Financing for Business Growth or Not: How Do Immigrant SMEs Differ from Native SMEs?

Abstract

Much debate persists regarding how immigrant founded small and medium sized enterprises (SMEs) differ from their native counterparts on financing for business growth. Drawing on the resource-based view, this study examines how SME owners’ immigrant status, combined with other characteristics (e.g., family involvement, owner involvement, owner education), has an impact on the use of internal and external capital for business expansion. Using microdata from the 2007 U.S. Survey of Business Owners (SBO), this study employs multinomial logistic regression modeling to test the hypothesized relationships. Results show that immigrant SMEs are more likely than their native counterparts to use internal capital and less likely to use external capital for business expansion. Furthermore, family involvement, owner involvement, and owner education positively moderate the relationship between immigrant status and use of internal/external capital for business expansion. This study contributes to the literature on both immigrant entrepreneurship and small business financing by suggesting that immigrant SMEs have resource endowments and constraints regarding use of internal and external capital for business expansion and that family/owner related characteristics (e.g., family involvement, owner involvement, and owner education) strengthen the resource endowments and/or mitigate the resource constraints that are associated with immigrant status.