When do return migrants become entrepreneurs? The role of global social networks and institutional distance

Abstract

AbstractResearch SummaryDoes embeddedness in global social networks elevate or diminish individuals' propensity to found new ventures? I analyze entrepreneurial entry among a large, cross‐country sample of skilled return migrants, all of whom had worked abroad in the United States before returning to 98 different home countries. My findings reveal that maintaining stronger cross‐border social ties—that is, relationships to former colleagues abroad—leads returnees to be more likely to found new ventures in their homelands. However, the positive effects of cross‐border social ties diminish with greater institutional distance between the returnee's home country and the United States. The findings have implications for research at the intersection of social networks, international migration, and entrepreneurship. Managerial SummaryWhen it comes to founding a venture, social networks are often critical in helping prospective entrepreneurs identify new market opportunities and resources. Which types of networks are most beneficial in helping people become entrepreneurs, however, still remains a question. This paper asks whether having social connections to individuals across countries makes one more likely to become an entrepreneur, and if so why? Studying skilled return migrants, I find that returnees who maintain stronger social ties to those they met while working abroad are more likely to start companies, but only if there is sufficient similarity between the market environments of the returnee's home country and the country where the returnee worked abroad.