The rise of Latino entrepreneurship in the United States

Evidence from the last two decades indicates that Latino immigrants across the United States are starting businesses at twice the rate of the general population (2). In fact, Latinos show remarkably higher rates of new business ownership than any other group, steadily becoming a driving force behind the country’s small-business growth. The findings of this study align with a wider reality, which is documented in a recently published report on the ‘economic strength’ of Latinos in the United States (3). If, for example, this community were a country, it would be the 5th largest GDP in the world, and the 2nd fastest growing economy (17-22) behind China!

Although most of Latinos’ entrepreneurial activity is still concentrated in traditional settlement communities (e.g., in Texas, California, Florida), small communities across the Midwest are increasingly becoming gateways for Latino entrepreneurs. This evidence aligns with various other studies which show that immigrants significantly contribute to the economy of non-metropolitan counties (4).

This leads us to ponder, what exactly characterizes Latino entrepreneurship? Latino entrepreneurs face the typical barriers that all entrepreneurs face, including limited access to financial and key resources. In addition, they can face other social, cultural, and economics barriers, such as lack of acculturation in the communities where they operate, limited language proficiency, access to key networks, among others.

An upcoming article (1) by Maria Figueroa-Armijos, EDHEC Associate Professor, and Corinne Valdivia, University of Missouri Doane Professor, in the ‘Entrepreneurial Ecosystems: Growth, Sustainability and Global Impact’ book edited by Professors I. Melchor-Duran and A. Villegas, seeks to explore the individual and ecosystem factors that determine entrepreneurial activity among Latinos in the United States. Read on to learn more about this phenomenon.

The boom of Latino-owned businesses

Latinos are individuals whose country of origin is Mexico, Puerto Rico, Cuba or other Hispanic or Latino country. According to the National Association for Latino Community Asset Builders (NALCAB), Latinos’ entrepreneurial activity has risen significantly over the last two decades (5), ahead of growth rates of all other racial groups. In fact, in the 1996-2016 period alone, the rate of entrepreneurial activity among Latinos rose by approximately 50 percent.

What factors can explain the boom of Latino-owned businesses? The study conducted by Professors Maria Figueroa-Armijos and Corinne Valdivia sought to answer this question (4). The authors used primary data collected from three target communities in the United States and found that the dynamics involved in Latino entrepreneurship are distinctive from a general concept of entrepreneurship.

First, most Latinos in the United States are economic migrants, “those who move from one place of work and residence to another [...] primarily because of their own economic opportunities” (Chiswick, 2008, p. 64). Historical trends indicate that ethnic minorities might be more prone to engaging in self-employment and business ownership than majority groups who enjoy the privileges of full social inclusion and employment opportunities. This explains why new settlement communities, such as Raleigh-Durham in North Carolina, are experiencing both higher population growth rates and higher entrepreneurship rates in their Latino population.

Entrepreneurship also offers immigrants, including Latinos, a mechanism to overcome discrimination and barriers like lack of resources. It is perceived as a way to achieve personal empowerment, economic freedom, self-sufficiency and integration in American society.

Other studies, such as the one conducted by Robles and Cordero-Guzman (6), also suggest that labor market barriers force Latinos into self-employment. They start businesses because of their lower levels of English proficiency and academic achievements, which limit their eligibility for the limited jobs available.

Enterprise development as a livelihood strategy

The study by Figueroa-Armijos and Valdivia found that Latinos consider entrepreneurship a key strategy for integrating into American society. Given their lack of access to critical resources that other entrepreneurs enjoy, and their potentially additional lack of English proficiency, Latinos use entrepreneurship as a means to establish themselves in the job market and the economic activity of the communities where they settle, concurrently contributing to the revival of small communities.

In general, entrepreneurial activity among minorities is seen as a mechanism to overcome poverty and racial disparities, and to exploit a region’s entrepreneurial potential. In fact, studies indicate that immigrants, especially the highly skilled, significantly contribute to the economy of non-metropolitan counties (3).

The study also found that the primary motivation among Latino entrepreneurs to start a business across there communities was “own initiative” (72%). It is noteworthy to point out that, compared to non-entrepreneurs, entrepreneurs had a higher level of acculturation or integration in the communities where they settled, confirming entrepreneurship as a strategy for integration into American society.

Another interesting finding of the study is that entrepreneurs perceived higher wellbeing, as well as less discrimination, racism and language pressures. They were also more comfortable in social interactions in the communities where they settled.

Acculturation: The relationship between culture and entrepreneurship

Acculturation can be defined as the process of getting acquainted with or of adopting a culture different from our own. Accordingly, is there a pattern between acculturation and Latino entrepreneurship?

The results from this study indicate that about 40 percent of entrepreneurs in the sample were bicultural (which is the highest level of acculturation or integration), compared to 19 percent of Latino non-entrepreneurs who were bicultural in the same community. These results are highly indicative that entrepreneurship promotes higher integration of Latinos, and that bicultural individuals are more likely to engage in entrepreneurial activity.

Other studies, like "Chicano entrepreneurship in rural California" by B.V Calo (7) uncovered direct relationships between Latino self- employment and greater educational attainment, higher English proficiency, and additional work experience.

To conclude

One million new Latino-owned businesses are consistently created in the United States every five years. By 2060, Latinos will make up a third of the U.S. population. This calls for stronger policy attention and action.

Despite capital, cultural, and market resource constraints, Latino entrepreneurs consistently show a growing presence in the economies and communities where they settle. This highlights the importance of understanding the conditions that support their activities, as well as the specific characteristics that differentiate Latino entrepreneurs from Latino non-entrepreneurs.

Numerous studies suggest that business ownership is a strategy to overcome disadvantages in the labor market. The growing number of Latino-owned businesses shows us that entrepreneurship might be a way to build social integration, but also to reach higher levels of wellbeing and self-accomplishment.

It also shows that everyone benefits from an inclusive economy that fosters the innovation and success of all entrepreneurs.

References

(1) Entrepreneurship and enterprise development in new settlement communities: Insights for Latino entrepreneurship policy in times of change (2024). Maria Figueroa-Armijos, Corinne Valdivia. NOVA Science Publishers, USA, December 2024

(2) Department of Commerce, 2010

(3) The 2024 Official LDC U.S. Latino GDP Report, 7th Annual Edition - https://latinodonorcollaborative.org/reports/the-2024-official-ldc-u-s-latino-gdp/

(4) Among other studies :

New Data Analysis: Immigrants Driving Opportunity, Prosperity in the U.S., Including in Swing States (2024). American Immigration Council - https://www.americanimmigrationcouncil.org/news/new-data-immigrants-driving-prosperity-in-united-states-2022

How Immigrants Contribute to Developing Countries' Economies (2018) OECD - https://www.oecd-ilibrary.org/development/how-immigrants-contribute-to-developing-countries-economies_9789264288737-en

(5) Latino Entrepreneurship Growth (2019) National Association for Latino Community Asset Builders (NALCAB). Guest Blog by Rogelio Sáenz, Ph.D.- https://nalcab.org/latino-entrepreneurship-growth/

(6) Robles, B. J., & Cordero-Guzmán, H. (2007). Latino Self-Employment and Entrepreneurship in the United States: An Overview of the Literature and Data Sources. The ANNALS of the American Academy of Political and Social Science, 613(1), 18-31. https://doi.org/10.1177/0002716207303541

(7) Chicano entrepreneurship in rural California: An empirical analysis (1995). Calo, Bea Violanda. University of California, Davis ProQuest Dissertations & Theses, 1995. 9543905. https://www.proquest.com/openview/46a971ea1cafbe6502486c9c3459fcfd/