role in enhancement of capabilities.
This is especially true of high technology entrepreneurship as most high technology ventures require capabilities that could be developed through institutions of higher learning (Cooper and Bruno, 1977). Based on this, we hypothesize that:
Hypothesis 2: A higher percentage of population receiving higher education would lead to higher entrepreneurial activity in various states of the two countries.
7.2.3 Population Structure
The second demographic indicator that we selected was that of population structure, which is quite different for the two countries. Indian population is younger while the German population is aging. Entrepreneurship as an activity requires consid- erable amount of energy and this could be provided by young people. In addition, entrepreneurship requires capabilities as well. The capabilities could be built through formal as well as informal ways. Both means of developing capabilities require time. Hence, a person would be able to create an enterprize only after the capabilities have been developed. With the assumption that the development of capabilities through socialization requires a person to be of at least 15 years of age, we hypothesize that:
Hypothesis 3: A higher percentage of population in the range of fifteen to forty- four years would lead to higher entrepreneurial activity in the state.
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