Uncertainty and Immigrant Entrepreneurship: Evidence From Brexit
60 Pages Posted: 13 Jun 2023
Date Written: May 1, 2023
Immigrant entrepreneurs are a major driver of economic growth, and their decisions about where to locate can greatly affect the entrepreneurial ecosystem of a country. Meanwhile, increasingly uncertain immigration environments might discourage immigrants from establishing new ventures in host countries. This paper exploits the unexpected result of the Brexit referendum to investigate the relationship between immigration uncertainty and the entry of immigrant-founded ventures of different quality. We propose a model of immigrant entrepreneurial entry and introduce a new measure of venture quality at founding. We find that a surge in uncertainty decreases the growth rate of new immigrant-founded firms by 3.2%. The reliance on other immigrant actors exacerbates the negative effect that uncertainty has on entry. Moreover, low- and high-quality firms are the most affected, while the effect for medium-quality firms is negligible. Back-of-the-envelope calculations suggest that Brexit discouraged the entry of around 620 low-quality and 250 high-quality firms. Our model suggests that while founders of low-quality ventures might decide to take up employment, founders of high-quality ventures might be better off establishing their companies in another country.
Keywords: entrepreneurship, immigration, uncertainty, Brexit, mobility
JEL Classification: L26, J61, M13, D81
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