Based on research on DE in relation with theoretical lens we discussed above, we will discuss motivations and success factors of rich-to-poor DE to develop research propositions in this section.
Migration is driven by its push and pull factors which differ for refugees, irregular and regular migrants. The origin of the entrepreneurship may lie already in the pre-migration phase, but we concentrate on the post-migration phase.
The reasons why some diasporans decide to become entrepreneurs can be classified into push and pull factors. The difficulties immigrants generally face in CORs are regarded as push factors. Many of diaspora entrepreneurs either from developing or emerging economies have been seen as necessity entrepreneurs (Cohen, 2008), since they do not have other options to provide themselves and their family members with a financial basis for living. Thus, they found a company by themselves. Diasporans usually encounter a number of problems with language, culture and therefore career chances (Leinonen, 2012; Lin and Tao, 2012). The general lack of job opportunities in CORs results in the higher rate of self-employment within migrants compared to non-diasporans (OECD, 2010).
However, rich-to-poor diasporans are in a different position from poor-to-rich ones. In the case of diasporans from a poor country living in a developed economy, it maybe a suboptimal option to stay in CORs due to their strong economy, high living standards, political stability and advanced social welfare which are not available in their COOs.
There are also numerous migrant workers who seek also temporary employment abroad, but who do not have the possibility to start entrepreneurial activities. In general, the poor-to-rich diasporans suffer from limited resources and may also be subject of economic pressure in the form of remittance expectations. On the countrary, rich-to-poor diasporans have a choice to go back to their home country, if they are not willing to overcome the difficulties in the job market of CORs. As Leinonen (2012) points out, there are also people from developed countries who decided to emigrate from their home country for their marriage partner from a different country which forms a pull factor.
However, these people are not representative for rich-to-poor diasporans. For this reason, it can be assumed that push factors do not play a siginificant role for rich-to-poor diasporans. When pull factors are more relevant when comparing rich-to-poor DE to poor-to-rich DE, there is an impact on corporate survival for push factors are very often related to necessity entrepreneruship and a more defensive position of the new venture. Thus, rich-to-poor DE is much less defensive and opportunity driven (Block and Sandner, 2007; Baum and Locke, 2004). This can have a positive impact on corporate survival. Therefore, we propose that:
P1. Rich-to-poor DE is less necessity driven and defensive which is positively related to corporate survival.
As for pull factors for DE, it has been observed that diasporans start their own business connected with some kind of homeland sentiments that might have an impact on the kind of business (Lin and Tao, 2012). Diasporans have homeland sentiments on different levels.
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Diaspora entrepreneurs may act in one or several markets in paralle. Here, we focus on COR-based investments, but diasporans often invest and venture also in their COO and may also use their intercultural competences for business and investment in third countries. Some diaspora homeland investments can be explained by their altrustic motivations, while others are motivated by the personal wish to stay in touch with their COOs. In many cases, it is a suboptimal situation that drives people from economically underdeveloped countries to migrate into a developed country. They leave their homeland not because they do not like their country anymore, but because they do not have any chance to realize the life they wish due to weak economic, politics or institutions. In other words, some of poor-to-rich diasporans would possibly stay in their home country, if their COOs provided better conditions (Lin and Tao, 2012). In such cases it can be considered that people have a strong wish to stay connected to their homeland and to contribute the improvement of economic as well as living situation of their COOs (Gillespie et.al., 1999). The decision to move to a economically less developed country for rich-to-poor diasporans is less influenced by negative push factors as they do not exist in similar intensity and scope in developed countries. Hence, the pull factors need to counterbalance the lack of push factors in some way, possibly also in the form of entrepreneurial opportunity.
Starting a business as a person from a developed country makes sense from an economic point of view for several reasons. First, the markets of developing or emering countries become attractive, when the rate of economic development is higher than in developed countries. The rapid economic advance creates new business chances, as the living standard of population becomes higher. In China, for instance, the so-called ‘new middle class’, who used to be belong to the low class and can now afford better products, has arisen due to the drastical economical development in the last decades (Farrell et.al., 2006). These people have started to consider the quality of products and got interested in products from developed countries (Horiuchi, 2010). This sort of new demands are regarded as new business opportunities for people from developed countries. Second, early-stage capital for new businesses in emerging or developing economies is lower than in developed countries. Horiuchi (2010) argues that only 10% of early-stage capital is required in Shanghai compared to Tokyo. Third, the markets of developing and emerging markets are not yet mature and saturated, thus establishing unique selling propositions (USP) is easier outside of COO from the competitive point of view, when domestic products or services that are common in the COObut not outside are offered.
Due to the existence of a myriad of competitors offering similar products or services, establishing a successful business in COO is a difficult challenge for many entrepreneurs. However, if product concepts which are specific to a developed economy are brought to developing or emerging countries, there are not many competitors who offer similar products and therefore establishing a USP is much easier than in contexts of developed countries. Besides these economic advantages, the decision to move out of their COO can be explained by unsatisfaction, emptiness and frustration with their home market as well as variety seeking. Since the gap between the rich and the poor in developed countriesis smaller, people have a sort of dilemma that they cannot get out of the middle class regardless their qualification and personal efforts for their career. On the contrary, accessing the upper class life is easier in developing or emerging countries. Some rich-to-poor DE is motivated by this middle-class dilenmma (Horiuchi, 2010). For these reasons discussed above, we can develop the next research propositions:
P2. Rich-to-poor DE is motivated mainly by the opportunity to achieve unique selling propositions in developing or emerging countries and thus to contribute to corporate survival.
P3. Rich-to-poor diaspora entrepreneurs are motivated to start their business in developing or emerging countries as means to develop their life dreams, overcome the middle-class dilemma and to energize their lives which has a positive impact on corporate survival.
Leinonen (2012) pointed out the significance role of marriage and family ties in the life decisions of migrants.
Possessing strong personal relationships in COR on the individual level can be a driver of migration. For instance, American migrants in Finland she observed in her study would not have come to Finland, if their partner were not from Finland and they did not wanted to live with their partner in their home country (Leinonen, 2012). Such migrants have strong personal ties to local people which could be advantageous for their entrepreneurial activities, since they are native speaker of the country and naturally know the market situations well. When such migrants decide to start a business, they are assumed to rely on these personal ties with local personals to a substantial extent. Therefore:
P4. Rich-to-poor DE is positively influenced by COR-based individual-level personal relationships (strong ties: partner, close friends) that contribute to corporate survival
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As we discussed in the section on the conceptual background, we will focus on individual capabilities of diasporans as success factors of rich-to-poor DE. Since diasporans live in culturally complex situations and their businesses spread to two or more countries, we can estimate that intercultural competencies play an essential role for the success of their business. Therefore, we will explore their culture-related capabilities along with the theoretical lens of CQ (Van Dyne, Ang, & Livermore, 2010, Earley & Mosakowski, 2004). CQ is defined as an individual’s capacity to deal effective in situations characterized by cultural diversity (Earley and Ang, 2003). CQ is highly related to interaction in business environments of diasporans. Starting DE is realized through communication and negotiations with various related actors such as cooperation partners, employees, or co-founders in culturally demanding settings.
Antal and Friedman (2003) discussed that individuals with higher intercultural skills possess an ample repertoire from which various action strategies dealing with situations are conducted and can realize more effective interaction. CQ is conceptualized along three dimensions, namely a cognitive, a motivational and a behaviral one (Earley, 2002). We will discuss diasporans’ CQs along with these three elements respectively.
Cognitive CQ is a dimension for an individual’s capablity to deal with cultures and reflects cognitive flexiblity and reasoning skills. Since high CQ levels require a capability of modifying one’s self concept (and concept of others) in new complex configuration, flexibility and a capability to inductively reorganize one’s self concept is necessary. Earley (2002) argues that bi- or muli-cultural persons, who have an awareness of more than a single culture, are an exceptional case, since their self concept is so complex that they can reflect the flexibility needed for CQ.
Diasporans are those who are embedded in multiple cultural contexts (Drori, Honig, and Wright, 2009) and can therefore be assumed to have a higher flexibility as well as capacity to reshape a self concept to understand a new cultural setting. Furthermore, compared to poor-to-rich diasporans who tend to rest strongly on their ethnic network in CORs, the role diaspora network plays for rich-to-poor diasporans is not that significant for mainly three reasons:
first, the total number of diasporans from developed countries is smaller and therefore the size as well as the intensity of diaspora networks in each city are not comparable to that of poor-to-rich diasporans, second, rich-to-poor diasporans are expected to have more individual resources and competencies and therefore they do not have to rely on networks so much, and, third, the large portion of people from developed countries often has a somewhat cosmopolitan lifestyle and therefore do not need access to ethnic networks so much to share their culture and religion. For this reason, diasporans originated from developed economies are more likely to exposure to intercultural interaction in CORs.
They are more experienced in a sort of detective work to ascertain significant cues in the environment, which lead the stronger reasoning skills. In addition to cognitive flexibility and reasoning skills, high cognitive CQ requires a higher level of learning thanks to metacognitive CQ (Earley, 2002). In order to be successful as entrepreneurs outside the home country without depending on diaspora networks, it is essential to understand the culture of COR thoroughly. A number of companies attempts to train their employeees by providing country-specific information (Earley, 2002), since many literatures recommend the adaption strategy of a six-stage model by Benett (1996) as the appropriate one for the majority of expatriates to deal with cultural differences. This model identifies six strategies to handle cultural differences: (1) denial of difference, (2) defense, (3) minimization, (4) acceptance, (5) adaptation and (6) integration.
The adaptation strategy is defined as knowing enough about different cultures to “ (…) intentionally shift into a different cultural frame of reference” and modify their behavior to fit the norms of another culture (e.g. Earley & Erez, 1997). However, many cultural training programs fail, since this approach over-emphasizes superficial information about specific cultures and does not offer general learning principle (Earley, 2002). Since rich-to-poor diasporans are required to have a deep understanding of the host culture, an effective meta-strategy is useful to overcome cultural difficulties. Therefore, we propose:
P5-a. Due to the double cultural interconnectedness, rich-to-poor diasporans possess a richer cognitive background and more flexibility than local entrepreneurs, which is positively related to coporate survival.
P5-b. Since rich-to-poor diasporans are required to make sense of a new cultural context without a significant ethnic business community of their COO, they possess a stronger cultural reasoning skill, which is positively related to corporate survival.
P5-c. Through cultural learning processes, rich-to-poor diasporans develop metacognitive CQ, which is positively related to corporate survival.
In order to build considerable intercultural competencies, possessing high cognitive CQ is not sufficient. One has to be motivated in learning new cultures and believe in their own capability to aquire and use the knowledge and
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produce a culturally appropriate response. Earley (2002) argues that self-efficacy plays an important role in motivational CQ, since successful intercultural interaction is based on a person’s sense of efficacy for social discourse in a novel setting. He maintains that a person with a weak sense of self-efficacy tends to disengage in learning new cultures after experiencing early failures. Motivational CQ includes intrinsic motivation, the degree to which you enjoy culturally diverse situations, and extrinsic motivation, the more tangible benefits you gain from culturally diverse experiences, and self-efficacy (Van Dyne, Ang, and Livermore, 2010). Unlike the case of poor-to-rich diasporans who live in part unwillingly in a foreign country, many of rich-to-poor diasporans proactively decide to move to a foreign country, while giving up the comfortable market and living situations of their COOs. They are assumed to have a stronger willingness to establish the new life in COR and to have a higher motivation to learn new cultures compared to poor-to-rich diasporans. Moreover, rich-to-poor diasporans interact personally with many local people in CORs and they are experienced in intercultural communciation as well as negotiations. Therefore, they are more likely to be confident in their own capabilities to deal with culturally novel situations.
P6. Rich-to-poor diasporans benefit from personal motivation and stronger self-efficacy in understanding culturally new situations, which is positively correated to corporate survival.
Behavioral CQ is the action dimension of CQ which refers to the individual’s ability to act appropriately in a range of cross-cultural situations (Van Dyne, Ang, and Livermore, 2010). While mimicring every behavior of people from another culture is impossible, there are certain behaviors that should be modified when one interacts with other cultures. For instance, giving one’s business card to another person only by one hand means arrogance in the Japanese business environment and the person might be regarded as impolite, even though it is a normal way in Western culture.
When Japanese managers have negotiations in Western countries, their expression can be misleading, because they mostly smile and try to avoid mention something negative in a direct way, even though they are unsatisfied. Adapting one’s behavior to a target culture is a significant part of intercultural interaction. By behaving in a similar way as people from another culture, people can ease situations and make others feel comfortable. In culturally complex situations where diasporans operate, knowing where new behavioral manners are required and how to execute them effectively is essential in order to smoothly launch intercultural negotiations.
P7. Possessing high behavioral CQ allows smooth intercultural interactions and is, thus, positively related to corporate survival.
P8. Advanced learning skills of the entrepreneur affect the employment of cognitive abilities which are necessary for successful opportunity development and thus contribute to corporate survival.
As previously discussed, diasporans are assumed to have unique learning capabilities due to their double social and cultural embeddedness (Drori, Honig, & Wright, 2009). We explore their learning ability illuminated by absorptive capacity on the individual level. Absorptive capacity is influenced by prior related knowledge and the diversity of background (Cohen and Levinthal, 1990). Diasporans possess a richer cultural and social background due to the longtime living experience acquired in the COR and the regular contact to the COO. Based on socio-cultural and business knowledge of the COO and the COR, diasporans’ background is highly diverse compared to non-diaspora entrepreneurs. Therefore, we assume that diasporans possess a greater absorptive capacity and therefore higher learning abilities.
The learning ability is connected to entrepreneurial opportunity recognition. According to Baron (2004), opportunity recognition can be regarded as ‘the cognitive process (or processes) through which individuals conclude that they have identified an opportunity’ (Baron, 2004; Page. A1). Opportunities can be seen as complex, discernible patterns (Baron, 2004; 2006). Baron suggests that it is necessary to fully understand how individuals identify complex patterns to consider two cognitive models: the prototype model (Smith, 1995) and the exemplar model (Hahn and Chater, 1997). In the prototype model it is assumed that people compare newly encountered stimuli or events with existing prototypes to determine whether they belong to specific categories (Baron, 2004). As for opportunity recognition, the closer the mach between information which is potentially relevant to business opportunities and individuals’ existing prototypes, the more likely they identify an opportunity. The exemplar models suggests that individuals compare new events or stimuli with specific examplars of relevant concepts in their memory. This exemplar include a number of examples of business opportunities they have encountered in the past. As we discussed above, diasporans are assumed to have a higher learning ability compared to non-diaspora populations and therefore they acquire external knowledge more efficiently. For this reason, we can assume that diasporans also have a wider
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variety of prototypes as well as exemplars, which enhances individuals’ congnitive diversity. Possessing a high level of cognitive diversity is positively related to entrepreneurial opportunity recognition (Baron, 2006).
While the discussion above is applicable to diasporans in general, rich-to-poor e discussion above is applicable to diasporans in general, rich-to-poor diasporans have an additional attribute. Ardichvili et.al. (2003) discuss that especially prior knowledge of market and customer knowledge increases the likelihood of successful entrepreneurial recognition. Rich-to-poor DE can be stimulated by new developments in the COO that often runs ahead of the development in the COR. Such entrepreneurs have extensive knowledge of the market and products/services which are common in developed countries but not yet in developing/emerging ones. Therefore, we can assume that rich-to-poor diasporans more likely recognize entrepreneurial opportunities in which they can utilize their market knowledge of their home country in COR (Fig. 1). Identifying and selecting right business opportunites are one of the crucial abilities to become successful entrepreneurs (Stevenson et.al., 1985). Therefore we propose:
R9: Rich-to-poor diasporans can recognize entrepreneurial opportunities which are not recognized by other types of entrepreneurs due to their high learning abilitiies, which is positively related to their corporate survival.
FIG. 1: OPPORTUNITY RECOGNITION OF RICH-TO-POOR DIASPORA ENTREPRENEURS