Immigrant Entrepreneurship: The Role of Formal Corporate Governance Arrangement and Social Capital in Community and Family

Abstract

We empirically test the relation between immigrant’s venture creation decision and governance mechanism under a unified framework of governance in both sociology and finance. We find that corporate governance arrangements are more valued by entrepreneurs with better education attainment and higher household income, such as immigrant entrepreneurs. This type of entrepreneurs tends to be more reluctant to create a venture due to the high opportunity costs. In addition, social capital embedded in community significantly and positively affects the new venture creation decision. At the same time, an inverted U shape relationship is observed between social capital in family and new venture creation. This paper answers how relational governance and corporate governance are related to new venture creation in immigrant entrepreneurship, especially in emerging phase. The key argument is that the efficacy of corporate governance and relational governance mechanisms in immigrant entrepreneurship are contingent on different types of social capital which immigrant entrepreneurs possess and on the formal corporate governance arrangement, the adoption of which is influenced by immigrant entrepreneurs’ characteristics.