Cultural Roots of Entrepreneurship: Evidence from Second-Generation Immigrants

Abstract

Entrepreneurial activity varies substantially across countries. Although a large literature has argued that national entrepreneurial culture plays an important role in explaining the international variation in entrepreneurial activity, the existing empirical evidence is mixed and evidence for a causal effect of culture is lacking. We study the importance of culture for entrepreneurship by examining the self-employment choices of second-generation immigrants. We argue that entrepreneurship is influenced by deeply held intergenerationally transmitted values and that second- generation immigrants are more likely to become entrepreneurs if their parents stem from countries characterized by a strong entrepreneurial culture. Using a sample of 55030 second-generation immigrants from 40 countries of ancestry who were born in the United States, we find that entrepreneurial culture is transmitted intergenerationally and has a significant positive effect on the likelihood that individuals are entrepreneurs. Our results are robust to a number of alternative non-cultural explanations such as the potential relevance of differences in resource holdings, discrimination, and labor market frictions. Our analysis highlights the durability, portability, and intergenerational transmission of culture as well as the profound impact of culture on entrepreneurship.